PRIOR PRINTER'S NOS. 2279, 2418, 2712 PRINTER'S NO. 2767
No. 1848 Session of 1999
INTRODUCED BY BOYES AND TRELLO, SEPTEMBER 27, 1999
AMENDMENTS TO SENATE AMENDMENTS, HOUSE OF REPRESENTATIVES, DECEMBER 7, 1999
AN ACT 1 Amending the act of March 4, 1971 (P.L.6, No.2), entitled "An 2 act relating to tax reform and State taxation by codifying 3 and enumerating certain subjects of taxation and imposing 4 taxes thereon; providing procedures for the payment, 5 collection, administration and enforcement thereof; providing 6 for tax credits in certain cases; conferring powers and 7 imposing duties upon the Department of Revenue, certain 8 employers, fiduciaries, individuals, persons, corporations 9 and other entities; prescribing crimes, offenses and 10 penalties," further providing for the calculation of the 11 manufacturing, processing, research and development capital 12 stock and franchise tax exemptions; continuing and expanding 13 a tax credit to employers who hire certain individuals; and 14 making a repeal. 15 The General Assembly of the Commonwealth of Pennsylvania 16 hereby enacts as follows: 17 Section 1. Section 602(b) of the act of March 4, 1971 18 (P.L.6, No.2), known as the Tax Reform Code of 1971, amended May 19 12, 1999 (P.L.26, No.4), is amended to read: 20 Section 602. Imposition of Tax.--* * * 21 (b) (1) Every foreign entity from which a report is 22 required under section 601 hereof, shall be subject to and pay 23 to the department annually, a franchise tax which is the greater
1 of (i) the amount computed by multiplying each dollar of the 2 capital stock value as defined in section 601(a) by the 3 appropriate rate of tax as set forth in subsection (h); or (ii) 4 the minimum tax set forth in subsection (i), upon a taxable 5 value to be determined in the following manner. The capital 6 stock value shall be ascertained in the manner prescribed in 7 section 601(a) of this article. The taxable value shall then be 8 determined by employing the relevant apportionment factors set 9 forth in Article IV: Provided, That the manufacturing, 10 processing, research and development exemptions contained under 11 section 602(a) shall also apply to foreign corporations. [and in <-- 12 determining the relevant apportionment factors the numerator of 13 the property[, payroll, or sales] or payroll factors shall not <-- 14 include any property[, payroll or sales] or payroll attributable <-- 15 to manufacturing, processing, research or development activities 16 in the Commonwealth.[: and Provided further, That, except] Any <-- 17 IN DETERMINING THE RELEVANT APPORTIONMENT FACTORS, THE FOLLOWING <-- 18 SHALL APPLY: 19 (I) FOR ALL TAXABLE YEARS OTHER THAN SPECIFICALLY SET FORTH 20 IN SUBCLAUSE (II) THE NUMERATOR OF THE PROPERTY, PAYROLL OR 21 SALES FACTORS SHALL NOT INCLUDE ANY PROPERTY, PAYROLL OR SALES 22 ATTRIBUTABLE TO MANUFACTURING, PROCESSING, RESEARCH OR 23 DEVELOPMENT ACTIVITIES IN THE COMMONWEALTH; 24 (II) FOR THE TAXABLE YEARS BEGINNING AFTER DECEMBER 31, 25 1998, AND BEGINNING BEFORE JANUARY 1, 2001, THE NUMERATOR OF THE 26 PROPERTY OR PAYROLL FACTORS SHALL NOT INCLUDE ANY PROPERTY OR 27 PAYROLL ATTRIBUTABLE TO MANUFACTURING, PROCESSING, RESEARCH OR 28 DEVELOPMENT ACTIVITIES IN THE COMMONWEALTH AND ANY property or 29 payroll attributable to manufacturing, processing, research or 30 development activities outside of the Commonwealth shall also be 19990H1848B2767 - 2 -
1 excluded from the numerator of the property or payroll factors. 2 Except for the imposition of the minimum tax set forth in 3 subsection (i), the provisions of this section shall not apply 4 to the taxation of so much of the capital stock value 5 attributable to student loan assets owned or held by an entity 6 created for the securitization of student loans or by a trustee 7 on its behalf. Any foreign corporation, joint-stock association, 8 limited partnership or company subject to the tax prescribed 9 herein may elect to compute and pay its tax under section 10 602(a): Provided, That any foreign corporation, joint-stock 11 association, limited partnership or company electing to compute 12 and pay its tax under section 602(a) shall be treated as if it 13 were a domestic corporation for the purpose of determining which 14 of its assets are exempt from taxation and for the purpose of 15 determining the proportion of the value of its capital stock 16 which is subject to taxation. 