THE GENERAL ASSEMBLY OF PENNSYLVANIA

HOUSE BILL

INTRODUCED BY YUDICHAK, BELFANTI, BOYD, BRENNAN, CALTAGIRONE, CARROLL, DONATUCCI, FLECK, FREEMAN, GEORGE, GIBBONS, GRUCELA, HESS, K. SMITH, M. O'BRIEN, MANN, McILVAINE SMITH, PALLONE, REICHLEY, SABATINA, SAYLOR, SCAVELLO, SEIP, SIPTROTH AND SOLOBAY, MARCH 17, 2009

REFERRED TO COMMITTEE ON FINANCE, MARCH 17, 2009  

AN ACT

Amending the act of March 4, 1971 (P.L.6, No.2), entitled "An

act relating to tax reform and State taxation by codifying

and enumerating certain subjects of taxation and imposing

taxes thereon; providing procedures for the payment,

collection, administration and enforcement thereof; providing

for tax credits in certain cases; conferring powers and

imposing duties upon the Department of Revenue, certain

employers, fiduciaries, individuals, persons, corporations

and other entities; prescribing crimes, offenses and

penalties," providing for a small business health care tax

credit.

The General Assembly of the Commonwealth of Pennsylvania

hereby enacts as follows:

Section 1.  The act of March 4, 1971 (P.L.6, No.2), known as

the Tax Reform Code of 1971, is amended by adding an article to

read:

ARTICLE XVII-F

SMALL BUSINESS HEALTH CARE TAX CREDIT

Section 1701-F.  Scope of article.

This article relates to health care tax credits.

Section 1702-F.  Definitions.

The following words and phrases when used in this article

shall have the meanings given to them in this section unless the

context clearly indicates otherwise:

"Department."  The Department of Revenue of the Commonwealth.

"Health care benefits."  An entitlement provided to an

employee in accordance with a wage agreement that provides

prevention, treatment and management of illness and the

preservation of mental health and physical well-being through

the services offered by the medical and allied health

professions.

"Pass-through entity."  Any of the following:

(1)  A partnership, limited partnership, limited

liability company, business trust or other unincorporated

entity that for Federal income tax purposes is taxable as a

partnership.

(2)  A Pennsylvania S corporation.

"Qualified tax liability."  The liability for taxes imposed

under Article III, IV or VI. The term shall include the

liability for taxes imposed under Article III on an owner of a

pass-through entity.

"Secretary."  The Secretary of Revenue of the Commonwealth.

"Small business."  An employer who, on at least 50% of its

working days during the taxable year, employed no more than 100

employees.

"Tax credit."  The small business health care tax credit

authorized under this article.

"Taxpayer."  An entity subject to tax under Article III, IV

or VI. The term shall include the shareholder, owner or member

of a pass-through entity that receives a tax credit.

Section 1703-F.  Credit for small business health care.

(a)  Application.--A taxpayer who is a small business and

provides health care benefits in a taxable year may apply for a

tax credit as provided in this article. By September 15, a

taxpayer must submit an application to the department for health

care benefits incurred in the taxable year that ended in the

prior calendar year.

(b)  Amount.--A taxpayer that is qualified under subsection

(a) shall receive a tax credit for the taxable year in the

amount equal to 50% of the amount of expenses incurred by a

small business for providing health care benefits to its

employees, but no more than $1,000 per employee receiving health

care benefits.

(c)  Notification.--By December 15 of the calendar year

following the close of the taxable year during which the health

care expense was incurred by the small business, the department

shall notify the taxpayer of the amount of the taxpayer's tax

credit approved by the department.

Section 1704-F.  Carryover, carryback, refund and assignment of

credit.

(a)  Carryover.--If the taxpayer cannot use the entire amount

of the tax credit for the taxable year in which the tax credit

is first approved, then the excess may be carried over to

succeeding taxable years and used as a credit against the

qualified tax liability of the taxpayer for those taxable years.

Each time that the tax credit is carried over to a succeeding

taxable year, it is to be reduced by the amount that was used as

a credit during the immediately preceding taxable year. The tax

credit may be carried over and applied to succeeding taxable

years for no more than 15 taxable years following the first

taxable year for which the taxpayer was entitled to claim the

credit.

(b)  Application.--A tax credit approved by the department

for small business health care tax credit in a taxable year

first shall be applied against the taxpayer's qualified tax

liability for the current taxable year as of the date on which

the credit was approved before the tax credit is applied against

any tax liability under subsection (a).

(c)  Unused credit.--A taxpayer is not entitled to assign,

carry back or obtain a refund of an unused tax credit.

Section 1705-F.  Shareholder, owner or member pass-through.

(a)  Shareholder credit.--If a Pennsylvania S corporation

does not have an eligible tax liability against which the tax

credit may be applied, a shareholder of the Pennsylvania S

corporation is entitled to a tax credit equal to the tax credit

determined for the Pennsylvania S corporation for the taxable

year multiplied by the percentage of the Pennsylvania S

corporation's distributive income to which the shareholder is

entitled.

(b)  Pass-through entity credit.--If a pass-through entity

other than a Pennsylvania S corporation does not have an

eligible tax liability against which the tax credit may be

applied, an owner or member of the pass-through entity is

entitled to a tax credit equal to the tax credit determined for

the pass-through entity for the taxable year multiplied by the

percentage of the pass-through entities' distributive income to

which the owner or member is entitled.

(c)  Additional credit.--The credit provided under subsection

(a) or (b) is in addition to any tax credit to which a

shareholder, owner or member of a pass-through entity is

otherwise entitled under this article. However, a pass-through

entity and a shareholder, owner or member of a pass-through

entity may not claim a credit under this article for the same

small business health care tax credit.

Section 1706-F.  Report to General Assembly.

The secretary shall submit an annual report to the General

Assembly indicating the effectiveness of the credit provided by

this article no later than March 15 following the year in which

the credits were approved. The report shall include the names of

all taxpayers utilizing the credit as of the date of the report

and the amount of credits approved and utilized by each

taxpayer. Notwithstanding any law providing for the

confidentiality of tax records, the information contained in the

report shall be public information. The report may also include

any recommendations for changes in the calculation or

administration of the credit.

Section 1707-F.  Regulations.

The secretary shall promulgate regulations necessary for the

implementation and administration of this article.

Section 2.  This act shall apply to taxable years beginning

after December 31, 2009.

Section 3.  This act shall take effect in 60 days.