Amendment 9950 to House Bill 2413 P.N. 3508, Regular Session 2017-2018

H2413B3508A09950 AJM:CDM 10/05/18 #90 A09950

AMENDMENTS TO HOUSE BILL NO. 2413

Sponsor: REPRESENTATIVE GREINER

Printer's No. 3508

Amend Bill, page 1, lines 10 through 20, by striking out "in

personal income tax, further providing for" in line 10 and all

of lines 11 through 20 and inserting

in personal income tax, further providing for tax withheld, for

withholding tax requirement for nonemployer payors, for

information statement for nonemployer payors, for information

statement for payees, for time for filing payor's returns,

for payment of taxes withheld for nonemployer payors, for

liability for withheld taxes, repealing provisions relating

to payor's liability for withheld taxes, further providing

for bulk and auction sales and transfers, notice, repealing

provisions relating to payor's failure to withhold, providing

for annual withholding return, further providing for amount

of withholding tax and for treatment of nonresident partners,

members, or shareholders, repealing provisions relating to

withholding on income and to annual withholding statement,

further providing for requirements concerning returns,

notices, records and statements, for interest and for

additions, penalties and fees.

Amend Bill, page 1, lines 23 through 26; pages 2 through 15,

lines 1 through 30; page 16, line 1; by striking out all of said

lines on said pages and inserting

Section 1. Sections 312, 316.2, 317.1, 317.2, 318.1 and

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

Tax Reform Code of 1971, amended or added October 30, 2017

(P.L.672, No.43), are amended to read:

Section 312. Tax Withheld.--(a) The amount withheld under

[section 316.1] sections 316.1 and 316.2 shall be allowed to the

taxpayer from whose income the tax was withheld as a credit

against the tax imposed on him by this article.

(b) The credit under subsection (a) shall be allowed for the

person's taxable year in which the tax was withheld.

Section 316.2. Withholding Tax Requirement for Nonemployer

Payors and Lessees.--(a) To the extent not already required to

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withhold tax on payments under section 316.1, a person that

makes the following types of payments, who is also required to

issue or voluntarily issues Federal form 1099-MISC for such

payments shall deduct and withhold from the payments an amount

equal to the amount of the payment required to be reported on

the Federal form 1099-MISC multiplied by the tax rate specified

under section 302(b):

(1) [makes] payments totaling $5,000 or more of income from

sources within this Commonwealth described in section 303(a)(1)

or (2) during the calendar year to either a nonresident

individual or an entity that is classified as a disregarded

entity under section 307.21 that [has a nonresident member; and

(2) is required under section 335(f)(1) to file a copy of

form 1099-MISC with the department regarding the payments;

shall deduct and withhold from the payments an amount equal to

the net amount of the payments multiplied by the tax rate

specified under section 302(b).

(b) Withholding of tax by payors is optional and at the

discretion of the payor with respect to payees who receive

payments of less than $5,000 annually from the payor.

to a payee if the payor is:

(1) The United States or an agency or instrumentality

thereof; or

(2) The Commonwealth or an agency, instrumentality or

political subdivision thereof.

(d) The department may prescribe regulations to implement

and clarify the withholding requirement set forth in this

section.] is owned by a nonresident individual; or

(2) lease payments totaling $5,000 or more for real estate

in this Commonwealth to a nonresident lessor either directly or

indirectly through a management company or other agent

authorized to receive the lease payments on behalf of the

nonresident lessor.

(b) Withholding of tax by a payor or lessee is optional and

at the discretion of a payor or lessee with respect to payments

of income from sources within this Commonwealth of less than

$5,000 annually.

reasonably expect total payments of income from sources within

this Commonwealth to a payee or lessor to be at least $5,000

during the calendar year, the payor or lessee shall begin to

withhold tax once the payor or lessee reasonably expects that

total payments of income from sources within this Commonwealth

to the payee will be at least $5,000 during the calendar year.

The payor or lessee will not be required to withhold tax on

payments made prior to that time.

(d) A management company acting as an agent for a lessee may

withhold and remit the tax on behalf of the lessee. A management

company that withholds the tax on behalf of the lessee becomes

jointly and severally liable with the lessee for the tax. A

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lessee is not relieved from liability for withholding tax if the

management company fails to withhold and remit the tax.

