Regular Session 2019-2020 House Bill 1173 P.N. 1359

PRINTER'S NO. 1359

THE GENERAL ASSEMBLY OF PENNSYLVANIA

HOUSE BILL

No.

1173

Session of

2019

INTRODUCED BY FREEMAN, JAMES, SOLOMON, BERNSTINE, BARRAR,

SCHLOSSBERG, KINSEY, SAMUELSON, MILLARD, SAINATO, MURT, HILL-

EVANS, VITALI, HARKINS, NEILSON, GILLEN, KORTZ, MOUL, ROZZI,

RADER, PASHINSKI AND STURLA, APRIL 10, 2019

REFERRED TO COMMITTEE ON FINANCE, APRIL 10, 2019

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 historic preservation incentive tax credit,

further providing for definitions and for tax credit

certificates, establishing the Historic Rehabilitation Tax

Credit Administration Account, further providing for

carryover, carryback and assignment of credit and for pass-

through entity, providing for annual report to General

Assembly, further providing for application of Internal

Revenue Code and for limitation and providing for recapture.

The General Assembly of the Commonwealth of Pennsylvania

hereby enacts as follows:

Section 1. Sections 1702-H, 1703-H, 1705-H(d) and (e) and

1706-H of the act of March 4, 1971 (P.L.6, No.2), known as the

Tax Reform Code of 1971, are amended to read:

Section 1702-H. Definitions.

The following words and phrases when used in this article

shall have the meanings given to them in this section unless the

context clearly indicates otherwise:

"Commission." The Pennsylvania Historical and Museum

Commission.

"Completed project." The completion of the [restoration]

rehabilitation of a qualified historic structure in accordance

with a qualified rehabilitation plan and the receipt of an

occupancy certificate for the structure.

"Department." The Department of Revenue of the Commonwealth.

"Internal Revenue Code." The Internal Revenue Code of 1986

(Public Law 99-514, 26 U.S.C. § 1 et seq.).

"Qualified expenditures." The costs and expenses incurred by

a qualified taxpayer in the [restoration] rehabilitation of a

qualified historic structure pursuant to a qualified

rehabilitation plan and which are defined as qualified

rehabilitation expenditures under section 47(c)(2) of the

Internal Revenue Code of 1986 (Public Law 99-514, 26 U.S.C. §

47(c)(2)).

"Qualified historic structure." A [commercial] building

located in this Commonwealth that qualifies as a certified

historic structure under section 47(c)(3) of the Internal

Revenue Code of 1986 (Public Law 99-514, 26 U.S.C. § 47(c)(3)).

"Qualified rehabilitation plan." A plan to rehabilitate a

qualified historic structure that is approved by the

Pennsylvania Historical and Museum Commission as being

consistent with the standards for rehabilitation and guidelines

for rehabilitation of historic buildings as adopted by the

United States Secretary of the Interior.

"Qualified tax liability." Tax liability imposed on a

taxpayer under Article III, IV, VI, VII, VIII, IX, XI or XV,

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excluding any tax withheld by an employer under Article III.

"Qualified taxpayer." Any natural person, corporation,

business trust, limited liability company, partnership, limited

liability partnership, association or any other form of legal

business entity that:

(1) Is subject to a tax imposed under Article III, IV,

VI, VII, VIII, IX, XI or XV, excluding any tax withheld by an

employer under Article III.

(2) Owns a qualified historic structure.

"Region." A community action team region as established by

the Department of Community and Economic Development.

"Workforce housing." A completed project in which at least

5% of the units meet the Department of Housing and Urban

Development's definition of "affordable" for individuals earning

80% of the area median income for a period of seven years after

the building is placed in service.

Section 1703-H. Tax credit certificates.

(a) Application.--

(1) A qualified taxpayer may apply to the Department of

Community and Economic Development for a tax credit

certificate under this section.

(2) The application shall be on the form required by the

Department of Community and Economic Development [and], shall

include a qualified rehabilitation plan[.], shall state

whether the project meets the definition of "workforce

housing" and, if applicable, shall include the plan for the

project to meet the definition of "workforce housing."

[(3) The application shall be filed on or before

February 1 for qualified expenditures incurred and to be

incurred in connection with the completed project.]

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(3) The Department of Community and Economic Development

shall establish an application processing fee. The fee

structure shall be tiered based on the amount of tax credits

requested and in no case shall exceed $2,000.

(4) The proceeds of the fee under paragraph (3) shall be

deposited into the Historic Rehabilitation Tax Credit

Administration Account, which is established as a special

fund in the State Treasury. The money in the account shall be

appropriated on a continuing basis to the Department of

Community and Economic Development and used by the commission

and the Department of Community and Economic Development to

offset the costs of the review of tax credit applications and

awarding of tax credit certificates.

(5) The Department of Community and Economic Development

shall begin accepting applications for credit certificates on

October 1 and close the initial application period on October

31.

