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        PRIOR PRINTER'S NOS. 41, 62, 91                PRINTER'S NO.  93

THE GENERAL ASSEMBLY OF PENNSYLVANIA


HOUSE BILL

No. 39 Special Session No. 1 of 2005


                     Report of the Committee of Conference

        To the Members of the House of Representatives and Senate:

           We, the undersigned, Committee of Conference on the part of
        the House of Representatives and Senate for the purpose of
        considering House Bill No. 39, entitled:
        "An act amending the act of December 31, 1965 (P.L.1257,
        No.511), entitled 'An act empowering cities of the second class,
        * * * Supreme Court and Superior Court,' restricting the power
        of certain school districts to levy, assess and collect taxes.
        PROVIDING FOR TAXATION BY SCHOOL DISTRICTS, FOR THE STATE FUNDS
        FORMULA, FOR TAX RELIEF IN FIRST CLASS CITIES, FOR SCHOOL
        DISTRICT CHOICE AND VOTER PARTICIPATION AND FOR OTHER SCHOOL
        DISTRICT OPTIONS; MAKING AN APPROPRIATION;* * * ASSESS AND
        COLLECT TAXES; AND MAKING RELATED REPEALS,"

        respectfully submit the following bill as our report:

                                           LYNN B. HERMAN

                                           DAVID J. STEIL

                                           MICHAEL R. VEON

                (Committee on the part of the House of Representatives.)

                                           DAVID J. BRIGHTBILL

                                           EDWIN B. ERICKSON

                                           ROBERT J. MELLOW

                                  (Committee on the part of the Senate.)



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                                     AN ACT

     1  Providing for taxation by school districts, for the State funds
     2     formula, for tax relief in first class cities, for school
     3     district choice and voter participation, for other school
     4     district options and for a task force on school cost
     5     reduction; making an appropriation; prohibiting prior
     6     authorized taxation; providing for installment payment of
     7     taxes; restricting the power of certain school districts to
     8     levy, assess and collect taxes; and making related repeals.

     9     The General Assembly of the Commonwealth of Pennsylvania
    10  hereby enacts as follows:
    11                             CHAPTER 1
    12                       PRELIMINARY PROVISIONS
    13  Section 101.  Short title.
    14     This act shall be known and may be cited as the Taxpayer
    15  Relief Act.
    16  Section 102.  Definitions.
    17     The following words and phrases when used in this act shall
    18  have the meanings given to them in this section unless the
    19  context clearly indicates otherwise:
    20     "Actual instruction expense."  The term shall have the same
    21  usage as in the act of March 10, 1949 (P.L.30, No.14), known as
    22  the Public School Code of 1949.
    23     "Average daily membership."  The term shall have the same
    24  usage as in the act of March 10, 1949 (P.L.30, No.14), known as
    25  the Public School Code of 1949.
    26     "Installment claim."  A claim for payment of taxes in
    27  installments pursuant to section 1503, including any penalties,
    28  costs and interest provided for under Chapter 15 or any other
    29  law.
    30     "Market value/income aid ratio."  As defined in section
    31  2501(14.1) of the act of March 10, 1949 (P.L.30, No.14), known
    32  as the Public School Code of 1949.

    20051H0039B0093                  - 3 -     

     1     "Personal income valuation."  As defined in section 2501(9.1)
     2  of the act of March 10, 1949 (P.L.30, No.14), known as the
     3  Public School Code of 1949.
     4     "Public School Code."  The act of March 10, 1949 (P.L.30,
     5  No.14), known as the Public School Code of 1949.
     6     "Tax collector."  The term shall have the same usage as in
     7  the act of May 25, 1945 (P.L.1050, No.394), known as the Local
     8  Tax Collection Law.
     9                             CHAPTER 3
    10                    TAXATION BY SCHOOL DISTRICTS
    11                            SUBCHAPTER A
    12                         GENERAL PROVISIONS
    13  Section 301.  Scope.
    14     This chapter relates to homeowner property tax relief.
    15  Section 302.  Definitions.
    16     The following words and phrases when used in this chapter
    17  shall have the meanings given to them in this section unless the
    18  context clearly indicates otherwise:
    19     "Assessor."  As defined in 53 Pa.C.S. § 8582 (relating to
    20  definitions).
    21     "Board of school directors."  A board of school directors of
    22  a school district of the first class A, second class, third
    23  class or fourth class.
    24     "Construction cost average on a square-foot basis."  An
    25  amount equal to $137 per square foot for an elementary school
    26  building and $142 per square foot for a secondary school
    27  building, as adjusted annually by the percentage increase in the
    28  average of the Statewide average weekly wage and the employment
    29  cost index.
    30     "Department."  The Department of Education of the
    20051H0039B0093                  - 4 -     

     1  Commonwealth.
     2     "Domicile."  As defined in section 13 of the act of December
     3  31, 1965 (P.L.1257, No.511), known as The Local Tax Enabling
     4  Act.
     5     "Earned income."  As defined in section 13 of the act of
     6  December 31, 1965 (P.L.1257, No.511), known as The Local Tax
     7  Enabling Act.
     8     "Election officials."  The board of elections of a county.
     9     "Employer."  As defined in section 301 of the act of March 4,
    10  1971 (P.L.6, No.2), known as the Tax Reform Code of 1971.
    11     "Employment Cost Index."  The most recent official figures,
    12  for the previous 12-month period beginning July 1 and ending
    13  June 30 for the Employment Cost Index Series for Elementary and
    14  Secondary Schools, reported by the Bureau of Labor Statistics of
    15  the Federal Department of Labor.
    16     "Farmstead."  As defined in 53 Pa.C.S. § 8582 (relating to
    17  definitions).
    18     "Farmstead property."  As defined in 53 Pa.C.S. § 8582
    19  (relating to definitions).
    20     "Fund."  The Property Tax Relief Fund established in the
    21  State Treasury.
    22     "Homestead."  As defined in 53 Pa.C.S. § 8401 (relating to
    23  definitions).
    24     "Homestead property."  As defined in 53 Pa.C.S § 8401
    25  (relating to definitions).
    26     "Income tax."  A tax on earned income and net profits or a
    27  tax on personal income imposed pursuant to this chapter.
    28     "Index."  As follows:
    29         (1)  Except as set forth in paragraph (2), the average of
    30     the percentage increase in the Statewide average weekly wage
    20051H0039B0093                  - 5 -     

     1     and the Employment Cost Index.
     2         (2)  For a school district with a market value/income aid
     3     ratio greater than 0.400 for the school year prior to the
     4     school year for which the index is calculated, the value
     5     under paragraph (1) multiplied by the sum of:
     6             (i)  0.75; and
     7             (ii)  the school district's market value/income aid
     8         ratio for the school year prior to the school year for
     9         which the index is calculated.
    10     "Local Tax Enabling Act."  The act of December 31, 1965
    11  (P.L.1257, No.511), known as The Local Tax Enabling Act.
    12     "Local tax revenue."  The revenue from taxes actually levied
    13  and assessed by a school district, including delinquent taxes.
    14  The term does not include interest or dividend earnings, Federal
    15  or State grants, contracts or appropriations, income generated
    16  from operations or any other source which is not derived from
    17  taxes levied and assessed by a school district.
    18     "Net profits."  As defined in section 13 of the act of
    19  December 31, 1965 (P.L.1257, No.511), known as The Local Tax
    20  Enabling Act.
    21     "Personal income."  Income enumerated in section 303 of the
    22  act of March 4, 1971 (P.L.6, No.2), known as the Tax Reform Code
    23  of 1971, as determined by the Department of Revenue, subject to
    24  any correction thereof for fraud, evasion or error as finally
    25  determined by the Commonwealth.
    26     "Resident individual."  An individual who is domiciled in a
    27  school district.
    28     "School district."  A school district of the first class A,
    29  second class, third class or fourth class.
    30     "Statewide average weekly wage."  That amount determined by
    20051H0039B0093                  - 6 -     

     1  the Department of Labor and Industry in the same manner that it
     2  determines the average weekly wage under section 404(e)(2) of
     3  the act of December 5, 1936 (2nd Sp.Sess., 1937 P.L.2897, No.1),
     4  known as the Unemployment Compensation Law, except that it shall
     5  be calculated for the preceding calendar year.
     6     "Tax Reform Code."  The act of March 4, 1971 (P.L.6, No.2),
     7  known as the Tax Reform Code of 1971.
     8     "Taxpayer."  An individual required under this chapter to pay
     9  a tax.
    10  Section 303.  Limitations.
    11     This chapter shall not be construed to affect the power of a
    12  school district to do any of the following:
    13         (1)  To eliminate its occupation tax pursuant to the act
    14     of June 22, 2001 (P.L.374, No.24), known as the Optional
    15     Occupation Tax Elimination Act. Except for an election in
    16     which a school district seeks to impose a personal income tax
    17     under section 321(c), a school district may place such
    18     referendum question on the ballot at the same municipal
    19     election as a referendum question placed on the ballot
    20     pursuant to Subchapter D. If a school district converts its
    21     earned income and net profits tax to a personal income tax
    22     under this chapter, the school district may not utilize the
    23     Optional Occupation Tax Elimination Act.
    24         (2)  To levy, assess or collect a tax on earned income
    25     and net profits under the Local Tax Enabling Act, provided
    26     that the school district complies with section 333(b).
    27         (3)  To impose special purpose tax levies approved by the
    28     electorate.
    29  Section 304.  Certain rates of taxation limited.
    30     (a)  Municipal rates.--If a municipality and school district
    20051H0039B0093                  - 7 -     

     1  both impose an earned income and net profits tax on the same
     2  individual under the Local Tax Enabling Act and are limited to
     3  or have agreed upon a division of the tax rate in accordance
     4  with section 8 of the Local Tax Enabling Act, the municipality
     5  shall remain subject to that limitation or agreement in the
     6  event that the school district opts to impose or increase an
     7  earned income and net profits tax authorized under section
     8  321(b) or a personal income tax authorized under section 321(c).
     9  Nothing in this chapter shall be construed to authorize a
    10  municipality to raise the rate of earned income and net profits
    11  tax above the rate it levied under the previously agreed upon
    12  division if a school district imposes or increases a personal
    13  income tax under Subchapter C.
    14     (b)  School districts.--A school district which imposes a tax
    15  under this chapter is subject to section 688 of the Public
    16  School Code.
    17                            SUBCHAPTER B
    18                      SCHOOL DISTRICT BUDGETS
    19  Section 311.  Adoption of preliminary budget proposals.
    20     (a)  Adoption.--Beginning January 1, 2006, and except as
    21  provided under section 333(a)(1), each board of school directors
    22  shall adopt a preliminary budget proposal for the following
    23  fiscal year no later than 90 days prior to the date of the
    24  election immediately preceding the fiscal year in which the
    25  preliminary budget will take effect.
    26     (b)  Contents.--The preliminary budget proposal shall include
    27  estimated revenues and expenditures and any proposed tax rates
    28  and shall be prepared on a uniform form furnished by the
    29  department.
    30     (c)  Public inspection.--The board of school directors shall
    20051H0039B0093                  - 8 -     

     1  print the preliminary budget proposal and make it available for
     2  public inspection at least 20 days prior to its adoption. The
     3  board of school directors shall give public notice of its intent
     4  to adopt the preliminary budget at least ten days prior to
     5  adoption and may hold a public hearing prior to its adoption.
     6     (d)  Resolution.--
     7         (1)  A board of school directors may elect to adopt a
     8     resolution indicating that it will not raise the rate of any
     9     tax for the support of the public schools for the following
    10     fiscal year by more than the index. The resolution must be
    11     adopted no later than 110 days prior to the date of the
    12     election immediately preceding the upcoming fiscal year. The
    13     resolution must make the following unconditional
    14     certifications:
    15             (i)  That the board of school directors will not
    16         increase any tax at a rate that exceeds the index as
    17         calculated by the department.
    18             (ii)  That the board of school directors will comply
    19         with the procedures set forth in section 687 of the
    20         Public School Code for the adoption of its proposed and
    21         final budgets.
    22             (iii)  That the board of school directors certifies
    23         that increasing any tax at a rate less than or equal to
    24         the index will be sufficient to balance its final budget.
    25         (2)  A board of school directors that adopts a resolution
    26     under this section shall do all of the following:
    27             (i)  Comply with the procedures in section 687 of the
    28         Public School Code for the adoption of its proposed and
    29         final budgets and shall not be subject to subsections (a)
    30         and (c).
    20051H0039B0093                  - 9 -     

     1             (ii)  Submit information on a proposed increase in
     2         the rate of a tax levied for the support of the public
     3         schools to the department on a uniform form prepared by
     4         the department no later than five days after the adoption
     5         of the resolution.
     6             (iii)  Send a copy of the resolution adopted pursuant
     7         to this section to the department no later than five days
     8         after the adoption of the resolution.
     9         (3)  A board of school directors that adopts a resolution
    10     under this section shall not be eligible to seek referendum
    11     exceptions under section 333(f), and section 333(e) shall not
    12     apply.
    13         (4)  Upon receipt of the information required under
    14     paragraph (2)(ii), the department shall compare the proposed
    15     percentage increase in the rate of the tax with the index.
    16     Within ten days of the receipt of the information required
    17     under this subsection, the department shall inform the school
    18     district whether the proposed tax rate increase is less than
    19     or equal to the index. If the department determines that the
    20     proposed percentage increase in the rate of the tax exceeds
    21     the index, the school district shall be subject to
    22     subsections (a) and (c); and paragraphs (2)(i) and (3) shall
    23     not apply. The department's determination under this
    24     paragraph shall not constitute an adjudication.
    25  Section 312.  Adoption of annual budgets.
    26     (a)  Adoption.--Beginning January 1, 2006, except as provided
    27  under section 671(b) of the Public School Code, each board of
    28  school directors shall adopt its annual budget for the following
    29  fiscal year no later than the last day of the fiscal year before
    30  the fiscal year in which the budget takes effect.
    20051H0039B0093                 - 10 -     

     1     (b)  Contents.--The annual budget shall include estimated
     2  revenues and expenditures and any proposed tax rates and be
     3  prepared on a uniform form furnished by the department.
     4     (c)  Public inspection.--The board of school directors shall
     5  print the annual budget and make it available for public
     6  inspection at least 20 days prior to its adoption. The board of
     7  school directors shall give public notice of its intent to adopt
     8  the annual budget at least ten days prior to adoption and may
     9  hold a public hearing prior to its adoption.
    10  Section 313.  Information to school districts.
    11         (1)  No later than September 30, 2006, and September 30
    12     of each year thereafter the department shall provide each
    13     school district with the following information:
    14             (i)  The dates by which actions required under this
    15         chapter shall take place.
    16             (ii)  The index for the applicable fiscal year.
    17         (2)  For the 2006-2007 school year, the department shall
    18     provide each school district with the information required
    19     under this section no later than ten days after the effective
    20     date of this act.
    21                            SUBCHAPTER C
    22                     GENERAL TAX AUTHORIZATION
    23  Section 321.  General tax authorization.
    24     (a)  General rule.--A board of school directors may levy,
    25  assess and collect a tax on earned income and net profits or a
    26  tax on personal income as provided in this section for the
    27  purpose of funding homestead and farmstead exclusions to reduce
    28  school district property taxes.
    29     (b)  Earned income and net profits tax.--
    30         (1)  A board of school directors may, in accordance with
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     1     section 331.2, levy or increase a tax on earned income and
     2     net profits of resident individuals for the purpose of
     3     funding homestead and farmstead exclusions.
     4         (2)  In addition to the authorization provided under
     5     paragraph (1), a school district may, in accordance with
     6     section 332, levy or increase a tax on earned income and net
     7     profits of resident individuals for the purpose of further
     8     funding homestead and farmstead exclusions. The board of
     9     school directors shall round the rate of the earned income
    10     and net profits tax levied pursuant to this section to the
    11     nearest 0.1%. For purposes of calculating the combined tax
    12     rate authorized under paragraph (1) and this paragraph, the
    13     portion of tax dedicated to the increase in revenue permitted
    14     under paragraph (4), if any, shall be excluded.
    15         (3)  (Reserved).
    16         (4)  Notwithstanding section 334, the rate of the earned
    17     income and net profits tax proposed to be levied and assessed
    18     for the fiscal year immediately following the year in which
    19     the tax is authorized may provide for an increase in revenue
    20     of not more than 2% of the estimated revenue from the earned
    21     income and net profits tax authorized under paragraph (1) or
    22     (2), which may be used for the operations of the school
    23     district.
    24     (c)  Personal income tax.--
    25         (1)  A board of school directors may levy, assess and
    26     collect a tax on the personal income of resident individuals
    27     at a rate determined by the board of school directors.
    28         (2)  A school district which seeks to levy the tax
    29     authorized under paragraph (1) must comply with section 331.2
    30     or 332 and the following:
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     1             (i)  The school district shall convert, in a revenue-
     2         neutral manner, any existing earned income and net
     3         profits tax rates levied pursuant to any other act to a
     4         personal income tax rate.
     5             (ii)  Any earned income and net profits tax imposed
     6         pursuant to section 331.2 or 332 shall be converted to a
     7         personal income tax rate which generates the same amount
     8         of tax revenue and shall be used for funding exclusions
     9         for homestead and farmstead property.
    10             (iii)  A school district may, in accordance with
    11         section 331.2 or 332, levy an additional tax on the
    12         personal income of resident individuals for the purpose
    13         of further funding homestead and farmstead exclusions.
    14             (iv)  For purposes of the referendum question under
    15         section 331.2 or 332, the board of school directors shall
    16         round the rate of the personal income tax levied pursuant
    17         to this subparagraph to the nearest 0.1%. For purposes of
    18         calculating the combined tax rate, the portion of tax
    19         dedicated to the increase in revenue permitted under
    20         paragraph (6), if any, shall be excluded.
    21         (3)  All revenue generated by a school district pursuant
    22     to paragraph (2)(ii) and (iii) shall be used as provided in
    23     sections 334 and 335.
    24         (4)  If a board of school directors seeks to impose a
    25     personal income tax under this subsection and the referendum
    26     under section 331.2 or 332 is approved by the electorate, the
    27     board of school directors shall have no authority to impose
    28     an earned income and net profits tax under subsection (b) or
    29     under any other act.
    30         (5)  A personal income tax imposed under the authority of
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     1     this section shall be levied by the school district on each
     2     of the classes of income specified in section 303 of the Tax
     3     Reform Code and regulations under that section, the
     4     provisions of which are incorporated by reference into this
     5     chapter.
     6             (i)  Notwithstanding the provisions of section 353(f)
     7         of the Tax Reform Code, the Department of Revenue may
     8         permit the proper officer or an authorized agent of a
     9         school district imposing a personal income tax pursuant
    10         to this chapter to inspect the tax returns of any
    11         taxpayer of the school district or may furnish to the
    12         officer or an authorized agent an abstract of the return
    13         of income of any current or former resident of the school
    14         district, or supply information concerning any item of
    15         income contained in any tax return. The officer or
    16         authorized agent of the school district imposing a tax
    17         under this chapter shall be furnished the requested
    18         information upon payment to the Department of Revenue of
    19         the actual cost of providing the requested information.
    20             (ii)  (A)  Except for official purposes or as
    21             provided by law, it shall be unlawful for any officer
    22             or authorized agent of a school district to do any of
    23             the following:
    24                     (I)  Disclose to any other individual or
    25                 entity the amount or source of income, profits,
    26                 losses, expenditures or any particular
    27                 information concerning income, profits, losses or
    28                 expenditures contained in any return.
    29                     (II)  Permit any other individual or entity
    30                 to view or examine any return or copy of a return
    20051H0039B0093                 - 14 -     

