PRINTER'S NO. 243
No. 238 Session of 1999
INTRODUCED BY PUNT, MUSTO, COSTA, SALVATORE, ARMSTRONG, WENGER,
SLOCUM, CORMAN, ROBBINS, HART AND WAUGH, FEBRUARY 1, 1999
REFERRED TO FINANCE, FEBRUARY 1, 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 minimum amount of
11 capital stock and franchise tax; and making editorial
12 changes.
13 The General Assembly of the Commonwealth of Pennsylvania
14 hereby enacts as follows:
15 Section 1. Section 402 of the act of March 4, 1971 (P.L.6,
16 No.2), known as the Tax Reform Code of 1971, amended June 30,
17 1995 (P.L.139, No.21), is amended to read:
18 Section 402. Imposition of Tax.--(a) Every corporation
19 shall be subject to, and shall pay for the privilege of (i)
20 doing business in this Commonwealth; or (ii) carrying on
21 activities in this Commonwealth; (iii) having capital or
22 property employed or used in this Commonwealth; or (iv) owning
23 property in this Commonwealth, by or in the name of itself, or
1 any person, partnership, association, limited partnership,
2 joint-stock association, or corporation, a State excise tax at
3 the rate [of twelve per cent per annum upon each dollar of
4 taxable income of such corporation received by, and accruing to,
5 such corporation during the calendar year 1971 and the first six
6 months of 1972 and at the rate of eleven per cent per annum upon
7 each dollar of taxable income of such corporation received by,
8 and accruing to, such corporation during the second six months
9 of calendar year 1972 through the calendar year 1973 and at the
10 rate of nine and one-half per cent per annum upon each dollar of
11 taxable income of such corporation received by, and accruing to,
12 such corporation during the calendar years 1974, 1975 and 1976
13 and at the rate of ten and one-half per cent per annum upon each
14 dollar of taxable income of such corporation received by, and
15 accruing to, such corporation during the calendar year 1977
16 through the calendar year 1984 and at the rate of nine and one-
17 half per cent per annum upon each dollar of taxable income of
18 such corporation received by and accruing to such corporation
19 during the calendar year 1985 through calendar year 1986 and at
20 the rate of eight and one-half per cent per annum upon each
21 dollar of taxable income of such corporation received by and
22 accruing to such corporation during the calendar year 1987
23 through the calendar year 1990 and at the rate of ten and one-
24 half per cent per annum upon each dollar of taxable income of
25 such corporation received by and accruing to such corporation
26 during calendar year 1991 through the calendar year 1994 and at
27 the rate of nine and ninety-nine hundredths per cent per annum
28 upon each dollar of taxable income of such corporation received
29 by and accruing to such corporation during the calendar year
30 1995 and during each calendar year thereafter, with an
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1 additional surtax equal to one and seventy-five hundredths per
2 cent per annum upon each dollar of taxable income of such
3 corporation received by and accruing to such corporation during
4 calendar year 1991 and through calendar year 1993 and with an
5 additional surtax equal to one and forty-nine hundredths per
6 cent per annum upon each dollar of taxable income of such
7 corporation received by and accruing to such corporation during
8 calendar year 1994 and with no surtax during calendar year 1995
9 and each calendar year thereafter] set forth in subsection (b),
10 except where a corporation reports to the Federal Government on
11 the basis of a fiscal year, and has certified such fact to the
12 department as required by section 403 of this article, in which
13 case, such tax[, at the rate of twelve per cent, shall be
14 levied, collected, and paid upon all taxable income received by,
15 and accruing to, such corporation during the first six months of
16 the fiscal year commencing in the calendar year 1972 and at the
17 rate of eleven per cent, shall be levied, collected, and paid
18 upon all taxable income received by, and accruing to, such
19 corporation during the second six months of the fiscal year
20 commencing in the calendar year 1972 and during the fiscal year
21 commencing in the calendar year 1973 and at the rate of nine and
22 one-half per cent, shall be levied, collected, and paid upon all
23 taxable income received by, and accruing to, such corporation
24 during the fiscal year commencing in the calendar years 1974,
25 1975 and 1976 and at the rate of ten and one-half per cent,
26 shall be levied, collected, and paid upon all taxable income
27 received by, and accruing to, such corporation during the fiscal
28 year commencing in the calendar year 1977 through the fiscal
29 year commencing in 1984 and at the rate of nine and one-half per
30 cent, shall be levied, collected, and paid upon all taxable
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1 income received by and accruing to such corporation during the
2 fiscal year commencing in 1985 through the fiscal year
3 commencing in 1986 and at the rate of eight and one-half per
4 cent per annum upon each dollar of taxable income of such