17 (2) The provisions of this article shall apply to the 18 taxation of entities organized for manufacturing, processing, 19 research or development purposes, but shall not apply to such 20 entities as enjoy and exercise the right of eminent domain. 21 * * * 22 Section 2. Section 1701-A of the act, amended or added 23 December 19, 1985 (P.L.356, No.102) and July 1, 1989 (P.L.109, 24 No.23), is amended to read: 25 [Section 1701-A. Employment Incentive Payments.--(a) Any 26 corporation, bank, savings institution, company, insurance 27 company, or mutual thrift institution employing persons, who 28 prior to their employment were recipients of aid to families 29 with dependent children or who are classified as chronically or 30 transitionally needy, pursuant to section 432 of the act of June 19990H1848B2767 - 3 -
1 13, 1967 (P.L.31, No.21), known as the "Public Welfare Code," 2 shall be entitled to employment incentive payments to be 3 provided as a credit against taxes imposed by Article IV, VII, 4 VIII, IX or XV of this act, and any person, partnership or 5 proprietorship employing such persons shall be entitled to 6 payments to be provided as a credit against taxes imposed by 7 Article III of this act. For the purposes of computing any tax 8 liabilities against which the credit may be applied, deductions 9 from taxable income shall be reduced by employment incentive 10 payments. Employment incentive payments unused as a tax credit 11 in any taxable year may be carried over against tax liabilities 12 of the employer in the three immediately subsequent taxable 13 years. 14 (b) An employment incentive payment may be claimed by an 15 employer who hires any person who is receiving aid to families 16 with dependent children or who is classified as chronically or 17 transitionally needy at the time of employment except that 18 payments shall not be provided for: 19 (1) The employment of any person who displaces any other 20 individual from employment, except persons discharged for cause 21 as certified by the Office of Employment Security. 22 (2) The employment of any person closely related, as defined 23 by paragraphs (1) through (8) of section 152(a) of the Internal 24 Revenue Code, to the taxpayer, or, if the taxpayer is a 25 corporation, to an individual who owns, directly or indirectly 26 more than fifty per cent of the outstanding stock of the 27 corporation, bank, savings institution, company, insurance 28 company, or mutual thrift institution. 29 (3) The employment of an individual for whom the employer is 30 simultaneously receiving federally or State funded job training 19990H1848B2767 - 4 -
1 payments. 2 (4) The employment of an individual as a domestic or other 3 household employe in the home of the employer. 4 (c) (1) The employment incentive payment shall be the sum 5 of thirty per cent of the first six thousand dollars ($6,000) of 6 qualified first year wages for such year, twenty per cent of the 7 first six thousand dollars ($6,000) of qualified second year 8 wages for such year and ten per cent of the first six thousand 9 dollars ($6,000) of the qualified third year wages for such 10 year. 11 (2) If the employer provides or pays for day care services 12 for the children of the employe, the employer shall be eligible 13 to receive an additional employment incentive payment of up to 14 six hundred dollars ($600) during the first year of employment, 15 five hundred dollars ($500) during the second year of employment 16 and four hundred dollars ($400) during the third year of 17 employment. 18 (3) Total employment incentive payments shall not exceed 19 ninety per cent of total taxes paid by the employer against 20 which the incentive payments may be claimed as a credit. 21 Qualified wages must be cash remuneration to the employe, 22 including any amounts deducted or withheld. 23 (d) To be eligible for employment incentive payments, the 24 employment must continue for at least one year unless the 25 employe voluntarily leaves the employment of the employer, 26 becomes disabled or is terminated for cause. If the employe 27 leaves his position voluntarily, becomes disabled, or is 28 terminated for cause in less than one year, the employment 29 incentive payment shall be reduced by the proportion of the year 30 not worked. Employment initiated during the year may be claimed 19990H1848B2767 - 5 -
