H0048B0036A00046 JKL:JSL 01/24/13 #90 A00046

 

 

 

 

AMENDMENTS TO HOUSE BILL NO. 48

Sponsor: REPRESENTATIVE MUNDY

Printer's No. 36

 

1Amend Bill, page 1, line 10, by inserting after "penalties,""

2in corporate net income tax, further providing for definitions,
3for imposition, for reports and payment and for consolidated
4reports; in inheritance tax,

5Amend Bill, page 1, line 11, by inserting after "tax"

6; and, in general provisions, further providing for
7underpayment of estimated tax

8Amend Bill, page 1, lines 14 through 16, by striking out all
9of said lines and inserting

10Section 1.  Section 401(3)1(a) and (b) and 2(a) and (5) of
11the act of March 4, 1971 (P.L.6, No.2), known as the Tax Reform
12Code of 1971, amended or added December 23, 1983 (P.L.370, 
13No.90), July 1, 1985 (P.L.78, No.29), August 4, 1991 (P.L.97, 
14No.22), May 12, 1999 (P.L.26, No.4), June 22, 2001 (P.L.353, 
15No.23), June 29, 2002 (P.L.559, No.89), October 9, 2009 
16(P.L.451, No.48) and July 2, 2012 (P.L.751, No.85) are amended,
17clause (3)2 is amended by adding a phrase and the section is
18amended by adding clauses to read:

19Section 401.  Definitions.--The following words, terms, and
20phrases, when used in this article, shall have the meaning
21ascribed to them in this section, except where the context
22clearly indicates a different meaning:

23* * *

24(3)  "Taxable income."  1.  (a)  In case the entire business
25of the corporation is transacted within this Commonwealth, for
26any taxable year which begins on or after January 1, 1971,
27taxable income for the calendar year or fiscal year as returned
28to and ascertained by the Federal Government, or in the case of
29a corporation participating in the filing of consolidated
30returns to the Federal Government or that is not required to 
31file a return with the Federal Government, the taxable income
32which would have been returned to and ascertained by the Federal
33Government if separate returns had been made to the Federal
34Government for the current and prior taxable years, subject,
35however, to any correction thereof, for fraud, evasion, or error

1as finally ascertained by the Federal Government.

2(b)  Additional deductions shall be allowed from taxable
3income on account of any dividends received from any other
4corporation but only to the extent that such dividends are
5included in taxable income as returned to and ascertained by the
6Federal Government. For tax years beginning on or after January
71, 1991, additional deductions shall only be allowed for amounts
8included, under section 78 of the Internal Revenue Code of 1986
9(Public Law 99-514, 26 U.S.C. § 78), in taxable income returned
10to and ascertained by the Federal Government and for the amount
11of any dividends received from a foreign corporation included in
12taxable income to the extent such dividends would be deductible
13in arriving at Federal taxable income if received from a
14domestic corporation. For taxable years beginning on or after 
15January 1, 2013, if not otherwise allowed as a deduction, an 
16additional deduction is allowed for all dividends paid by one to 
17another of the included corporations of a unitary business to 
18the extent those dividends are included in business income of a 
19corporation that is required to determine its business income 
20pursuant to paragraph (1) of phrase (e) of subclause (2).

21* * *

222.  In case the entire business of any corporation, other
23than a corporation engaged in doing business as a regulated
24investment company as defined by the Internal Revenue Code of
251986, is not transacted within this Commonwealth, the tax
26imposed by this article shall be based upon such portion of the
27taxable income of such corporation for the fiscal or calendar
28year, as defined in subclause 1 hereof, and may be determined as
29follows:

30(a)  Division of Income.

31(1)  As used in this definition, unless the context otherwise
32requires:

33(A)  "Business income" means income arising from transactions
34and activity in the regular course of the taxpayer's trade or
35business and includes income from tangible and intangible
36property if either the acquisition, the management or the
37disposition of the property constitutes an integral part of the
38taxpayer's regular trade or business operations. The term
39includes all income which is apportionable under the
40Constitution of the United States.

41(B)  "Commercial domicile" means the principal place from
42which the trade or business of the taxpayer is directed or
43managed.

44(C)  "Compensation" means wages, salaries, commissions and
45any other form of remuneration paid to employes for personal
46services.

47(D)  "Nonbusiness income" means all income other than
48business income. The term does not include income which is
49apportionable under the Constitution of the United States.

50(E)  "Sales" means all gross receipts of the taxpayer not
51allocated under this definition other than dividends received,

1interest on United States, state or political subdivision
2obligations and gross receipts heretofore or hereafter received
3from the sale, redemption, maturity or exchange of securities,
4except those held by the taxpayer primarily for sale to
5customers in the ordinary course of its trade or business.