     1                 or any book containing any abstract or
     2                 particulars.
     3                     (III)  Print, publish or publicize in any
     4                 manner any return; any particular information
     5                 contained in or concerning the return; any amount
     6                 or source of income, profits, losses or
     7                 expenditures in or concerning the return; or any
     8                 particular information concerning income,
     9                 profits, losses or expenditures contained in or
    10                 relating to any return.
    11                 (B)  Any officer or authorized agent of a school
    12             district that violates clause (A):
    13                     (I)  May be fined not more than $1,000 or
    14                 imprisoned for not more than one year, or both.
    15                     (II)  May be removed from office or
    16                 discharged from employment.
    17         (6)  Notwithstanding section 334, the rate of the
    18     personal income tax proposed to be levied and assessed for
    19     the first fiscal year immediately following the year in which
    20     the tax is authorized may provide for an increase in revenue
    21     of not more than 2% of the estimated revenue from the
    22     personal income tax authorized under paragraph (2)(iii),
    23     which may be used for the operations of the school district.
    24     (d)  Execution of tax rate.--A tax authorized under section
    25  331.2 or 332 shall be self-executing and shall be effective
    26  beginning on the first day of the fiscal year which begins after
    27  the tax is authorized. A tax rate under this subsection shall
    28  continue in force on a fiscal year basis without annual
    29  reenactment except in a year in which the rate of the tax is
    30  changed or the tax is repealed.
    20051H0039B0093                 - 15 -     

     1  Section 322.  Collections.
     2     (a)  Designation of tax collector.--A board of school
     3  directors imposing an income tax under this chapter shall
     4  designate a tax officer under section 10 of the Local Tax
     5  Enabling Act, or otherwise by law, as the collector of the tax.
     6  In the performance of the tax collection duties under this
     7  subchapter, the designated tax officer shall have all the same
     8  powers, rights, responsibilities and duties for the collection
     9  of the taxes which may be imposed under the Local Tax Enabling
    10  Act, 53 Pa.C.S. Ch. 84 Subch. C (relating to local taxpayers
    11  bill of rights) or as otherwise provided by law.
    12     (b)  Conflict.--In any situation where there is a conflict
    13  involving the authority conferred on a local tax collector by
    14  the provisions of the Local Tax Enabling Act and the Tax Reform
    15  Code, the provisions of the Local Tax Enabling Act shall
    16  control.
    17  Section 323.  Credits.
    18     (a)  Credit.--Except as set forth in subsection (b), the
    19  provisions of section 14 of the Local Tax Enabling Act shall be
    20  applied by a board of school directors to determine any credits
    21  applicable to a tax imposed under section 321(b) or (c).
    22     (b)  Limitation.--Payment of any tax on income to any state
    23  other than Pennsylvania or to any political subdivision located
    24  outside the boundaries of this Commonwealth by a resident of a
    25  school district located in this Commonwealth shall not be
    26  credited to and allowed as a deduction from the liability of
    27  such person for any income tax imposed by the school district of
    28  residence pursuant to this chapter.
    29  Section 324.  Reimbursement.
    30     Notwithstanding any other provisions of law to the contrary,
    20051H0039B0093                 - 16 -     

     1  the following apply:
     2         (1)  This section only applies to a taxpayer who is a
     3     resident of this Commonwealth and not a resident of a city of
     4     the first class but who is subject to the tax on salaries,
     5     wages, commissions or other compensation imposed by a city of
     6     the first class under the authority of the act of August 5,
     7     1932 (Sp.Sess., P.L.45, No.45), referred to as the Sterling
     8     Act.
     9         (2)  For tax years beginning in the first calendar year
    10     in which a payment under section 505(b) is made and each tax
    11     year thereafter, payment of a tax on salaries, wages,
    12     commissions or other compensation as set forth in paragraph
    13     (1) shall be credited by the school district of the
    14     taxpayer's residence at an amount no greater than the tax on
    15     salaries, wages, commissions or other compensation as set
    16     forth in paragraph (1) imposed by the school district in
    17     which the taxpayer resides.
    18         (3)  Except as set forth in paragraph (4), an amount
    19     equal to the aggregate amount of the tax credited under
    20     paragraph (2) shall be paid from the fund to the school
    21     district of residence of each taxpayer under paragraph (1)
    22     for the purpose of funding homestead and farmstead exclusions
    23     in accordance with this chapter. The department shall
    24     prescribe procedures to calculate the amount due to each
    25     school district qualifying under this paragraph and shall
    26     publish the procedures in the Pennsylvania Bulletin.
    27         (4) (i)  A school district that receives a payment under
    28         paragraph (3) shall receive a full payment when the
    29         amount available for distribution under section 503(e) is
    30         greater than or equal to $750,000,000.
    20051H0039B0093                 - 17 -     

     1             (ii)  If the amount available for distribution under
     2         section 503(e) is less than $750,000,000, each eligible
     3         school district shall receive a pro rata share of the
     4         reimbursement calculated under this section.
     5  Section 325.  Exemption and special provisions.
     6     (a)  Earned income and net profits tax.--A school district
     7  that imposes an earned income and net profits tax authorized
     8  under section 321(b) may exempt from the payment of that tax any
     9  person whose total income from all sources is less than $12,000.
    10     (b)  Applicability to personal income tax.--Section 304 of
    11  the Tax Reform Code shall apply to any personal income tax
    12  levied by a school district under section 321(c).
    13  Section 326.  Regulations.
    14     A school district that imposes:
    15         (1)  an earned income and net profits tax authorized
    16     under section 321(b) shall be subject to section 13 of the
    17     Local Tax Enabling Act and may adopt procedures for the
    18     processing of claims for credits or exemptions under sections
    19     323, 324 and 325; or
    20         (2)  a personal income tax authorized under section
    21     321(c) shall be subject to all regulations adopted by the
    22     Department of Revenue in administering the tax due to the
    23     Commonwealth under Article III of the Tax Reform Code.
    24  Section 327.  Property tax limits on reassessment.
    25     Notwithstanding any other provision of law, including this
    26  act, after any county makes a countywide revision of assessment
    27  of real property at values based upon an established
    28  predetermined ratio as required by law or after any county
    29  changes its established predetermined ratio, a board of school
    30  directors in a school district located within that county which,
    20051H0039B0093                 - 18 -     

     1  after July 1, 2006, for the first time levies its real estate
     2  taxes on that revised assessment or valuation shall for the
     3  first year reduce its tax rate, if necessary, for the purpose of
     4  having the percentage increase in taxes levied for that year
     5  against the real properties contained in the duplicate for the
     6  preceding year be less than or equal to the index for the
     7  preceding year notwithstanding the increased valuations of such
     8  properties under the revised assessment. For the purpose of
     9  determining the total amount of taxes to be levied for the first
    10  year, the amount to be levied on newly constructed buildings or
    11  structures or on increased valuations based on new improvements
    12  made to existing houses need not be considered. The tax rate
    13  shall be fixed for that year at a figure which will accomplish
    14  this purpose. The provisions of section 333 shall apply to
    15  increases in the tax rate above the limits provided in this
    16  section.
    17                            SUBCHAPTER D
    18               SCHOOL DISTRICT PROPERTY TAX REDUCTION
    19  Section 331.  Local tax study commission.
    20     (a)  Appointment.--A board of school directors shall appoint
    21  a local tax study commission prior to adopting a resolution
    22  under section 331.2(b) or 332(b)(1). The local tax study
    23  commission shall be appointed no later than 180 days prior to
    24  the date on which the board of school directors is required to
    25  adopt a resolution under section 331.2(b) or 332(b)(1).
    26     (b)  Membership.--The local tax study commission shall
    27  consist of five, seven or nine members who are resident
    28  individuals or taxpayers of the school district and shall
    29  reflect the socioeconomic, age and occupational diversity of the
    30  school district to the extent possible. Except that one member
    20051H0039B0093                 - 19 -     

     1  of the local tax study commission may be a member of the board
     2  of school directors, no member shall be an official or employee
     3  or a relative thereof, of the school district.
     4     (c)  Staff and expenses.--The school district shall provide
     5  necessary and reasonable support staff and shall reimburse the
     6  members of the local tax study commission for necessary and
     7  reasonable expenses in the discharge of their duties. Receipts
     8  shall be required for all reimbursable expenses under this
     9  subsection.
    10     (d)  Contents of study.--The local tax study commission shall
    11  study the existing taxes levied, assessed and collected by the
    12  school district and the effect of any county or municipal taxes
    13  imposed concurrently with the school district. The local tax
    14  study commission shall determine how the tax policies of the
    15  school district could be improved by the levy, assessment and
    16  collection of the taxes authorized under section 321. The study
    17  shall include consideration of all of the following:
    18         (1)  Historic and present rates of and revenue from taxes
    19     currently levied, assessed and collected.
    20         (2)  The percentage of total revenues provided by taxes
    21     currently levied, assessed and collected.
    22         (3)  The age, income, employment and property use
    23     characteristics of the existing tax base.
    24         (4)  Projected revenues of taxes currently levied,
    25     assessed and collected, including taxes authorized and taxes
    26     not levied under this chapter.
    27     (e)  Recommendation.--Within 90 days of its appointment, the
    28  local tax study commission shall make a nonbinding
    29  recommendation to the board of school directors regarding the
    30  imposition of the taxes authorized under section 321, commencing
    20051H0039B0093                 - 20 -     

     1  in the subsequent fiscal year. Prior to making its
     2  recommendation, the local tax study commission shall hold at
     3  least one public hearing. The recommendation of the local tax
     4  study commission shall be presented at a public meeting of the
     5  board of school directors. The board of school directors shall
     6  make such recommendation available to interested persons upon
     7  request.
     8     (f)   Failure to issue a recommendation.--If the local tax
     9  study commission fails to make a recommendation under subsection
    10  (e), the board of school directors shall discharge the local tax
    11  study commission.
    12     (g)  Adoption of recommendation.--The board of school
    13  directors shall accept or reject the recommendation of the local
    14  tax study commission prior to adopting a resolution under
    15  section 331.2(b) or section 332(b)(1).
    16     (h)  Materials.--All records of the local tax study
    17  commission, including receipts, tapes, minutes of meetings and
    18  written communications shall be turned over to the board of
    19  school directors and made available for public inspection during
    20  the regular business hours of the school district.
    21  Section 331.1.  (Reserved).
    22  Section 331.2.  2007 Referendum.
    23     (a)  General rule.--A board of school directors shall submit
    24  at the primary election of 2007 a referendum question to the
    25  electors of the school district seeking voter approval allowing
    26  the school district to levy, assess and collect an earned income
    27  and net profits tax authorized under section 321(b)(1) or a
    28  personal income tax authorized under section 321(c) for the
    29  purpose of annually funding homestead and farmstead exclusions.
    30  A board of school directors may not submit a referendum question
    20051H0039B0093                 - 21 -     

     1  regarding a personal income tax until the Department of Revenue
     2  receives final approval of regulations governing the collection
     3  of a personal income tax.
     4     (b)  Adoption of resolution.--No later than March 13, 2007, a
     5  school district subject to this section shall adopt a resolution
     6  authorizing the referendum question required under subsection
     7  (a). The board of school directors shall give public notice of
     8  its intent to adopt the resolution in the manner provided for in
     9  section 4 of the Local Tax Enabling Act and must conduct at
    10  least one public hearing on the resolution.
    11     (c)  Proposed tax rate.--The board of school directors shall
    12  establish the rate of the proposed income tax in the resolution
    13  required under subsection (b). The rate shall not exceed the
    14  rate required to provide an exclusion for homestead property and
    15  farmstead property equal to the maximum exclusion under 53
    16  Pa.C.S. § 8586 (relating to limitations) and shall not be less
    17  than the rate required to provide an exclusion for homestead and
    18  farmstead property equal to 50% of the maximum homestead
    19  exclusion, provided that a school district shall not be required
    20  to propose an earned income and net profits tax under this
    21  section that is greater than 1% or a personal income tax that is
    22  greater than the equivalent of an earned income and net profits
    23  tax of 1%.
    24     (d)  Submittal of referendum to county officials.--A board of
    25  school directors subject to this section shall submit the
    26  referendum question required under subsection (a) to the
    27  election officials of each county in which the school district
    28  is situate no later than 60 days prior to the primary election
    29  of 2007. The election officials shall cause the referendum
    30  question to be submitted to the electors of the school district
    20051H0039B0093                 - 22 -     

     1  at the primary election of 2007.
     2     (e)  Referendum question.--
     3         (1)  The referendum question submitted to the electors of
     4     the school district at the primary election of 2007 shall
     5     state the rate of the proposed income tax to be levied, the
     6     reason for the tax, the estimated per homestead tax reduction
     7     and the current rate of earned income and net profits tax
     8     levied by the school district. The question shall be clear
     9     and in language that is readily understandable by a layperson
    10     and shall be framed in one of the following forms:
    11             (i)  Do you favor imposing an additional X% earned
    12         income tax? The revenue generated from the increased tax
    13         rate will be used to reduce taxes on qualified
    14         residential properties by (insert amount of reduction).
    15         The current earned income tax rate is Z%.
    16             (ii)  Do you favor imposing a personal income tax at
    17         X%? The revenue generated from the tax will be used to
    18         reduce taxes on qualified residential properties by
    19         (insert amount of reduction).
    20             (iii)  Do you favor converting the school district's
    21         current earned income tax to a personal income tax at X%?
    22         The revenue generated from the personal income tax will
    23         be used to reduce taxes on qualified residential property
    24         by (insert amount of reduction) and to replace the
    25         revenue from the school district's current earned income
    26         tax. The current earned income tax rate is Z%.
    27         (2)  The election officials of each county shall, in
    28     consultation with the board of school directors, draft a
    29     nonlegal interpretative statement which shall accompany the
    30     referendum question in accordance with section 201.1 of the
    20051H0039B0093                 - 23 -     

     1     act of June 3, 1937 (P.L.1333, No.320), known as the
     2     Pennsylvania Election Code. The nonlegal interpretative
     3     statement shall inform the voters of:
     4             (i)  The reason for the tax.
     5             (ii)  The estimated increase in revenue that the
     6         board of school directors has included in the proposed
     7         tax rate as authorized under section 321(b)(4)or
     8         321(c)(6).
     9             (iii)  The estimated per homestead tax reduction.
    10             (iv)  The current rate of earned income and net
    11         profits tax levied by the school district.
    12             (v)  The proposed tax rate.
    13         (3)  The election officials of a county shall certify the
    14     results of the referendum required under this section to the
    15     Department of State in accordance with Article XIV of the
    16     Pennsylvania Election Code and shall notify the school
    17     district of the certified results as soon as is practicable.
    18         (4)  Approval of the referendum required under this
    19     subsection shall be by a majority of the electors voting on
    20     the question in the school district.
    21         (5)  Where the referendum question under this subsection
    22     is approved, the new tax rate shall take effect pursuant to
    23     section 321(d).
    24         (6)  A school district that is subject to 53 Pa.C.S. Ch.
    25     87 (relating to other subjects of taxation) shall comply with
    26     the provisions of this chapter and the following:
    27             (i)  The school district shall convert its earned
    28         income and net profits tax authorized under 53 Pa.C.S. §
    29         8703 (relating to adoption of referendum) to an earned
    30         income and net profits tax authorized under this chapter
    20051H0039B0093                 - 24 -     

     1         at the same rate as the tax levied under 53 Pa.C.S. §
     2         8703 on the date of conversion. The tax authorized under
     3         this subsection shall be subject to the provisions of
     4         this subsection  and sections 323, 324, 325 and 326.
     5             (ii)  The school district shall combine all revenue
     6         generated for funding homestead and farmstead exclusions
     7         under 53 Pa.C.S. § 8703 with any revenue collected for
     8         the purposes of funding homestead and farmstead
     9         exclusions under this chapter.
    10             (iii)  When calculating the proposed rate of the
    11         income tax pursuant to subsection (c), the school
    12         district shall include any revenue collected for the
    13         purposes of homestead and farmstead exclusions.
    14             (iv)  The school district shall no longer implement
    15         any provision of 53 Pa.C.S. Ch. 87.
    16     (f)  Election proceedings.--Proceedings under this section
    17  shall be in accordance with the provisions of the Pennsylvania
    18  Election Code.
    19     (g)  Nonapplicability to certain school districts.--This
    20  section shall not apply to a school district of the first class,
    21  a school district of the first class A or a school district
    22  coterminous with a city of the second class A.
    23  Section 332.  Adoption of further referendum.
    24     (a)  General rule.--In addition to the provisions of section
    25  331.2, a board of school directors may:
    26         (1)  Levy, assess and collect an earned income and net
    27     profits tax authorized under section 321(b)(2) only after
    28     obtaining the approval of the electorate of the school
    29     district in a public referendum at a municipal election. The
    30     first such public referendum must be conducted no earlier
    20051H0039B0093                 - 25 -     

     1     than the municipal election of 2009.
     2         (2)  Levy, assess and collect a personal income tax
     3     authorized under section 321(c) only after obtaining the
     4     approval of the electorate of the school district in a public
     5     referendum at a municipal election. The first such public
     6     referendum must be conducted no earlier than the municipal
     7     election of 2009 and no such public referendum may be
     8     conducted until the Department of Revenue receives final
     9     approval of regulations governing the collection of a
    10     personal income tax.
    11     (b)  Submittal of referendum.--
    12         (1)  A board of school directors may submit, at a
    13     municipal election, a referendum question to the electors of
    14     the school district seeking voter approval allowing the
    15     school district to levy, assess and collect an earned income
    16     and net profits tax or a personal income tax for the purpose
    17     of annually funding homestead and farmstead exclusions or
    18     millage reductions in certain circumstances. Prior to placing
    19     a referendum question on the ballot, the board of school
    20     directors must adopt a resolution pursuant to this section.
    21     The board of school directors must give public notice of its
    22     intent to adopt the resolution in the manner provided by
    23     section 4 of the Local Tax Enabling Act and must conduct at
    24     least one public hearing on the resolution.
    25         (2)  The board of school directors shall submit the
    26     referendum question required under this section to the
    27     election officials of each county in which the school
    28     district is situate no later than 60 days prior to a
    29     municipal election. The election officials shall cause the
    30     referendum question to be submitted to the electors of the
    20051H0039B0093                 - 26 -     