(e) A management company, agent or payee that withholds its

compensation from a payment from a lessee or other person shall

remit to the lessor or payor with the balance of the payment any

tax required to be withheld under this section. If no portion of

the payment is remitted to the lessor or payor, the management

company, agent or payee must remit the amount of the withheld

tax to the lessor or payor within thirty (30) days of receipt of

the payment from the lessee or other person. The lessor or payor

must remit and report the tax in accordance with sections 318.1

and 319.1.

(f) Except as provided in subsection (g), in instances where

a payment to a payee is attributable to business engaged in, or

services performed both within and without this Commonwealth,

the portion of the payment constituting income from sources

within this Commonwealth for withholding purposes shall be

determined by multiplying the payment times the fraction of time

spent in this Commonwealth engaging in business or performing

services in this Commonwealth to which the payment relates over

total time spent engaging in business or performing services

everywhere to which the payment relates. Time spent shall be

measured in days, hours or any other unit of time that results

in a fair and equitable determination of income from sources

within this Commonwealth.

(g) If the payment is based upon volume of activity,

including commissions of a salesman, the portion of the payment

constituting income from sources within this Commonwealth would

be apportioned based upon the volume of activity within and

outside this Commonwealth.

(h) (1) A payor or lessee is not required to withhold the

tax under this section if the payee or lessee provides a

certification that:

(i) the payee or lessor is a resident of this Commonwealth;

(ii) the payee or lessor is not subject to tax under this

article.

(2) The certification may be on a form prescribed by the

department or a substitute form as long as the form contains the

information necessary for the payor or lessee to determine

whether withholding is required, and the payee or lessor signs

the form.

(i) If a payment relates to business engaged or services

performed within or outside this Commonwealth, a nonresident

payee shall provide the payor with the portion of the payment

that is attributable to business engaged or services performed

within this Commonwealth as determined in accordance with

subsections (f) and (g).

(j) If a payee or lessor fails to provide the required

information under subsection (h) or a payee fails to provide the

required information in subsection (i), the payor or lessee

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shall withhold tax on one hundred per cent of each payment until

the payee or lessor provides the required information. The payor

or lessee may not be required to adjust the tax withheld on any

payment made prior to receipt of the required information.

(k) A payor or lessee that, in good faith, relies upon

information that a payee or lessor provides under subsections

(h) and (i) may not be subject to the imposition of a tax under

section 320, interest and penalty under this article if the

department determines that the payee or lessor was subject to

withholding under this section or the payee erroneously provided

the payor with the amount of a payment constituting income from

sources within this Commonwealth.

(l) The department may promulgate regulations necessary to

implement the withholding requirements of this section.

(m) This section shall not apply to payments made by a payor

or lessee who is:

(1) the United States or an agency or instrumentality

thereof;

(2) the Commonwealth or an agency, instrumentality or

political subdivision thereof; or

(3) a lessee under a residential lease.

(n) For purposes of this section, the term or phrase:

"Lease payment." Includes, but is not limited to, rents,

royalties, bonus payments, damage payments, delay rents and

other payments that are made pursuant to a lease other than

compensation derived from intangible property having a taxable

or business situs in this Commonwealth. Classification as a

"lease payment" under this section is solely for the purpose of

establishing withholding requirements and is not relevant for

determining the proper income classification of the lease

payment.

"Lessor." An individual, estate or trust.

Section 317.1. [Information Statement for Nonemployer

Payors.--Every payor required to deduct and withhold tax under

section 316.2 shall furnish to a payee to whom the payor has

paid income from sources within this Commonwealth during the

calendar year a copy of form 1099-MISC required under section

335(f)(1). The copy of form 1099-MISC required by this section

for each calendar year shall be forwarded to the payee on or

before March 1 of the year succeeding the calendar year.]

Information Statement.--(a) Every person required to deduct and

withhold tax under section 316.2 shall furnish to a payee or

lessee to whom the person has paid income during the calendar

year and the department a copy of the Federal form 1099-MISC

reporting the payment. The copy of form 1099-MISC required by

this section for each calendar year shall be forwarded to the

payee or lessor and the department on or before the date the

person is required to furnish the form for Federal income tax

purposes. The form shall include the amount of the payment

subject to withholding under this part and the amount of

Pennsylvania tax withheld in accordance with section 316.2.

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(b) A person that files a corrected Federal form 1099-MISC

for Federal income tax purposes shall file a corrected Federal

form 1099-MISC with the department if there is a change in

income from sources within this Commonwealth of a payee or

lessor or if a person erroneously reports income from sources

within this Commonwealth or the amount of tax withheld.

with the department.