6(F)  "State" means any state of the United States, the
7District of Columbia, the Commonwealth of Puerto Rico, any
8territory or possession of the United States, and any foreign
9country or political subdivision thereof.

10(G)  "This state" means the Commonwealth of Pennsylvania or,
11in the case of application of this definition to the
12apportionment and allocation of income for local tax purposes,
13the subdivision or local taxing district in which the relevant
14tax return is filed.

15(2)  Any taxpayer having income from business activity which
16is taxable both within and without this State other than
17activity as a corporation whose allocation and apportionment of
18income is specifically provided for in section 401(3)2(b)(c) and
19(d) shall allocate and apportion taxable income as provided in
20this definition.

21(3)  For purposes of allocation and apportionment of income
22under this definition, a taxpayer is taxable in another state if
23in that state the taxpayer is subject to a net income tax, a
24franchise tax measured by net income, a franchise tax for the
25privilege of doing business, or a corporate stock tax or if that
26state has jurisdiction to subject the taxpayer to a net income
27tax regardless of whether, in fact, the state does or does not.

28(4)  Rents and royalties from real or tangible personal
29property, gains, interest, patent or copyright royalties, to the
30extent that they constitute nonbusiness income, shall be
31allocated as provided in paragraphs (5) through (8).

32(5)  (A)  Net rents and royalties from real property located
33in this State are allocable to this State.

34(B)  Net rents and royalties from tangible personal property
35are allocable to this State if and to the extent that the
36property is utilized in this State, or in their entirety if the
37taxpayer's commercial domicile is in this State and the taxpayer
38is not organized under the laws of or taxable in the state in
39which the property is utilized.

40(C)  The extent of utilization of tangible personal property
41in a state is determined by multiplying the rents and royalties
42by a fraction, the numerator of which is the number of days of
43physical location of the property in the state during the rental
44or royalty period in the taxable year and the denominator of
45which is the number of days of physical location of the property
46everywhere during all rental or royalty periods in the taxable
47year. If the physical location of the property during the rental
48or royalty period is unknown or unascertainable by the taxpayer,
49tangible personal property is utilized in the state in which the
50property was located at the time the rental or royalty payer
51obtained possession.

1(6)  (A)  Gains and losses from sales or other disposition of
2real property located in this State are allocable to this State.

3(B)  Gains and losses from sales or other disposition of
4tangible personal property are allocable to this State if the
5property had a situs in this State at the time of the sale, or
6the taxpayer's commercial domicile is in this State and the
7taxpayer is not taxable in the state in which the property had a
8situs.

9(C)  Gains and losses from sales or other disposition of
10intangible personal property are allocable to this State if the
11taxpayer's commercial domicile is in this State.

12(7)  Interest is allocable to this State if the taxpayer's
13commercial domicile is in this State.

14(8)  (A)  Patent and copyright royalties are allocable to
15this State if and to the extent that the patent or copyright is
16utilized by the payer in this State, or if and to the extent
17that the patent copyright is utilized by the payer in a state in
18which the taxpayer is not taxable and the taxpayer's commercial
19domicile is in this State.

20(B)  A patent is utilized in a state to the extent that it is
21employed in production, fabrication, manufacturing, or other
22processing in the state or to the extent that a patented product
23is produced in the state. If the basis of receipts from patent
24royalties does not permit allocation to states or if the
25accounting procedures do not reflect states of utilization, the
26patent is utilized in the state in which the taxpayer's
27commercial domicile is located.

28(C)  A copyright is utilized in a state to the extent that
29printing or other publication originates in the state. If the
30basis of receipts from copyright royalties does not permit
31allocation to states or if the accounting procedures do not
32reflect states of utilization, the copyright is utilized in the
33state in which the taxpayer's commercial domicile is located.

34(9)  (A)  Except as provided in subparagraph (B):

35(i)  For taxable years beginning before January 1, 2007, all
36business income shall be apportioned to this State by
37multiplying the income by a fraction, the numerator of which is
38the property factor plus the payroll factor plus three times the
39sales factor and the denominator of which is five.

40(ii)  For taxable years beginning after December 31, 2006,
41all business income shall be apportioned to this State by
42multiplying the income by a fraction, the numerator of which is
43the sum of fifteen times the property factor, fifteen times the
44payroll factor and seventy times the sales factor and the
45denominator of which is one hundred.

