PRINTER'S NO. 2562
No. 2041 Session of 1978
INTRODUCED BY ZEARFOSS, BURNS AND SPITZ, FEBRUARY 1, 1978
REFERRED TO COMMITTEE ON LOCAL GOVERNMENT, FEBRUARY 1, 1978
AN ACT
1 Amending the act of December 31, 1965 (P.L.1257, No.511),
2 entitled "An act empowering cities of the second class,
3 cities of the second class A, cities of the third class,
4 boroughs, towns, townships of the first class, townships of
5 the second class, school districts of the second class,
6 school districts of the third class and school districts of
7 the fourth class including independent school districts, to
8 levy, assess, collect or to provide for the levying,
9 assessment and collection of certain taxes subject to maximum
10 limitations for general revenue purposes; authorizing the
11 establishment of bureaus and the appointment and compensation
12 of officers, agencies and employes to assess and collect such
13 taxes; providing for joint collection of certain taxes,
14 prescribing certain definitions and other provisions for
15 taxes levied and assessed upon earned income, providing for
16 annual audits and for collection of delinquent taxes, and
17 permitting and requiring penalties to be imposed and
18 enforced, including penalties for disclosure of confidential
19 information, providing an appeal from the ordinance or
20 resolution levying such taxes to the court of quarter
21 sessions and to the Supreme Court and Superior Court,"
22 authorizing a school income tax and a school business use and
23 occupancy tax in lieu of real property tax after a local
24 option referendum; providing for collection and imposing
25 certain powers and duties on the Department of Revenue;
26 providing for rates and exclusions, and establishing a
27 Tenants' Rent Rebate Fund.
28 The General Assembly of the Commonwealth of Pennsylvania
29 hereby enacts as follows:
30 Section 1. The act of December 31, 1965 (P.L.1257, No.511),
31 known as "The Local Tax Enabling Act," is amended by adding a
1 section to read:
2 Section 13.1. Optional School Finance Plan.--In recognition
3 of the burdensome and sometimes punitive affect of real estate
4 taxation for school purposes, the General Assembly of the
5 Commonwealth of Pennsylvania hereby declares it to be its policy
6 to provide for an alternative to such taxation which may be
7 implemented only upon voter approval.
8 I. Definitions
9 The following words and phrases when used in this section
10 shall have, unless the context clearly indicates otherwise, the
11 meanings given to them in this division:
12 "Business." Any business, trade, occupation, profession,
13 vocation or any other commercial or industrial activity,
14 including the leasing of property for any purpose.
15 "Department." The Department of Revenue.
16 "School district." Any school district of the second, third
17 or fourth class.
18 "Use." For the purpose of rental properties shall include
19 all premises available for lease, even though unoccupied.
20 II. Optional School District Taxes
21 (a) The board of school directors of a school district may
22 provide by resolution, subject to adoption by referendum, for
23 the levying of taxes upon the personal income of its residents
24 and upon use and occupancy of real property by businesses within
25 its jurisdiction in lieu of and not in addition to any real
26 property taxes levied by such school district and any tax on
27 wages, salaries, commissions and other earned income of
28 individuals as provided by section 2.
29 (b) Any school district's real property and earned income
30 taxes are hereby abolished effective January 1 of the calendar
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1 year following the approval of the alternative tax plan
2 referendum.
3 III. School Income Tax
4 (a) In the event that a resolution is adopted authorizing
5 this alternative form of taxation, the board of school directors
6 of any school district may levy upon residents of the school
7 district a school income tax, the basis for which shall be
8 taxable income as reported to the Commonwealth of Pennsylvania
9 pursuant to Article III, act of March 4, 1971 (P.L.6, No.2),
10 known as the "Tax Reform Code of 1971."
11 (b) Such tax for any taxable year shall be due and payable
12 on the fifteenth day of the fourth calendar month of a person's
13 succeeding taxable year and shall be remitted along with any
14 State personal income tax due and payable on that date to the
15 department on a form prescribed by the department.
16 (c) Any school district may provide for a system of
17 quarterly estimated tax payments payable to the department on
18 forms prescribed by the department and due on the dates a
19 taxpayer's State personal income tax estimate would be due, if
20 such taxpayer were required to file same.