     1     school district.
     2         (3)  The referendum question shall state the rate of the
     3     proposed earned income and net profits tax or personal income
     4     tax to be levied, the reason for the tax, the estimated per
     5     homestead tax reduction and the current rate of earned income
     6     and net profits or personal income tax levied by the school
     7     district. The question shall be clear and in language that is
     8     readily understandable by a layperson and shall be framed in
     9     one of the following forms with the school district
    10     resolution enumerating the variable amounts represented by
    11     the terms X, Y and Z:
    12             (i)  Do you favor imposing an additional X% (insert
    13         name of tax)? The revenue generated from the increased
    14         tax rate will be used to reduce taxes on qualified
    15         residential property by an estimated amount of $Y. The
    16         current (insert name of tax) rate for the school district
    17         is Z%.
    18             (ii)  Do you favor imposing a personal income tax at
    19         X%? The revenue generated from the tax will be used to
    20         reduce taxes on qualified residential properties by
    21         (insert amount of reduction).
    22             (iii)  Do you favor converting the school district's
    23         current earned income and net profits tax into a personal
    24         income tax at X%? The revenue generated from the personal
    25         income tax will be used to reduce taxes on qualified
    26         residential property by an estimated amount of (insert
    27         amount of reduction) and to replace the revenue from the
    28         current school district's earned income tax. The current
    29         earned income tax rate is Z%.
    30         (4)  The election officials of each county shall, in
    20051H0039B0093                 - 27 -     

     1     consultation with the board of school directors, draft a
     2     nonlegal interpretative statement which shall accompany the
     3     referendum question in accordance with section 201.1 of the
     4     act of June 3, 1937 (P.L.1333, No.320), known as the
     5     Pennsylvania Election Code. The nonlegal interpretative
     6     statement shall inform the voters of:
     7             (i)  the reason for the tax;
     8             (ii)  the estimated increase in revenue which the
     9         board of school directors has included in the proposed
    10         tax rate as authorized under section 321(b)(4) or section
    11         321(c)(6);
    12             (iii)  the estimated per homestead tax reduction; and
    13             (iv)  the current rate of earned income and net
    14         profits tax or, if applicable, personal income tax levied
    15         by the school district.
    16     (c)  Proposed tax rate.--The proposed rate of the earned
    17  income and net profits tax or personal income tax shall be
    18  established by the board of school directors of the school
    19  district and shall not exceed the rate, when combined with the
    20  tax rate authorized under section 331.2, required to provide an
    21  exclusion for homestead property and farmstead property equal to
    22  the maximum exclusion under 53 Pa.C.S. § 8586.
    23     (d)  Effective date.--If the referendum question under this
    24  section is approved, the new rate of the earned income and net
    25  profits tax or personal income tax shall take effect pursuant to
    26  section 321(d).
    27     (e)  Majority approval.--Approval of the referendum required
    28  under this subsection shall be by a majority of the electors
    29  voting on the question in the school district.
    30     (f)  (Reserved).
    20051H0039B0093                 - 28 -     

     1     (g)  Effect on certain school districts.--This section shall
     2  not apply to a school district of the first class.
     3     (h)  School districts operating under 53 Pa.C.S. Ch. 87.--
     4         (1)  (Reserved).
     5         (2)  (Reserved).
     6         (2.1)  This subsection shall apply to a school district
     7     which is subject to 53 Pa.C.S. Ch. 87 (relating to other
     8     subjects of taxation).
     9         (3)  A school district under this subsection shall
    10     convert its earned income and net profits tax authorized
    11     under 53 Pa.C.S. § 8703 to an earned income and net profits
    12     tax authorized under this subsection at the same rate as the
    13     tax was levied under 53 Pa.C.S. § 8703 on the date of
    14     conversion. The tax authorized under this subsection shall be
    15     subject to the provisions of sections 323, 324, 325 and 326.
    16         (4)  A school district under this subsection shall
    17     combine all revenue generated for funding homestead and
    18     farmstead exclusions under 53 Pa.C.S. § 8703 with any revenue
    19     collected for the purposes of funding homestead and farmstead
    20     exclusions under this chapter.
    21     (i)  Pennsylvania Election Code provisions.--Proceedings
    22  under this section shall be in accordance with the provisions of
    23  the Pennsylvania Election Code.
    24  Section 333.  Public referendum requirements for increasing
    25                 certain taxes.
    26     (a)  Applicability.--The following provisions shall apply to
    27  this section:
    28         (1)  For the 2006-2007 fiscal year, the tax increase
    29     proposed by any board of school directors shall not exceed
    30     the index, unless an exception under subsection (f) or (n) is
    20051H0039B0093                 - 29 -     

     1     approved pursuant to subsection (i) or (j), provided that a
     2     board of school directors that did not elect to participate
     3     in the former act of July 5, 2004 (P.L.654, No.72), known as
     4     the Homeowner Tax Relief Act, shall have the authority to
     5     petition the court of common pleas for an additional tax rate
     6     increase if the tax rate increase allowed by the index and
     7     any exception approved pursuant to subsection (i) or (j) is
     8     insufficient to balance the proposed budget. No later than
     9     July 15, 2006, the court shall grant the school district's
    10     request for the tax rate increase upon good cause shown if
    11     the school district proves by clear and convincing evidence
    12     that the tax rate increase authorized under this paragraph is
    13     insufficient to balance the proposed budget. For a board of
    14     school directors subject to this paragraph, the dates by
    15     which the board of school directors, the department and the
    16     court of common pleas shall be required to comply with
    17     section 311 and subsections (e), (i) and (j) shall be 92 days
    18     after the dates set forth in those provisions; except that
    19     the date by which the board of school directors shall be
    20     required to comply with all of the provisions of section
    21     311(c) shall be ten days prior to the date by which the board
    22     of school directors is required to adopt a preliminary
    23     budget. Any exceptions granted to a board of school directors
    24     under section 333 of the former Homeowner Tax Relief Act
    25     shall remain in full force and effect. Notwithstanding the
    26     provisions of this paragraph, a board of school directors
    27     that sought and was granted approval for one or more
    28     exceptions under section 333 of the former Homeowner Tax
    29     Relief Act may apply for any exception under subsections
    30     (f)(v) and (ix) and (n), where the dollar amount of an
    20051H0039B0093                 - 30 -     

     1     exception approved by the department under the former
     2     Homeowner Tax Relief Act is less than the dollar amount of
     3     the exception for which the school district is eligible under
     4     this act.
     5         (2)  This section shall apply to each board of school
     6     directors beginning with any proposed tax increase that takes
     7     effect in the 2007-2008 fiscal year and each fiscal year
     8     thereafter.
     9     (b)  Prohibitions.--Except as set forth in subsection (i) and
    10  (j), unless there is compliance with subsection (c), a board of
    11  school directors may not do any of the following:
    12         (1)  Increase the rate of a tax levied for the support of
    13     the public schools by more than the index. For purposes of
    14     compliance with this paragraph, a school district which is
    15     situated in more than one county and which levies real estate
    16     taxes under section 672.1 of the act of March 10, 1949
    17     (P.L.30, No.14), known as the Public School Code of 1949,
    18     shall apply the index to each separate rate of real estate
    19     taxes levied.
    20         (2)  Levy a tax for the support of the public schools
    21     which was not levied in the 2005-2006 fiscal year.
    22         (3)  Raise the rate of the earned income and net profits
    23     tax if already imposed under the authority of the Local Tax
    24     Enabling Act, except as otherwise provided for under section
    25     331.2 or 332.
    26         (4)  Notwithstanding any other provision of this chapter
    27     to the contrary, the adoption of a referendum under section
    28     331.2 or 332 confers on the board of school directors the
    29     authority to raise income taxes only to the extent contained
    30     in the language of the referendum, and any future increase of
    20051H0039B0093                 - 31 -     

     1     an income tax to be used for the purpose of property tax
     2     reduction shall be submitted to the electors of the school
     3     district at a subsequent municipal election pursuant to the
     4     provisions of section 332.
     5     (c)  Referendum.--
     6         (1)  In order to take an action prohibited under
     7     subsection (b)(1), at the election immediately preceding the
     8     start of the school district fiscal year in which the
     9     proposed tax increase would take effect, a referendum stating
    10     the specific rate or rates of the tax increase must be
    11     submitted to the electors of the school district, and a
    12     majority of the electors voting on the question must approve
    13     the increase.
    14         (2)  In order to take an action under subsection (b)(2),
    15     at the election immediately preceding the start of the school
    16     district fiscal year in which the proposed tax would take
    17     effect, a referendum stating the proposed tax and the rate at
    18     which it will be levied must be submitted to the electors of
    19     the school district, and a majority of the electors voting on
    20     the question must approve the tax.
    21         (3)  Except as set forth in subsections (i) and (j), a
    22     school district acting pursuant to this subsection shall
    23     submit the referendum question required under this section to
    24     the election officials of each county in which it is situate
    25     no later than 60 days prior to the election immediately
    26     preceding the fiscal year in which the tax increase would
    27     take effect.
    28         (4)  The election officials of each county shall, in
    29     consultation with the board of school directors, draft a
    30     nonlegal interpretative statement which shall accompany the
    20051H0039B0093                 - 32 -     

     1     referendum question in accordance with section 201.1 of the
     2     act of June 3, 1937 (P.L.1333, No.320), known as the
     3     Pennsylvania Election Code. The nonlegal interpretative
     4     statement shall include information that references the items
     5     of expenditure for which the tax increase is sought and the
     6     consequence of the referendum being disapproved by the
     7     electorate.
     8     (d)  Failure to approve referendum.--
     9         (1)  If a referendum question submitted under subsection
    10     (c)(1) is not approved, the board of school directors may
    11     approve an increase in the tax rate of not more than the
    12     index.
    13         (2)  If a referendum question submitted under subsection
    14     (c)(2) is not approved, the board of school directors may not
    15     levy the tax.
    16     (e)  Tax rate submissions.--A school district that has
    17  adopted a preliminary budget proposal under section 311 that
    18  includes an increase in the rate of any tax levied for the
    19  support of public schools shall submit information on the
    20  increase to the department on a uniform form prepared by the
    21  department. The school district shall submit such information no
    22  later than 85 days prior to the date of the election immediately
    23  preceding the beginning of the school district's fiscal year.
    24  The department shall compare the proposed percentage increase in
    25  the rate of any tax with the index. Within ten days of the
    26  receipt of the information required under this subsection but no
    27  later than 75 days prior to the date of the election immediately
    28  preceding the beginning of the school district's fiscal year,
    29  the department shall inform the school district whether the
    30  proposed tax rate increase is less than or equal to the index.
    20051H0039B0093                 - 33 -     

     1  If the department determines that the proposed percentage
     2  increase in the rate of the tax exceeds the index, the
     3  department shall notify the school district that:
     4         (1)  the proposed tax increase must be reduced to an
     5     amount less than or equal to the index;
     6         (2)  the proposed tax increase must be approved by the
     7     electorate under subsection (c)(1); or
     8         (3)  an exception must be sought under subsections (i)
     9     and (j).
    10     (f)  Referendum exceptions.--A school district may, without
    11  seeking voter approval under subsection (c), increase the rate
    12  of a tax levied for the support of the public schools by more
    13  than the index if all of the following apply:
    14         (1)  The revenue raised by the allowable increase under
    15     the index is insufficient to balance the proposed budget due
    16     to one or more of the expenditures listed in paragraph (2).
    17         (2)  The revenue generated by increasing the rate of a
    18     tax by more than the index will be used to pay for any of the
    19     following:
    20             (i)  Costs incurred in responding to or recovering
    21         from an emergency or disaster declared pursuant to 35
    22         Pa.C.S. § 7301 (relating to general authority of
    23         Governor) or 75 Pa.C.S. § 6108 (relating to power of
    24         Governor during emergency).
    25             (ii)  Costs to implement a court order or an
    26         administrative order from a Federal or State agency as
    27         long as the tax increase is rescinded following
    28         fulfillment of the court order or administrative order.
    29             (iii)  Costs associated with the following:
    30                 (A)  For a board of school directors that elected
    20051H0039B0093                 - 34 -     

     1             to participate in the former act of July 5, 2004
     2             (P.L.654, No.72) known as the Homeowner Tax Relief
     3             Act, to pay interest and principal on any
     4             indebtedness incurred under 53 Pa.C.S. Pt. VII Subpt.
     5             B (relating to indebtedness and borrowing) prior to
     6             September 4, 2004. In no case may the school district
     7             incur additional debt under this clause except for
     8             the refinancing of existing debt, including the
     9             payment of costs and expenses related to such
    10             refinancing and the establishment of funding of
    11             appropriate debt service reserves. An increase under
    12             this clause shall be rescinded following the final
    13             payment of interest and principal.
    14                 (A.1)  For a board of school directors that did
    15             not elect to participate in the former act of July 5,
    16             2004 (P.L.654, No.72), known as the Homeowner Tax
    17             Relief Act, to pay interest and principal on any
    18             indebtedness incurred under 53 Pa.C.S. Pt. VII Subpt.
    19             B (relating to indebtedness and borrowing) prior to
    20             the effective date of this act. In no case may the
    21             school district incur additional debt under this
    22             clause except for the refinancing of existing debt,
    23             including the payment of costs and expenses related
    24             to such refinancing and the establishment of funding
    25             of appropriate debt service reserves. An increase
    26             under this clause shall be rescinded following the
    27             final payment of interest and principal.
    28                 (B)  To pay interest and principal on any
    29             electoral debt incurred under 53 Pa.C.S. Pt. VII
    30             Subpt. B. An increase under this clause shall be
    20051H0039B0093                 - 35 -     

     1             rescinded following the final payment of interest and
     2             principal.
     3                 (C)  To pay interest and principal on
     4             indebtedness for up to 60% of the construction cost
     5             average on a square-foot basis if all of the
     6             following apply:
     7                     (I)  The indebtedness is for a school
     8                 construction project under 22 Pa. Code Ch. 21
     9                 (relating to school buildings).
    10                     (II)  For a board of school directors that
    11                 elected to participate in the former Homeowner
    12                 Tax Relief Act, the indebtedness to fund
    13                 appropriate debt service reserves for the project
    14                 is incurred after September 3, 2004.
    15                     (II.1)  For a board of school directors that
    16                 did not elect to participate in the former
    17                 Homeowner Tax Relief Act, the indebtedness to
    18                 fund appropriate debt service reserves for the
    19                 project is incurred on or after the effective
    20                 date of this act.
    21                     (III)  The increase sought under this clause
    22                 is rescinded following final payment of interest
    23                 and principal.
    24                     (IV)  The indebtedness is incurred only after
    25                 existing fund balances for school construction
    26                 and any undesignated fund balances have been
    27                 fully committed to fund the project.
    28                     (V)  The indebtedness is for an academic
    29                 elementary or academic secondary school building.
    30                 For purposes of this subclause, the following
    20051H0039B0093                 - 36 -     

     1                 shall not be considered to be an academic
     2                 elementary or academic secondary school building:
     3                 natatorium, stadium bleachers, athletic field,
     4                 athletic field lighting equipment and apparatus
     5                 used to promote and conduct interscholastic
     6                 athletics.
     7                     (VI)  For school districts of the second,
     8                 third and fourth class, the project has been
     9                 approved by the department under section 731 of
    10                 the act of March 10, 1949 (P.L.30, No.14), known
    11                 as the Public School Code of 1949. For
    12                 nonreimbursable projects in school districts of
    13                 the first class A, the plans and specifications
    14                 have been approved by the board of school
    15                 directors. For reimbursable projects in school
    16                 districts of the first class A, the plans and
    17                 specifications have been approved by the
    18                 department pursuant to 22 Pa. Code Ch. 21.
    19                 (D)  To pay interest and principal on
    20             indebtedness for up to $250,000 of the construction
    21             cost of a nonacademic school construction project, as
    22             adjusted annually by the percentage increase in the
    23             average of the Statewide average weekly wage and the
    24             employment cost index. An increase under this clause
    25             shall be rescinded following the final payment of
    26             interest and principal.
    27                 (E)  For purposes of this subparagraph, electoral
    28             debt includes the refunding or refinancing of
    29             electoral debt for which an exception is permitted
    30             under clause (B) as long as the refunding or
    20051H0039B0093                 - 37 -     

     1             refinancing incurs no additional debt other than for:
     2                     (I)  costs and expenses related to the
     3                 refunding or refinancing; and
     4                     (II)  funding of appropriate debt service
     5                 reserves.
     6                 (F)  For purposes of this subparagraph,
     7             indebtedness includes the refunding or refinancing of
     8             indebtedness for which an exception is permitted
     9             under clauses (A), (A.1), (C) and (D) as long as the
    10             refunding or refinancing incurs no additional debt
    11             other than for:
    12                     (I)  costs and expenses related to the
    13                 refunding or refinancing; and
    14                     (II)  funding of appropriate debt service
    15                 reserves.
    16             (iv)  Costs to respond to conditions which pose an
    17         immediate threat of serious physical harm or injury to
    18         the students, staff or residents of the school district,
    19         but only until the conditions causing the threat have
    20         been fully resolved.
    21             (v)  Costs incurred in providing special education
    22         programs and services to students with disabilities if
    23         the increase in expenditures on special education
    24         programs and services was greater than the index. The
    25         dollar amount of this exception shall be equal to the
    26         portion of the increase that exceeds the index.
    27             (vi)  Costs which:
    28                 (A)  were incurred in the implementation of a
    29             school improvement plan required under section
    30             1116(b) of the Elementary and Secondary Education Act
    20051H0039B0093                 - 38 -     