5 corporation received by and accruing to such corporation during
6 the fiscal year commencing in 1987 through the fiscal year
7 commencing in 1990 and at the rate of ten and one-half per cent
8 per annum upon each dollar of taxable income of such corporation
9 received by and accruing to such corporation during the fiscal
10 year commencing in 1991 through the fiscal year commencing in
11 1994 and at the rate of nine and ninety-nine hundredths per cent
12 per annum upon each dollar of taxable income of such corporation
13 received by and accruing to such corporation during the fiscal
14 year commencing in 1995 and during each fiscal year thereafter,
15 with an additional surtax equal to one and seventy-five
16 hundredths per cent per annum upon each dollar of taxable income
17 of such corporation received by and accruing to such corporation
18 during the fiscal year commencing in 1991 and through fiscal
19 year 1993 and with an additional surtax equal to one and forty-
20 nine hundredths per cent per annum upon each dollar of taxable
21 income of such corporation received by and accruing to such
22 corporation during fiscal year 1994 and with no surtax during
23 the fiscal year commencing in 1995 and each fiscal year
24 thereafter] shall be at the rate set forth in subsection (b). No
25 penalty prescribed by subsection (e) of section 3003 shall be
26 assessed against a corporation for the additional tax which may
27 be due as a result of the increase in tax rate from nine and
28 one-half per cent to ten and one-half per cent imposed
29 retroactively by this section for the calendar year 1977 or for
30 the fiscal year commencing in 1977.
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1 (b) The rate of tax on corporate net income for taxable
2 years beginning for the calendar year or fiscal year on or after
3 the dates set forth shall be as follows:
4 Regular Surtax Total
5 Year Rate Rate Rate
6 January 1, 1971 to June 30, 1972 12% 0% 12%
7 July 1, 1972 to December 31, 1973 11% 0% 11%
8 January 1, 1974 to December 31, 1976 9.5% 0% 9.5%
9 January 1, 1977 to December 31, 1984 10.5% 0% 10.5%
10 January 1, 1985 to December 31, 1986 9.5% 0% 9.5%
11 January 1, 1987 to December 31, 1990 8.5% 0% 8.5%
12 January 1, 1991 to December 31, 1993 10.5% 1.75% 12.25%
13 January 1, 1994 to December 31, 1994 10.5% 1.49% 11.99%
14 January 1, 1995 and each taxable 9.99% 0% 9.99%
15 year thereafter
16 Section 2. Section 602 of the act, amended April 23, 1998
17 (P.L.239, No.45), is amended to read:
18 Section 602. Imposition of Tax.--(a) That every domestic
19 entity from which a report is required under section 601 hereof,
20 shall be subject to, and pay to the department annually, a tax
21 which is the greater of (i) [three hundred dollars ($300)] the
22 amount of minimum tax set forth in subsection (i) or (ii) the
23 amount computed at the rates provided in subsection (h) upon
24 each dollar of the capital stock value as defined in section
25 601(a), except that any domestic entity or company subject to
26 the tax prescribed herein may elect to compute and pay its tax
27 under and in accordance with the provisions of subsection (b) of
28 this section 602: Provided, That, except for the imposition of
29 the [three hundred dollar ($300)] minimum tax set forth in
30 subsection (i), the provisions of this section shall not apply
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1 to the taxation of the capital stock of entities organized for
2 manufacturing, processing, research or development purposes,
3 which is invested in and actually and exclusively employed in
4 carrying on manufacturing, processing, research or development
5 within the State, except such entities as enjoy and exercise the
6 right of eminent domain, but every entity organized for the
7 purpose of manufacturing, processing, research or development
8 except such entities as enjoy and exercise the right of eminent
9 domain shall pay the State tax of the greater of (i) [three
10 hundred dollars ($300)] the amount of minimum tax set forth in
11 subsection (i) or (ii) the amount computed at the rates provided
12 in subsection (h) upon each dollar of the capital stock value as
13 defined in section 601(a), upon such proportion of its capital
14 stock, if any, as may be invested in any property or business
15 not strictly incident or appurtenant to the manufacturing,
16 processing, research or development business, in addition to the
17 local taxes assessed upon its property in the district where
18 located, it being the object of this provision to relieve from
19 State taxation, except for imposition of the [three hundred
20 dollar ($300)] minimum tax under this section, only so much of
21 the capital stock as is invested purely in the manufacturing,
22 processing, research or development plant and business: and
23 Provided further, That, except for the imposition of the minimum
24 tax set forth in this section, the provisions of this section
25 shall not apply to the taxation of so much of the capital stock
26 value attributable to student loan assets owned or held by an
27 entity created for the securitization of student loans or by a
28 trustee on its behalf.