21 IV. Remittance by the Commonwealth
22 to Local School Districts
23 (a) The department shall remit to each school district, for
24 which it has acted as collection agent for school income taxes,
25 all taxes collected within forty-five days of the date such
26 taxes were due and payable.
27 (b) In the event a school district has required estimated
28 payments to be made to the department on school income taxes
29 due, the department shall remit any moneys collected to the
30 proper school district within thirty days of the day such
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1 estimate was due.
2 V. School Business Use and Occupancy Tax
3 (a) In the event that a resolution is adopted authorizing
4 this alternative form of taxation, the board of school directors
5 of any school district may levy upon users and occupiers of real
6 property used for carrying on any business within the district a
7 school business use and occupancy tax, measured by the assessed
8 value of the real estate, the square footage of usage or
9 occupancy and the number of days of use or occupancy according
10 to the following formula:
11 Square feet Days of actual
12 occupied or used Assessed Rate of use or occupancy
13 x x x
14 ________________ value taxation ________________
15 Total square feet 360
16 available for use
17 or occupancy on
18 the real estate
19 Such tax shall be collected directly by the school district.
20 (b) Such tax shall be based upon use or occupancy for the
21 fiscal year beginning July 1 and ending June 30 and shall be
22 prepaid for the fiscal year on August 15 of such year. The
23 prepayment shall be for the entire year and shall be an
24 annualization of the use or occupancy for July of such year. On
25 August 15 following any year for which prepayment was made, the
26 owner of such real estate, and, in the event the property has
27 changed ownership at any time during that year, the prior owner
28 or owners, shall file a final return in order that any change in
29 use or occupancy during such year may be resolved. Such final
30 return shall be accompanied by payment of any tax due or a claim
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1 for refund of any overpayment. Refunds shall be made, on valid
2 claims, by the school district within fifteen days of the
3 receipt of the claim.
4 VI. Exclusions
5 The authorization to levy and collect a business use and
6 occupancy tax shall not include the power to levy such tax upon:
7 (1) Any real property to the extent that such property is
8 used or occupied as the principal place of residence of the user
9 or occupier. In the event an apportionment must be made between
10 business and personal use, such shall be made by the local tax
11 assessor.
12 (2) Any real property exempted from ordinary real estate
13 taxes by any other act.
14 VII. Initial and Subsequent Rates of Tax
15 (a) When the board of school directors of a school district
16 by resolution proposes the adoption of school income and
17 business use and occupancy taxes in lieu of taxes on real
18 property and any earned income tax, the board of school
19 directors shall give public notice of the proposed tax rates by:
20 (1) publishing the notice once in a "newspaper of general
21 circulation," as defined by Title 45 (Legal Notices), act of
22 November 25, 1970 (P.L.707, No.230), known as the Pennsylvania
23 Consolidated Statutes, which is published and circulated in the
24 political subdivision, or such newspaper of general circulation
25 which has a bona fide paid circulation equal to or greater than
26 any newspaper published in the political subdivision; and
27 (2) by posting a copy of the notice prominently at the
28 office of the board of school directors, at least thirty and not
29 more than sixty days prior to the date of the referendum on the
30 question of replacing taxes on real property levied by the
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1 school district with taxes upon personal and corporate income.
2 (b) The initial rates of taxes on school income and school
3 business use and occupancy taxes shall be determined so that the
4 proportion of the total proposed revenues to be produced by each
5 such tax is substantially in the same proportion that the
6 previous year's real property taxes collected on residential
7 properties bears to those collected on properties made subject
8 to the school business use and occupancy tax by this act. For
9 purposes of this subsection, "substantially equal" means within
10 a deviation of plus or minus two percent.
11 (c) Any time the aforementioned taxes are raised subsequent
12 to their initial enactment, the proportion that the collections
13 under each bears to the total taxes to be collected under the
14 new rates shall be in the proportion that the assessed value on
15 residential real property bears to the assessed value on the
16 real property of businesses subject to the school business use
17 and occupancy tax for the current year, as contained in the
18 official records in the county assessor's office, and the rates
19 shall be determined therefrom.
20 (d) In the event the alternative taxing structure permitted
21 by this section is adopted by any school district, the rates
22 established for the new taxes in their initial year of enactment
23 shall be set so that the total estimated revenues from both
24 taxes shall not exceed one hundred ten percent of the total
25 revenue collections from real property taxes in the last year of
26 their collection.