46(iii)  For taxable years beginning after December 31, 2008,
47all business income shall be apportioned to this State by
48multiplying the income by a fraction, the numerator of which is
49the sum of eight and a half times the property factor, eight and
50a half times the payroll factor and eighty-three times the sales
51factor and the denominator of which is one hundred.

1(iv)  For taxable years beginning after December 31, 2009,
2all business income shall be apportioned to this State by
3multiplying the income by a fraction, the numerator of which is
4the sum of five times the property factor, five times the
5payroll factor and ninety times the sales factor and the
6denominator of which is one hundred.

7(v)  For taxable years beginning after December 31, 2012, all
8business income shall be apportioned to this State by
9multiplying the income by the sales factor.

10(B)  For purposes of apportionment of the capital stock -
11franchise tax as provided in section 602 of Article VI of this
12act, the apportionment fraction shall be the property factor
13plus the payroll factor plus the sales factor as the numerator,
14and the denominator shall be three.

15(10)  The property factor is a fraction, the numerator of
16which is the average value of the taxpayer's real and tangible
17personal property owned or rented and used in this State during
18the tax period and the denominator of which is the average value
19of all the taxpayer's real and tangible personal property owned
20or rented and used during the tax period but shall not include
21the security interest of any corporation as seller or lessor in
22personal property sold or leased under a conditional sale,
23bailment lease, chattel mortgage or other contract providing for
24the retention of a lien or title as security for the sales price
25of the property.

26(11)  Property owned by the taxpayer is valued at its
27original cost. Property rented by the taxpayer is valued at
28eight times the net annual rental rate. Net annual rental rate
29is the annual rental rate paid by the taxpayer less any annual
30rental rate received by the taxpayer from subrentals.

31(12)  The average value of property shall be determined by
32averaging the values at the beginning and ending of the tax
33period but the tax administrator may require the averaging of
34monthly values during the tax period if reasonably required to
35reflect properly the average value of the taxpayer's property.

36(13)  The payroll factor is a fraction, the numerator of
37which is the total amount paid in this State during the tax
38period by the taxpayer for compensation and the denominator of
39which is the total compensation paid everywhere during the tax
40period.

41(14)  Compensation is paid in this State if:

42(A)  The individual's service is performed entirely within
43the State;

44(B)  The individual's service is performed both within and
45without this State, but the service performed without the State
46is incidental to the individual's service within this State; or

47(C)  Some of the service is performed in this State and the
48base of operations or if there is no base of operations, the
49place from which the service is directed or controlled is in
50this State, or the base of operations or the place from which
51the service is directed or controlled is not in any state in

1which some part of the service is performed, but the
2individual's residence is in this State.

3(15)  The sales factor is a fraction, the numerator of which
4is the total sales of the taxpayer in this State during the tax
5period, and the denominator of which is the total sales of the
6taxpayer everywhere during the tax period.

7(16)  Sales of tangible personal property are in this State
8if the property is delivered or shipped to a purchaser, within
9this State regardless of the f.o.b. point or other conditions of
10the sale.

11(17)  Sales, other than sales of tangible personal property
12and sales set forth under paragraphs (17.1) and (17.2), are in
13this State if:

14(A)  The income-producing activity is performed in this
15State; or

16(B)  The income-producing activity is performed both in and
17outside this State and a greater proportion of the income-
18producing activity is performed in this State than in any other
19state, based on costs of performance.

20(17.1)  Sales of services are in this State if sales are
21derived from customers within this State. If part of the sales
22with respect to a specific contract or other agreement to
23perform services is derived from customers from within this
24State, sales are in this State in proportion to the sales
25derived from customers within this State to total sales with
26respect to that contract or agreement.

27(17.2)  In order to determine sales in this State of any
28railroad, truck, bus, airline, pipeline, natural gas or water
29transportation company that is required to determine its
30business income under paragraph (1) of phrase (e) of this
31subclause the company must convert the relevant fraction set
32forth under phrase (b), (c) or (d) of this subclause to gross
33receipts. Sales in this State are the result of multiplying
34total gross receipts from relevant transportation activities by
35the decimal equivalent of the relevant fraction set forth under
36phrase (b), (c) or (d) of this subclause.

37(18)  If the allocation and apportionment provisions of this
38definition do not fairly represent the extent of the taxpayer's
39business activity in this State, the taxpayer may petition the
40Secretary of Revenue or the Secretary of Revenue may require, in
41respect to all or any part of the taxpayer's business activity:

42(A)  Separate accounting;

43(B)  The exclusion of any one or more of the factors;

44(C)  The inclusion of one or more additional factors which
45will fairly represent the taxpayer's business activity in this
46State; or

47(D)  The employment of any other method to effectuate an
48equitable allocation and apportionment of the taxpayer's income.
49In determining the fairness of any allocation or apportionment,
50the Secretary of Revenue may give consideration to the
51taxpayer's previous reporting and its consistency with the

1requested relief.

