Regular Session 2023-2024 House Bill 0653 P.N. 0592

PRINTER'S NO. 592

THE GENERAL ASSEMBLY OF PENNSYLVANIA

HOUSE BILL

No.

653

Session of

2023

INTRODUCED BY FREEMAN, JAMES, D. WILLIAMS, MADDEN, SANCHEZ,

HILL-EVANS, ZIMMERMAN, DELLOSO, WARREN, NEILSON AND CIRESI,

MARCH 21, 2023

REFERRED TO COMMITTEE ON FINANCE, MARCH 21, 2023

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," providing for tax credits for rehabilitation and

reconstruction of certain factory and mill buildings and for

a business tax credit.

The General Assembly of the Commonwealth of Pennsylvania

hereby enacts as follows:

Section 1. The act of March 4, 1971 (P.L.6, No.2), known as

the Tax Reform Code of 1971, is amended by adding an article to

read:

ARTICLE XVII-M

FACTORY OR MILL BUILDING

ECONOMIC REVITALIZATION

Section 1701-M. 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:

"Certifiable building." A factory or mill complex or a

building the use of which conforms to the comprehensive plan and

local land use management ordinances of the municipality in

which the factory or mill complex or building is located and

that:

(1) was constructed prior to January 1, 1973;

(2) has at least one floor, excluding a basement;

(3) has been, is or will be used primarily for

manufacturing, processing, wholesale trade and other

commercial purposes;

(4) is proposed for substantial rehabilitation;

(5) has been at a minimum 75% vacant for a minimum of 24

months at the time of submission by the municipality;

(6) is designated by the municipality for consideration

as a certifiable building as provided in this article; and

(7) meets any other requirement established by the

department.

"Certified building." A building with respect to which the

department has issued a written notice of final designation as a

certified building in accordance with section 1703-M.

"Certified building owner." An individual, partnership,

corporation, limited liability company or other entity which is

the owner of record of a certified building and may include one

or more successors in title to the owner of the building at the

time the building received written notice of final designation

as a certified building in accordance with section 1703-M. The

term includes the owner of a leasehold interest with a minimum

term of 30 years, with respect to which a memorandum of lease

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has been recorded in the office of the recorder of deeds of the

county.

"Department." The Department of Community and Economic

Development of the Commonwealth.

"Eligible business." Any business, corporation, sole

proprietorship, partnership, limited partnership or limited

liability company or other entity that:

(1) is located in a certified building after the

building has undergone substantial rehabilitation;

(2) is engaged principally in manufacturing, processing,

wholesale trade or other commercial business activities;

(3) has total Pennsylvania salaries and wages that

exceed the total Pennsylvania salaries and wages paid to its

employees in the prior calendar year;

(4) has received certification from the department in

accordance with rules and regulations of the department; and

(5) as part of its annual certification:

(i) obtains certificates of good standing from the

Department of Revenue, the Corporation Bureau of the

Department of State and the appropriate municipal

authority;

(ii) provides the department an affidavit stating

under oath that the entity seeking certification as an

eligible business has not within the preceding 12 months

from the date of application for certification changed

its legal status or location solely for the purpose of

gaining favorable treatment under this article; and

(iii) meets any other requirement as may be set

forth by the department.

"Factory or mill complex." One or more factory or mill

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buildings, located on the same or contiguous parcels of land,

each of which, at one time, had the same owner or owners.

"Qualified employee." A full-time employee of an eligible

business whose business activity originates and terminates from

within the eligible business and certified building on a daily

basis, who is employed by the eligible business at the end of

the calendar year and who is a resident of this Commonwealth.

"Qualified tax liability." Tax liability imposed on a

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

excluding any tax withheld by an employer under Article III.

"Rehabilitation and reconstruction costs." As follows:

(1) Only those amounts incurred and paid by the

certified building owner, after issuance of the notice of

final designation of the building, solely and exclusively for

the rehabilitation of the certified building and which are

incurred and paid by the certified building owner to acquire

tangible personal property and structural components of the

certified building which:

(i) are depreciated under 26 U.S.C. § 167 (relating

to depreciation);

(ii) have a useful life of three years or more as

evidenced by the tax depreciation method taken and shown

on the Federal tax return of the certified building

owner; and

(iii) are acquired by purchase as defined in 26

U.S.C. § 179(d) (relating to election to expense certain

depreciable business assets) .

