THE GENERAL ASSEMBLY OF PENNSYLVANIA

HOUSE BILL

INTRODUCED BY PETRI, BAKER, BEAR, BOYD, CALTAGIRONE, CLYMER, D. COSTA, DENLINGER, EVERETT, FLECK, GEIST, GOODMAN, GRELL, GROVE, HARHART, HENNESSEY, HUTCHINSON, KILLION, KNOWLES, LONGIETTI, MICOZZIE, MILLARD, MURT, O'NEILL, PETRARCA, PICKETT, PYLE, RAPP, READSHAW, SCAVELLO, SWANGER, VULAKOVICH AND WATSON, FEBRUARY 8, 2011

REFERRED TO COMMITTEE ON FINANCE, FEBRUARY 8, 2011  

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 long-term 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-G

LONG-TERM CARE INSURANCE TAX CREDIT

Section 1701-G.  Scope of article.

This article relates to long-term care insurance tax credits.

Section 1702-G.  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.

"Long-term care insurance."  An insurance policy, offered to

an employee by an employer, to provide coverage when long-term

care is needed, including chronic illness or disability and

expenses for a nursing home, an assisted living facility, home

care, a visiting nurse, a home health aide, a friendly visitor

program, home-delivered meals, chore services, adult day-care

centers or respite services.

"Long-term care insurance expenses."  Expenses associated

with providing long-term care insurance.

"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.

"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.

"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 fewer than 100

people.

"Tax credit."  The long-term care insurance tax credit

authorized under this article.

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

or VI. The term includes the shareholder, owner or member of a

pass-through entity that receives a tax credit.

Section 1703-G.  Credit for long-term care insurance.

(a)  Application.--A taxpayer who purchases long-term care

insurance 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 long-term care

insurance expenses 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 of 20% of the long-term care insurance expenses incurred

by the taxpayer during the taxable year.

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

following the close of the taxable year during which the long-

term care insurance expense was incurred, the department shall

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

approved by the department.

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

credit.

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

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

first approved, 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 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 long-term care insurance expenses 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)  Prohibition.--A taxpayer is not entitled to assign,

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

Section 1705-G.  Time limitations.

A taxpayer shall not be entitled to a tax credit for long-

term care insurance expenses incurred in taxable years ending

after December 31, 2020.

Section 1706-G.  Limitation on credits.

(a)  Total.--The total amount of tax credits approved by the

department shall not exceed $20,000,000 in any fiscal year. Of

that amount, $5,000,000 shall be allocated exclusively for small

businesses. If the total amounts allocated to either the group

of applicants, exclusive of small businesses, or the group of

small business applicants is not approved in any fiscal year,

the unused portion shall become available for use by the other

group of qualifying taxpayers.

(b)  Proration among all applicants.--If the total amount of

tax credits applied for by all applicants, exclusive of small

businesses, exceeds the amount allocated for those credits, then

the tax credit to be received by each applicant shall be

prorated by the department among all applicants, exclusive of

small businesses, who have qualified for the credit.

(c)  Proration among small business applicants.--If the total

amount of tax credits applied for by all small businesses

exceeds the amount allocated for those credits, then the tax

credit to be received by each small business applicant shall be

prorated by the department among all small business applicants

who have qualified for the credit.

Section 1707-G.  Shareholder, owner or member pass-through.

(a)  Pennsylvania S corporation shareholder.--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 shall be 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 owner or member.--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 entity's distributive income to

which the owner or member is entitled.

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

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

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

otherwise entitled under this article, except that 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 long-term care insurance expense.

Section 1708-G.  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 1709-G.  Termination.

The department shall not approve a tax credit under this

article for taxable years ending after December 31, 2020.

Section 1710-G.  Regulations.

The secretary shall promulgate regulations necessary for the

implementation and administration of this article.

Section 2.  The addition of Article XVII-G of the act shall

apply to taxable years beginning after December 31, 2010.

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