1Amending the act of March 4, 1971 (P.L.6, No.2), entitled "An
2act relating to tax reform and State taxation by codifying
3and enumerating certain subjects of taxation and imposing
4taxes thereon; providing procedures for the payment,
5collection, administration and enforcement thereof; providing
6for tax credits in certain cases; conferring powers and
7imposing duties upon the Department of Revenue, certain
8employers, fiduciaries, individuals, persons, corporations
9and other entities; prescribing crimes, offenses and
10penalties," in employment incentive payments, further
11providing for scope of article, for definitions and for
12employment incentive payments; providing for amount; further
13providing for administration and regulations, for limitations
14on credits, for time limitations and report; and providing
15for guidelines.

16The General Assembly of the Commonwealth of Pennsylvania
17hereby enacts as follows:

18Section 1. The act of March 4, 1971 (P.L.6, No.2), known as
19the Tax Reform Code of 1971, is amended by adding a section to
20read:

21Section 1701.1-A. Scope of Article.--This article provides
22for the Employment Incentive Tax Credit.

23Section 2. The definitions of "employment incentive payment"

1and "pass-through entity" in section 1702-A of the act, added
2December 15, 1999 (P.L.926, No.63), are amended and the section
3is amended by adding definitions to read:

4Section 1702-A. Definitions.--The following words, terms and
5phrases when used in this article shall have the meanings
6ascribed to them in this section, except where the context
7clearly indicates a different meaning:

8"Department" means the Department of Community and Economic
9Development of the Commonwealth.

10* * *

11["Employment incentive payment" means the employment
12incentive payment credit provided by this article.]

13"Pass-through entity" means [any of the following:

14(1) A partnership, limited partnership, limited liability
15company, business trust or other unincorporated entity that for
16Federal income tax purposes is taxable as a partnership.

17(2) A Pennsylvania S corporation.] a partnership as defined 
18in section 301(n.0) or a Pennsylvania S corporation as defined 
19in section 301(n.1).

20"Qualified benefits" means, excluding any government
21subsidized medical care, any payments received by an eligible
22individual from general assistance, temporary assistance for
23needy families or any other welfare benefits as determined by
24the Department of Public Welfare of the Commonwealth.

25* * *

26"Qualified offer of employment" means a bona fide offer of
27employment as determined by the Department of Public Welfare of
28the Commonwealth.

29* * *

30"Tax credit" mean the employment incentive tax credit

1established by this article.

2* * *

3Section 3. Section 1703-A of the act, added December 15,
41999 (P.L.926, No.63), is amended to read:

5Section 1703-A. [Employment Incentive Payments]
6Eligibility.--(a) A taxpayer who employs an eligible individual
7shall be entitled to [employment incentive payments] a tax 
8credit as provided by this article.

9(b) No [employment incentive payment shall be provided] tax 
10credit shall be awarded for:

11(1) The employment of a person who displaces any other
12individual from employment except persons discharged for cause
13as certified by the Department of Labor and Industry.

14(2) The employment of a person closely related, as defined
15by clauses (1) through (8) of section 152(a) of the Internal
16Revenue Code of 1986 (Public Law 99-514, 26 U.S.C. § 152(a)(1)
17through(8)), to the taxpayer or, if the taxpayer is a
18corporation, to an individual who owns, directly or indirectly,
19more than 50% of the outstanding stock of the taxpayer.

20(3) Wages paid to an individual during the time period for
21which the employer received federally funded or State funded job
22training payments for that individual.

23[(c) The employment incentive payment shall be calculated on
24an annual basis as provided in clauses (1) and (2):

25(1) The employment incentive payment shall be the sum of
26thirty per cent of the first nine thousand dollars ($9,000) of
27qualified first-year wages, twenty per cent of the first nine
28thousand dollars ($9,000) of qualified second-year wages and ten
29per cent of the first nine thousand dollars ($9,000) of
30qualified third-year wages.

1(2) A taxpayer eligible to receive a credit under clause (1)
2shall be eligible to receive an additional employment incentive
3payment as provided in this clause if:

4(i) the taxpayer provides or pays for day care services for
5the children of an eligible individual; or

6(ii) the taxpayer provides or pays for transportation
7services that enable an eligible individual to travel to and
8from work.

9The additional employment incentive payments under this clause
10shall be the expenses incurred by the taxpayer for services
11listed in subclauses (i) and (ii), but in no case shall the
12additional employment incentive payment for each eligible
13individual exceed eight hundred dollars ($800) during the first
14year of employment, six hundred dollars ($600) during the second
15year of employment or four hundred dollars ($400) during the
16third year of employment.

17(d) The employment incentive payment shall be utilized as a
18credit against a qualified tax liability to which the taxpayer
19is subject. The employment incentive payment applicable to a
20pass-through entity shall be allocated in the same manner as
21income is allocated.

22(e) (1) Except in cases where an eligible individual
23voluntarily leaves the employment of the taxpayer, becomes
24disabled or is terminated for cause, no taxpayer shall be
25entitled to receive an employment incentive payment if the
26eligible individual is employed by the taxpayer for less than
27one year.

28(2) If the eligible individual leaves the employment of the
29taxpayer voluntarily, becomes disabled or is terminated for
30cause in less than one year, the employment incentive payment

1shall be reduced by the proportion of the year not worked.