1 as an employment incentive payment in the subsequent year. 2 (e) The Department of Revenue, in cooperation with the 3 Department of Public Welfare and the Department of Labor and 4 Industry, shall administer the provisions of this section, 5 promulgate appropriate rules, regulations and forms for that 6 purpose and make such determinations as may be required. 7 Determinations made with respect to the employment incentive 8 payment provided in this section may be reviewed and appealed in 9 the manner provided by law for other corporate or personal tax 10 credits. The Department of Public Welfare shall conduct a 11 program of employer education to inform employers of the 12 benefits available under this section as well as to inform them 13 of any similar tax credits for hiring welfare recipients 14 available under Federal law. 15 (f) The total amount of employment incentive payments 16 authorized by this section shall not exceed twenty-five million 17 dollars ($25,000,000) in any fiscal year. To insure that credits 18 are not claimed in excess of this amount, an employer may claim 19 the incentive payments only upon presentation of an authorizing 20 certificate. Certificates will be issued to the employer by the 21 Department of Public Welfare upon presentation to the Department 22 of Public Welfare of evidence of a qualifying offer of 23 employment. If necessary to avoid certificate issuances in 24 excess of the maximum authorized amount for any fiscal year, the 25 department shall advise the Department of Public Welfare of the 26 total number of certificates which may be issued in each 27 calendar quarter. The Department of Public Welfare may issue 28 certificates through the Office of Employment Security and may 29 promulgate regulations to allocate certificates. 30 (g) Employment incentive payments shall not be available for 19990H1848B2767 - 6 -
1 employes hired after June 30, 1993, unless reenacted by the 2 General Assembly. Not later than September 1, 1990, and 3 September 1 each year thereafter, the Department of Public 4 Welfare shall report to the General Assembly on the 5 effectiveness of incentive payments to encourage the employment 6 of cash assistance recipients and recommend whether changes are 7 needed in the program and whether the program should be 8 continued. The report shall contain information, including the 9 number of authorizing certificates issued by the Department of 10 Public Welfare, the number of authorizing certificates accepted 11 by the Department of Revenue from employers as evidence of 12 qualified hires, the number and dollar amounts of tax credits 13 approved by the Department of Revenue in each tax year, the 14 average hourly starting wage of employes hired and the category 15 of assistance received previously by employes hired. The report 16 shall also include an analysis of the types of businesses 17 identified as either corporations or individuals or partnerships 18 which have had tax credits approved by the Department of Revenue 19 and the types of employment positions into which employes have 20 been hired as indicated by Standard Occupational Classification 21 Codes. The report shall describe outreach and publicity efforts 22 by the Department of Public Welfare. The report shall contain 23 similar information about the day care tax credit authorized in 24 subsection (c)(2). Credits may be claimed against taxes payable 25 for tax years beginning January 1, 1989, and thereafter, and may 26 be claimed for employes hired on or after January 1, 1989.] 27 Section 3. The act is amended by adding sections to read: 28 Section 1702-A. Definitions.--The following words, terms and 29 phrases when used in this article, shall have the meanings 30 ascribed to them in this section, except where the context 19990H1848B2767 - 7 -
1 clearly indicates a different meaning: 2 "Eligible individual" means any of the following: 3 (1) A person who at any time, within the twelve months 4 preceding the date of hire, received general assistance. 5 (2) A person who at any time, within the twelve months 6 preceding the date of hire, received temporary assistance to 7 needy families. 8 (3) A person who: 9 (i) has a physical or mental disability which, for such 10 individual, constitutes or results in a substantial handicap to 11 employment; and 12 (ii) is referred to the employer upon completion of or while 13 receiving rehabilitative services pursuant to an individualized 14 written rehabilitation plan under a State plan for vocational 15 rehabilitation services approved under the Rehabilitation Act of 16 1973 (Public Law 93-112, 29 U.S.C. § 701 et seq.), or a program 17 of vocational rehabilitation carried out under Title I of the 18 Veterans' Rehabilitation and Education Amendments of 1980 19 (Public Law 96-466, 94 Stat. 2171). 