(b) Review, recommendation and approval.--

(1) The Department of Community and Economic Development

shall forward applications received under this section to the

commission for review.

[(2) The commission shall review the proposed

rehabilitation plan, verify that the building is a qualified

historic structure and recommend approval or disapproval to

the Department of Community and Economic Development within

30 days of receipt of the application. The commission shall

notify the qualified taxpayer within 15 days of its

determination.]

(2.1) The commission shall review the proposed

rehabilitation plan in each application, verify that the

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building is a qualified historic structure and by December 1

provide the Department of Community and Economic Development

a list of eligible projects.

(2.2) The Department of Community and Economic

Development shall allocate the credits and release a list of

allocated projects within 15 days. Applicants with approved

allocations shall be provided with an award letter.

(2.3) Any amount of tax credit certificates up to the

annual program limit of $30,000,000 not awarded within the

initial application period shall be available on a first-

come, first-served basis through a process determined by the

Department of Community and Economic Development.

(3) The commission shall notify the Department of

Community and Economic Development of verification of a

completed project and notify the Department of Community and

Economic Development of the amount of qualified expenditures

incurred by the taxpayer in connection with the completed

project.

(4) If the Department of Community and Economic

Development has approved the application and received

notification of a completed project, it shall issue the

qualified taxpayer a tax credit certificate [by April 1]

within 45 days of the receipt of an approved, completed

project. A tax credit certificate issued under this section

shall not exceed [25%] either:

(i) twenty-five percent of qualified expenditures

determined by the commission to have been incurred by the

qualified taxpayer in connection with the completed

project[.]; or

(ii) thirty percent of qualified expenditures

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determined by the commission to have been incurred by the

qualified taxpayer in connection with a completed

workforce housing project.

(5) In granting tax credit certificates under this

article, the Department of Community and Economic

Development:

(i) Shall not grant more than [$3,000,000]

$30,000,000 in tax credit certificates in any fiscal year

exclusive of any tax credit certificates not awarded or

returned from previous fiscal years.

(ii) Shall not grant more than [$500,000] $2,500,000

in tax credit certificates to a single qualified taxpayer

in any fiscal year.

(iii) Shall assure that credits are awarded in an

equitable manner to each region in this Commonwealth.

However, credits allocated to a region that are unclaimed

shall be promptly reallocated to eligible projects in

other regions.

(6) Tax credits under this article shall be made

available on a first-come, first-served basis within the

limitation established under subsection (b)(5).

Section 1705-H. Carryover, carryback and assignment of credit.

* * *

(d) Sale or assignment.--The following shall apply:

(1) A qualified taxpayer or a purchaser or assignee of

the tax credit or a shareholder, member or partner of a pass-

through entity that was transferred the tax credit or a

portion of the tax credit from such pass-through entity

subject to section 1706-H, upon application to and approval

by the Department of Community and Economic Development, may

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sell or assign[, in whole or in part,] a tax credit granted

to the qualified taxpayer under this article[.] without

regard to its actual ability to use the credit against its

qualified tax liability. Any sale or assignment, whether by a

qualified taxpayer or a purchaser or assignee of the tax

credit or a shareholder, member or partner of a pass-through

entity, pursuant to this paragraph, may be of the whole tax

credit or any part or parts thereof.

(2) Before an application is approved, the department

must find that the applicant has filed all 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.

(e) Purchasers and assignees.--[The purchaser or assignee of

all or a portion of a tax credit obtained under section 1703-H

shall immediately claim the credit in the taxable year in which

the purchase or assignment is made. The purchaser or assignee

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

or assign the tax credit. The purchaser or assignee shall notify

the department of the seller or assignor of the tax credit in

compliance with procedures specified by the department.]

(1) If a purchaser or assignee of all or a portion of a

tax credit obtained under section 1703-H cannot use the

entire amount of the tax credit for the taxable year in which

the tax credit was purchased or assigned, the excess may be

carried over to succeeding taxable years and used as a credit

against the qualified tax liability of the purchaser or

assignee for those taxable years.

(2) Each time the tax credit is carried over to a

succeeding taxable year, the tax credit shall be reduced by

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the amount that was used as a credit during the immediately

preceding taxable year.

(3) The tax credit obtained by the purchaser or assignee

may be carried over and applied to succeeding taxable years

for not more than seven taxable years following the first

taxable year for which the original qualified taxpayer was

entitled to claim the credit.

(4) The purchaser or assignee may not carry back the

credit or obtain a refund.

(5) The purchaser or assignee shall be permitted to make

a further sale or assignment of the credit. The purchaser or

assignee shall notify the department of the seller or

assignor of the tax credit in compliance with procedures

specified by the department.

Section 1706-H. Pass-through entity.