29 (b) (1) Every foreign entity from which a report is
30 required under section 601 hereof, shall be subject to and pay
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1 to the department annually, a franchise tax which is the greater
2 of (i) [three hundred dollars ($300)] the amount of minimum tax
3 set forth in subsection (i) or (ii) the amount computed at the
4 rates provided in subsection (h) upon each dollar of the capital
5 stock value as defined in section 601(a), upon a taxable value
6 to be determined in the following manner. The capital stock
7 value shall be ascertained in the manner prescribed in section
8 601(a) of this article. The taxable value shall then be
9 determined by employing the relevant apportionment factors set
10 forth in Article IV: Provided, That the manufacturing,
11 processing, research and development exemptions contained under
12 section 602(a) shall also apply to foreign corporations and in
13 determining the relevant apportionment factors the numerator of
14 the property, payroll, or sales factors shall not include any
15 property, payroll or sales attributable to manufacturing,
16 processing, research or development activities in the
17 Commonwealth: and Provided further, That, except for the
18 imposition of the minimum tax set forth in this section, the
19 provisions of this section shall not apply to the taxation of so
20 much of the capital stock value attributable to student loan
21 assets owned or held by an entity created for the securitization
22 of student loans or by a trustee on its behalf. Any foreign
23 corporation, joint-stock association, limited partnership or
24 company subject to the tax prescribed herein may elect to
25 compute and pay its tax under section 602(a): Provided, That any
26 foreign corporation, joint-stock association, limited
27 partnership or company electing to compute and pay its tax under
28 section 602(a) shall be treated as if it were a domestic
29 corporation for the purpose of determining which of its assets
30 are exempt from taxation and for the purpose of determining the
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1 proportion of the value of its capital stock which is subject to
2 taxation.
3 (2) The provisions of this article shall apply to the
4 taxation of entities organized for manufacturing, processing,
5 research or development purposes, but shall not apply to such
6 entities as enjoy and exercise the right of eminent domain.
7 (d) It shall be the duty of the treasurer or other officers
8 having charge of any domestic or foreign entity, upon which a
9 tax is imposed by this section, to transmit the amount of tax to
10 the department within the time prescribed by law: Provided, That
11 for the purposes of this act interest in limited partnerships or
12 joint-stock associations shall be deemed to be capital stock,
13 and taxable accordingly: Provided, further, That entities liable
14 to a tax under this section, shall not be required to pay any
15 further tax on the mortgages, bonds, and other securities owned
16 by them and in which the whole body of stockholders or members,
17 as such, have the entire equitable interest in remainder; but
18 entities owning or holding such securities as trustees,
19 executors, administrators, guardians, or in any other manner
20 than for the whole body of stockholders or members thereof as
21 sole equitable owners in remainder, shall return and pay the tax
22 imposed by this act upon all securities so owned or held by
23 them, as in the case of individuals.
24 (e) Any holding company subject to the capital stock tax or
25 the franchise tax imposed by this section may elect to compute
26 the capital stock or franchise tax by applying the rate of tax
27 provided in subsection (h) to ten per cent of the capital stock
28 value as defined in section 601(a), but in no case shall the tax
29 so computed be less than [three hundred dollars ($300)] the
30 amount of minimum tax set forth in subsection (i). If exercised,
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1 this election shall be in lieu of any other apportionment or
2 allocation to which such company would otherwise be entitled.