2* * *

3(e)  Corporations That are Members of a Unitary Business.

4(1)  Notwithstanding any contrary provisions of this article,
5for taxable years that begin on or after January 1, 2013,
6business income of a corporation that is a member of a unitary
7business that consists of two or more corporations, at least one
8of which does not transact its entire business in this State, is
9determined by combining the business income of either all
10corporations, other than as provided under this paragraph, that
11are water's-edge basis members or all corporations, other than
12as provided under this paragraph, that are worldwide members of
13the unitary business. Business income from an intercompany
14transaction between included corporations of a unitary business
15shall be deferred in the manner set forth under 26 CFR 1.1502-13
16(relating to intercompany transactions) in determining the
17business income of a corporation that is a member of that
18unitary business. Business income of the following corporations
19is not included in the determination of combined business
20income:

21(i)  any corporation subject to taxation under Article VII,
22VIII, IX or XV;

23(ii)  any corporation specified in the definition of
24"institution" in section 701.5 that would be subject to taxation
25under Article VII if it was located, as defined in section
26701.5, in this State;

27(iii)  any corporation commonly known as a title insurance
28company that would be subject to taxation under Article VIII if
29it was incorporated in this State;

30(iv)  any corporation specified as an insurance company,
31association or exchange in Article IX that would be subject to
32taxation under Article IX if its insurance business was
33transacted in this State;

34(v)  any corporation specified in the definition of
35"institution" in section 1501 that would be subject to taxation
36under Article XV if it was located, as defined in section 1501,
37in this State; or

38(vi)  any corporation that is a small corporation, as defined
39in section 301(s.2), or a qualified Subchapter S subsidiary, as
40defined in section 301(o.3).

41(2)  Notwithstanding any contrary provisions of this article,
42all corporations that are required to compute business income
43under paragraph (1) are entitled to apportion the business
44income when one corporation of the same unitary business is
45entitled to apportion the business income. Notwithstanding any
46contrary provisions of this article, for taxable years that
47begin on or after January 1, 2013, the denominator of the
48apportionment fraction of a corporation that is required to
49compute its business income under paragraph (1) shall be
50computed on a combined basis for all included corporations of
51the unitary business. Gross receipts from an intercompany

1transaction between included corporations of a unitary business
2shall be eliminated unless the gross receipts are derived from
3transactions that are deferred in the manner set forth under 26
4CFR 1.1502-13 in computing the numerator and denominator of the
5apportionment fraction of a corporation that is required to
6compute its business income under paragraph (1). Gross receipts
7from transactions that had been deferred in the manner set forth
8under 26 CFR 1.1502-13 are included in a corporation's
9apportionment fraction during the same taxable year that it
10realizes business income that had been deferred due to the
11transaction. The apportionment fraction of the following
12corporations shall not be included in the determination of the
13combined apportionment fraction:

14(i)  any corporation subject to taxation under Article VII,
15VIII, IX or XV;

16(ii)  any corporation specified in the definition of
17"institution" in section 701.5 that would be subject to taxation
18under Article VII if it was located, as defined in section
19701.5, in this State;

20(iii)  any corporation commonly known as a title insurance
21company that would be subject to taxation under Article VIII if
22it was incorporated in this State;

23(iv)  any corporation specified as an insurance company,
24association or exchange in Article IX that would be subject to
25taxation under Article IX if its insurance business was
26transacted in this State;

27(v)  any corporation specified in the definition of
28"institution" in section 1501 that would be subject to taxation
29under Article XV if it was located, as defined in section 1501,
30in this State;

31(vi)  any corporation that is a small corporation, as defined
32in section 301(s.2), or a qualified Subchapter S subsidiary, as
33defined in section 301(o.3).

34(3)  A corporation that is required to compute its business
35income under paragraph (1) shall apportion the combined business
36income by multiplying the combined business income by a fraction
37which is the combined apportionment fraction set forth under
38paragraph (2).

39(4)  Nonbusiness income of a corporation that is required to
40compute business income under paragraph (1) shall be allocated
41as provided in paragraphs (5), (6), (7) and (8) of phrase (a) of
42subclause 2 of the definition of "taxable income."

43(5)  Each corporation that is a member of a unitary business
44that consists of two or more corporations shall determine its
45tax liability based on its apportioned share of the combined
46business income of the unitary business plus its nonbusiness
47income or loss allocated to this State, minus its net loss
48deduction.