27 (e) No school district shall increase the rate of either tax
28 to more than twenty-five percent in excess of the initial rates
29 imposed unless such question has been submitted to the voters of
30 said school district in the same manner as required by the
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1 initial authorization.
2 VIII. Tenants' Rent Rebate Fund
3 (a) In every school district which uses this optional form
4 of taxation, the tax collector for the school district shall
5 establish a separate, segregated fund for collection of the
6 school business use and occupancy tax from owners of rental
7 properties, which fund shall be known as the "Tenants' Rent
8 Rebate Fund," for such school district. It is the intent of the
9 Legislature hereby to insure against the imposition of double
10 taxation upon those persons who rent their principal place of
11 residence. Any tenant of a residential rental property located
12 in a school district that has adopted a school income tax and
13 school business use and occupancy tax may file for a rebate of
14 the real estate taxes paid by such tenant on his portion of the
15 premises through rental payments, which rebate shall not exceed
16 the lesser of the total amount apportioned as school business
17 use and occupancy taxes or the total school income tax paid. The
18 apportionment of the amount of tax paid by each tenant shall be
19 made by the local tax assessor based upon the proportion that
20 the monthly rental paid by such tenant bears to the total amount
21 of rentals received by the landlord on the entire property.
22 Rebate claims for the calendar year shall be filed with the
23 school district on or before March 15 of the succeeding calendar
24 year on forms prescribed by the department and available from
25 the school district.
26 (b) The school district shall distribute rebates to eligible
27 tenants within thirty days of the deadline for filing claims.
28 Any moneys which remain in the fund after the distribution of
29 rebates to all claimants shall be transferred to and shall
30 accrue to the use of the school district.
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1 IX. Local Option
2 In any school district, an election may be held on the date
3 of the primary election immediately preceding any municipal
4 election to determine the will of the electors with respect to
5 the abolishing of all real estate taxes for school purposes and
6 any tax on wages, salaries, commissions and other earned income
7 of individuals as authorized by section 2 and the levying of
8 taxes for school purposes on the income of residents of the
9 district and the use of property within the district for
10 commercial or industrial purposes. Whenever the board of school
11 directors of a school district shall file a petition with the
12 county board of elections of the county for a referendum on the
13 question of replacing property taxes levied by the school
14 district with taxes upon the income of residents of its district
15 and the use of property within the district for commercial or
16 industrial purposes, the said county board of elections shall
17 cause a question to be placed on the ballots or on the voting
18 machine board and submitted at the primary immediately preceding
19 the municipal election.
20 The question shall be in the following form and shall include
21 a specification of the maximum initial rate of each tax:
22 Do you favor______________________
23 __________________________________ Yes
24 __________________________________
25 __________________________________ No
26 __________________________________
27 _________________________________?
28 In case of a tie vote, the status quo shall obtain. If a
29 majority of the voting electors on any question vote "Yes" then
30 income taxes shall replace the real estate taxes as provided in
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1 this section; but, if a majority of the electors voting on any
2 such question vote "No," then the board shall have no power to
3 adopt such income taxes in place of real estate taxes.
4 X. Appeals
5 Appeals from any adverse decision made by any assessor
6 required pursuant to this section shall be allowed and shall
7 follow the procedure required by law for appeals of real estate
8 tax assessments.
9 XI. Regulations
10 (a) The department shall cooperate fully with any school
11 district requesting aid in establishing this alternative plan of
12 taxation.
13 (b) The department shall submit all proposed regulations
14 that it deems necessary for the uniformity of application of
15 this section to the General Assembly for its approval within
16 ninety days of the effective date of this act. Such regulations
17 shall become effective automatically in thirty calendar days or
18 ten legislative days, whichever later occurs, unless the General
19 Assembly disapproves thereof.
20 XII. Severability
21 Divisions III and V hereof are hereby expressly made
22 inseverable from this section.
23 Section 2. (a) This act shall take effect January 1, 1978.
24 (b) Any optional tax plan allowed by this act which has been
25 approved by the voters shall take effect on January 1 of the
26 calendar year following the date of approval.
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