     1             of 1965 (Public Law 89-10, 20 U.S.C. § 6316(b)); and
     2                 (B)  were not offset by a State allocation.
     3             (vii)  Costs necessary to maintain:
     4                 (A)  per-student local tax revenue, adjusted by
     5             the index, if the percentage growth in average daily
     6             membership between the school year determined under
     7             subsection (j)(4) and the third school year preceding
     8             the school year determined under subsection (j)(4)
     9             exceeds 7.5%; or
    10                 (B)  actual instruction expense per average daily
    11             membership, adjusted by the index, if the increase in
    12             actual instruction expense per average daily
    13             membership between the school year determined under
    14             subsection (j)(4) and the school year preceding the
    15             school year determined under subsection (j)(4) is
    16             less than the index.
    17             (viii)  The maintenance of revenues derived from real
    18         property taxes, earned income and net profits taxes,
    19         personal income taxes, basic education funding
    20         allocations and special education funding allocations,
    21         adjusted by the index, for a school district where the
    22         percentage increase in revenues derived from real
    23         property taxes, earned income and net profits taxes,
    24         personal income taxes, basic education funding
    25         allocations and special education funding allocations
    26         between the school year determined under subsection
    27         (j)(4) and the school year preceding the school year
    28         determined under subsection (j)(4) is less than the
    29         index.
    30             (ix)  Costs incurred for providing health care-
    20051H0039B0093                 - 39 -     

     1         related benefits which are directly attributable to a
     2         collective bargaining agreement in effect on January 1,
     3         2006, between the school district and its employees'
     4         organization if the anticipated increase in the cost of
     5         health care-related benefits between the current year and
     6         the upcoming year is greater than the index. The dollar
     7         amount of this exception shall be equal to the portion of
     8         the increase which exceeds the index. This subparagraph
     9         shall not apply to a collective bargaining agreement
    10         renewed, extended or entered into after January 1, 2006.
    11     (g)  Revenue derived from increase.--Any revenue derived from
    12  an increase in the rate of any tax allowed pursuant to
    13  subsection (f)(2)(iii) shall not exceed the anticipated dollar
    14  amount of the expenditure.
    15     (h)  Limitation on tax rate.--The increase in the rate of any
    16  tax allowed pursuant to an exception under subsection (f)(2)(i),
    17  (ii), (iv), (v), (vi), (vii), (viii) or (ix) or (n) shall not
    18  exceed the rate increase required as determined by a court of
    19  common pleas or the department pursuant to subsection (i) or
    20  (j).
    21     (i)  Court action.--
    22         (1)  Prior to the imposition of a tax increase under
    23     subsection (f)(2)(i), (ii) and (iv) and no later than 75 days
    24     prior to the election immediately preceding the beginning of
    25     the school district's fiscal year, approval by the court of
    26     common pleas in the judicial district in which the
    27     administrative office of the school district is located must
    28     be sought. The board of school directors shall publish in a
    29     newspaper of general circulation and on the district's
    30     publicly accessible Internet site, if one is maintained,
    20051H0039B0093                 - 40 -     

     1     notice of its intent to file a petition under this subsection
     2     at least one week prior to the filing of the petition. The
     3     board of school directors shall also publish in a newspaper
     4     of general circulation and on the district's publicly
     5     accessible Internet site, if one is maintained, notice, as
     6     soon as possible following notification from the court that a
     7     hearing has been scheduled, stating the date, time and place
     8     of the hearing on the petition. The following shall apply to
     9     any proceedings instituted under this subsection:
    10             (i)  The school district must prove by clear and
    11         convincing evidence that it qualifies for each exception
    12         sought.
    13             (ii)  The school district must prove by clear and
    14         convincing evidence the anticipated dollar amount of the
    15         expenditure for each exception sought.
    16         (2)  The court shall rule on the school district's
    17     petition and inform the school district of its decision no
    18     later than 55 days prior to the date of the election
    19     immediately preceding the beginning of the school district's
    20     fiscal year. If the court approves the petition, the court
    21     shall also determine the dollar amount of the expenditure for
    22     which an exception is granted, the tax rate increase required
    23     to fund the exception and the appropriate duration of the
    24     increase. If the court denies the petition, the school
    25     district may submit a referendum question under subsection
    26     (c)(1). The question must be submitted to the election
    27     officials no later than 50 days prior to the date of the
    28     election immediately preceding the beginning of the school
    29     district's fiscal year.
    30     (j)  Department approval.--
    20051H0039B0093                 - 41 -     

     1         (1)  A school district that seeks to increase the rate of
     2     tax due to an expenditure under subsection (f)(2)(iii), (v),
     3     (vi), (vii), (viii) or (ix) or (n) shall obtain the approval
     4     of the department before imposing the tax increase. The
     5     department shall establish procedures for administering the
     6     provisions of this subsection, which may include an
     7     administrative hearing on the school district's submission.
     8         (2)  A school district proceeding under the provisions of
     9     this subsection shall publish in a newspaper of general
    10     circulation and on the district's publicly accessible
    11     Internet site, if one is maintained, notice of its intent to
    12     seek department approval at least one week prior to
    13     submitting its request for approval to the department. If the
    14     department schedules a hearing on the school district's
    15     request, the school district shall publish notice of the
    16     hearing in a newspaper of general circulation and on the
    17     district's publicly accessible Internet site, if one is
    18     maintained, immediately upon receiving the information from
    19     the department. The notice shall include the date, time and
    20     place of the hearing.
    21         (3)  The department shall approve a school district's
    22     request under this subsection if a review of the data under
    23     paragraph (4) demonstrates that:
    24             (i)  the school district qualifies for one or more
    25         exceptions under subsection (f)(2)(iii), (v), (vi),
    26         (vii), (viii) or (ix) or (n); and
    27             (ii)  the sum of the dollar amounts of the exceptions
    28         for which the school district qualifies makes the school
    29         district eligible under subsection (f)(1).
    30         (4)  For the purpose of determining the eligibility of a
    20051H0039B0093                 - 42 -     

     1     school district for an exception under subsection (f)(2)(v),
     2     (vi), (vii) or (viii), the department shall utilize data from
     3     the most recent school years for which annual financial
     4     report data required under section 2553 of the Public School
     5     Code of 1949 has been received. The department shall inform
     6     school districts of the school years determined under this
     7     subsection no later than 30 days prior to the date on which
     8     public inspection of proposed school budgets is required
     9     under section 311(c).
    10         (5)  (i)  The department shall rule on the school
    11     district's request and shall inform the school district of
    12     its decision no later than 55 days prior to the date of the
    13     election immediately preceding the beginning of the school
    14     district's fiscal year.
    15             (ii)  If the department approves the request, the
    16         department shall determine the dollar amount of the
    17         expenditure for which the exception is sought and the tax
    18         rate increase required to fund the exception.
    19             (iii)  If the department denies the request, the
    20         school district may submit a referendum question under
    21         subsection (c)(1). The question must be submitted to the
    22         election officials no later than 50 days prior to the
    23         date of the election immediately preceding the beginning
    24         of the school district's fiscal year.
    25         (6)  Within 30 days of the deadline under paragraph
    26     (5)(i), the department shall submit a report to the President
    27     pro tempore of the Senate, the Minority Leader of the Senate,
    28     the Speaker of the House of Representatives and the Minority
    29     Leader of the House of Representatives enumerating the school
    30     districts which sought an exception under this subsection.
    20051H0039B0093                 - 43 -     

     1     The department shall also publish the report on its publicly
     2     accessible Internet site. The report shall include:
     3             (i)  The name of each school district making a
     4         request under this subsection.
     5             (ii)  The specific exceptions requested by each
     6         school district and the dollar amount of the expenditure
     7         for each exception.
     8             (iii)  The department's ruling on the request for the
     9         exception.
    10             (iv)  If the exception was approved, the dollar
    11         amount of the expenditure for which the exception was
    12         sought and the tax rate increase required to fund the
    13         exception.
    14             (v)  A statistical summary of the information in
    15         subparagraphs (ii), (iii) and (iv).
    16     (k)  Objections.--Any person who resides within or pays real
    17  property taxes to the school district filing a petition under
    18  subsection (i) may file with the court written objections to any
    19  petition filed under this section.
    20     (l)  Index calculation.--No later than August 15, 2005, and
    21  each August 15 thereafter, the department shall calculate the
    22  index. The department shall publish the index by September 1,
    23  2005, and each September 1 thereafter in the Pennsylvania
    24  Bulletin.
    25     (m)  Election interference prohibited.--
    26         (1)  No public funds may be used to urge any elector to
    27     vote for or against a referendum or be appropriated for
    28     political or campaign purposes.
    29         (2)  This subsection shall not be construed to prohibit
    30     the use of public funds for dissemination of factual
    20051H0039B0093                 - 44 -     

     1     information relative to a referendum appearing on an election
     2     ballot.
     3         (3)  As used in this subsection, the term "public funds"
     4     means any funds appropriated by the General Assembly or by a
     5     political subdivision.
     6     (n)  Treatment of certain required payments.--The provisions
     7  of subsections (f) and (j) shall apply to a school district's
     8  share of payments to the Public School Employees' Retirement
     9  System as required under 24 Pa.C.S. § 8327 (relating to payments
    10  by employers) if the increase in the actual dollar amount of
    11  estimated payments between the current year and the upcoming
    12  year is greater than the index. The dollar amount to which
    13  subsection (f) applies shall equal that portion of the increase
    14  which exceeds the product of the index and the actual dollar
    15  value of payments for the current year.
    16  Section 334.  Disposition of income tax revenue and property tax
    17                 reduction allocations.
    18     (a)  Earned income and net profits tax revenue.--All earned
    19  income and net profits tax revenue received by the school
    20  district pursuant to this chapter shall be used as follows:
    21         (1)  (Reserved).
    22         (2)  (Reserved).
    23         (3)  Except as set forth in section 335(a) or section
    24     321(b)(4), in the fiscal year that a tax under section
    25     321(b)(1) or (2) is implemented or increased, all revenue
    26     received by a school district that is directly attributable
    27     to that tax shall be used to fund exclusions for homestead
    28     and farmstead property.
    29         (4)  Except as set forth in section 335(a), in the second
    30     fiscal year and each fiscal year thereafter, an amount
    20051H0039B0093                 - 45 -     

     1     equivalent to the revenue directly attributable to the
     2     imposition of the tax in the first full fiscal year in which
     3     the tax is levied and collected shall be used to fund
     4     exclusions for homestead and farmstead property. All
     5     remaining revenue may be used for the operations of the
     6     school district.
     7     (b)  Personal income tax revenue.--All personal income tax
     8  revenue received by the school district pursuant to this chapter
     9  shall be used as follows:
    10         (1)  Except as set forth in section 321(c)(6) or 335(a),
    11     in the fiscal year that the tax under section 321(c) is
    12     implemented or increased, all revenue received by the school
    13     district pursuant to section 321(c)(2)(iii) shall be used to
    14     fund exclusions for homestead and farmstead property.
    15         (2)  Except as set forth in section 335(a), in the second
    16     fiscal year and each fiscal year thereafter, an amount
    17     equivalent to the revenue directly attributable to the
    18     imposition of the tax in the first full fiscal year in which
    19     the tax is levied and collected shall be used to fund
    20     exclusions for homestead and farmstead property. All
    21     remaining revenue may be used for the operations of the
    22     school district.
    23     (c)  Property tax reduction allocations.--
    24         (1)  A school district that receives a property tax
    25     reduction allocation under section 505 shall use the property
    26     tax reduction allocation to fund exclusions for homestead and
    27     farmstead property or, where section 335(a)(2) applies, to
    28     reduce the property tax rate on all properties subject to the
    29     property tax in the school district.
    30         (2)  Notwithstanding the provisions of paragraph (1), a
    20051H0039B0093                 - 46 -     

     1     school district coterminous with a city of the second class A
     2     may use up to 50% of the property tax reduction allocation
     3     received under section 505 to reduce the rate of the earned
     4     income and net profits tax levied by the school district
     5     pursuant to any other act. If a board of school directors
     6     elects to reduce the rate of earned income and net profits
     7     tax pursuant to this paragraph, it shall adopt a resolution
     8     reducing the rate of earned income and net profits tax no
     9     later than the last day of the fiscal year immediately
    10     preceding the fiscal year in which the new earned income and
    11     net profits tax rate shall take effect. The board shall give
    12     public notice of its intent to adopt the resolution in the
    13     manner provided by section 4 of the Local Tax Enabling Act
    14     and shall conduct at least one public hearing on the
    15     resolution. Any portion of the property tax reduction
    16     allocation not used to reduce the rate of the earned income
    17     and net profits tax shall be used as prescribed in paragraph
    18     (1).
    19  Section 335.  School district options.
    20     (a)  Receipt of property tax reduction allocation.--In any
    21  fiscal year in which a school district receives a property tax
    22  reduction allocation under section 505 and the sum of the
    23  property tax reduction allocation and revenue from the earned
    24  income and net profits tax or personal income tax received by
    25  the school district under this chapter exceeds the amount
    26  required to fund the maximum homestead and farmstead exclusions
    27  authorized under 53 Pa.C.S. § 8586 (relating to limitations),
    28  the school district may:
    29         (1)  reduce the rate of the earned income and net profits
    30     tax or personal income tax such that the sum of the property
    20051H0039B0093                 - 47 -     

     1     tax reduction allocation and the earned income and net
     2     profits tax or personal income tax revenue is equal to the
     3     amount required to fund the maximum homestead and farmstead
     4     exclusions authorized under 53 Pa.C.S. § 8586; or
     5         (2)  maintain the rate of the earned income and net
     6     profits tax or personal income tax and utilize any revenue in
     7     excess of the revenue required to fund the maximum homestead
     8     and farmstead exclusions authorized under 53 Pa.C.S. § 8586
     9     to reduce the property tax rate on all properties subject to
    10     the property tax in the school district.
    11     (b)  Reduction of earned income and net profits tax.--In any
    12  year subsequent to a year in which the rate of the earned income
    13  and net profits tax or personal income tax was reduced pursuant
    14  to subsection (a)(1) and the sum of the property tax reduction
    15  allocation under section 505 and revenue from the earned income
    16  and net profits tax or personal income tax received by the
    17  school district under this chapter is less than the amount
    18  necessary to maintain the maximum homestead and farmstead
    19  exclusions authorized under 53 Pa.C.S. § 8586, the school
    20  district may raise the rate of the earned income and net profits
    21  tax or personal income tax up to the amount previously reduced
    22  under subsection (a)(1), without complying with the referendum
    23  provisions of section 332.
    24                            SUBCHAPTER E
    25                        HOMESTEAD EXCLUSION
    26  Section 341.  Homestead and farmstead applications.
    27     (a)  (Reserved).
    28     (b)  Annual notification.--No later than 60 days prior to the
    29  application deadline in subsection (c), a board of school
    30  directors shall notify by first class mail the owner of each
    20051H0039B0093                 - 48 -     

     1  parcel of residential property within the district of the
     2  existence of the school district's homestead and farmstead
     3  exclusion program, the need to file an application in accordance
     4  with 53 Pa.C.S. § 8584(a) in order to qualify for the program
     5  and the application deadline. A school district may limit the
     6  annual notification to owners of residential property:
     7         (1)  who are not currently approved; or
     8         (2)  whose approval is due to expire.
     9     (c)  Application deadline.--In accordance with 53 Pa.C.S. §
    10  8584(b), the deadline for filing an application with the
    11  assessor shall be March 1.
    12     (d)  Action on application.--Real property for which an
    13  application has been filed by the application deadline shall be
    14  deemed to be a homestead or farmstead property which is eligible
    15  for a homestead or farmstead exclusion unless the assessor
    16  denies the application. Denials of application by the assessor
    17  and the right to appeal that decision shall be in accordance
    18  with 53 Pa.C.S. § 8584(d) and (e).
    19     (e)  Application review and submission.--Except as set forth
    20  in 53 Pa.C.S. § 8584(j), an assessor shall not require the owner
    21  of a previously approved property to resubmit an application
    22  more than one time every three years.
    23     (f)  Applicability.--The provisions of 53 Pa.C.S. § 8584(f),
    24  (g), (h) and (j) shall apply to any application filed under this
    25  section.
    26     (g)  Duties of assessors.--
    27         (1)  The assessor shall mail to the owner of property for
    28     which an application has been submitted and approved or
    29     denied under this section notice of such fact no later than
    30     30 days after receipt of the application.
    20051H0039B0093                 - 49 -     

     1         (2)  (i)  The assessor shall notify the owner of any
     2         homestead or farmstead property designated as such under
     3         any other statute of the need, if any, to resubmit an
     4         application to maintain the property's eligibility as a
     5         homestead or farmstead property.
     6             (ii)  Nothing in this paragraph shall be construed to
     7         prohibit a county assessor from designating property
     8         previously determined to be homestead property under any
     9         other statute as homestead or farmstead property for
    10         purposes of this section.
    11         (3)  The assessor shall provide each school district with
    12     a certified report, as provided in 53 Pa.C.S. § 8584(i), no
    13     later than May 1.
    14     (h)  Uniform application and instructions.--The application
    15  to designate property as homestead or farmstead property shall
    16  be uniform and shall include instructions for completing the
    17  application. The Department of Community and Economic
    18  Development shall develop a uniform application and instructions
    19  to be used by county assessors and shall publish the uniform
    20  application and instructions no later than 15 days after the
    21  effective date of this section. Nothing in this subsection shall
    22  be construed to require the department to develop and publish
    23  the uniform allocation and instructions if the department did so
    24  during calendar year 2004.
    25     (i)  Prohibitions.--A county shall not require an application
    26  fee for the filing or review of an application submitted under
    27  this section or under 53 Pa.C.S. § 8584(a).
    28     (j)  Applications previously filed.--An application filed
    29  between September 3, 2004, and the effective date of this
    30  section shall be used to qualify an applicant for the program.
    20051H0039B0093                 - 50 -     

     1  Section 342.  Homestead and farmstead exclusion process.
     2     Each fiscal year in which a school district imposes a tax
     3  authorized under section 321 or receives a property tax
     4  reduction allocation pursuant to Chapter 5, the district shall
     5  calculate a homestead and farmstead exclusion for the purpose of
     6  reducing school district property taxes. The school district
     7  shall adopt a resolution implementing the homestead and
     8  farmstead exclusion no later than the last day of the fiscal
     9  year immediately preceding the fiscal year in which the
    10  homestead and farmstead exclusions shall take effect.
    11  Section 343.  School district tax notices.
    12     (a)  Tax notice.--A school district that implements homestead
    13  and farmstead exclusions shall itemize the homestead and
    14  farmstead exclusion on tax bills sent to homestead and farmstead
    15  owners, indicating the original amount of tax liability, the
    16  amount of the exclusion and the net amount of tax due after the
    17  exclusion is applied. The tax bill shall be easily
    18  understandable and include a notice pursuant to subsection (b).
    19     (b)  Notice of property tax relief.--A school district that
    20  implements homestead and farmstead exclusions shall include with
    21  the homestead or farmstead owner's tax bill a notice that the
    22  tax bill includes a homestead or farmstead exclusion. The notice
    23  shall at a minimum take the following form:
    24                   NOTICE OF PROPERTY TAX RELIEF
    25     Your enclosed tax bill includes a tax reduction for your
    26     homestead and/or farmstead property. As an eligible homestead
    27     and/or farmstead property owner, you have received tax relief
    28     through a homestead and/or farmstead exclusion which has been
    29     provided under the Pennsylvania Taxpayer Relief Act, a law
    30     passed by the Pennsylvania General Assembly designed to
    20051H0039B0093                 - 51 -     