49(6)  If any provision of this phrase operates so that an
50amount is added to or deducted from taxable income for a taxable
51year for any corporation of a unitary business that previously

1had been added to or deducted from taxable income of any
2corporation of the same unitary business, an appropriate
3adjustment shall be made for the taxable year in order to
4prevent double taxation or double deduction. If this adjustment
5is not made by the appropriate corporation of the unitary
6business, the Secretary of Revenue is authorized to make this
7adjustment.

8(7)  The Secretary of Revenue shall have the authority and
9responsibility to make adjustments to insure that a corporation
10does not incur an unfair penalty nor realize an unfair benefit
11because it is required to compute its business income under
12paragraph (1). Fairness shall be measured by whether the
13corporation's income allocated and apportioned to this State
14fairly reflects the corporation's share of the unitary business
15conducted in this State in the taxable year.

16* * *

17(5)  "Taxable year."  [The] 1.  Except as set forth in 
18subclause 2, the taxable year which the corporation, or any
19consolidated group with which the corporation participates in
20the filing of consolidated returns, actually uses in reporting
21taxable income to the Federal Government[.], or which the 
22corporation would have used in reporting taxable income to the 
23Federal Government had it been required to report its taxable 
24income to the Federal Government. With regard to the tax imposed
25by Article IV of this act (relating to the Corporate Net Income
26Tax), the terms "annual year," "fiscal year," "annual or fiscal
27year," "tax year" and "tax period" shall be the same as the
28corporation's taxable year, as defined in this [paragraph.]
29subclause or subclause 2.

302.  All corporations of a unitary business shall have a
31common taxable year for purposes of computing tax due under this
32article. The taxable year for the purposes shall be the common
33taxable year adopted, in a manner prescribed by the department,
34by all corporations of a unitary business. The common taxable
35year must be used by all corporations of that unitary business
36in the year of adoption and all future years unless otherwise
37permitted by the department.

38* * *

39(8)  "Tax haven."  A jurisdiction that during a taxable year
40has no or a nominal effective tax on the income taxable under
41this article and does any of the following:

421.  has laws or practices that prevent effective exchange of
43information for tax purposes with other governments regarding
44taxpayers subject to its jurisdiction;

452.  has a tax regime that lacks transparency. A tax regime
46lacks transparency if the details of legislative, legal or
47administrative provisions are not open and apparent, are not
48consistently applied among similarly situated taxpayers or if
49the information needed by taxing authorities to determine a
50taxpayer's correct tax liability, such as accounting records and
51underlying documentation, is not readily available;

13.  facilitates the establishment of foreign-owned entities
2without the need for a local substantive presence or prohibits
3the entities from having a commercial impact on the local
4economy;

54.  explicitly or implicitly excludes the jurisdiction's
6resident taxpayers from taking advantage of the jurisdiction's
7tax regime or prohibits persons that benefit from the
8jurisdiction's tax regime from operating in the jurisdiction's
9domestic market; or

105.  has created a tax regime that is favorable for tax
11avoidance, based upon an overall assessment of relevant factors,
12including whether the jurisdiction has a significant untaxed
13offshore financial or other services sector relative to its
14overall economy.

15(9)  "Unitary business."  A single economic enterprise that
16is made up of separate parts of a single corporation, of a
17commonly controlled group of corporations, or both, that are
18sufficiently interdependent, integrated and interrelated through
19their activities so as to provide a synergy and mutual benefit
20that produces a sharing or exchange of value among them and a
21significant flow of value to the separate parts. A unitary
22business shall include only those parts and corporations which
23may be included as a unitary business under the Constitution of
24the United States.

25(10)  "Water's-edge basis."  A system of reporting that
26includes the business income and apportionment factor of certain
27corporations of a unitary business, described as follows:

281.  The business income and apportionment factor of any
29member incorporated in the United States or formed under the
30laws of any state of the United States, the District of
31Columbia, any territory or possession of the United States or
32the Commonwealth of Puerto Rico.

332.  The business income and apportionment factor of any
34member, regardless of the place incorporated or formed, if the
35average of its property, payroll and sales factors within the
36United States is twenty per cent or more.

373.  The business income and apportionment factor of any 
38member which is a domestic international sales corporation as 
39described in sections 991, 992, 993 and 994 of the Internal 
40Revenue Code of 1986 (Public Law 99-514, 26 U.S.C. §§ 991, 992, 
41993 and 994); a foreign sales corporation as described in former 
42sections 921, 922, 923, 924, 925, 926 and 927 of the Internal 
43Revenue Code of 1986 (formerly 26 U.S.C. §§ 921, 922, 923, 924, 
44925, 926 and 927); or any member which is an export trade 
45corporation, as described in sections 970 and 971 of the 
46Internal Revenue Code of 1986 (26 U.S.C. §§ 970 and 971).

