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                                                       PRINTER'S NO. 383



No. 333 Session of 2007



                                     AN ACT

     1  Amending the act of March 4, 1971 (P.L.6, No.2), entitled "An
     2     act relating to tax reform and State taxation by codifying
     3     and enumerating certain subjects of taxation and imposing
     4     taxes thereon; providing procedures for the payment,
     5     collection, administration and enforcement thereof; providing
     6     for tax credits in certain cases; conferring powers and
     7     imposing duties upon the Department of Revenue, certain
     8     employers, fiduciaries, individuals, persons, corporations
     9     and other entities; prescribing crimes, offenses and
    10     penalties," providing for a youth employment incentive tax
    11     credit.

    12     The General Assembly of the Commonwealth of Pennsylvania
    13  hereby enacts as follows:
    14     Section 1.  The act of March 4, 1971 (P.L.6, No.2), known as
    15  the Tax Reform Code of 1971, is amended by adding an article to
    16  read:
    17                           ARTICLE XVII-D
    19  Section 1701-D.  Scope.
    20     This article relates to youth employment incentive tax
    21  credits.

     1  Section 1702-D.  Definitions.
     2     The following words and phrases when used in this article
     3  shall have the meanings given to them in this section unless the
     4  context clearly indicates otherwise:
     5     "Department."  The Department of Revenue of the Commonwealth.
     6     "Pass-through entity."  Any of the following:
     7         (1)  A partnership, limited partnership, limited
     8     liability company, business trust or other unincorporated
     9     entity that for Federal income tax purposes is taxable as a
    10     partnership.
    11         (2)  A Pennsylvania S corporation.
    12     "Qualified tax liability."  The liability for taxes imposed
    13  under Article III, IV or VI of this act. The term shall include
    14  the liability for taxes imposed under Article III on a
    15  shareholder of a pass-through entity.
    16     "Qualified youth employee."  A Pennsylvania resident
    17  individual between 14 and 21 years of age whose median family
    18  income does not exceed 150% of the Federal poverty level. The
    19  term shall not make a distinction based on education.
    20     "Qualified youth employment expense."  Wages paid by a
    21  taxpayer to a qualified youth employee. All qualified youth
    22  employment expenses incurred in a taxable year shall be combined
    23  and treated as one qualified youth employment expense for
    24  purposes of this article.
    25     "Secretary."  The Secretary of Revenue of the Commonwealth.
    26     "Tax credit."  The Youth Employment Incentive Tax Credit
    27  authorized under this article.
    28     "Taxpayer."  An entity subject to tax under Article III, IV
    29  or VI of this act. The term shall include the shareholder, owner
    30  or member of a pass-through entity that receives a tax credit.
    20070H0333B0383                  - 2 -     

     1  Section 1703-D.  Credit for qualified youth employment expense.
     2     (a)  Application.--A taxpayer who incurs a qualified youth
     3  employment expense in a taxable year may apply for a tax credit
     4  as provided in this article. By September 15, a taxpayer must
     5  submit an application to the department for a qualified youth
     6  employment expense incurred in the taxable year that ended in
     7  the prior calendar year.
     8     (b)  Receipt.--A taxpayer that is qualified under subsection
     9  (a) shall receive a tax credit for the taxable year in the
    10  amount of 70% of the taxpayer's total qualified youth employment
    11  expense for the taxable year.
    12     (c)  Notification.--By December 15 of the calendar year
    13  following the close of the taxable year during which the
    14  qualified youth employment expense was incurred, the department
    15  shall notify the taxpayer of the amount of the taxpayer's tax
    16  credit approved by the department.
    17  Section 1704-D.  Carryover, carryback, refund and assignment of
    18                     credit.
    19     (a)  Carryover.--If the taxpayer cannot use the entire amount
    20  of the tax credit for the taxable year in which the tax credit
    21  is first approved, then the excess may be carried over to
    22  succeeding taxable years and used as a credit against the
    23  qualified tax liability of the taxpayer for those taxable years.
    24  Each time that the tax credit is carried over to a succeeding
    25  taxable year, it is to be reduced by the amount that was used as
    26  a credit during the immediately preceding taxable year. The tax
    27  credit may be carried over and applied to succeeding taxable
    28  years for no more than 15 taxable years following the first
    29  taxable year for which the taxpayer was entitled to claim the
    30  credit.
    20070H0333B0383                  - 3 -     

     1     (b)  Application.--A tax credit approved by the department
     2  for a qualified youth employment expense in a taxable year first
     3  shall be applied against the taxpayer's qualified tax liability
     4  for the current taxable year as of the date on which the credit
     5  was approved before the tax credit is applied against any tax
     6  liability under subsection (a).
     7     (c)  Prohibition.--A taxpayer is not entitled to assign,
     8  carry back or obtain a refund of an unused tax credit.
     9  Section 1705-D.  Time limitations.
    10     A taxpayer is not entitled to a tax credit for qualified
    11  youth employment expenses incurred in taxable years ending after
    12  December 31, 2010.
    13  Section 1706-D.  Limitation on credits.
    14     (a)  Total amount.--The total amount of tax credits approved
    15  by the department shall not exceed $20,000,000 in any fiscal
    16  year.
    17     (b)  Proration.--If the total amount of tax credits applied
    18  for by all taxpayers exceeds the amount allocated for those
    19  credits, then the tax credit to be received by each applicant
    20  shall be prorated by the department among all applicants who
    21  have qualified for the credit.
    22  Section 1707-D.  Shareholder, owner or member pass-through.
    23     (a)  Application to Pennsylvania S corporations.--If a
    24  Pennsylvania S corporation does not have an eligible tax
    25  liability against which the tax credit may be applied, a
    26  shareholder of the Pennsylvania S corporation is entitled to a
    27  tax credit equal to the tax credit determined for the
    28  Pennsylvania S corporation for the taxable year multiplied by
    29  the percentage of the Pennsylvania S corporation's distributive
    30  income to which the shareholder is entitled.
    20070H0333B0383                  - 4 -     

     1     (b)  Other applications.--If a pass-through entity other than
     2  a Pennsylvania S corporation does not have an eligible tax
     3  liability against which the tax credit may be applied, an owner
     4  or member of the pass-through entity is entitled to a tax credit
     5  equal to the tax credit determined for the pass-through entity
     6  for the taxable year multiplied by the percentage of the pass-
     7  through entities' distributive income to which the owner or
     8  member is entitled.
     9     (c)  Additional credit.--The credit provided under subsection
    10  (a) or (b) is in addition to any tax credit to which a
    11  shareholder, owner or member of a pass-through entity is
    12  otherwise entitled under this article. However, a pass-through
    13  entity and a shareholder, owner or member of a pass-through
    14  entity may not claim a credit under this article for the same
    15  qualified youth employment expense.
    16  Section 1708-D.  Termination.
    17     The department shall not approve a tax credit under this
    18  article for taxable years ending after December 31, 2010.
    19  Section 1709-D.  Regulations.
    20     The secretary shall promulgate regulations necessary for the
    21  implementation and administration of this article.
    22     Section 2.  This act shall apply to taxable years beginning
    23  after December 31, 2006.
    24     Section 3.  This act shall take effect in 60 days.

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