     1     reduce your property taxes.
     2                            SUBCHAPTER F
     3                              REGISTER
     4  Section 351.  Tax Register and Local Tax Withholding Register.
     5     (a)  General rule.--The Department of Community and Economic
     6  Development shall maintain a Tax Register and Local Withholding
     7  Tax Register.
     8     (b)  Tax Register.--The Department of Community and Economic
     9  Development shall maintain a Tax Register, an official
    10  continuing register of all county, municipal and school tax
    11  rates within this Commonwealth on its publicly accessible
    12  Internet website. Information for the Tax Register shall be
    13  furnished by each county, municipality and school district to
    14  the department as prescribed by the Department of Community and
    15  Economic Development. The Department of Community and Economic
    16  Development shall continuously update the Tax Register as new
    17  and updated information is provided.
    18     (c)  Local Withholding Tax Register.--As part of the Tax
    19  Register, the Department of Community and Economic Development
    20  shall maintain a Local Withholding Tax Register, an official
    21  continuing register of all withholding taxes.
    22     (d)  Contents of Local Withholding Tax Register.--The Local
    23  Withholding Tax Register shall be organized by municipality and
    24  shall list all of the following:
    25         (1)  Each municipality and coterminous school district.
    26         (2)  The effective municipal income tax rate on resident
    27     taxpayers.
    28         (3)  The effective school district income tax rate on
    29     resident taxpayers.
    30         (4)  The combined municipal and school district income
    20051H0039B0093                 - 52 -     

     1     tax rate on taxpayers residing in each municipality.
     2         (5)  The effective income tax rate on resident and
     3     nonresident taxpayers working within a municipality.
     4         (6)  Whether an income tax is a personal income tax
     5     levied under this chapter.
     6         (7)  The effective emergency and municipal services tax
     7     rate.
     8         (8)  The effective school district emergency and
     9     municipal services tax rate.
    10         (9)  The combined municipal and school district emergency
    11     and municipal services tax rate.
    12         (10)  The amount of any other withholding tax.
    13         (11)  The name, telephone number, address, e-mail
    14     address, where available, and Internet website, where
    15     available, of the tax officer responsible for administering
    16     the collection of the tax and from whom information, forms
    17     and copies of regulations are available.
    18         (12)  Any other information deemed to be necessary by the
    19     Department of Community and Economic Development.
    20     (e)  Official release and effective period of tax rates on
    21  Local Withholding Tax Register.--On June 15 and December 15 of
    22  each year, the Department of Community and Economic Development
    23  shall update and officially release withholding tax rates on the
    24  Local Tax Withholding Register. Withholding for tax rates
    25  released on June 15 shall become effective on July 1.
    26  Withholding for tax rates released on December 15 shall become
    27  effective on January 1 of the following year. The Department of
    28  Community and Economic Development may revise the notification,
    29  official release and effective dates of the Local Withholding
    30  Tax Register for good cause and with adequate notice.
    20051H0039B0093                 - 53 -     

     1     (f)  Information for the Local Withholding Tax Register.--
     2  Information for the Local Withholding Tax Register shall be
     3  furnished by each municipality and school district to the
     4  Department of Community and Economic Development as prescribed
     5  by the department. The information shall include a copy of the
     6  ordinance or resolution enacting, repealing or changing the tax.
     7  The Department of Community and Economic Development shall be
     8  notified and receive information regarding changes to the Local
     9  Withholding Tax Register as follows:
    10         (1)  New tax enactments, repeals and changes shall be
    11     received by the Department of Community and Economic
    12     Development no later than June 1 to require withholding of a
    13     new tax, withholding at a new rate, or to suspend withholding
    14     of such tax effective July 1 of that year. All new tax
    15     enactments, repeals and changes received by the Department of
    16     Community and Economic Development by June 1 shall be
    17     officially released on June 15 and become effective on July
    18     1. Failure of the Department of Community and Economic
    19     Development to receive information by June 1 from
    20     municipalities and school districts regarding current tax
    21     rates, new tax enactments, repeals and changes shall be
    22     construed to mean that the information contained in the
    23     previous release of the Local Tax Withholding Register is
    24     still in force. Information received by the Department of
    25     Community and Economic Development after June 1, but before
    26     December 1, shall be officially released on December 15.
    27         (2)  New tax enactments, repeals and changes shall be
    28     received by the Department of Community and Economic
    29     Development no later than December 1 to require withholding
    30     of a new tax, withholding at a new rate, or to suspend
    20051H0039B0093                 - 54 -     

     1     withholding of such tax effective January 1 of the following
     2     year. All new tax enactments, repeals and changes received by
     3     the Department of Community and Economic Development by
     4     December 1 shall be officially released on December 15 and
     5     become effective on January 1 of the following year. Failure
     6     of the Department of Community and Economic Development to
     7     receive information by December 1 from municipalities and
     8     school districts regarding current tax rates, new tax
     9     enactments, repeals and changes shall be construed to mean
    10     that the information contained in the previous release of the
    11     Local Tax Withholding Register is still in force. Information
    12     received by the Department of Community and Economic
    13     Development after December 1, but before June 1, shall be
    14     officially released on June 15.
    15     (g)  Withholding and effect of Local Withholding Tax
    16  Register.--Employers shall not be required to withhold from the
    17  compensation of their employees or make reports of compensation
    18  in connection with any withholding tax that is not officially
    19  released on the Local Withholding Tax Register as of June 15 and
    20  December 15 of each year or as of August 15, 2006, as provided
    21  in subsections (e) and (f). Notwithstanding any law to the
    22  contrary, no school district, municipality or tax officer may
    23  require any employer to withhold a withholding tax at a rate or
    24  amount which is not officially released on the Local Withholding
    25  Tax Register. The provisions of this section shall not affect
    26  the liability of any taxpayer for taxes lawfully imposed under
    27  this act.
    28     (h)  Withholding and effect to Tax Register.--An employer may
    29  withhold at the most recently available rate on the Tax Register
    30  even if the rate is different than the tax rate officially
    20051H0039B0093                 - 55 -     

     1  released on the Local Withholding Tax Register as provided in
     2  subsections (d) and (e). An employer shall not be required to
     3  withhold a tax rate that is not officially released on the Local
     4  Withholding Tax Register.
     5                             CHAPTER 5
     6                        STATE FUNDS FORMULA
     7  Section 501.  Scope.
     8     This chapter relates to the State funds formula for tax
     9  relief.
    10  Section 502.  Definitions.
    11     The following words and phrases when used in this chapter
    12  shall have the meanings given to them in this section unless the
    13  context clearly indicates otherwise:
    14     "Allocation maximum."  A numerical value of 0.4 plus the
    15  modifier calculated under section 503(c)(2). The value,
    16  including the maximum modifier, shall not exceed 0.6.
    17     "Allocation minimum."  A numerical value of 0.1 plus the
    18  modifier calculated under section 503(c)(1). The value,
    19  including the minimum modifier, shall not exceed 0.15.
    20     "Department."  The Department of Education of the
    21  Commonwealth.
    22     "Estimated local revenue calculation."  The compensation and
    23  net profits component of the 2002 personal income valuation
    24  certified by the Secretary of Revenue under section 2501(9.1) of
    25  the act of March 10, 1949 (P.L.30, No.14), known as the Public
    26  School Code of 1949, multiplied by 0.1%.
    27     "Fund."  The Property Tax Relief Fund established under 4
    28  Pa.C.S. § 1409 (relating to Property Tax Relief Fund).
    29     "Income tax."  A tax on earned income and net profits or a
    30  tax on personal income pursuant to Chapter 3.
    20051H0039B0093                 - 56 -     

     1     "Property tax reduction index."  A quotient equal to the sum
     2  of the numerical rank of a school district's personal income
     3  valuation per average daily membership, the numerical rank of
     4  its market value/income aid ratio, the numerical rank of its
     5  equalized millage and the numerical rank of its school tax
     6  ratio, divided by 1,000.
     7     "Property Tax Relief Reserve Fund."  The fund established in
     8  section 504.
     9     "Residential property tax."  The dollar value of real
    10  property taxes paid by residential property owners in a school
    11  district, determined by multiplying the real property taxes
    12  collected by the school district times the percentage of the
    13  total property value in the school district classified as
    14  residential by the State Tax Equalization Board.
    15     "School district."  As defined in section 302 and including a
    16  school district of the first class.
    17     "School tax ratio."  The dollar value of local taxes
    18  collected by the school district or by a city of the first class
    19  for a school district of the first class divided by the personal
    20  income valuation of the school district.
    21     "Secretary."  The Secretary of the Budget of the
    22  Commonwealth.
    23  Section 503.  Certification; calculation of minimum and maximum
    24                 modifiers.
    25     (a)  Secretary of the Budget certification.--
    26         (1)  No later than April 15, 2006, and April 15 of each
    27     year thereafter, the Secretary of the Budget shall certify
    28     all of the following:
    29             (i)  The total amount of revenue in the fund. In
    30         calculating the total amount of revenue in the fund, the
    20051H0039B0093                 - 57 -     

     1         secretary shall take into account all of the following:
     2                 (A)  For the certification to be completed no
     3             later than April 15, 2006, revenue which:
     4                     (I)  has been deposited into the fund prior
     5                 to the date of the certification;
     6                     (II)  is reasonably projected to be deposited
     7                 into the fund during the six months following the
     8                 date on which the certification is made; and
     9                     (III)  has been appropriated under section
    10                 5002.
    11                 (B)  For certifications in subsequent fiscal
    12             years:
    13                     (I)  revenue which has been deposited into
    14                 the fund during the six months prior to the date
    15                 on which the certification is made; and
    16                     (II)  revenue enumerated in clause (A)(II).
    17             (ii)  The total amount of revenue in the Property Tax
    18         Relief Reserve Fund.
    19             (iii)  In certifying the amount available for
    20         distribution under subsection (e), the secretary shall
    21         only certify an amount that is sustainable in subsequent
    22         years.
    23         (2)  If the actual revenue deposited into the fund during
    24     the six months following the date on which the certification
    25     is made exceeds projections, any revenue in excess of
    26     projections shall remain in the fund and may be included in
    27     the certification for the subsequent fiscal year.
    28     (b)  Additional certification.--
    29         (1)  The department shall calculate each school
    30     district's estimated local revenue calculation and certify
    20051H0039B0093                 - 58 -     

     1     the calculation to the secretary no later than 30 days after
     2     the effective date of this section.
     3         (2)  By December 15, 2004, and December 15 of each year
     4     thereafter, each school district subject to section 324 shall
     5     certify to the department the total amount of tax credits
     6     under section 324(2).
     7     (c)  Allocation modifiers.--The secretary shall calculate
     8  modifiers for the allocation maximum and the allocation minimum
     9  based on the amount available for distribution under subsection
    10  (e).
    11         (1)  If the amount available for distribution for a
    12     fiscal year exceeds $750,000,000, the minimum modifier for
    13     the allocation minimum shall be a value of .005 per
    14     $50,000,000 in excess of $750,000,000. The modifier for the
    15     allocation minimum shall not exceed 0.05.
    16         (2)  If the amount available for distribution for a
    17     fiscal year exceeds $750,000,000, the minimum modifier for
    18     the allocation maximum shall be a value of .02 per
    19     $50,000,000 in excess of $750,000,000. The modifier for the
    20     allocation maximum shall not exceed 0.2.
    21     (d)  Notification.--
    22         (1)  By April 20, 2006, and April 20 each year
    23     thereafter, the secretary shall notify the department whether
    24     it is authorized to provide school districts with property
    25     tax reduction allocations under section 505.
    26         (2)  The secretary shall not authorize the department to
    27     provide the first property tax reduction allocations until:
    28             (i)  the certification under subsection (a)(1)(ii) is
    29         in compliance with section 504(c)(1); and
    30             (ii)  the amount available for distribution under
    20051H0039B0093                 - 59 -     

     1         subsection (e) is equal to or greater than $400,000,000.
     2         (3)  Subsequent property tax reduction allocations shall
     3     only be authorized when the balance of the Property Tax
     4     Relief Reserve Fund is in compliance with section 504(c)(1).
     5     (e)  Distribution.--
     6         (1)  For fiscal years 2007-2008 and 2008-2009, the
     7     secretary shall distribute the difference between the amount
     8     certified under subsection (a)(1)(i) and the sum of all of
     9     the following:
    10             (i)  The amount sufficient to fund reimbursements to
    11         eligible school districts pursuant to section 324. The
    12         amount deducted pursuant to this clause shall be
    13         calculated based on the information provided by school
    14         districts pursuant to subsection (b)(2).
    15             (ii)  The amount of approved claims under section
    16         704.
    17             (iii)  The amount of approved claims under section
    18         1304(a)(2)(ii).
    19         (2)  For fiscal year 2009-2010 and each fiscal year
    20     thereafter, the secretary shall distribute the difference
    21     between the amount certified under subsection (a)(1)(i) and
    22     the sum of all of the following:
    23             (i)  The difference between the sum of the amount of
    24         approved claims to be paid in the next fiscal year under
    25         section 1304(a)(2)(i) and (3) and the amount of approved
    26         claims paid in the 2006-2007 fiscal year under section
    27         1304(a)(1).
    28             (ii)  The sum of all of the following:
    29                 (A)  The amount sufficient to fund reimbursements
    30             to eligible school districts pursuant to section 324.
    20051H0039B0093                 - 60 -     

     1             The amount deducted pursuant to this clause shall be
     2             calculated based on the information provided by
     3             school districts pursuant to subsection (b)(2).
     4                 (B)  The amount of approved claims under section
     5             704.
     6                 (C)  The amount of approved claims under section
     7             1304(a)(2)(ii).
     8  Section 504.  Property Tax Relief Reserve Fund.
     9     (a)  Fund established.--There is established in the State
    10  Treasury a restricted receipts account to be known as the
    11  Property Tax Relief Reserve Fund.
    12     (b)  Receipts.--The secretary is authorized to transfer funds
    13  from the fund into the Property Tax Relief Reserve Fund
    14  necessary to comply with the requirements of subsection (c).
    15     (c)  Balance.--
    16         (1)  The secretary shall ensure that 25% of the amount
    17     available for distribution under section 503(e), but in no
    18     case more than $150,000,000, exists in the Property Tax
    19     Relief Reserve Fund prior to making an authorization under
    20     section 503(d).
    21         (2)  If a transfer was made under subsection (d) in the
    22     prior year, the secretary shall deposit funds necessary to
    23     ensure that 25% of the amount available for distribution
    24     under section 503(e), but in no case more than $150,000,000,
    25     is available in the Property Tax Relief Reserve Fund prior to
    26     making an authorization under section 503(d).
    27     (d)  Transfers.--
    28         (1)  The secretary may authorize a transfer from the
    29     Property Tax Relief Reserve Fund to the fund if the amount
    30     for distribution under section 503(e) is less than the amount
    20051H0039B0093                 - 61 -     

     1     for distribution under section 503(e) made in the prior year.
     2     The amount of the transfer under this subsection shall be
     3     equal to the difference between the amount for distribution
     4     under section 503(e) and the amount for distribution under
     5     section 503(e) made in the prior year.
     6         (2)  The secretary shall transfer any interest that has
     7     accrued from the revenue in the Property Tax Relief Reserve
     8     Fund to the fund on an annual basis.
     9     (e)  Nonlapse.--The money in the Property Tax Relief Reserve
    10  Fund is continuously appropriated to the Property Tax Relief
    11  Reserve Fund and shall not lapse at the end of any fiscal year.
    12  Section 505.  State property tax reduction allocation.
    13     (a)  Administration.--The department shall do all of the
    14  following:
    15         (1)  Array the 2002 personal income valuation divided by
    16     the 2003-2004 average daily membership, the 2004-2005 market
    17     value/income aid ratio, the 2002-2003 equalized millage and
    18     the 2002-2003 school tax ratio of each school district in
    19     rank order and assign each school district a discreet
    20     numerical rank for its personal income valuation per average
    21     daily membership, its market value/income aid ratio, its
    22     equalized millage and its school tax ratio. For the numerical
    23     rank of a school district's personal income valuation per
    24     average daily membership, the school district with the lowest
    25     personal income valuation per average daily membership shall
    26     have the highest numerical rank. For the numerical rank of a
    27     school district's market value/income aid ratio, the school
    28     district with the highest market value/income aid ratio shall
    29     have the highest numerical rank, provided that all school
    30     districts with a market value/income aid ratio equal to 0.15
    20051H0039B0093                 - 62 -     

     1     shall receive a ranking of 1. For the numerical rank of a
     2     school district's equalized millage, the school district with
     3     the highest equalized millage shall have the highest
     4     numerical rank. For the numerical rank of a school district's
     5     school tax ratio, the school district with the highest school
     6     tax ratio shall have the highest numerical rank.
     7         (2)  Assign each school district a property tax reduction
     8     index.
     9         (3)  If the department receives authorization under
    10     section 503(d), allocate the property tax reduction for each
    11     school district as follows:
    12             (i)  Calculate the property tax reduction allocation
    13         as follows:
    14                 (A)  Multiply the school district's 2003-2004
    15             average daily membership by the school district's
    16             property tax reduction index.
    17                 (B)  Multiply the product under clause (A) by the
    18             dollar amount necessary to allocate all of the money
    19             available for distribution under section 503(e). If
    20             the amount for distribution under section 503(e) is
    21             less than $750,000,000, the dollar amount shall be
    22             the dollar amount necessary to allocate $750,000,000.
    23                 (C)  If applicable, provide for the allocation
    24             minimum or allocation maximum under subparagraph (ii)
    25             or (iii).
    26             (ii)  If the sum of the allocation under this
    27         paragraph and the estimated local revenue calculation
    28         certified under section 503(b) is less than the product
    29         of the residential property taxes collected during the
    30         2001-2002 fiscal year and the allocation minimum for a
    20051H0039B0093                 - 63 -     