Section 317.2. Information Statement for Payees or

Lessors.--Every payee or lessor receiving a [copy of] Federal

form 1099-MISC [from a payor] under section 317.1 shall file a

[duplicate of such information return with the payee's] copy

with his or her State income tax return.

Section 318.1. Time for Filing [Payors'] Nonemployer Payer

and Lessee Withholding Returns.--Every [payor] person required

to deduct and withhold tax under section 316.2 shall file a

quarterly withholding return with the department on or before

the last day of April, July, October and January for each three-

month period ending the last day of March, June, September and

December. The quarterly returns shall be filed with the

department [in the manner prescribed by regulation.] beginning

with the quarter in which the tax is required to be remitted

under section 319.1.

Section 319.1. Payment of Taxes Withheld for Nonemployer

Payors and Lessees.--Every [payor] person withholding tax under

section 316.2 shall pay over to the department or to a

depository designated by the department the tax required to be

deducted and withheld under section 316.2. The time for paying

over the withheld tax shall be as set forth in section 319(1),

(2), (3) and (4).

Section 2. Section 320 of the act is amended to read:

Section 320. Liability for Withheld Taxes.--[Every] Except

as otherwise provided in this part, every person required to

deduct and withhold tax or voluntarily deducts and withholds tax

under [section 316.1] sections 316.1 and 316.2 is hereby made

liable for such tax. For purposes of assessment and collection,

any amount required to be withheld and paid over to the

department, any amount voluntarily withheld and paid over to the

department and any additions to tax, penalties and interest with

respect thereto, shall be considered the tax of the person. All

taxes deducted and withheld pursuant to [section 316.1 or under

color of section 316.1] sections 316.1 and 316.2 shall

constitute a trust fund for the Commonwealth and shall be

enforceable against such person, his representative or any other

person receiving any part of such fund.

Section 3. Section 320.1 of the act is repealed:

[Section 320.1. Payor's Liability for Withheld Taxes.--Every

payor required to deduct and withhold tax under section 316.2 is

hereby made liable for such tax. For purposes of assessment and

collection, any amount required to be withheld and paid over to

the department and any additions to tax, penalties and interest

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with respect thereto shall be considered the tax of the payor.

All taxes deducted and withheld from payees pursuant to section

316.2 or under color of section 316.2 shall constitute a trust

fund for the Commonwealth and shall be enforceable against such

payor, his representative or any other person receiving any part

of such fund.]

Section 4. Section 321.1 of the act is amended to read:

Section 321.1. Bulk and Auction Sales and Transfers,

Notice.--[(a) An employer] A person that is liable for filing

returns in accordance with the provisions of this part and

either sells or causes to be sold at auction, or sells or

transfers in bulk, fifty-one per cent or more of any stock of

goods, wares or merchandise of any kind, fixtures, machinery,

equipment, buildings or real estate held by or on behalf of the

employer shall be subject to the provisions of section 1403 of

"The Fiscal Code."

Section 5. Section 321.2 of the act is repealed:

[Section 321.2. Payor's Failure to Withhold.--If a payor

fails to deduct and withhold tax as prescribed under section

316.2 and thereafter the tax which may be credited is paid, the

tax which was required to be deducted and withheld shall not be

collected from the payor, but the payor shall not be relieved of

the liability for any penalty, interest or additions to the tax

imposed with respect to such failure to deduct and withhold.]

Section 6. The act is amended by adding a section to read:

Section 323.1. Annual Withholding Return.--A person required

to withhold tax under this part shall file an annual withholding

return in a time and in such manner as the department may

prescribe showing the total payments subject to withholding and

the total amount of tax deducted, withheld and remitted.

Section 7. Sections 324.1 and 324.2 of the act, amended

October 30, 2017 (P.L.672, No.43), are amended to read:

Section 324.1. Amount of Withholding Tax.--(a) The amount

of tax withheld [from nonresidents and the amount of the

withholding tax payable] under section 324 shall be equal to the

income from sources within this Commonwealth of the partnership,

association or Pennsylvania S corporation which is allocable to

nonresident partners, members or shareholders multiplied by the

tax rate specified in section 302(b).

(b) There shall not be taken into account any item of

income, gain, loss or deduction to the extent allocable to any

partner, member or shareholder who is not a nonresident.

