Regular Session 2017-2018 Senate Bill 0925 P.N. 1393

PRINTER'S NO. 1393

THE GENERAL ASSEMBLY OF PENNSYLVANIA

SENATE BILL

No.

925

Session of

2017

INTRODUCED BY HUGHES, BREWSTER, YUDICHAK, TARTAGLIONE AND

SCHWANK, DECEMBER 28, 2017

REFERRED TO FINANCE, DECEMBER 28, 2017

AN ACT

Amending the act of March 4, 1971 (P.L.6, No.2), entitled "An

act relating to tax reform and State taxation by codifying

and enumerating certain subjects of taxation and imposing

taxes thereon; providing procedures for the payment,

collection, administration and enforcement thereof; providing

for tax credits in certain cases; conferring powers and

imposing duties upon the Department of Revenue, certain

employers, fiduciaries, individuals, persons, corporations

and other entities; prescribing crimes, offenses and

penalties," in manufacturing and investment tax credit,

further providing for definitions and for manufacturing tax

credit and providing for workforce development tax credit.

The General Assembly of the Commonwealth of Pennsylvania

hereby enacts as follows:

Section 1. The definition of "taxpayer" in section 1801-G of

the act of March 4, 1971 (P.L.6, No.2), known as the Tax Reform

Code of 1971, added July 13, 2016 (P.L.526, No.84), is amended

and the section is amended by adding definitions to read:

Section 1801-G. Definitions.

The following words and phrases when used in this part shall

have the meanings given to them in this section unless the

context clearly indicates otherwise:

* * *

"Diverse and disadvantaged businesses." The term as defined

in 62 Pa.C.S. § 2201 (relating to definitions).

"Economically distressed municipality." A municipality that

meets any of the following criteria:

(1) Is a municipality which has been determined to be

financially distressed under section 203(f) of the act of

July 10, 1987 (P.L.246, No.47), known as the Municipalities

Financial Recovery Act.

(2) Is a city, borough, town or township with a market

value per capita below the fifth percentile of all such

cities, boroughs, towns and townships, as certified annually

by the State Tax Equalization Board.

(3) Is located in a county having a personal income per

capita below the 15th percentile of all counties, as

certified annually by the Department of Revenue.

(4) Is located in a county having an annual average

unemployment rate above the 70th percentile of all counties,

as determined annually by the Department of Labor and

Industry.

* * *

"Taxpayer." An entity or a group of entities that is engaged

in the mechanical, physical or chemical transformation of

materials, substances or components into new products that are

creations of new items of tangible personal property for sale.

To qualify as a "taxpayer," a group of entities must:

(1) be comprised of individual entities that are engaged

in a similar line of manufacturing;

(2) have a formal written agreement between each of the

individual entities comprising the group; and

(3) ensure that each individual entity accounts for at

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least $100,000 and not more than $600,000 of the annual

taxable payroll requirement provided under section 1802-G.

* * *

Section 2. Section 1804-G of the act, added July 13, 2016

(P.L.526, No.84), is amended to read:

Section 1804-G. Manufacturing tax credit.

(a) Maximum amount.--The department may award a

manufacturing tax credit of up to 5% of the taxpayer's increase

in annual taxable payroll if the annual taxable payroll

increases in year one by at least $1,000,000 above the base year

amount from the creation of new jobs up to the amount specified

in the commitment letter.

(b) Determination.--The annual taxable payroll in year one

for a new job shall be the sum of the amount of annual taxable

payroll in year one for the new jobs created above the taxable

payroll in the base year.

the taxpayer has increased the annual taxable payroll in year

one by at least $1,000,000 above the base year amount from the

creation of new jobs up to the amount specified and any other

conditions required by the department and specified in the

commitment letter, the taxpayer shall receive a manufacturing

tax credit certificate and filing information.

(d) Applicable taxes.--A taxpayer may apply the

manufacturing tax credit to 100% of the taxpayer's qualified tax

liability.

