H0440B1575A01200 MSP:SRA 04/23/13 #90 A01200
AMENDMENTS TO HOUSE BILL NO. 440
Sponsor: REPRESENTATIVE MUNDY
Printer's No. 1575
4(3) "Taxable income." 1. * * *
13(u) (1) If the related member was subject to tax in this
14Commonwealth, another state or possession of the United States
15or a foreign nation or a combination of those governmental
16entities on a tax base that included the interest expense or
17intangible expense paid, accrued or incurred by the taxpayer,
18the taxpayer shall receive a credit against tax due in this
19Commonwealth in an amount equal to the higher of the tax paid by
20the related member with respect to the portion of its income
21representing the interest expense or the intangible expense
22paid, accrued or incurred by the taxpayer, or the tax that would
23have been paid by the related member with respect to that
24portion of its income if:
29(2) The credit determined under subparagraph (1) shall be
30multiplied by the apportionment factor of the taxpayer in this
31Commonwealth, but may not exceed the taxpayer's liability in
32this Commonwealth attributable to the net income taxed as a
33result of the adjustment required by paragraph (t).
1of the following requirements:
36(iv) the interest expense or intangible expense was paid,
37accrued or incurred pursuant to a transaction that was
38undertaken for a valid business purpose and using terms that
39reflect an arm's length relationship.
40(E) If the taxpayer and the department agree in writing to
41the application or use of alternative adjustments or
42computations. The department may, in its discretion, agree to
43the application or use of alternative adjustments or
44computations when it concludes that in the absence of the
45agreement the income of the taxpayer would not be properly
4(8) "Aggregate effective rate of tax." The sum of the
5effective rates of tax imposed by the Commonwealth, another
6state or a possession of the United States or any combination of
7those governmental entities on a related member.
8(9) "Effective rate of tax." The maximum statutory rate of
9tax imposed by the Commonwealth, another state or a possession
10of the United States on a related member's net income multiplied
11by the apportionment percentage, if any, applicable to the
12related member under the laws of that jurisdiction. For purposes
13of this definition, the following shall apply:
14(A) The effective rate of tax shall be zero if the related
15member's net income tax liability in the jurisdiction is
16reported on a combined or consolidated return including both the
17taxpayer and the related member where the reported transactions
18between the taxpayer and the related member are eliminated or
20(B) When computing the effective rate of tax for a
21jurisdiction in which a related member's net income is
22eliminated or offset by a credit or similar adjustment that is
23dependent upon the related member either maintaining or managing
24intangible property or collecting interest income in that
25jurisdiction, the maximum statutory rate of tax imposed by the
26jurisdiction shall be decreased to reflect the statutory rate of
27tax that applies to the related member as effectively reduced by
28the credit or similar adjustment.
29(10) "Interest expense." Amounts directly or indirectly
30allowed as deductions under section 163 of the Internal Revenue
31Code of 1986 (26 U.S.C. § 163) for purposes of determining
32taxable income under the Internal Revenue Code of 1986.
33(11) "Intangible expense." The term includes:
341. Expenses, losses and costs for, related to, or in
35connection directly or indirectly with, the direct or indirect
36acquisition, use, maintenance or management, ownership, sale,
37exchange, or any other disposition of intangible property to the
38extent the amounts are allowed as deductions or costs in
39determining taxable income before operating loss deductions and
40special deductions for the taxable year under the Internal
41Revenue Code of 1986.
453. Royalty, patent, technical and copyright fees.
464. Licensing fees.
475. Other similar expenses and costs.
48(12) "Intangible property." The term includes patents,
4(13) "Related entity." Any of the following:
51. A stockholder who is an individual or a member of the
6stockholder's family under section 318 of the Internal Revenue
7Code of 1986 (26 U.S.C. § 318) if the stockholder and the
8members of the stockholder's family own, directly, indirectly,
9beneficially or constructively, in the aggregate, at least fifty
10per cent of the value of the taxpayer's outstanding stock.
112. A stockholder or a stockholder's partnership, limited
12liability company, estate, trust or corporation, if the
13stockholder and the stockholder's partnerships, limited
14liability companies, estates, trusts and corporations own
15directly, indirectly, beneficially or constructively, in the
16aggregate, at least fifty per cent of the value of the
17taxpayer's outstanding stock.
183. A corporation or a party related to the corporation in a
19manner that would require an attribution of stock from the
20corporation to the party or from the party to the corporation
21under the attribution rules of the Internal Revenue Code of 1986
22if the taxpayer owns, directly, indirectly, beneficially or
23constructively, at least fifty per cent of the value of the
24corporation's outstanding stock. The attribution rules of the
25Internal Revenue Code of 1986 shall apply for purposes of
26determining whether the ownership requirements of this
27definition have been met.
311. A related entity.
40(15) "Valid business purpose." As follows:
411. One or more business purposes which alone or in
42combination constitute the primary motivation for a business
43activity or transaction and the activity or transaction changes
44in a meaningful way, apart from tax effects, the economic
45position of the taxpayer.
1taxpayer into new business markets.
2Amend Bill, page 45, line 8, by inserting after "401(3)1(t),"
3 (u), (v) and (w),
6, (11), (12), (13), (14) and (15)