[(c) There shall not be taken into account any share of

income of nonresident partner, member or shareholder from

sources within this Commonwealth to the extent that the amount

was subject to withholding under section 324.4 and to the extent

withholding actually occurred under section 324.4 by the time

withholding is required to be made by the partnership,

association or Pennsylvania S corporation under section 324.]

Section 324.2. Treatment of Nonresident Partners, Members or

Shareholders.--[(a)] Each nonresident partner, member,

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shareholder or holder of a beneficial interest shall be allowed

a credit for such partner's, member's, shareholder's or holder

of a beneficial interest's share of the withholding tax paid by

the partnership, association or Pennsylvania S corporation. Such

credit shall be allowed for the partner's, member's,

shareholder's or holder of a beneficial interest's taxable year

in which, or with which, the partnership, association or

Pennsylvania S corporation taxable year (for which such tax was

paid) ends.

[(b) Each nonresident lessor shall be allowed a credit for

the nonresident lessor's share of the withholding tax paid by

the lessee under section 324.4.

nonresident lessor's taxable year in which the lessee withheld

tax.]

Section 8. Sections 324.4 and 324.5 of the act are repealed:

[Section 324.4. Withholding on Income.--(a) Every lessee of

Pennsylvania real estate who makes a lease payment in the course

of a trade or business to a nonresident lessor shall withhold

Pennsylvania personal income tax on rental payments to such

nonresident lessor.

(b) Every lessee shall withhold from each payment made to a

lessor an amount equal to the net amount payable to the lessor

multiplied by the tax rate specified under section 302(b).

(d) The withholding of tax under this section is optional

and at the discretion of the lessee with respect to payments to

a lessor who receives less than $5,000 annually on a lease.

(e) For purposes of this section, the term or phrase:

(1) "Lessor" shall include an individual, estate or trust.

(2) "Lease payment" shall include, but not be limited to,

rents, royalties, bonus payments, damage payments, delay rents

and other payments made pursuant to a lease, other than

compensation derived from intangible property having a taxable

or business situs in this Commonwealth. Classification as a

"lease payment" under this section is solely for the purposes of

establishing withholding requirements and shall not be relevant

for a determination as to the proper income classification of

any such lease payment.

(3) "In the course of a trade or business" shall include any

person or business entity making lease payments to a nonresident

or agent of a nonresident who collects rent or lease payments on

behalf of a nonresident owner other than a tenant of residential

property.

Section 324.5. Annual Withholding Statement.--(a) Every

lessee shall furnish to each lessor an annual statement at such

time and in such manner as may be prescribed by the department

showing the total payments made by the lessee to the lessor

during the preceding taxable year and showing the amount of the

tax deducted and withheld from the payments under section 324.4.

(b) Every lessee shall file with the department an annual

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statement at such time and in such manner as may be prescribed

by the department showing the total payments made to each lessor

subject to withholding during the preceding taxable year or any

portion of the preceding taxable year and the total amount of

tax deducted and withheld under section 324.4.

statement furnished by the lessee under this section with the

lessor's State income tax return.]

Section 9. Section 335(f), amended October 30, 2017

(P.L.672, No.43), is amended to read:

Section 335. Requirements Concerning Returns, Notices,

Records and Statements.--* * *

[(f) The following apply:

(1) Any person who:

(i) makes payments of Pennsylvania source income that fall

within any of the eight classes of income enumerated in section

303(a);

(ii) makes such payments to an individual, an entity treated

as a partnership for tax purposes or a single member limited

liability company; and

(iii) is required to make a form 1099-MISC return to the

Secretary of the Treasury of the United States with respect to

such payments, shall file a copy of such form 1099-MISC with the

department and send a copy of such form 1099-MISC to the payee

by March 1 of each year or, if filed electronically, by March 31

of each year. If the form 1099-MISC filed by a payor with the

Secretary of the Treasury of the United States is not completed

in such a manner that State income and State tax withheld

information, currently boxes 16 through 18 on Federal form 1099-

MISC, is reflected thereon, the payor shall update the copies of

form 1099-MISC to be provided pursuant to this section to

reflect such information prior to filing it with the department

and sending it to the payee.

(2) If the payor is required to perform electronic filing

for Pennsylvania employer withholding purposes, the form 1099-

MISC shall be filed electronically with the department.

(3) As used in this subsection, the following words and

phrases shall have the meanings given to them in this paragraph

unless the context clearly indicates otherwise:

"Payee." The person receiving the payments subject to

withholding under this subsection.