20 "Employment incentive payment" means the employment 21 incentive payment credit provided by this article. 22 "Pass-through entity" means any of the following: 23 (1) A partnership, limited partnership, limited liability 24 company, business trust or other unincorporated entity that for 25 Federal income tax purposes is taxable as a partnership. 26 (2) A Pennsylvania S corporation. 27 "Qualified first-year wages" means the qualified wages 28 attributable to service rendered by an eligible individual 29 during the one-year period beginning with the day the eligible 30 individual begins work for the employer. 19990H1848B2767 - 8 -
1 "Qualified second-year wages" means the qualified wages 2 attributable to service rendered by an eligible individual 3 during the one-year period beginning one year after the eligible 4 individual begins work for the employer. 5 "Qualified tax liability" means the liability for taxes 6 imposed under Article III, IV, VII, VIII, IX or XV of this act. 7 The term includes the liability for taxes imposed under Article 8 III of this act on the owner or owners of a pass-through entity. 9 The term does not include amounts withheld or required to be 10 withheld from employees under Article III of this act. 11 "Qualified third-year wages" means the qualified wages 12 attributable to service rendered by an eligible individual 13 during the one-year period beginning two years after the 14 eligible individual begins work for the employer. 15 "Qualified wages" means wages as that term is defined in 16 section 51A(b)(5) of the Internal Revenue Code of 1986 (Public 17 Law 99-514, 26 U.S.C. § 51A(b)(5)). 18 "Taxpayer." A person or entity subject to tax under Article 19 III, IV, VII, VIII, IX or XV of this act. This term includes a 20 pass-through entity. 21 Section 1703-A. Employment Incentive Payments.--(a) A 22 taxpayer who employs an eligible individual shall be entitled to 23 employment incentive payments as provided by this article. 24 (b) No employment incentive payment shall be provided for: 25 (1) The employment of a person who displaces any other 26 individual from employment, except persons discharged for cause 27 as certified by the Department of Labor and Industry. 28 (2) The employment of a person closely related, as defined 29 by clauses (1) through (8) of section 152(a) of the Internal 30 Revenue Code of 1986 (Public Law 99-514, 26 U.S.C. § 1 et. 19990H1848B2767 - 9 -
1 seq.), to the taxpayer, or, if the taxpayer is a corporation, to 2 an individual who owns, directly or indirectly, more than 50% of 3 the outstanding stock of the taxpayer. 4 (3) Wages paid to an individual during the time period for 5 which the employer received federally funded or State funded job 6 training payments for that individual. 7 (c) The employment incentive payment shall be calculated on 8 an annual basis as provided in clauses (1) and (2): 9 (1) The employment incentive payment shall be the sum of 10 thirty per cent of the first nine thousand dollars ($9,000) of 11 qualified first-year wages, twenty per cent of the first nine 12 thousand dollars ($9,000) of qualified second-year wages and ten 13 per cent of the first nine thousand dollars ($9,000) of 14 qualified third-year wages. 15 (2) A taxpayer eligible to receive a credit under clause (1) 16 shall be eligible to receive an additional employment incentive 17 payment as provided in this clause if: 18 (i) the taxpayer provides or pays for day-care services for 19 the children of an eligible individual; or 20 (ii) the taxpayer provides or pays for transportation 21 services that enable an eligible individual to travel to and 22 from work. 23 The additional employment incentive payments under this 24 paragraph shall be the expenses incurred by the taxpayer for 25 services listed in subclauses (i) and (ii), but in no case 26 shall the additional employment incentive payment for each 27 eligible individual exceed eight hundred dollars ($800) 28 during the first year of employment, six hundred dollars 29 ($600) during the second year of employment or four hundred 30 dollars ($400) during the third year of employment. 19990H1848B2767 - 10 -