474.  Any member not described in subclauses 1, 2 and 3 shall
48include the portion of its business income derived from or
49attributable to sources within the United States, as determined
50under the Internal Revenue Code of 1986 without regard to
51Federal treaties, and its apportionment factor related thereto.

15.  Any member that is a "controlled foreign corporation" as
2defined in section 957 of the Internal Revenue Code of 1986 (26
3U.S.C. § 957), to the extent the business income of that member
4is income defined in section 952 of the Internal Revenue Code of
51986 (26 U.S.C. § 952), Subpart F income, not excluding lower-
6tier subsidiaries' distributions of the income which were
7previously taxed, determined without regard to Federal treaties,
8and the apportionment factor related to that income; any item of
9income received by a controlled foreign corporation and the
10apportionment factor related to the income shall be excluded if
11the corporation establishes to the satisfaction of the Secretary
12of Revenue that the income was subject to an effective rate of
13income tax imposed by a foreign country greater than ninety per
14cent of the maximum rate of tax specified in section 11 of the
15Internal Revenue Code of 1986 (26 U.S.C. § 11). The effective
16rate of income tax determination shall be based upon the
17methodology set forth under 26 CFR 1.954-1 (relating to foreign
18base company income).

196.  The business income and apportionment factor of any
20member that is not described in subclause 1, 2, 3, 4 and 5 and
21that is doing business in a tax haven. The business income and
22apportionment factor of a corporation doing business in a tax
23haven shall be excluded if the corporation establishes to the
24satisfaction of the Secretary of Revenue that its income was
25subject to an effective rate of income tax imposed by a country
26greater than ninety per cent of the maximum rate of tax
27specified in section 11 of the Internal Revenue Code of 1986 (26
28U.S.C. § 11).

29(11)  "Commonly controlled group."  For a corporation, the
30corporation is a member of a group of two or more corporations
31and more than fifty per cent of the voting stock of each member
32of the group is directly or indirectly owned by a common owner
33or by common owners, either corporate or noncorporate, or by one
34or more of the member corporations of the group.

35(12)  "Separate company."  A corporation that is not a member
36of a unitary business that consists of two or more corporations.

37(13)  "Tax."  Includes interest, penalties and additions to
38tax unless a more limited meaning is disclosed by the context.

39Section 2.  Section 402(b) of the act, amended June 29, 2002 
40(P.L.559, No.89), is amended to read:

41Section 402.  Imposition of Tax.--* * *

42(b)  The annual rate of tax on corporate net income imposed
43by subsection (a) for taxable years beginning for the calendar
44year or fiscal year on or after the dates set forth shall be as
45follows:

46Taxable Year

Tax Rate

47[January 1, 1995, and each
48taxable year thereafter

 

9.99%]

49January 1, 1995, and each
50taxable year through December
5131, 2012

 

 

9.99%

1January 1, 2013, through
2December 31, 2013

 

9.45%

3January 1, 2014, and each
4taxable year thereafter

 

8.990%

5* * *

6Section 3.  Section 403 of the act is amended by adding
7subsections to read:

8Section 403.  Reports and Payment of Tax.--* * *

9(a.1)  (1)  Each corporation subject to tax under this
10article shall file an annual report in accordance with this
11section. Each corporation that is a member of a unitary business
12that consists of two or more corporations, unless excluded by
13the provisions of this article, shall file as part of a combined
14annual report. The corporations of the unitary business shall
15designate one member that is subject to tax under this article
16to file the combined annual report and to act as agent on behalf
17of all other corporations that are members of the unitary
18business. Each corporation that is a member of a unitary
19business shall be responsible for its tax liability under this
20article.

21(2)  The oath or affirmation of the designated member's
22president, vice president or other principal officer, and of its
23treasurer or assistant treasurer shall constitute the oath or
24affirmation of each corporation that is a member of that unitary
25business.

26(3)  The designated member shall transmit to the department
27upon a form prescribed by the department, an annual combined
28report under oath or affirmation of its president, vice
29president or other principal officer, and of its treasurer or
30assistant treasurer. The report shall set forth:

31(i)  All corporations included in the unitary business.

32(ii)  All necessary data, both in the aggregate and for each
33corporation of the unitary business, that sets forth the
34determination of tax liability for each corporation of the
35unitary business.

36(iii)  Any other information that the department may require.