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

tax credit under section 1705-H, it may elect, in writing,

according to procedures established by the department, to

transfer all or a portion of the credit to its shareholders,

members or partners in [proportion to the share of the entity's

distributive income to which the shareholder, member or partner

is entitled.] any manner agreed to by the shareholders, members

or partners without regard to their sharing or other economic

attributes. A shareholder, member or partner that is transferred

a tax credit or a portion of a tax credit may elect to sell or

assign that credit under the provisions of section 1705-H(d).

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

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

credit under subsection (a) for the same qualified expenditures.

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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.]

(1) If a shareholder, member or partner of a pass-

through entity that is transferred a tax credit or a portion

of a tax credit under subsection (a) cannot use the entire

amount of the tax credit for the taxable year in which the

tax credit is transferred, the excess may be carried over to

succeeding taxable years and used as a credit against the

qualified tax liability of the shareholder, member or partner

for those taxable years.

(2) Each time the tax credit is carried over to a

succeeding taxable year, the tax credit shall be reduced by

the amount that was used as a credit during the immediately

preceding taxable year.

(3) The tax credit transferred to a shareholder, member

or partner may be carried over and applied to succeeding

taxable years for not more than seven taxable years following

the first taxable year for which the original qualified

taxpayer was entitled to claim the credit.

(4) A shareholder, member or partner may not carry back

the credit or obtain a refund.

(5) A shareholder, member or partner may sell or assign

the tax credit or a portion of a tax credit without regard to

its ability to use the tax credit against qualified tax

liability.

Section 2. The act is amended by adding a section to read:

Section 1707.1-H. Annual report to General Assembly.

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(a) Report on tax credit.--By October 1, 2020, and October 1

of each year thereafter, the Department of Community and

Economic Development shall submit a report on the tax credit

under this article to:

(1) The chairperson and minority chairperson of the

Appropriations Committee of the Senate.

(2) The chairperson and minority chairperson of the

Appropriations Committee of the House of Representatives.

(3) The chairperson and minority chairperson of the

Finance Committee of the Senate.

(4) The chairperson and minority chairperson of the

Finance Committee of the House of Representatives.

(b) Report content.--The report shall include:

(1) The list of projects that have been awarded tax

credits.

(2) The amount of Federal rehabilitation tax credits

received by each completed project.

(3) The amount of State historic preservation incentive

tax credits awarded per project.

(4) Total project costs and the amount of private

investment in each completed project.

(5) The total number of completed projects placed into

service in the past year that were vacant for at least 12

months prior to commencement of redevelopment work.

(6) The total number of completed projects placed into

service in the past year that had not paid property taxes for

at least 12 months prior to the commencement of redevelopment

work.

(7) The total number of temporary construction jobs and

permanent jobs created by completed projects placed into

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service in the prior year.

(8) The amount of completed workforce housing projects

placed into service in the prior year.

Notwithstanding any law providing for the confidentiality of tax

records, the information in the report shall be public

information and shall be posted on the Department of Community

and Economic Development's publicly accessible Internet website.

(d) Review of tax credit program.--The Department of

Community and Economic Development, in cooperation with the

commission, shall undertake a review of the Historic

Preservation Incentive Tax Credit Program to determine the

effectiveness of the program in preserving and rehabilitating

the Commonwealth's historic structures and the impact these

preservation efforts have in stimulating investment in this

Commonwealth. The results of the review shall be included in the

annual report due October 1, 2025.

Section 3. Sections 1708-H and 1709-H of the act are amended

to read:

Section 1708-H. Application of Internal Revenue Code.

The provisions of section 47 of the Internal Revenue Code and

the regulations promulgated regarding those provisions shall

apply to the department's interpretation and administration of

the credit provided under this article without regard to ratably

allocating the credit over a five-year period as required by

section 47(a) of the Internal Revenue Code. References to the

Internal Revenue Code shall mean the sections of the Internal

Revenue Code as existing on any date of interpretation of this

article, except, if those sections of the Internal Revenue Code

referenced in this article are repealed or terminated,

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references to the Internal Revenue Code shall mean those

sections last having full force and effect without regard to

ratably allocating the credit over a five-year period as

required by section 47(a) of the Internal Revenue Code. If after

repeal or termination the Internal Revenue Code sections are

revised or reenacted, references in this article to Internal

Revenue Code sections shall mean those revised or reenacted

sections.

Section 1709-H. Limitation.

Taxpayers shall not be entitled to apply for historic

preservation tax credits after [the seventh fiscal year

following the effective date of this article] February 1, 2031.

Section 4. The act is amended by adding a section to read:

Section 1710-H. Recapture.

In the event that a tax credit or a portion of a tax credit

is subject to recapture and the tax credit has been purchased,

assigned or transferred, the State shall pursue its recapture

remedies and rights against the qualified taxpayer that applied

for the credit. No redress shall be sought against an assignee,

purchaser or transferee of the tax credit if the assignee,

purchaser or transferee acquired the tax credit by way of an

arm's-length transaction, for value and without notice of

violation, fraud or misrepresentation.

Section 5. This act shall take effect in 60 days.

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