(e) Term.--A taxpayer may claim the manufacturing tax credit

for a period determined by the department, not to exceed the

earlier of:

(1) five years from the date the taxpayer receives the

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manufacturing tax credit certificate; or

(2) six years from the start date.

(f) Availability.--A manufacturing tax credit shall be made

available by the department on a first-come, first-served basis.

(g) Limitation.--The following shall apply:

(1) For [each] the fiscal year beginning [after June 30,

2017,] July 1, 2017, and ending June 30, 2018, $4,000,000 in

manufacturing tax credits shall be made available to the

department and may be awarded by the department in accordance

with this part. [In any fiscal year, the department may

reissue, assign or award prior fiscal year manufacturing tax

credits which have been recaptured under section 1808-G(a) or

(b) and may award prior fiscal year manufacturing tax credits

not previously issued.]

(2) For each fiscal year beginning after June 30, 2018,

the following shall apply:

(i) Ten million five hundred thousand dollars in

manufacturing tax credits shall be made available to the

department and may be awarded by the department in

accordance with this part. In any fiscal year, the

department may reissue, assign or award prior fiscal year

manufacturing tax credits which have been recaptured

under section 1808-G(a) or (b) and may award prior fiscal

year manufacturing tax credits not previously issued.

(ii) No less than $2,500,000 of the tax credits

authorized under this part shall be restricted to

taxpayers that are diverse and disadvantaged businesses

or are claiming a credit for new jobs created in an

economically distressed municipality. For taxpayers

comprised of a group of entities to meet the requirements

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of this paragraph, a majority of the increase in the

taxpayers' annual taxable payroll must be attributable to

entities that are diverse and disadvantaged businesses or

have created new jobs in economically distressed

municipalities.

Section 3. Article XVIII-G of the act is amended by adding a

part to read:

PART III

WORKFORCE DEVELOPMENT TAX CREDIT

Section 1841-G. Definitions.

The following words and phrases when used in this part shall

have the meanings given to them in this section unless the

context clearly indicates otherwise:

"Department." The Department of Community and Economic

Development of the Commonwealth.

"Diverse and disadvantaged businesses." The term as defined

in 62 Pa.C.S. § 2201 (relating to definitions).

"Economically distressed municipality." A municipality that

meets any of the following criteria:

(1) Is a municipality which has been determined to be

financially distressed under section 203(f) of the act of

July 10, 1987 (P.L.246, No.47), known as the Municipalities

Financial Recovery Act.

(2) Is a city, borough, town or township with a market

value per capita below the fifth percentile of all such

cities, boroughs, towns and townships, as certified annually

by the State Tax Equalization Board.

(3) Is located in a county having a personal income per

capita below the 15th percentile of all counties, as

certified annually by the Department of Revenue.

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(4) Is located in a county having an annual average

unemployment rate above the 70th percentile of all counties,

as determined annually by the Department of Labor and

Industry.

"Employee." A new hire or existing employee for whom a

taxpayer makes a workforce development investment to prepare the

new hire or existing employee to perform a full-time job in the

manufacturing sector which has an average wage at least equal to

the county average wage where the job is located and which

includes employer-provided health benefits.

"Manufacturing." The mechanical, physical or chemical

transformation of materials, substances or components into new

products that are creations of new items of tangible personal

property for sale.

"Pass-through entity." Any of the following:

(1) A partnership as defined in section 301(n.0).

(2) A Pennsylvania S corporation as defined in section

301(n.1).

(3) An unincorporated entity subject to section 307.21.

"Qualified tax liability." A taxpayer's tax liability under

Article III, IV, VI, VII, VIII, IX, XI or XV.

"Taxpayer." An entity that is engaged in the business of

manufacturing in this Commonwealth.

"Workforce development." Information access, lifelong

learning and employee training and retraining programs. The term

includes:

(1) vocational education programs;

(2) programs in community colleges, technical colleges

and postsecondary education institutions authorized to grant

diplomas and certificates and specialized associate,

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associate, baccalaureate and advanced degrees; and

(3) transitional support and work support services or

activities which enable a taxpayer's new hires and current

employees to engage in or prepare for job related functions.