(2) The term does not include amounts incurred or paid

with respect to tangible personal property and structural

components of the certified building which the certified

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building owner leases from any other person or corporation.

For purposes of this paragraph, any contract or agreement to

lease or rent or for a license to use the property shall be

considered a lease unless the contract or agreement is

treated for Federal income tax purposes of the certified

building owner as an installment purchase rather than a

lease.

"Salaries and wages." Salaries, wages, tips and other

compensation as defined in 26 U.S.C. § 61 (relating to gross

income defined).

"Substantial rehabilitation." Rehabilitation and

reconstruction costs of a certified building in a dollar amount

that equals or exceeds 20% of the appraised market value of the

certified building prior to rehabilitation or reconstruction, as

the prior market value is determined by a Commonwealth licensed

and certified appraiser who is independent of the certified

building owner or owners and their affiliated corporations and

any tenants of the certified building and their affiliated

corporations.

Section 1702-M. Building certification process.

(a) Initial consideration.--A municipality shall submit to

the department a list of industrial factory or mill structures

located within the municipality for consideration by the

department as to whether any of these structures qualify as

certifiable buildings. The department shall notify the

municipality as to which structures qualify as certifiable

buildings.

(b) Designation.--Eighteen months following the effective

date of this section, any building designated by the department

as a certifiable building may be submitted by the municipality

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to the department for preliminary designation as a certified

building if the municipality has given notice to the department:

(1) that within six months of the designation, the

municipality agrees to adopt an ordinance to:

(i) expedite the building permit review and approval

process required in the municipality for the

rehabilitation of certified buildings;

(ii) provide design standards in the municipality

which encourage historic preservation of certified

buildings and that conform to rehabilitation design

standards developed and recommended by the Pennsylvania

Historical and Museum Commission and the United States

Secretary of the Interior's Standards for the Treatment

of Historic Properties; and

(iii) require the review and approval by the

Pennsylvania Historical and Museum Commission be obtained

for the rehabilitation of any certified building in the

municipality;

(2) that within six months of the designation, the

municipality agrees to establish a program for eligible

businesses which coordinates the economic development

activities of State and local business assistance programs

and agencies; and

(3) that the building has been determined eligible for

listing on the National Register of Historic Places or is

already listed on the National Register of Historic Places.

may be treated as a separate building for purposes of this

article if:

(1) it consists of a clearly identifiable part of a

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certifiable building, including, without limitation, one or

more wings, stories or other separable portions of a

certifiable building;

(2) it is held by a single owner, whether in fee or as a

condominium, cooperative or leasehold interest; and

(3) at least one eligible business reasonably could be

operated within the confines of the portion of the building.

Section 1703-M. Notice of final designation of certified

building.

Upon notice to the department that the municipality has

satisfied the requirements of section 1702-M(b)(1) and (2), the

department shall provide to the municipality and to the

certified building owner a written notice of final designation,

which notice shall include a statement that an independent

appraisal is required in order to document substantial

rehabilitation.

Section 1704-M. Certified building rehabilitation.

(a) General rule.--A certified building shall be treated as

having been substantially rehabilitated only if the

reconstruction and rehabilitation expenditures incurred during

the 32-month period selected by the certified building owner and

ending with or within the taxable year in which the

rehabilitated certified building is first placed in service by

the certified building owner meet the definition of "substantial

rehabilitation." For purposes of determining whether the

certified building has been substantially rehabilitated, the

market value of the certified building shall be determined at

the beginning of the first day of the 32-month period.

(b) Special rule for phased rehabilitation.--In the case of

any rehabilitation which may reasonably be expected to be

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completed in phases set forth in architectural, engineering and

relevant historic preservation plans, documentation and

specifications completed before the rehabilitation begins,

subsection (a) shall be applied by substituting a 60-month

period for the 32-month period.

Section 1705-M. Tax credit.

(a) General rule.--A certified building owner may be allowed

a tax credit against the qualified tax liability of the owner.

(b) Eligible costs.--The taxpayer may claim a tax credit for

the rehabilitation and reconstruction costs of a certified

building which has been substantially rehabilitated. Once

substantial rehabilitation is established by the taxpayer, the

taxpayer may claim a tax credit for all rehabilitation and

reconstruction costs incurred with respect to the certified

building within five years from the date of final designation of

the certified building under section 1703-M.

rehabilitation and reconstruction costs of the certified

building. The tax credit shall be allowable in the year the

substantially rehabilitated certified building is first placed

into service, which is the year in which, under the taxpayer's

depreciation practice, the period for depreciation with respect

to the property begins or the year in which the property is

placed in a condition or state of readiness and availability for

its specifically assigned function, whichever is earlier.