37(a.2)  (1)  Activities that evidence a significant flow of
38value among commonly controlled corporations shall include the
39following:

40(i)  Assisting in the acquisition of equipment.

41(ii)  Assisting with filling personnel needs.

42(iii)  Lending funds or guaranteeing loans.

43(iv)  Interplay in the area of corporate expansion.

44(v)  Providing technical assistance.

45(vi)  Supervising.

46(vii)  Providing general operational guidance.

47(viii)  Providing overall operational strategic advice.

48(ix)  Common use of trade names and patents.

49(2)  Significant flow of value must be more than the flow of
50funds arising out of passive investment and shall consist of
51more than periodic financial oversight.

1(a.3)  (1)  With respect to a commonly controlled group of
2corporations, the presence of any of these factors creates a
3presumption of a unitary business:

4(i)  Corporations engaged in the same type of business.

5(ii)  Corporations engaged in different steps in a vertically
6structured enterprise.

7(iii)  Strong centralized management of corporations.

8(2)  A corporation newly formed by a corporation that is a
9member of a unitary business is rebuttably presumed to be a
10member of the unitary business.

11(3)  A corporation that owns a controlling interest in two or
12more corporations of a unitary business is rebuttably presumed
13to be a member of the unitary business.

14(4)  A corporation that permits one or more other
15corporations of a unitary business to substantially use its
16patents, trademarks, service marks, logo-types, trade secrets,
17copyrights or other proprietary assets or that is principally
18engaged in loaning money to one or more other corporations of a
19unitary business is rebuttably presumed to be a member of the
20unitary business. This presumption only applies to a commonly
21controlled group of corporations.

22(a.4)  As far as applicable to a specific unitary business,
23unless there is a revision of applicable State law or unless a
24corporation is not included under the provisions of this
25article, there is a rebuttable presumption for all tax years
26that begin in years 2013 and 2014 that a unitary business of two
27or more corporations includes at least all corporations that are
28part of a unitary business under the law of any state of the
29United States in which the corporation files a tax report or tax
30return of combined net income for the same tax year.

31(a.5)  Unless an election is made to use a worldwide basis of
32accounting, a corporation that is a member of a unitary business
33of two or more corporations must determine its business income
34and apportionment factor upon a water's-edge basis. This basis
35shall apply to all corporations of the unitary business. If an
36election is made to use a worldwide basis of accounting, all
37corporations of the unitary business must make the election,
38upon a form, prescribed, prepared and furnished by the
39department. This election shall bind all corporations of the
40unitary business for the period of time that the election
41remains in effect. An initial election is binding for a period
42of seven years. Subsequent elections shall be binding for a
43period of five years.

44(a.6)  The department shall determine the adequacy of
45estimated tax payments required under section 3003.2 for tax
46year 2013 and any fiscal year beginning during the calendar year
472013 and shall have the authority to waive or reduce the payment
48of interest due on account of an underpayment as a result of the
49implementation of the provisions of subsection (a.1).

50* * *

51Section 4.  Section 404 of the act is amended to read:

1Section 404.  Consolidated Reports.--The department shall not
2permit any corporation owning or controlling, directly or
3indirectly, any of the voting capital stock of another
4corporation or of other corporations, subject to the provisions
5of this article, to make a consolidated report[, showing the
6combined net income].

7Section 5.  Section 2111 of the act is amended by adding a
8subsection to read:

9Amend Bill, page 3, by inserting between lines 4 and 5

10Section 6.  Section 3003.3(d) of the act, amended October 18, 
112006 (P.L.1149, No.119), is amended and the section is amended 
12by adding subsections to read:

13Section 3003.3.  Underpayment of Estimated Tax.--* * *

14(d)  Notwithstanding the provisions of the preceding
15subsections, other than as set forth under subsection (d.1),
16interest with respect to any underpayment of any installment of
17estimated tax shall not be imposed if the total amount of all
18payments of estimated tax made on or before the last date
19prescribed for the payment of such installment equals or exceeds
20the amount which would have been required to be paid on or
21before such date if the estimated tax were an amount equal to
22the tax computed at the rates applicable to the taxable year,
23including any minimum tax imposed, but otherwise on the basis of
24the facts shown on the report of the taxpayer for, and the law
25applicable to, the safe harbor base year, adjusted for any
26changes to sections 401, 601, 602 and 1101 enacted for the
27taxable year, if a report showing a liability for tax was filed
28by the taxpayer for the safe harbor base year. If the total
29amount of all payments of estimated tax made on or before the
30last date prescribed for the payment of such installment does
31not equal or exceed the amount required to be paid per the
32preceding sentence, but such amount is paid after the date the
33installment was required to be paid, then the period of
34underpayment shall run from the date the installment was
35required to be paid to the date the amount required to be paid
36per the preceding sentence is paid. Provided, that if the total
37tax for the safe harbor base year exceeds the tax shown on such
38report by ten per cent or more, the total tax adjusted to
39reflect the current tax rate shall be used for purposes of this
40subsection. In the event that the total tax for the safe harbor
41base year exceeds the tax shown on the report by ten per cent or
42more, interest resulting from the utilization of such total tax
43in the application of the provisions of this subsection shall
44not be imposed if, within forty-five days of the mailing date of
45each assessment, payments are made such that the total amount of
46all payments of estimated tax equals or exceeds the amount which
47would have been required to be paid on or before such date if
48the estimated tax were an amount equal to the total tax adjusted
49to reflect the current tax rate. In any case in which the