3 (f) Every domestic corporation and every foreign corporation
4 (i) registered to do business in Pennsylvania; (ii) which
5 maintains an office in Pennsylvania; (iii) which has filed a
6 timely election to be taxed as a regulated investment company
7 with the Federal Government; and (iv) which duly qualifies to be
8 taxed as a regulated investment company under the provisions of
9 the Internal Revenue Code of 1954 as amended, shall be taxed as
10 a regulated investment company and shall be subject to the
11 capital stock or franchise tax imposed by section 602, in either
12 case for the privilege of having an office in Pennsylvania,
13 which tax shall be computed pursuant to the provisions of this
14 subsection in lieu of all other provisions of this section 602.
15 The tax shall be in an amount which is the greater of [three
16 hundred dollars ($300)] the amount of minimum tax set forth in
17 subsection (i) or the sum of the amounts determined pursuant to
18 clauses (1) and (2):
19 (1) The amount determined pursuant to this clause shall be
20 seventy-five dollars ($75) times that number which is the result
21 of dividing the net asset value of the regulated investment
22 company by one million, rounded to the nearest multiple of
23 seventy-five dollars ($75). Net asset value shall be determined
24 by adding the monthly net asset values as of the last day of
25 each month during the taxable period and dividing the total sum
26 by the number of months involved. Each such monthly net asset
27 value shall be the actual market value of all assets owned
28 without any exemptions or exclusions, less all liabilities,
29 debts and other obligations.
30 (2) The amount determined pursuant to this clause shall be
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1 the amount which is the result of multiplying the rate of
2 taxation applicable for purposes of the personal income tax
3 during the same taxable year times the apportioned undistributed
4 personal income tax income of the regulated investment company.
5 For the purposes of this clause:
6 (A) Personal income tax income shall mean income to the
7 extent enumerated and classified in section 303.
8 (B) Undistributed personal income tax income shall mean all
9 personal income tax income other than personal income tax income
10 undistributed on account of the capital stock or foreign
11 franchise tax, less all personal income tax income distributed
12 to shareholders. At the election of the company, income
13 distributed after the close of a taxable year, but deemed
14 distributed during the taxable year for Federal income tax
15 purposes, shall be deemed distributed during that year for
16 purposes of this clause. If a company in a taxable year has both
17 current income and income accumulated from a prior year,
18 distributions during the year shall be deemed to have been made
19 first from current income.
20 (C) Undistributed personal income tax income shall be
21 apportioned to Pennsylvania by a fraction, the numerator of
22 which is all income distributed during the taxable period to
23 shareholders who are resident individuals, estates or trusts and
24 the denominator of which is all income distributed during the
25 taxable period. Resident trusts shall not include charitable,
26 pension or profit-sharing, or retirement trusts.
27 (D) Personal income tax income and other income of a company
28 shall each be deemed to be either distributed to shareholders or
29 undistributed in the proportion each category bears to all
30 income received by the company during the taxable year.
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1 (g) In the event that a domestic or foreign entity is
2 required to file a report pursuant to section 601(b) on other
3 than an annual basis, the tax imposed by this section, including
4 the [three hundred dollar ($300)] minimum tax, shall be prorated
5 to reflect the portion of a taxable year for which the report is
6 filed by multiplying the tax liability by a fraction equal to
7 the number of days in the taxable year divided by three hundred
8 sixty-five days.
9 (h) The rate of tax for purposes of the capital stock and
10 franchise tax for taxable years beginning within the dates set
11 forth shall be as follows:
12 Taxable Year Regular Rate Surtax Total Rate
13 January 1, 1971, to
14 December 31, 1986 10 mills 0 10 mills
15 January 1, 1987, to
16 December 31, 1987 9 mills 0 9 mills
17 January 1, 1988, to
18 December 31, 1990 9.5 mills 0 9.5 mills
19 January 1, 1991, to
20 December 31, 1991 11 mills 2 mills 13 mills
21 January 1, 1992, to
22 December 31, 1997 11 mills 1.75 mills 12.75 mills
23 January 1, 1998, and
24 each year thereafter 11 mills .99 mills 11.99 mills
25 (i) The minimum amount of capital stock and franchise tax for the
26 taxable years beginning for the calendar year or the fiscal
27 year on or after the dates set forth shall be
28 as follows:
29 Taxable Minimum
30 Year Tax
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1 January 1, 1971 to December 31, 1983 No minimum tax imposed
2 January 1, 1984 to December 31, 1990 $75 minimum tax
3 January 1, 1991 to December 31, 1999 $300 minimum tax
4 January 1, 2000 and $75 minimum tax
5 each taxable year thereafter
6 Section 3. This act shall take effect January 1, 2000.
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