"Payments." The term does not include a partner or

shareholder's distributive share of income from a partnership or

Pennsylvania S corporation.

"Payor." The person required to withhold under this

subsection.]

* * *

Section 10. Section 351 of the act is amended to read:

Section 351. Interest.--* * *

(b) [If] Except as otherwise provided in Part VII, if any

amount of tax required to be withheld [by an employer] and paid

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to the department under Part VII of this article is not paid by

the due date prescribed under section 319 or 319.1, interest on

the amount at the rate established under section 806 of "The

Fiscal Code" shall be paid from that date for the period of

underpayment.

Section 11. Section 352(f), (h) and (j) of the act, amended

October 30, 2017 (P.L.672, No.43), are amended to read:

Section 352. Additions, Penalties and Fees.--* * *

(f) (1) Any person required under the provisions of section

317 to furnish a statement to an employe who wilfully furnishes

a false or fraudulent statement, or who wilfully fails to

furnish a statement in the manner, at the time, and showing the

information required under section 317 and the regulations

prescribed thereunder, shall, for each such failure, be subject

to a penalty of fifty dollars ($50) for each employe.

(2) Any person required to furnish an information return who

furnishes a false or fraudulent return or who fails to file or

provide an information return shall be subject to a penalty of

two hundred fifty dollars ($250).

(3) Every partnership, estate, trust or Pennsylvania S

corporation required to file a return with the department under

the provisions of section 330.1 or 335(c) who furnishes a false

or fraudulent return or who fails to file the return in the

manner and at the time required under section 330.1 or 335(c)

shall be subject to a penalty of $250 for each failure.

(4) Any person required to file a copy of form 1099-MISC

with the department under the provisions of section [335(f)]

317.1 who wilfully furnishes a false or fraudulent form or who

wilfully fails to file the form in the manner, at the time and

showing the information required under section [335(f)] 317.1

shall, for each such failure, be subject to a penalty of fifty

dollars ($50).

(5) Any person required under the provisions of section

[335(f)] 317.1 to furnish a copy of form 1099-MISC to a payee

who wilfully furnishes a false or fraudulent form or who

wilfully fails to furnish a form in the manner, at the time and

showing the information required by section [335(f)] 317.1

shall, for each such failure, be subject to a penalty of fifty

dollars ($50).

(6) Any person required to file an annual statement with the

department under the provisions of section [324.5] 323.1 who

wilfully furnishes a false or fraudulent statement or who

wilfully fails to file the statement in the manner, at the time

and showing the information required under section [324.5] 323.1

and the regulations prescribed under section [324.5] 323.1

shall, for each such failure, be subject to a penalty of fifty

dollars ($50).

[(7) Any person required under the provisions of section

324.5 to furnish an annual statement to a lessor who wilfully

furnishes a false or fraudulent statement or who wilfully fails

to furnish a statement in the manner, at the time and showing

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the information required by section 324.5 and the regulations

prescribed under section 324.5 shall, for each such failure, be

subject to a penalty of fifty dollars ($50).]

(h) [If] Except as otherwise provided in Part VII, if any

amount of tax required to be withheld by [an employer] a person

and paid over to the department under section 319 or 319.1 is

not paid on or before the due date prescribed for filing the

quarterly return under section 318 or 318.1, determined without

regard to an extension of time for filing, there shall be added

to the tax and paid to the department each month five per cent

of such underpayment for each month or fraction thereof from the

due date, for the period from the due date to the date paid; but

the underpayment shall, for purposes of computing the addition

for any month, be reduced by the amount of any part of the tax

which is paid by the beginning of that month. The total of such

additions shall not exceed fifty per cent of the amount of tax

required to be shown on the return reduced by the amount of any

part of the tax which is paid by the return due date and by the

amount of any credit against the tax which may be claimed on the

return.

* * *

(j) If any amount of tax required to be withheld by a

partnership, association[,] or Pennsylvania S corporation [or

lessee] and paid over to the department under section 324 [or

324.4] is not paid on or before the date prescribed therefor,

there shall be added to the tax and paid to the department each

month five per cent of such underpayment for each month or

fraction thereof from the due date, for the period from the due

date to the date paid; but the underpayment shall, for purposes

of computing the addition for any month, be reduced by the

amount of any part of the tax which is paid by the beginning of

that month. The total of such additions shall not exceed fifty

per cent of the amount of such tax.

Section 12. This act shall take effect immediately.

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