     1         school district, the school district shall receive an
     2         additional amount so that the sum of the total allocation
     3         under this paragraph and the estimated local revenue
     4         calculation certified under section 503(b) is equal to
     5         the product of the residential property taxes collected
     6         during the 2001-2002 fiscal year and the allocation
     7         minimum.
     8             (iii)  Except as set forth in subsection (c), if the
     9         sum of the total allocation under this paragraph and the
    10         estimated local revenue calculation certified under
    11         section 503(b) is greater than the product of the
    12         residential property taxes collected during the 2001-2002
    13         fiscal year and the allocation maximum for a school
    14         district, the school district shall receive a total
    15         allocation such that the sum of the total allocation and
    16         the estimated local revenue calculation certified under
    17         section 503(b) is equal to the product of the residential
    18         property taxes collected during the 2001-2002 fiscal year
    19         and the allocation maximum.
    20             (iv)  If the amount for distribution under section
    21         503(e) is less than $750,000,000, each school district
    22         shall receive a pro rata share of the property tax
    23         reduction allocation calculated under this paragraph at
    24         $750,000,000.
    25         (4)  Notify each school district of the amount of its
    26     property tax reduction allocation no later than May 1 of each
    27     year.
    28     (b)  Payment.--For the fiscal year commencing July 1, 2006,
    29  and July 1 of each fiscal year thereafter, except as set forth
    30  in subsection (c), the department shall pay to each eligible
    20051H0039B0093                 - 64 -     

     1  school district a property tax reduction allocation equal to the
     2  amount calculated under subsection (a)(3). The property tax
     3  reduction allocation shall be divided into two equal payments,
     4  which shall be made on the fourth Thursday of August and the
     5  fourth Thursday of October. Each school district shall be
     6  eligible to receive a property tax reduction allocation under
     7  this section unless its board of school directors takes action
     8  under section 903.
     9     (c)  First class school districts.--The property tax
    10  reduction allocation for a school district of the first class
    11  shall be paid by the department to a city of the first class.
    12  The limitations set forth in subsection (a)(3)(iii) shall not
    13  apply to the calculation of the property tax reduction
    14  allocation for a school district of the first class.
    15     (d)  Reduction of wage taxes in a city of the first class.--A
    16  city council of a city of the first class shall reduce any tax
    17  imposed on the wages of residents and nonresidents under the
    18  authority of the act of August 5, 1932 (Sp.Sess., P.L.45,
    19  No.45), referred to as the Sterling Act, in a manner consistent
    20  with Chapter 7 and in accordance with the following:
    21         (1)  For residents, by an amount equal to the amount of
    22     the property tax reduction allocation received from the
    23     Commonwealth pursuant to subsection (b) in an amount not to
    24     exceed the limitations set forth in subsection (a)(3)(iii)
    25     had such limitations applied.
    26         (2)  For nonresidents, by any amount equal to the amount
    27     of the property tax reduction allocation received from the
    28     Commonwealth pursuant to subsection (b) in excess of the
    29     limitations set forth in subsection (a)(3)(iii) had such
    30     limitations applied.
    20051H0039B0093                 - 65 -     

     1         (3)  If the amount for distribution under section 503(e)
     2     is less than $750,000,000, the tax reductions under
     3     paragraphs (1) and (2) shall be a pro rata share of the
     4     property tax reduction allocation to a school district of the
     5     first class calculated under subsection (a) at $750,000,000.
     6                             CHAPTER 7
     7              TAX RELIEF IN CITIES OF THE FIRST CLASS
     8  Section 701.  Scope.
     9     This chapter provides for tax relief in cities of the first
    10  class.
    11  Section 702.  (Reserved).
    12  Section 703.  Tax relief.
    13     (a)  Tax rate reduction.--A city of the first class shall
    14  reduce the rate of wage and net profits tax on residents and
    15  nonresidents levied under the act of August 5, 1932 (Sp.Sess.,
    16  P.L.45, No.45), referred to as the Sterling Act, in order to be
    17  eligible to receive a property tax reduction allocation under
    18  Chapter 5. If the city elects to reduce taxes pursuant to this
    19  chapter, all money received from the fund shall be used to
    20  offset a reduction by the city in the fiscal year in which a
    21  payment under section 505(b) is received and each fiscal year
    22  thereafter in the rate of tax on wages and net profits for both
    23  residents and nonresidents as provided for in subsection (b).
    24  The reductions shall remain in effect for so long as a tax
    25  reduction allocation pursuant to Chapter 5 is paid to the city
    26  in an amount equal to the cost of such reductions.
    27     (b)  Calculation of reduction.--
    28         (1)  The city shall calculate the amount of the tax rate
    29     reductions so that they equal, based on estimates certified
    30     by the city's director of finance and approved by the
    20051H0039B0093                 - 66 -     

     1     Pennsylvania Intergovernmental Cooperation Authority prior to
     2     the implementation of the reductions, in combination with any
     3     reduction in the rate of unearned income tax imposed by a
     4     school district in the city of the first class required by
     5     the act of August 9, 1963 (P.L.640, No.338), entitled "An act
     6     empowering cities of the first class, coterminous with school
     7     districts of the first class, to authorize the boards of
     8     public education of such school districts to impose certain
     9     additional taxes for school district purposes, and providing
    10     for the levy, assessment and collection of such taxes," as a
    11     result of the reduction in the rate of wage and net profits
    12     tax, the amount paid to the city from the fund for tax
    13     reductions. The city shall each year transfer to the school
    14     district an amount equal to the cost of any reduction in the
    15     rate of unearned income tax, and the transfer shall not be
    16     subject to the provisions of section 696(h) of the Public
    17     School Code.
    18         (2)  The tax rate reductions implemented by a city of the
    19     first class pursuant to this section shall be in addition to
    20     the following schedule of percentages of wage and net profits
    21     tax rate reductions:
    22             (i)  On January 1, 2005, 2.9468% for residents and
    23         1.5567% for nonresidents.
    24             (ii)  On January 1, 2006, 0.6927% for residents and
    25         1.2593% for nonresidents.
    26             (iii)  On January 1, 2007, 0.9533% for residents and
    27         0.4216% for nonresidents.
    28             (iv)  On January 1, 2008, 0.9624% for residents and
    29         0.8387% for nonresidents.
    30             (v)  On January 1, 2009, 1.1851% for residents and
    20051H0039B0093                 - 67 -     

     1         1.0526% for nonresidents.
     2     (c)  Exceptions.--The wage and net profits tax rates may only
     3  be raised above the rates specified in subsection (b)(2) if all
     4  of the following apply:
     5         (1)  The increase is approved by an affirmative vote of
     6     at least ten members of a city council of a city of the first
     7     class.
     8         (2)  The Pennsylvania Intergovernmental Cooperation
     9     Authority certifies that a condition under paragraph (3)
    10     exists.
    11         (3)  The increase is necessary to respond to any of the
    12     following:
    13             (i)  A fiscal threat or condition, as certified by
    14         the city's director of finance, that occurs to the city
    15         as set forth in section 333(f) or an equivalent fiscal
    16         threat that affects the citizens of the city. It shall be
    17         the responsibility of the city's director of finance with
    18         the approval of the Pennsylvania Intergovernmental
    19         Cooperation Authority to ensure that any additional tax
    20         revenue raised is equal to the amount expended to respond
    21         to the fiscal threat or condition. If the amount of
    22         revenue raised through rate adjustment exceeds the amount
    23         necessary to respond, over the course of the city's
    24         approved financial plan, to the fiscal threat, the excess
    25         amount shall be used for wage tax and net profits tax
    26         reduction in the immediately succeeding approved
    27         financial plan, but only if the tax rate reduction,
    28         expressed as the difference between the two tax rates,
    29         would exceed .0002.
    30             (ii)  A decrease of more than 2% in the amount of
    20051H0039B0093                 - 68 -     

     1         total tax collections plus any funds provided under this
     2         chapter from the preceding year's collections. Such a
     3         determination of a decrease must be attested to by the
     4         city's director of finance.
     5             (iii)  A declaration by the Pennsylvania
     6         Intergovernmental Cooperation Authority that the city's
     7         five-year plan is disapproved pursuant to section 209 of
     8         the act of June 5, 1991 (P.L.9, No.6), known as the
     9         Pennsylvania Intergovernmental Cooperation Authority Act
    10         for Cities of the First Class.
    11             (iv)  Federal or State law imposes a new unfunded
    12         mandate on the city that costs the city more than 1.5% of
    13         the city's total general fund expenditures in any fiscal
    14         year.
    15             (v)  The cost to the city of an existing mandate
    16         imposed by Federal or State law increases by more than
    17         1.5% of the city's total general fund expenditures in any
    18         fiscal year and funds to pay for the increase are not
    19         appropriated to the city by the Federal or State
    20         government.
    21             (vi)  Existing Federal or State funding is decreased
    22         by 1.5% of the city's total general fund expenditures in
    23         any fiscal year.
    24     (d)  Excess funds.--If in any fiscal year the sums received
    25  by a city of the first class from the fund are in excess of the
    26  value of the tax rate reductions actually made by the city and
    27  the school district of the first class pursuant to subsection
    28  (a), the city shall, within 60 days following the certification
    29  by the director of finance, in consultation with the Secretary
    30  of the Budget and with the approval of the Pennsylvania
    20051H0039B0093                 - 69 -     

     1  Intergovernmental Cooperation Authority of the amount of the
     2  excess, do either of the following:
     3         (1)  repay to the fund the excess sums; or
     4         (2)  further reduce wage and net profits tax rates and
     5     unearned income tax rates, if required, in the fiscal year
     6     next following the determination of the excess, by an amount
     7     that will result in total tax rate reductions required for
     8     the amount received from the fund. To the extent the tax rate
     9     reduction provided for in this paragraph, expressed as the
    10     difference between the two tax rates, would not exceed .0002,
    11     this subsection shall not apply.
    12     (e)  Insufficient funds.--If in any fiscal year the director
    13  of finance certifies, in consultation with the Secretary of the
    14  Budget and with the approval of the Pennsylvania
    15  Intergovernmental Cooperation Authority, that the amount of sums
    16  received by the city from the fund are less than the value of
    17  the tax rate reductions actually made by the city and school
    18  district of the first class pursuant to subsection (a), the city
    19  may, in the fiscal year next following the determination of the
    20  amount, increase the city's wage and net profits tax rate above
    21  the rates specified in subsection (b)(2) by an amount that will
    22  result in an overall tax rate reduction equal to that required
    23  for the amount received by the city from the fund. To the extent
    24  the tax rate increase provided for in this subsection, expressed
    25  as the difference between the two tax rates, would not exceed
    26  .0002, this subsection shall not apply.
    27  Section 704.  Supplemental senior citizen tax reduction.
    28     (a)  Eligibility.--Beginning in the first year in which a
    29  payment under section 505(b) is made and each year thereafter,
    30  the following apply:
    20051H0039B0093                 - 70 -     

     1         (1)  Except as provided in paragraph (2), any resident of
     2     a city of the first class, a city of the second class A or a
     3     resident of a school district of the first class A who is
     4     eligible to receive a property tax rebate under Chapter 13
     5     and has a household income as defined under section 1303,
     6     equal to or less than $30,000 shall be eligible to receive an
     7     additional property tax rebate equal to 50% of the amount the
     8     individual is eligible to receive under Chapter 13.
     9         (2)  An additional rebate under paragraph (1) may not
    10     exceed the difference between the property tax paid by the
    11     eligible resident and the rebate received by the eligible
    12     resident under Chapter 13 for the same tax year.
    13     (b)  Payment.--The property tax rebates authorized under
    14  subsection (a) shall be paid from the State Lottery Fund.
    15     (c)  Applicability.--This section shall not apply to a
    16  resident of a city of the first class, a city of the second
    17  class A or a resident of a school district of the first class A,
    18  who is entitled to receive a rent rebate in lieu of property
    19  taxes under Chapter 13.
    20                             CHAPTER 9
    21           SCHOOL DISTRICT CHOICE AND VOTER PARTICIPATION
    22  Section 901.  Scope.
    23     This chapter relates to school district choice and voter
    24  option.
    25  Section 902. (Reserved).
    26  Section 903.  School district choice.
    27     (a)  General rule.--Within 30 days of receipt of the notice
    28  required under section 505(a)(4), a board of school directors of
    29  a school district, except a school district of the first class,
    30  may by resolution reject the property tax reduction allocation
    20051H0039B0093                 - 71 -     

     1  provided to the school district pursuant to Chapter 5.
     2     (b)  Notice to department.--Within five days after adopting
     3  the resolution, the board of school directors shall notify the
     4  department in a form and manner prescribed by the department.
     5     (c)  Effect of resolution.--A school district that adopts a
     6  resolution pursuant to subsection (a) shall be ineligible to
     7  receive a property tax reduction allocation pursuant to Chapter
     8  5 for the upcoming fiscal year, and the school district's
     9  property tax reduction allocation shall be deposited into the
    10  Property Tax Relief Reserve Fund.
    11  Section 904.  Voter participation.
    12     (a)  General rule.--If a school district adopts a resolution
    13  pursuant to section 903(a), a referendum shall be submitted to
    14  the electors of the school district under the provisions of this
    15  section to determine whether the electors favor the school
    16  district receiving a property tax reduction allocation.
    17     (b)  Notice to election officials.--Within 60 days after the
    18  deadline for a school district to notify the department that the
    19  school district has taken action under section 903(a), the
    20  department shall notify the election officials of each county of
    21  the school districts in that county that have taken action under
    22  section 903(a).
    23     (c)  Referendum question required.--Upon receipt of
    24  information provided by the department under subsection (b), the
    25  election officials of the county in which is situate a school
    26  district or portion of a school district that has taken action
    27  under section 903(a) shall cause a referendum question to be
    28  placed on the ballot at the municipal or general election
    29  immediately following the receipt of the information. The
    30  referendum question shall be in the following form:
    20051H0039B0093                 - 72 -     

     1             Do you favor the (name of school district) receiving
     2             State funds to reduce property taxes on qualified
     3             residential properties?
     4     (d)  Nonlegal interpretive statement.--The election officials
     5  of a county shall, in consultation with the board of school
     6  directors, draft a nonlegal interpretive statement which shall
     7  accompany this referendum question in accordance with section
     8  201.1 of the act of June 3, 1937 (P.L.1333, No.320), known as
     9  the Pennsylvania Election Code.
    10     (e)  Certification of results.--The election officials of a
    11  county shall certify the results of the referendum under this
    12  section to the Department of State in accordance with Article
    13  XIV of the Pennsylvania Election Code. The Department of State
    14  shall notify the school district and the department of the
    15  results of the referendum required under subsection (b) as soon
    16  as is practicable.
    17     (f)  Approval of referendum.--In any school district in which
    18  a referendum question under subsection (c) has been approved by
    19  a majority of the electors voting on the question, the school
    20  district shall be eligible to receive the property tax reduction
    21  allocation provided under Chapter 5 beginning with the fiscal
    22  year immediately following the year in which the referendum is
    23  approved. The school district shall use the property tax
    24  reduction allocation pursuant to sections 334 and 335.
    25                             CHAPTER 13
    26                  SENIOR CITIZENS PROPERTY TAX AND
    27                       RENT REBATE ASSISTANCE
    28  Section 1301.  Scope.
    29     This chapter provides senior citizens with assistance in the
    30  form of property tax and rent rebates.
    20051H0039B0093                 - 73 -     

     1  Section 1302.  (Reserved).
     2  Section 1303.  Definitions.
     3     The following words and phrases when used in this chapter
     4  shall have the meanings given to them in this section unless the
     5  context clearly indicates otherwise:
     6     "Board."  The Board of Finance and Revenue of the
     7  Commonwealth.
     8     "Claimant."  A person who files a claim for property tax
     9  rebate or rent rebate in lieu of property taxes and:
    10         (1)  was at least 65 years of age, or whose spouse, if a
    11     member of the household, was at least 65 years of age during
    12     a calendar year in which real property taxes or rent were due
    13     and payable;
    14         (2)  was a widow or widower and was at least 50 years of
    15     age during a calendar year or part thereof in which real
    16     property taxes or rent were due and payable; or
    17         (3)  was a permanently disabled person 18 years of age or
    18     older during a calendar year or part thereof in which the
    19     real property taxes or rent were due and payable.
    20     "Department."  The Department of Revenue of the Commonwealth.
    21     "Homestead."  A dwelling, whether owned or rented, and so
    22  much of the land surrounding it, as is reasonably necessary for
    23  the use of the dwelling as a home, occupied by a claimant. The
    24  term includes, but is not limited to:
    25         (1)  Premises occupied by reason of ownership or lease in
    26     a cooperative housing corporation.
    27         (2)  Mobile homes which are assessed as realty for local
    28     property tax purposes and the land, if owned or rented by the
    29     claimant, upon which the mobile home is situated, and other
    30     similar living accommodations.
    20051H0039B0093                 - 74 -     

     1         (3)  A part of a multidwelling or multipurpose building
     2     and a part of the land upon which it is built.
     3         (4)  Premises occupied by reason of the claimant's
     4     ownership or rental of a dwelling located on land owned by a
     5     nonprofit incorporated association, of which the claimant is
     6     a member, if the claimant is required to pay a pro rata share
     7     of the property taxes levied against the association's land.
     8         (5)  Premises occupied by a claimant if the claimant is
     9     required by law to pay a property tax by reason of the
    10     claimant's ownership or rental, including a possessory
    11     interest, in the dwelling, the land, or both. An owner
    12     includes a person in possession under a contract of sale,
    13     deed of trust, life estate, joint tenancy or tenancy in
    14     common or by reason of statutes of descent and distribution.
    15     "Household income."  All income received by a claimant and
    16  the claimant's spouse while residing in the homestead during the
    17  calendar year for which a rebate is claimed.
    18     "Income."  All income from whatever source derived,
    19  including, but not limited to:
    20         (1)  Salaries, wages, bonuses, commissions, income from
    21     self-employment, alimony, support money, cash public
    22     assistance and relief.
    23         (2)  The gross amount of any pensions or annuities
    24     including railroad retirement benefits for calendar years
    25     prior to 1999, and 50% of railroad retirement benefits for
    26     calendar years 1999 and thereafter.
    27         (3)  All benefits received under the Social Security Act
    28     (49 Stat. 620, 42 U.S.C. § 301 et seq.), except Medicare
    29     benefits, for calendar years prior to 1999, and 50% of all
    30     benefits received under the Social Security Act, except
    20051H0039B0093                 - 75 -     