"Workforce development tax credit." A tax credit for which

the department has issued a certificate under this part.

Section 1842-G. Eligibility.

In order to be eligible to receive a workforce development

tax credit, a taxpayer must demonstrate to the department the

following:

(1) A workforce development investment in its employees

of at least $50,000.

(2) The ability to maintain the jobs for which the

workforce development investment was made for a period of at

least five years from the start date.

(3) The intent to maintain existing operations in this

Commonwealth for a period of at least five years from the

start date.

Section 1843-G. Procedure.

(a) Application.--A taxpayer applying to claim a workforce

development tax credit must complete and submit to the

department a workforce development tax credit application on a

form and in a manner as determined by the department.

(b) Approval.--If the department approves the taxpayer's

application, the department and the taxpayer shall execute a

commitment letter containing the following:

(1) A description of the jobs that require an investment

in workforce development.

(2) The number of jobs for which the taxpayer made a

workforce development investment.

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(3) The amount of taxpayer's private capital invested in

workforce development.

(4) A description of the workforce development training

undergone by the taxpayer's employees.

(5) The maximum workforce development tax credit amount

the taxpayer may claim.

(6) A signed statement that the taxpayer intends to

maintain existing operations in this Commonwealth for at

least five years from the start date.

(7) Any other information as the department deems

appropriate.

signed by both the Commonwealth and the taxpayer, the taxpayer

must maintain the jobs for which the workforce development

investment was made for a period of at least five years and

continue operations in this Commonwealth for a period of five

years. If the taxpayer does not maintain the jobs for which the

workforce development investment was made or ceases operations

in this Commonwealth as provided for under this subsection, the

commitment letter shall be revoked and deemed to be null and

void.

Section 1844-G. Workforce development tax credit.

(a) Maximum amount.--The department may award a workforce

development tax credit of up to $100,000 or 50% of the

taxpayer's workforce development investment specified in

section 1843-G, whichever is less.

(b) Certificate.--After verification by the department that

the taxpayer has made an eligible workforce development

investment of at least $50,000 and any other conditions required

by the department and specified in the commitment letter, the

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taxpayer shall receive a workforce development tax credit

certificate and filing information.

development tax credit to 100% of the taxpayer's qualified tax

liability.

(d) Availability.--A workforce development tax credit shall

be made available by the department on a first-come, first-

served basis.

(e) Limitation.--The following shall apply:

(1) For each fiscal year beginning after June 30, 2018,

$2,000,000 in workforce development tax credits shall be made

available to the department and may be awarded by the

department in accordance with this part. In any fiscal year,

the department may reissue, assign or award prior fiscal year

workforce development tax credits which have been recaptured

under section 1848-G(a) or (b) and may award prior fiscal

year workforce development tax credits not previously issued.

(2) For each fiscal year beginning after June 30, 2018,

no less than $250,000 of the workforce development tax

credits authorized under this part shall be restricted to

taxpayers that are diverse and disadvantaged businesses or

are claiming a credit for workforce development in an

economically distressed municipality.

Section 1845-G. Limitations.

The following shall apply to workforce development tax

credits:

(1) If a taxpayer cannot use the entire amount of the

workforce development tax credit for the taxable year in

which the workforce development tax credit is first approved,

the excess may be carried over to succeeding taxable years

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and used as a credit against the qualified tax liability of

the taxpayer for the taxable years. Each time the workforce

development tax credit is carried over to a succeeding

taxable year, the workforce development tax credit shall be

reduced by the amount of the workforce development tax credit

used as a credit during the immediately preceding taxable

year. The workforce development tax credit may be carried

over and applied to succeeding taxable years for no more than

three taxable years following the first taxable year for

which the taxpayer was entitled to claim the credit.