(d) Limitations.--Amounts of unused tax credit may be

carried over and offset against the taxpayer's qualified tax

liability for a period not to exceed the following seven taxable

years. A taxpayer is not entitled to carry back, obtain a refund

for, sell or assign an unused tax credit.

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Section 1706-M. Business tax credit.

A taxpayer who owns and operates an eligible business within

a certified building that has been substantially rehabilitated

is allowed a tax credit against the qualified tax liability of

the taxpayer as follows:

(1) A tax credit equal to 100% of the total amount of

Pennsylvania salaries and wages as are paid to qualified

employees in excess of Pennsylvania salaries and wages paid

to the same employees in the prior calendar year. The maximum

tax credit allowable per taxable year under the provisions of

this paragraph is $7,000 per qualified employee.

(2) A tax credit provided in paragraph (1) shall not

offset any tax liability in years other than the year in

which the taxpayer qualifies for the tax credit. A taxpayer

is not entitled to carry back, obtain a refund of, sell or

assign an unused tax credit.

(3) In the case of multiple business owners, the tax

credit provided in paragraph (1) is apportioned according to

the ownership interests of the eligible business.

Section 1707-M. Interest income.

(a) Loans to eligible businesses.--A taxpayer is allowed a

tax credit of 15% of the qualified tax liability of the taxpayer

for interest earned and paid on loans made to eligible

businesses, solely and exclusively for expenditures within the

certified building.

(b) Loans for substantial rehabilitation.--The taxpayer is

further allowed a tax credit of 100% of the qualified tax

liability of the taxpayer for interest earned on loans made

solely and exclusively for the purpose of substantial

rehabilitation.

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offset any tax liability in taxable years other than the year in

which the taxpayer qualifies for the tax credit. A taxpayer is

not entitled to carry back, obtain a refund of, sell or assign

an unused tax credit.

(d) Amount.--The taxpayer is allowed a maximum tax credit of

$12,000 per taxable year under subsection (a). The taxpayer is

allowed a maximum tax credit of $25,000 per taxable year under

subsection (b).

Section 1708-M. Revocation of certification.

The department may revoke the certification of any building

certified under section 1703-M, and may revoke the eligibility

of any business defined as an eligible business, for

noncompliance with the provisions of this article.

Section 1709-M. Limitation.

The total aggregate amount of tax credits approved under this

article shall not exceed $13,000,000 in a fiscal year.

Section 1710-M. Penalties.

(a) Failure to maintain operations.--A certified building

owner that receives a tax credit and fails to substantially

maintain existing operations in the certified building for which

the tax credit is claimed for a period of five years from the

date the tax credit is first allowable shall be required to

refund to the Commonwealth the total amount of credit or credits

granted.

(b) Waiver.--The department may waive the penalty outlined

in subsection (a) if it is determined that a certified building

owner's operations were not maintained because of circumstances

beyond the owner's control, which circumstances include natural

disasters, unforeseen industry trends or a loss of a major

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supplier or market.

Section 1711-M. Regulations.

The department shall promulgate regulations as may be

necessary to administer this article.

Section 1712-M. Report to General Assembly.

(a) Report.--No later than June 1, 2024, and September 1 of

each year thereafter, the Secretary of Community and Economic

Development shall submit a report to the General Assembly

summarizing the effectiveness of the tax credits provided by

this article. The report shall include the names of all

taxpayers utilizing any tax credit under this article as of the

date of the report and the amount of credit approved for and

utilized by each taxpayer. The report may also include any

recommendations for changes in the calculation or administration

of the tax credits. The report shall be submitted to the

chairperson and minority chairperson of the Appropriations

Committee of the Senate, the chairperson and minority

chairperson of the Appropriations Committee of the House of

Representatives, the chairperson and minority chairperson of the

Finance Committee of the Senate and the chairperson and minority

chairperson of the Finance Committee of the House of

Representatives.

(b) Public information.--Notwithstanding any law providing

for the confidentiality of tax records, the information in the

report shall be public information, and all report information

shall be posted on the department's publicly accessible Internet

website.

Section 2. The addition of Article XVII-M of the act applies

to tax years beginning after December 31, 2023.

Section 3. This act shall take effect immediately.

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