     1     Medicare benefits, for calendar years 1999 and thereafter.
     2         (4)  All benefits received under State unemployment
     3     insurance laws and veterans' disability payments.
     4         (5)  All interest received from the Federal or any state
     5     government, or any instrumentality or political subdivision
     6     thereof.
     7         (6)  Realized capital gains and rentals.
     8         (7)  Workers' compensation.
     9         (8)  The gross amount of loss of time insurance benefits,
    10     life insurance benefits and proceeds, except the first $5,000
    11     of the total of death benefit payments.
    12         (9)  Gifts of cash or property, other than transfers by
    13     gift between members of a household, in excess of a total
    14     value of $300.
    15  The term does not include surplus food or other relief in kind
    16  supplied by a governmental agency, property tax or rent rebate
    17  or inflation dividend.
    18     "Permanently disabled person."  A person who is unable to
    19  engage in any substantial gainful activity by reason of any
    20  medically determinable physical or mental impairment which can
    21  be expected to continue indefinitely, except as provided in
    22  section 1304(b)(3) and (c).
    23     "Real property taxes."  All taxes on a homestead, exclusive
    24  of municipal assessments, delinquent charges and interest, due
    25  and payable during a calendar year.
    26     "Rent rebate in lieu of property taxes."  Twenty percent of
    27  the gross amount actually paid in cash or its equivalent in any
    28  calendar year to a landlord in connection with the occupancy of
    29  a homestead by a claimant, irrespective of whether such amount
    30  constitutes payment solely for the right of occupancy or
    20051H0039B0093                 - 76 -     

     1  otherwise.
     2     "Secretary."  The Secretary of Revenue of the Commonwealth.
     3     "Widow" or "widower."  The surviving wife or the surviving
     4  husband, as the case may be, of a deceased individual and who
     5  has not remarried except as provided in section 1304(b)(3) and
     6  (c).
     7  Section 1304.  Property tax; and rent rebate.
     8     (a)  Schedule of rebates.--
     9         (1)  The amount of any claim for property tax rebate or
    10     rent rebate in lieu of property taxes for real property taxes
    11     or rent due and payable during calendar years 1985 through
    12     2005 shall be determined in accordance with the following
    13     schedule:
    14                             Percentage of Real Property Taxes or
    15                                 Rent Rebate in Lieu of
    16     Household Income        Property Taxes Allowed as Rebate
    17      $    0 - $4,999                        100%
    18       5,000 -  5,499                        100
    19       5,500 -  5,999                         90
    20       6,000 -  6,499                         80
    21       6,500 -  6,999                         70
    22       7,000 -  7,499                         60
    23       7,500 -  7,999                         50
    24       8,000 -  8,499                         40
    25       8,500 -  8,999                         35
    26       9,000 -  9,999                         25
    27      10,000 - 11,999                         20
    28      12,000 - 12,999                         15
    29      13,000 - 15,000                         10
    30         (2)  The following apply:
    20051H0039B0093                 - 77 -     

     1             (i)  The base amount of any claim for property tax
     2         rebate for real property taxes due and payable during
     3         calendar year 2006 and thereafter shall be determined in
     4         accordance with the following schedule:
     5                             Amount of Real Property Taxes
     6     Household Income        Allowed as Rebate
     7      $     0 -  $ 8,000                     $650
     8        8,001 -  15,000                       500
     9       15,001 -  18,000                       300
    10       18,001 -  35,000                       250
    11             (ii)  The supplemental amount for a claimant with a
    12         household income equal to or less than $30,000 and an
    13         eligible claim for property tax rebate for real property
    14         taxes due and payable during the calendar year preceding
    15         the first year in which a payment under section 505(b) is
    16         made and each year thereafter and whose real property
    17         taxes exceed 15% of the claimant's household income shall
    18         be equal to 50% of the base amount determined under
    19         subparagraph (i). A claimant who is a resident of a city
    20         of the first class, a city of the second class A or a
    21         school district of the first class A shall be ineligible
    22         for the supplemental amount under this subparagraph.
    23         (3)  The amount of any claim for rent rebate in lieu of
    24     property taxes for rent due and payable during calendar year
    25     2006 and thereafter shall be determined in accordance with
    26     the following:
    27                             Amount of Rent Rebate in
    28                             Lieu of Property Taxes
    29     Household Income        Allowed as Rebate
    30      $     0 -  $ 8,000                     $650
    20051H0039B0093                 - 78 -     

     1        8,001 -  15,000                       500
     2     (b)  Limitations on claims.--
     3         (1)  No claim through calendar year 2005 shall be allowed
     4     if the amount of property tax or rent rebate computed in
     5     accordance with this section is less than $10, and the
     6     maximum amount of property tax or rent rebate payable shall
     7     not exceed $500.
     8         (2)  For calendar year 2006 and thereafter, the maximum
     9     amount of property tax or rent rebate in lieu of property
    10     taxes payable shall not exceed the lesser of:
    11             (i)  the amount of a claim under subsection (a)(2) or
    12         (3);
    13             (ii)  the amount of real property taxes actually
    14         paid; or
    15             (iii)  20% of gross rent actually paid.
    16         (3)  No claim shall be allowed if the claimant is a
    17     tenant of an owner of real property exempt from real property
    18     taxes.
    19     (c)  Apportionment and public assistance.--
    20         (1)  If any of the following exist relating to a claim:
    21             (i)  a homestead is owned or rented and occupied for
    22         only a portion of a year or is owned or rented in part by
    23         a person who does not meet the qualifications for a
    24         claimant, exclusive of any interest owned or leased by a
    25         claimant's spouse;
    26             (ii)  the claimant is a widow or widower who
    27         remarries; or
    28             (iii)  the claimant is a formerly disabled person who
    29         is no longer disabled,
    30     the department shall apportion the real property taxes or
    20051H0039B0093                 - 79 -     

     1     rent in accordance with the period or degree of ownership or
     2     leasehold or eligibility of the claimant in determining the
     3     amount of rebate for which a claimant is eligible.
     4         (2)  A claimant who receives public assistance from the
     5     Department of Public Welfare shall not be eligible for rent
     6     rebate in lieu of property taxes during those months within
     7     which the claimant receives public assistance.
     8     (d)  Government subsidies.--Rent shall not include subsidies
     9  provided by or through a governmental agency.
    10  Section 1305.  Filing of claim.
    11     (a)  General rule.--Except as otherwise provided in
    12  subsection (b), a claim for property tax or rent rebate shall be
    13  filed with the department on or before the 30th day of June of
    14  the year next succeeding the end of the calendar year in which
    15  real property taxes or rent was due and payable.
    16     (b)  Exception.--A claim filed after the June 30 deadline
    17  until December 31 of such calendar year shall be accepted by the
    18  secretary as long as funds are available to pay the benefits to
    19  the late filing claimant.
    20     (c)  Payments from State Lottery Fund.--No reimbursement on a
    21  claim shall be made from the State Lottery Fund earlier than the
    22  day following the 30th day of June provided in this chapter on
    23  which that claim may be filed with the department.
    24     (d)  Eligibility of claimants.--
    25         (1)  Only one claimant from a homestead each year shall
    26     be entitled to the property tax or rent rebate.
    27         (2)  If two or more persons are able to meet the
    28     qualifications for a claimant, they may determine who the
    29     claimant shall be.
    30         (3)  If they are unable to agree, the department shall
    20051H0039B0093                 - 80 -     

     1     determine to whom the rebate is to be paid.
     2  Section 1306.  Proof of claim.
     3     (a)  Contents.--Each claim shall include:
     4         (1)  Reasonable proof of household income.
     5         (2)  The size and nature of the property claimed as a
     6     homestead.
     7         (3)  The rent, tax receipt or other proof that the real
     8     property taxes on the homestead have been paid or rent in
     9     connection with the occupancy of a homestead has been paid.
    10         (4)  If the claimant is a widow or widower, a declaration
    11     of such status in such manner as prescribed by the secretary.
    12     (b)  Proof of disability.--
    13         (1)  Proof that a claimant is eligible to receive
    14     disability benefits under the Social Security Act (49 Stat.
    15     620, 42 U.S.C. § 301 et seq.) shall constitute proof of
    16     disability under this chapter.
    17         (2)  No person who has been found not to be disabled by
    18     the Social Security Administration shall be granted a rebate
    19     under this chapter.
    20         (3)  A claimant not covered under the Social Security Act
    21     shall be examined by a physician designated by the department
    22     and such status determined using the same standards used by
    23     the Social Security Administration.
    24     (c)  Direct payment of taxes or rent not required.--It shall
    25  not be necessary that such taxes or rent were paid directly by
    26  the claimant if the rent or taxes have been paid when the claim
    27  is filed.
    28     (d)  Proof of age on first claim.--The first claim filed
    29  shall include proof that the claimant or the claimant's spouse
    30  was at least 65 years of age, or at least 50 years of age in the
    20051H0039B0093                 - 81 -     

     1  case of a widow or widower during the calendar year in which
     2  real property taxes or rent were due and payable.
     3  Section 1307.  Incorrect claim.
     4     Whenever on audit of a claim, the department finds the claim
     5  to have been incorrectly determined, it shall redetermine the
     6  correct amount of the claim and notify the claimant of the
     7  reason for the redetermination and the amount of the corrected
     8  claim.
     9  Section 1308.  Funds for payment of claims.
    10     (a)  Payment.--Approved claims shall be paid from the State
    11  Lottery Fund established by the act of August 26, 1971 (P.L.351,
    12  No.91), known as the State Lottery Law.
    13     (b)  Transfers.--The Secretary of the Budget shall transfer
    14  the following amounts from the Property Tax Relief Fund to the
    15  State Lottery:
    16         (1)  Notwithstanding any other provision of law, an
    17     amount equal to $100,000,000 of the total slot machine
    18     license fees paid by successful applicants for a Category 1
    19     slot machine license under 4 Pa.C.S. § 1209 (relating to slot
    20     machine license fee). The transfer under this paragraph shall
    21     occur upon deposit in the Property Tax Relief Fund of moneys
    22     derived from the fee from the fourth successful applicant for
    23     a Category 1 slot machine license.
    24         (2)  Notwithstanding any other provision of law, an
    25     amount equal to $100,000,000 of the total slot machine
    26     license fees paid by successful applicants for a Category 2
    27     slot machine license under 4 Pa.C.S. § 1209. The transfer
    28     under this paragraph shall occur upon deposit in the Property
    29     Tax Relief Fund of moneys derived from the fee from the third
    30     successful applicant for a Category 2 slot machine license.
    20051H0039B0093                 - 82 -     

     1         (3)  For fiscal years 2007-2008 and 2008-2009, an amount
     2     equal to the sum of approved claims to be paid in each of
     3     those fiscal years under sections 704 and 1304(a)(2)(ii), if
     4     any.
     5         (4)  For fiscal year 2009-2010 and each fiscal year
     6     thereafter, all of the following:
     7             (i)  The difference between the sum of the amount of
     8         approved claims to be paid in the next fiscal year under
     9         section 1304(a)(2)(i) and (3) and the amount of approved
    10         claims paid in fiscal year 2006-2007 under section
    11         1304(a)(1).
    12             (ii)  The sum of the amount of approved claims to be
    13         paid in the next fiscal year under sections 704 and
    14         1304(a)(2)(ii), if any.
    15         (5)  Beginning in fiscal year 2009-2010 and until the
    16     difference between the sum of subparagraphs (i) and (ii) and
    17     $200,000,000 is paid, an amount of not less than $40,000,000
    18     annually or the amount of the difference, whichever is less.
    19     All transfers under this paragraph shall be completed no
    20     later than four years after the transfer required by
    21     paragraph (2).
    22             (i)  The difference between the sum of the amount of
    23         approved claims to be paid in fiscal year 2007-2008 under
    24         section 1304(a)(2)(i) and (3) and the amount of approved
    25         claims paid in fiscal year 2006-2007 under section
    26         1304(a)(1).
    27             (ii)  The difference between the sum of the amount of
    28         approved claims to be paid in fiscal year 2008-2009 under
    29         section 1304(a)(2)(i) and (3) and the amount of approved
    30         claims paid in fiscal year 2006-2007 under section
    20051H0039B0093                 - 83 -     

     1         1304(a)(1).
     2  Section 1309.  Claim forms and rules and regulations.
     3     (a)  General rule.--Necessary rules and regulations shall be
     4  prescribed by a committee consisting of the Secretary of Aging,
     5  the Secretary of Revenue and the Secretary of Community and
     6  Economic Development. The Secretary of Aging shall serve as the
     7  chairman of the committee. The department shall receive all
     8  applications, determine the eligibility of claimants, hear
     9  appeals, disburse payments and make available suitable forms for
    10  the filing of claims.
    11     (b)  Report to General Assembly.--In addition to any rules
    12  and regulations prescribed under subsection (a), the department
    13  shall collect the following information and issue a report
    14  including such information to the chairman and minority chairman
    15  of the Appropriations Committee of the Senate and the chairman
    16  and minority chairman of the Appropriations Committee of the
    17  House of Representatives by September 30, 2006, and September 30
    18  of each year thereafter.
    19         (1)  The total number of claims which will be paid in the
    20     fiscal year in which the report is issued with the
    21     information provided by school district, by county and for
    22     each household income level under section 1304(a)(2)(i).
    23         (2)  The total amount of rebates paid in the fiscal year
    24     in which the report is issued with the information provided
    25     by school district, by county and for each household income
    26     level under section 1304(a)(2)(i).
    27  Section 1310.  Fraudulent claims and conveyances to obtain
    28                 benefits.
    29     (a)  Civil penalty.--In any case in which a claim is
    30  excessive and was filed with fraudulent intent, the claim shall
    20051H0039B0093                 - 84 -     

     1  be disallowed in full and a penalty of 25% of the amount claimed
     2  shall be imposed. The penalty and the amount of the disallowed
     3  claim, if the claim has been paid, shall bear interest at the
     4  rate of 1.5% per month from the date of the claim until repaid.
     5     (b)  Criminal penalty.--The claimant and any person who
     6  assisted in the preparation or filing of a fraudulent claim
     7  commits a misdemeanor of the third degree and, upon conviction
     8  thereof, shall be sentenced to pay a fine not exceeding $1,000,
     9  or to imprisonment not exceeding one year, or both.
    10     (c)  Disallowance for receipt of title.--A claim shall be
    11  disallowed if the claimant received title to the homestead
    12  primarily for the purpose of receiving property tax rebate.
    13  Section 1311.  Petition for redetermination.
    14     (a)  Right to file.--A claimant whose claim is either denied,
    15  corrected or otherwise adversely affected by the department may
    16  file with the department a petition for redetermination on forms
    17  supplied by the department within 90 days after the date of
    18  mailing of written notice by the department of such action.
    19     (b)  Contents.--The petition shall set forth the grounds upon
    20  which the claimant alleges that such departmental action is
    21  erroneous or unlawful, in whole or part, and shall contain an
    22  affidavit or affirmation that the facts contained in the
    23  petition are true and correct.
    24     (c)  Extension of time for filing.--
    25         (1)  An extension of time for filing the petition may be
    26     allowed for cause, but may not exceed 120 days.
    27         (2)  The department shall hold such hearings as may be
    28     necessary for the purpose of redetermination, and each
    29     claimant who has duly filed such petition for redetermination
    30     shall be notified by the department of the time when, and the
    20051H0039B0093                 - 85 -     

     1     place where, such hearing in the claimant's case will be
     2     held.
     3     (d)  Time period for decision.--The department shall, within
     4  six months after receiving a filed petition for redetermination,
     5  dispose of the matters raised by such petition and shall mail
     6  notice of the department's decision to the claimant.
     7  Section 1312.  Review by Board of Finance and Revenue.
     8     (a)  Right to review.--Within 90 days after the date of
     9  official receipt by the claimant of notice mailed by the
    10  department of its decision on a petition for redetermination
    11  filed with it, the claimant who is adversely affected by the
    12  decision may by petition request the board to review such
    13  action.
    14     (b)  Effect of no decision from department.--The failure of
    15  the department to officially notify the claimant of a decision
    16  within the six-month period provided for by section 1311 shall
    17  act as a denial of the petition, and a petition for review may
    18  be filed with the board within 120 days after written notice is
    19  officially received by the claimant that the department has
    20  failed to dispose of the petition within the six-month period.
    21     (c)  Contents of petition for redetermination.--A petition
    22  for redetermination filed shall state the reasons upon which the
    23  claimant relies or shall incorporate by reference the petition
    24  for redetermination in which such reasons were stated. The
    25  petition shall be supported by affidavit that the facts set
    26  forth therein are correct and true.
    27     (d)  Time period for decision.--The board shall act in
    28  disposition of petitions filed with it within six months after
    29  they have been received, and in the event of failure of the
    30  board to dispose of any petition within six months, the action
    20051H0039B0093                 - 86 -     

     1  taken by the department upon the petition for redetermination
     2  shall be deemed sustained.
     3     (e)  Relief authorized by board.--The board may sustain the
     4  action taken by the department on the petition for
     5  redetermination or it may take such other action as it shall
     6  deem necessary and consistent with provisions of this chapter.
     7     (f)  Form of notice.--Notice of the action of the board shall
     8  be given by mail to the department and to the claimant.
     9  Section 1313.  Appeal.
    10     A claimant aggrieved by a decision of the board may appeal
    11  from the decision of the board in the manner provided by law for
    12  appeals from decisions of the board in tax cases.
    13                             CHAPTER 15
    14                    INSTALLMENT PAYMENT OF TAXES
    15  Section 1501.  Applicability.
    16     Notwithstanding the act of May 25, 1945 (P.L.1050, No.394),
    17  known as the Local Tax Collection Law, this chapter shall
    18  authorize school districts of the second, third and fourth class
    19  to provide for the collection of school real property taxes in
    20  installments for certain eligible taxpayers, to assign
    21  installment claims and to increase the compensation of tax
    22  collectors.
    23  Section 1502.  Installment payment of school real property
    24                 taxes.
    25     (a)  General rule.--A board of school directors of a school
    26  district of the second, third or fourth class may adopt a
    27  resolution authorizing the collection and payment of school real
    28  property taxes in installments.
    29     (b)  Adoption of resolution.--No later than June 30, 2007, a
    30  board of school directors of a school district of the second,
    20051H0039B0093                 - 87 -     

     1  third or fourth class shall adopt a resolution which, for
     2  calendar year 2007 and each year thereafter, authorizes the
     3  collection and payment of school real property taxes, excluding
     4  any interim or delinquent school property taxes, in
     5  installments.
     6     (c)  Contents of resolution.--The resolution adopted pursuant
     7  to subsection (b) shall set forth all of the following:
     8         (1)  Permit taxpayers with homestead or farmstead
     9     property approved pursuant to section 341 to be eligible to
    10     pay school real property taxes in installments.
    11         (2)  The process through which an eligible taxpayer may
    12     choose to pay school real property taxes in installments. The
    13     process shall indicate that:
    14             (i)  The payment of the first installment by a
    15         taxpayer before it becomes delinquent shall conclusively
    16         evidence an intention to pay school real property taxes
    17         in installments.
    18             (ii)  Where a taxpayer fails to evidence an intention
    19         to pay school real property taxes in installments, the
    20         school real property taxes shall become due and payable
    21         and be collected as provided in the act of May 25, 1945
    22         (P.L.1050, No.394), known as the Local Tax Collection
    23         Law, subject to the discounts and penalties provided by
    24         that act.
    25         (3)  The number of installments that an eligible taxpayer
    26     shall be required to pay of school real property taxes, which
    27     shall be no more than monthly and no less than three times
    28     during the months prior to the date established by the county
    29     in which the school district is located for the turnover of
    30     delinquent taxes pursuant to the act of July 7, 1947
    20051H0039B0093                 - 88 -     