1taxable year for which an underpayment of estimated tax may
2exist is a short taxable year, in determining the tax shown on
3the report or the total tax for the safe harbor base year, the
4tax will be reduced by multiplying it by the ratio of the number
5of installment payments made in the short taxable year to the
6number of installment payments required to be made for the full
7taxable year.

8(d.1)  (1)  Notwithstanding subsections (a), (b) and (c),
9interest with respect to any underpayment of any installment of
10estimated corporate net income tax for any tax year that begins
11in year 2013 or 2014 shall not be imposed if the total amount of
12all payments of estimated corporate net income tax made on or
13before the last date prescribed for the payment of the
14installment equals or exceeds the amount which would have been
15required to be paid on or before that date if the estimated tax
16were an amount equal to the tax shown on the report of the
17taxpayer for the safe harbor base year, if a report showing a
18liability for tax was filed by the taxpayer for the safe harbor
19base year.

20(2)  If the total amount of all payments of estimated tax
21made on or before the last date prescribed for the payment of
22the installment does not equal or exceed the amount required to
23be paid under paragraph (1), but the amount is paid after the
24date the installment was required to be paid, the period of
25underpayment shall run from the date the installment was
26required to be paid to the date the amount required to be paid
27under paragraph (1) is paid.

28(3)  If the total tax for the safe harbor base year exceeds
29the tax shown on the report by ten per cent or more, the total
30tax shall be used for purposes of this subsection. If the total
31tax for the safe harbor base year exceeds the tax shown on the
32report by ten per cent or more, interest resulting from the
33utilization of the total tax in the application of the
34provisions of this subsection shall not be imposed if, within
35forty-five days of the mailing date of a notice from the
36department increasing the total tax, payments are made such that
37the total amount of all payments of estimated tax equals or
38exceeds the amount which would have been required to be paid on
39or before the date if the estimated tax were an amount equal to
40the total tax.

41(4)  If the taxable year for which an underpayment of
42estimated tax may exist is a short taxable year, in determining
43the tax shown on the report or the total tax for the safe harbor
44base year, the tax shall be reduced by multiplying it by the
45ratio of the number of installment payments made in the short
46taxable year to the number of installment payments required to
47be made for the full taxable year.

48(d.2)  (1)  If there is a substantial underpayment, as
49defined in subsection (a), of any installment of estimated
50corporate net income tax or estimated capital stock/franchise
51tax for any taxable year beginning in 2013 or 2014, there shall

1be imposed additional interest in an amount determined at one
2hundred twenty per cent of the annual rate as provided by law
3upon the entire underpayment for the period of the substantial
4underpayment.

5(2)  The additional interest imposed under this subsection
6shall be in addition to any other interest imposed on
7underpayments under this section.

8Section 7.  The amendment or addition of the following
9provisions shall apply to taxable years beginning after December
1031, 2012:

11(1)  Section 401(3)1(a) and (b) and 2(a) and (e), (5),
12(8), (9), (10), (11), (12) and (13) of the act.

13(2)  Section 402(b) of the act.

14(3)  Section 403(a.1), (a.2), (a.3), (a.4), (a.5) and
15(a.6) of the act.

16(4)  Section 404 of the act.

17(5)  Section 3003.3(d), (d.1) and (d.2) of the act.

18Amend Bill, page 3, line 5, by striking out "2" and inserting

19 8

20Amend Bill, page 3, line 7, by striking out "3" and inserting

21 9

22Amend Bill, page 3, line 7, by striking out "in 60 days." and
23inserting

24 as follows:

25(1)  The additions of section 2111(t) of the act shall
26take effect in 60 days.

27(2)  Section 8 of this act shall take effect in 60 days.

28(3)  The remainder of this act shall take effect
29immediately.

 

See A00046 in
the context
of HB0048