(2) A workforce development tax credit approved by the

department in a taxable year shall first be applied against a

taxpayer's qualified tax liability for the current taxable

year as of the date on which the credit was approved before

the workforce development tax credit can be applied against

any tax liability under paragraph (1).

(3) A taxpayer shall not be entitled to carry back or

obtain a refund of all or any portion of an unused workforce

development tax credit granted to the taxpayer under this

part.

Section 1846-G. Sale or assignment.

(a) Application.--A taxpayer, upon application to and

approval by the department, may sell or assign, in whole or in

part, a workforce development tax credit granted to the

taxpayer. The following shall apply:

(1) The department and the Department of Revenue shall

jointly issue guidelines for the approval of applications

under this subsection.

(2) Before an application is approved, the Department of

Revenue must make a finding that the applicant has filed all

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required State tax reports and returns for all applicable

taxable years and paid any balance of State tax due as

determined at settlement, assessment or determination by the

Department of Revenue.

(3) Notwithstanding any other provision of law, the

Department of Revenue must settle, assess or determine the

tax of an applicant under this subsection within 90 days of

the filing of each required final return or report in

accordance with section 806.1(a)(5) of the act of April 9,

1929 (P.L.343, No.176), known as The Fiscal Code.

(b) Use by purchaser or assignee.--The purchaser or assignee

of all or a portion of a workforce development tax credit under

subsection (a) must immediately claim the credit in the taxable

year in which the purchase or assignment is made. The following

shall apply:

(1) The amount of the workforce development tax credit

that a purchaser or assignee may use against any one

qualified tax liability may not exceed 50% of the qualified

tax liability for the taxable year.

(2) The purchaser or assignee may not carry forward,

carry back or obtain a refund of or sell or assign the

workforce development tax credit.

(3) The purchaser or assignee shall notify the

Department of Revenue of the seller or assignor of the

workforce development tax credit in compliance with

procedures specified by the Department of Revenue.

Section 1847-G. Pass-through entity.

(a) General rule.--If a pass-through entity has any unused

tax credits under section 1845-G, the entity may elect in

writing, according to procedures established by the Department

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of Revenue, to transfer all or a portion of the credit to

shareholders, members of partners in proportion of the share of

the entity's distributive income to which the shareholder,

member or partner is entitled.

(b) Limitation.--A pass-through entity and a shareholder,

member or partner of a pass-through entity may not claim the

credit under subsection (a) for the same workforce development

investment.

pass-through entity to whom a credit is transferred under

subsection (a) shall immediately claim the credit in the taxable

year in which the transfer is made. The shareholder, member or

partner may not carry forward, carry back, obtain a refund of or

sell or assign the credit.

Section 1848-G. Penalties.

(a) Failure to maintain operations.--A taxpayer that

receives a workforce development tax credit and fails to

maintain existing operations related to the workforce

development tax credits in this Commonwealth for a period of at

least five years from the date the certificate is issued under

section 1844-G(b) must refund to the Commonwealth the total

amount of workforce development tax credits granted. The

Department of Revenue may issue an assessment, including

interest, additions and penalties, for the total amount of each

workforce development tax credit to be refunded to the

Commonwealth.

(b) Failure to maintain jobs.--A taxpayer which receives a

workforce development tax credit and fails to maintain the jobs

related to the workforce development tax credits for a period of

at least five years from the date the certificate is issued

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under section 1844-G(b) must refund to the Commonwealth the

total amount of workforce development tax credits granted. The

Department of Revenue may issue an assessment, including

interest, additions and penalties, for the total amount of

workforce development tax credits to be refunded to the

Commonwealth.

subsections (a) and (b) if it is determined that a taxpayer's

existing operations and jobs were not maintained because of

circumstances beyond the taxpayer's control. Circumstances shall

include natural disasters, unforeseen industry trends or a loss

of a major supplier or market.

Section 1849-G. Guidelines.

The department shall develop and publish guidelines necessary

to implement this part.

Section 4. This act shall take effect in 60 days.

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