     1     (P.L.1368, No.542), known as the Real Estate Tax Sale Law.
     2         (4)  The dates on which installment payments of school
     3     real property taxes are due or delinquent. Notwithstanding
     4     the complete and final settlement made in accordance with
     5     section 26 of the Local Tax Collection Law, a board of school
     6     directors may set installment payment dates subsequent to
     7     December 31 and prior to the date established by the county
     8     in which the school district is located for the turnover of
     9     delinquent taxes pursuant to the Real Estate Tax Sale Law.
    10     The unpaid installments shall not be considered delinquent if
    11     paid on or before the respective installment dates. To each
    12     installment on the date when it becomes delinquent, a penalty
    13     of up to 10% shall be added, which shall be collected by the
    14     tax collector. No further penalties, except as provided in
    15     this chapter, shall be added to any installment of taxes,
    16     unless one or more installments remain unpaid, and the lands
    17     upon which such installments are due are returned under the
    18     existing laws to the county commissioners for nonpayment of
    19     taxes, or in case a lien for such unpaid installment or
    20     installments is filed under existing laws in the office of
    21     the prothonotary, in which case, the additional penalty or
    22     interest provided for by the existing return and lien laws
    23     shall apply. A taxpayer who is delinquent by more than ten
    24     days on more than two installment payments shall be
    25     ineligible for the installment payment option in the
    26     following school fiscal year.
    27     (d)  Notice.--A board of school directors of a school
    28  district to which this section applies shall annually set forth
    29  information regarding the payment of school real property taxes
    30  in installments and the dates on which such payments are due or
    20051H0039B0093                 - 89 -     

     1  delinquent on the tax notice sent to a homestead or farmstead
     2  property owner.
     3  Section 1503.  Collection of installment payments of school real
     4                 property taxes.
     5     (a)  Contract.--
     6         (1)  A school district may contract with a tax bureau
     7     independent of the school district for collection of
     8     installments under this section. A tax bureau may contract
     9     with more than one tax collector. The tax collector shall be
    10     paid such commissions or compensation at the same rate on
    11     installment payments as is paid for the collection of taxes
    12     generally. Such commissions or compensation shall be paid by
    13     proper orders drawn on the school district. Every tax
    14     collector shall be responsible and accountable to the school
    15     district for all such taxes collected by the tax collector,
    16     and the final accounts and records, returns and payments and
    17     duplicates shall be audited annually in the year in which the
    18     installments are collected in like manner and in accordance
    19     with the laws pertaining to tax collections.
    20         (2)  Nothing in this act should be construed to alter any
    21     existing tax collection arrangement unless deemed appropriate
    22     by the school district or as otherwise provided for under
    23     this section.
    24     (b)  Authorization.--A board of school directors may
    25  authorize the collection of installment payments:
    26         (1)  Through electronic fund transfers through the
    27     Federal Reserve Bank's Automated Clearing House. Electronic
    28     fund transfers shall be a debit to the taxpayer's account to
    29     the school district's depository bank account at the option
    30     of the taxpayer.
    20051H0039B0093                 - 90 -     

     1         (2)  By a credit card payment which shall be made through
     2     the school district's depository bank or another bank
     3     designated by the board of school directors. The board of
     4     school directors shall also designate the credit card type
     5     that may be utilized for installment payment collection.
     6  Section 1504.  Assignment of installment claims.
     7     (a)  Initial assignment.--A taxing district may assign some
     8  or all of its installment claims, either absolutely or as
     9  collateral security, for an amount to be determined by the
    10  taxing district and under such terms and conditions upon which
    11  the taxing district and the assignee shall agree in writing and
    12  shall be approved by resolution of the taxing district. An
    13  installment claim may be assigned whether or not any installment
    14  thereunder has become delinquent. Upon such an assignment, the
    15  following shall apply:
    16         (1)  Assignment shall not be deemed a discharge or
    17     satisfaction of the installment claim or the taxes giving
    18     rise to the installment claim and any lien of the assigned
    19     installment claim and taxes giving rise to the installment
    20     claim shall continue in favor of the assignee.
    21         (2)  The assignee shall have and enjoy the same rights,
    22     privileges and remedies as were held by the taxing district
    23     with respect to the assigned installment claim and the tax
    24     giving rise to the claim under the provisions of the act of
    25     May 25, 1945 (P.L.1050, No.394), known as the Local Tax
    26     Collection Law, or any other laws applicable to the
    27     collection and enforcement of tax claims.
    28         (3)  An assignment of an installment claim under this
    29     section shall be deemed, unless otherwise provided in
    30     writing, an assignment of applicable claims and liens arising
    20051H0039B0093                 - 91 -     

     1     with respect to such installment claim under section 33 of
     2     the act of May 16, 1923 (P.L.207, No.153), referred to as the
     3     Municipal Claim and Tax Lien Law, and section 316 of the act
     4     of July 7, 1947 (P.L.1368, No.542), known as the Real Estate
     5     Tax Sale Law.
     6         (4)  If the instrument of assignment so provides and
     7     contains or provides for the delivery of an extract from the
     8     duplicate of the information pertaining to the assigned
     9     installment claims, the assignee exclusively shall have the
    10     rights and duties of the tax collector under the Local Tax
    11     Collection Law with respect to the assigned installment
    12     claims and shall be deemed to be acting pursuant to the
    13     warrant provided in section 5 of the Local Tax Collection
    14     Law; provided, that the assignee shall not be entitled to any
    15     commission or salary in such capacity and shall not be
    16     subject to sections 4 and 16 of the Local Tax Collection Law.
    17         (5)  An owner of property shall have the same rights and
    18     defenses under this act and any other law applicable to the
    19     collection and enforcement of tax claims that the owner held
    20     against the assignor.
    21         (6)  References in the Local Tax Collection Law to a
    22     taxing district with respect to an installment claim shall be
    23     deemed to be references to the assignee of the taxing
    24     district with respect to assigned installment claims except
    25     for references to any actions taken by the taxing district
    26     before the assignment.
    27     (b)  Further assignment.--An installment claim assigned
    28  pursuant to this section may be further assigned, with the
    29  subsequent assignee having and enjoying the same rights,
    30  privileges and remedies as its assignor.
    20051H0039B0093                 - 92 -     

     1  Section 1505.  Considering increase in compensation of tax
     2                 collector.
     3     (a)  Request.--Within 15 days of a board of school directors'
     4  adoption of a resolution under section 1502, the tax collector
     5  in the school district may, by sending a certified letter,
     6  request that the school district consider increasing the
     7  compensation of the tax collector to account for any increased
     8  administrative costs incurred by the tax collector. Within 45
     9  days of receiving such letter, the school district shall
    10  consider the request.
    11     (b)  Permission.--Within 15 days of a board of school
    12  directors' adoption of a resolution under section 1502, the
    13  school district may, by sending a certified letter, inform the
    14  tax collector that tax collector compensation may be adjusted
    15  for installments until January 31, 2009. Within 45 days of
    16  sending the letter, the school district shall consider any
    17  adjustment.
    18                             CHAPTER 17
    19                TASK FORCE ON SCHOOL COST REDUCTION
    20  Section 1701.  Scope.
    21     This chapter relates to the Task Force on School Cost
    22  Reduction.
    23  Section 1702.  Purpose.
    24     The purpose of this chapter is to do all of the following:
    25         (1)  Establish a task force on school cost reduction to
    26     thoroughly examine all cost to school districts, regardless
    27     of the reason or source of such costs.
    28         (2)  Offer viable options for use by both the General
    29     Assembly and local governments to minimize or reduce the
    30     costs to school districts within this Commonwealth.
    20051H0039B0093                 - 93 -     

     1  Section 1703.  Establishment.
     2     (a)  Establishment.--There is established the Task Force on
     3  School Cost Reduction as an advisory board within the Office of
     4  the Governor.
     5     (b)  Composition and appointment.--The task force shall
     6  consist of members who have a demonstrated knowledge of the
     7  public educational system, compensation systems, contracts,
     8  collective bargaining, public school finance, State and local
     9  taxation systems, both Federal and State education requirements
    10  or any other area of knowledge or expertise that may be relevant
    11  to the costs to school districts within this Commonwealth. Not
    12  more than five task force members shall currently be employed as
    13  teachers or be affiliated with any Statewide or local teachers'
    14  organization in a policymaking or policy advisory capacity
    15  during the time they serve on the task force. Task force members
    16  shall be appointed, within 45 days of the effective date of this
    17  section as follows:
    18         (1)  Three members to be appointed by the Governor, one
    19     of whom represents the interests of teachers in this
    20     Commonwealth and one of whom represents the interests of
    21     school boards in this Commonwealth.
    22         (2)  Three members to be appointed by the President pro
    23     tempore of the Senate.
    24         (3)  Two members to be appointed by the Minority Leader
    25     of the Senate.
    26         (4)  Three members to be appointed by the Speaker of the
    27     House of Representatives.
    28         (5)  Two members to be appointed by the Minority Leader
    29     of the House of Representatives.
    30     (c)  Vacancies.--Any vacancy on the task force shall be
    20051H0039B0093                 - 94 -     

     1  filled by the original appointing officer.
     2  Section 1704.  Organizational meeting.
     3     The task force shall select a chairman and vice chairman from
     4  among its membership at the organizational meeting. The
     5  organizational meeting shall take place no later than 60 days
     6  following the effective date of this section.
     7  Section 1705.  Meetings and hearings.
     8     The task force shall hold meetings at the call of the
     9  chairman or of a majority of the members serving thereon. The
    10  task force may also hold public hearings on the matters to be
    11  considered by the task force at locations throughout this
    12  Commonwealth. All meetings and public hearings of the task force
    13  shall be deemed public meetings for the purpose of 65 Pa.C.S.
    14  Ch. 7 (relating to open meetings).
    15  Section 1706.  Quorum.
    16     Seven members of the task force shall constitute a quorum at
    17  any meeting. Each member of the task force may designate another
    18  person to represent that member at meetings of the task force.
    19  Section 1707.  Compensation.
    20     Task force members shall receive no compensation for their
    21  services but shall be reimbursed for all necessary travel and
    22  other reasonable expenses incurred in connection with the
    23  performance of their duties as members.
    24  Section 1708.  Administrative support.
    25     The task force may employ professional, technical and
    26  clerical staff as it deems necessary to carry out its
    27  responsibilities under this chapter. The Department of Education
    28  shall provide administrative support, office space and any other
    29  assistance required by the task force to carry out its duties
    30  under this act. Whenever possible, the task force shall utilize
    20051H0039B0093                 - 95 -     

     1  the services and expertise of existing personnel and staff of
     2  State government, and to this end the Governor is hereby
     3  directed to make such personnel and staff available to the task
     4  force to the fullest extent commensurate with the performance of
     5  their other duties.
     6  Section 1709.  Powers and duties.
     7     (a)  General powers and duties.--The task force shall have
     8  the powers and duties authorized under this section.
     9     (b)  Specific powers and duties.--The task force shall have
    10  the overall responsibility, power and duty to investigate, study
    11  and make recommendations to the Governor and to the General
    12  Assembly concerning current and projected costs to school
    13  districts within this Commonwealth and viable options to reduce
    14  current and future costs to school districts within this
    15  Commonwealth. The task force shall, without limiting its
    16  authority to study related subjects, address the following
    17  specific areas and issues:
    18         (1)  Conduct a comprehensive review of the various
    19     categories of public school costs, the historic rate of
    20     increase in categories of public school costs and determine
    21     the reasons behind these increases.
    22         (2)  Examine the impact of Federal and State mandates on
    23     school districts.
    24         (3)  Determine whether any of the Federal or State
    25     mandates should be eliminated, revised or better funded.
    26         (4)  Identify best practices used by school districts
    27     around this Commonwealth and other states to provide services
    28     in a cost-effective manner.
    29         (5)  Offer options and viable recommendations to reduce
    30     costs to school districts within this Commonwealth.
    20051H0039B0093                 - 96 -     

     1         (6)  Provide a report that thoroughly discusses options
     2     and viable recommendations considered and express clear
     3     rationales for options not recommended.
     4     (c)  Public hearings.--The task force may conduct public
     5  hearings to solicit testimony from public and private agencies,
     6  citizens, teachers and representatives of local school districts
     7  on the topic of costs to school districts of this Commonwealth
     8  and means to reduce or minimize these costs.
     9  Section 1710.  Reports.
    10     The task force shall prepare and submit quarterly reports of
    11  its findings and any recommendations to the Governor, the
    12  chairman of the Education Committee of the Senate and the
    13  Chairman of the Education Committee of the House of
    14  Representatives. The task force shall submit its final report to
    15  the Governor, each of the appointing officers specified in
    16  section 1703(b), the chairman of the Education Committee of the
    17  Senate and the chairman of the Education Committee of the House
    18  of Representatives no later than one year following the
    19  organizational meeting of the task force. In no case shall the
    20  recommendations of the task force be binding on the Governor,
    21  the General Assembly or the Commonwealth.
    22                             CHAPTER 50
    23                      MISCELLANEOUS PROVISIONS
    24  Section 5001.  Other subjects of taxation.
    25     No school district which has not already made an election to
    26  adopt the provisions of 53 Pa.C.S. Ch. 87 (relating to other
    27  subjects of taxation) may make an election to do so after the
    28  effective date of this section.
    29  Section 5002.  Appropriations.
    30     The sum of $3,000,000, or as much thereof as may be
    20051H0039B0093                 - 97 -     

     1  necessary, is hereby appropriated from the Property Tax Relief
     2  Reserve Fund to the Department of Community and Economic
     3  Development for the purpose of making one-time transition grants
     4  to counties, other than counties of the first class, for costs
     5  associated with implementing the Taxpayer Relief Act. Grants
     6  shall be made pursuant to guidelines adopted by the department
     7  and shall be limited to funds appropriated for this purpose. The
     8  Department of Community and Economic Development shall not draw
     9  a warrant upon the State Treasurer for a disbursement from this
    10  appropriation until the State Treasurer certifies that the
    11  Property Tax Relief Reserve Fund has at least a $3,000,000
    12  balance.
    13  Section 5003.  Prohibition.
    14     A school district that has authorized the levy of a 0.1%
    15  earned income and net profits tax, by resolution or referendum,
    16  under the former act of July 5, 2004 (P.L.654, No.72), known as
    17  the Homeowner Tax Relief Act, is prohibited from levying,
    18  assessing or collecting the tax.
    19  Section 5004.  Authority to levy, assess and collect taxes.
    20     The following shall apply:
    21         (1)  Except as provided in paragraph (2), the authority
    22     of any independent school district to levy, assess and
    23     collect any tax under the act of December 31, 1965 (P.L.1257,
    24     No.511), known as The Local Tax Enabling Act, shall expire at
    25     midnight on December 31, 2011.
    26         (2)  The provisions of paragraph (1) shall not prevent or
    27     interfere with any action of any independent school district
    28     to collect any tax imposed under the authority of The Local
    29     Tax Enabling Act that is levied and assessed prior to January
    30     1, 2012.
    20051H0039B0093                 - 98 -     

     1  Section 5004.1.  Regulations.
     2     The Department of Revenue shall promulgate regulations which
     3  are necessary for implementation of a local personal income tax.
     4  Proposed rulemaking shall be omitted under section 204 of the
     5  act of July 31, 1968 (P.L.769, No.240), referred to as the
     6  Commonwealth Documents Law. The regulations shall be consistent
     7  with the act of March 4, 1971 (P.L.6, No.2), known as the Tax
     8  Reform Code of 1971 and shall be submitted as final-omit
     9  regulations under section 5(a) of the act of June 25, 1982
    10  (P.L.633, No.181), known as the Regulatory Review Act.
    11  Section 5005.  Repeals.
    12     Repeals are as follows:
    13         (1)  The General Assembly declares that the repeals under
    14     paragraphs (2), (3), (4), (5) and (6) are necessary to
    15     effectuate this act.
    16         (2)  Section 9 of the act of December 31, 1965 (P.L.1257,
    17     No.511), known as The Local Tax Enabling Act, is repealed
    18     insofar as it is inconsistent with the provisions of section
    19     351.
    20         (3)  The act of March 11, 1971 (P.L.104, No.3), known as
    21     the Senior Citizens Rebate and Assistance Act, is repealed.
    22         (4)  The act of July 5, 2004 (P.L.654, No.72), known as
    23     the Homeowner Tax Relief Act, is repealed.
    24         (5)  53 Pa.C.S. Ch. 89 Subch. B is repealed.
    25         (6)  Any act that provides for a register of municipal
    26     and school district withholding taxes is repealed insofar as
    27     it is inconsistent with the provisions of section 351.
    28  Section 5006.  Continuation.
    29     (a)  Senior Citizens Rebate and Assistance Act.--The addition
    30  of Chapter 13 is a continuation of the former act of March 11,
    20051H0039B0093                 - 99 -     

     1  1971 (P.L.104, No.3), known as the Senior Citizens Rebate and
     2  Assistance Act. Except as otherwise provided in Chapter 13, all
     3  activities initiated under the former Senior Citizens Rebate and
     4  Assistance Act shall continue and remain in full force and
     5  effect and may be completed under Chapter 13. Orders,
     6  regulations, rules and decisions which were made under the
     7  former Senior Citizens Rebate and Assistance Act and which are
     8  in effect on the effective date of section 5005(2) shall remain
     9  in full force and effect until revoked, vacated or modified
    10  under Chapter 13.
    11     (b)  Homeowner Tax Relief Act.--Except as otherwise provided
    12  in Chapter 1, 3, 5 or 7, actions, orders, regulations, rules,
    13  designations and decisions which were made by the Department of
    14  Education or by a school district under the former Homeowner Tax
    15  Relief Act and which have been completed or are in effect on the
    16  effective date of section 5005(4) shall continue and remain in
    17  full force and effect for the purposes of Chapters 1, 3, 5 and 7
    18  to the extent that such actions, orders, regulations, rules,
    19  designations and decisions apply to the 2006-2007 fiscal year
    20  unless revoked, vacated or modified by this act, the Department
    21  of Education or the school district pursuant to Chapters 1, 3, 5
    22  and 7.
    23  Section 5007.  Effective date.
    24     This act shall take effect immediately.




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