1 (d) The employment incentive payment shall be utilized as a 2 credit against a qualified tax liability to which the taxpayer 3 is subject. The employment incentive payment applicable to a 4 pass-through entity shall be allocated in the same manner as 5 income is allocated. 6 (e) (1) Except in cases where an eligible individual 7 voluntarily leaves the employment of the taxpayer, becomes 8 disabled or is terminated for cause, no taxpayer shall be 9 entitled to receive an employment incentive payment if the 10 eligible individual is employed by the taxpayer for less than 11 one year. 12 (2) If the eligible individual leaves the employment of the 13 taxpayer voluntarily, becomes disabled or is terminated for 14 cause in less than one year, the employment incentive payment 15 shall be reduced by the proportion of the year not worked. 16 (f) The total employment incentive payment credit shall not 17 exceed ninety per cent of the total taxes paid by the employer 18 against which the employment incentive payments may be claimed 19 as a credit. 20 (g) Employment incentive payments unused as a tax credit in 21 a taxable year may be carried over against a qualified tax 22 liability in the ten immediately subsequent taxable years. 23 (h) For the purposes of computing a tax liability against 24 which the employment incentive payments may be applied, 25 deductions from taxable income shall be reduced by the 26 employment incentive payments. 27 Section 1704-A. Administration and Regulations.--The 28 department, in cooperation with the Department of Public Welfare 29 and the Department of Labor and Industry, shall administer the 30 provisions of this article, promulgate appropriate rules, 19990H1848B2767 - 11 -
1 regulations and forms for that purpose and make such 2 determinations as may be required. Determinations made with 3 respect to the employment incentive payment provided in this 4 section may be reviewed and appealed in the manner provided by 5 law for other corporate or personal tax credits. 6 Section 1705-A. Limitation on Credits.--The total amount of 7 employment incentive payments authorized by this article shall 8 not exceed twenty-five million dollars ($25,000,000) in any 9 fiscal year. To insure that credits are not claimed in excess of 10 this amount, a taxpayer may claim the incentive payments only 11 upon presentation of an authorizing certificate. Certificates 12 will be issued to the taxpayer by the Department of Labor and 13 Industry upon presentation to the Department of Labor and 14 Industry of evidence of a qualifying offer of employment. If 15 necessary to avoid certificate issuances in excess of the 16 maximum authorized amount for any fiscal year, the department 17 shall advise the Department of Labor and Industry of the total 18 number of certificates which may be issued in each calendar 19 quarter. 20 Section 1706-A. Time Limitations and Report.--Employment 21 incentive payments shall not be available for employees hired 22 after December 31, 2004, unless reenacted by the General 23 Assembly. Not later than July 1, 2004, the Secretary of Public 24 Welfare shall report to the General Assembly on the 25 effectiveness of incentive payments to encourage the employment 26 of general assistance and temporary assistance to needy families 27 recipients and recommend whether the program should be 28 continued. Credits may be claimed against taxes payable for tax 29 years beginning January 1, 2000, and thereafter, and may be 30 claimed for employees hired after December 31, 1999. 19990H1848B2767 - 12 -
1 Section 4. The amendment of section 602(b) of the act shall 2 apply to taxable years beginning after December 31, 1998. 3 Section 5. It is the intent of the General Assembly that the 4 addition of sections 1702-A through 1706-A of the act shall be 5 deemed to be a continuation and expansion of the employment 6 incentive payments program authorized in section 491 of the act 7 of June 13, 1967 (P.L.31, No.21), known as the Public Welfare 8 Code. Accordingly: 9 (1) Nothing in this act shall be construed to preclude 10 consideration of applications for credits filed under section 11 1701-A of the act or section 491 of the Public Welfare Code, 12 which applications were filed prior to or on the effective date 13 of this act. 14 (2) Nothing in this act shall be construed to preclude the 15 utilization of credits which were approved but not applied under 16 section 1701-A of the act or section 491 of the Public Welfare 17 Code after the effective date of this act. 18 Section 6. Section 491 of the act of June 13, 1967 (P.L.31, 19 No.21), known as the Public Welfare Code, is repealed insofar as 20 it is inconsistent with this act. 21 Section 7. This act shall take effect January 1, 2000. I17L72DMS/19990H1848B2767 - 13 -