2(f) The total employment incentive payment credit shall not
3exceed ninety per cent of the total taxes paid by the employer
4against which the employment incentive payments may be claimed
5as a credit.

6(g) Employment incentive payments unused as a tax credit in
7a taxable year may be carried over against a qualified tax
8liability in the ten immediately subsequent taxable years.

9(h) For the purposes of computing a tax liability against
10which the employment incentive payments may be applied,
11deductions from taxable income shall be reduced by the
12employment incentive payments.]

13Section 4. The act is amended by adding a section to read:

14Section 1703.1-A. Amount.--(a) The tax credit shall be
15calculated on an annual basis as provided in clauses (1), (2)
16and (3):

17(1) The tax credit shall be the sum of thirty per cent of
18the first nine thousand dollars ($9,000) of qualified first-year
19wages, twenty per cent of the first nine thousand dollars
20($9,000) of qualified second-year wages and ten per cent of the
21first nine thousand dollars ($9,000) of qualified third-year
22wages.

23(2) A taxpayer eligible to receive a tax credit under clause
24(1) shall be eligible to receive an additional tax credit as
25provided in this clause if:

26(i) the taxpayer provides or pays for day care services for
27the children of an eligible individual; or

28(ii) the taxpayer provides or pays for transportation
29services that enable an eligible individual to travel to and
30from work.

1(3) Excluding any government subsidized medical benefits,
2the tax credit shall not exceed fifty per cent of the average
3monthly benefits received by the eligible individual from the
4following sources:

5(i) General assistance.

6(ii) Temporary assistance to needy families.

7(iii) Disability payments.

8(b) The additional tax credit under this subsection shall be
9claimed against the expenses incurred by the taxpayer for
10services listed in subclauses (i) and (ii), but in no case shall
11the additional tax credit for each eligible individual exceed
12eight hundred dollars ($800) during the first year of
13employment, six hundred dollars ($600) during the second year of
14employment or four hundred dollars ($400) during the third year
15of employment.

16(c) All tax credits claimed under this article shall be
17utilized as a credit against a qualified tax liability to which
18the taxpayer is subject.

19(d) For the purposes of computing a tax liability against
20which the tax credits may be applied, deductions from taxable
21income shall be reduced by the tax credit.

22Section 5. Section 1704-A of the act, added December 15,
231999 (P.L.926, No.63), is amended to read:

24Section 1704-A. [Administration and Regulations.--The
25department, in cooperation with the Department of Public Welfare
26and the Department of Labor and Industry, shall administer the
27provisions of this article, promulgate appropriate rules,
28regulations and forms for that purpose and make such
29determinations as may be required. Determinations made with
30respect to the employment incentive payment provided in this

1section may be reviewed and appealed in the manner provided by
2law for other corporate or personal tax credits] (Reserved).

3Section 6. The act is amended by adding sections to read:

4Section 1704.1-A. Application for Tax Credit Certificate.--
5(a) A qualified taxpayer may apply to the department for a tax
6credit certificate under this section. The application must be
7on a form required by the department and shall include all of
8the following information:

9(1) The name and address of the applicant.

10(2) Documentation of the following for each eligible
11individual:

12(i) All wages paid by the taxpayer.

13(ii) Any payments made by the taxpayer to provide day care
14services for the children of the eligible individual.

15(iii) Any payment made by the taxpayer to provide
16transportation services that enabled the eligible individual to
17travel to and from work.

18(3) Any other information required by the department.

19(b) During the review process, the department shall do the
20following:

21(1) Review and approve applications according to the order
22applications are received and the availability of employment
23incentive tax credits.

24(2) Notify the applicant within thirty days of receipt of
25the application of its determination.

26(3) If the application is approved, the department shall
27issue the qualified taxpayer a tax credit certificate within
28fifteen days of the approval.

29(4) In granting tax credits under this article, the
30department, in any fiscal year, shall not grant more than

1twenty-five million dollars ($25,000,000) in tax credit
2certificates to taxpayers who reduce an eligible individual's
3qualified benefits by less than fifty percent.

4Section 1704.2-A. Shareholder, Owner or Member Pass-
5Through.--(a) If a Pennsylvania S corporation does not have an
6eligible tax liability against which the tax credit may be
7applied, a shareholder of the Pennsylvania S corporation shall
8be entitled to a tax credit equal to the tax credit determined
9for the Pennsylvania S corporation for the taxable year
10multiplied by the percentage of the Pennsylvania S corporation's
11distributive income to which the shareholder is entitled.

12(b) If a pass-through entity other than a Pennsylvania S
13corporation does not have tax liability against which the tax
14credit may be applied, an owner or member of the pass-through
15entity shall be entitled to a tax credit equal to the tax credit
16determined for the pass-through entity for the taxable year
17multiplied by the percentage of the pass-through entities'
18distributive income to which the owner or member is entitled.

19(c) (1) Except as provided under clause (2), the tax credit
20provided under subsections (a) or (b) shall be in addition to
21any other tax credit to which a shareholder, owner or member of
22a pass-through entity is otherwise entitled under this chapter.

23(2) A pass-through entity and a shareholder, owner or member
24of a pass-through entity shall not claim a tax credit under this
25chapter for the same qualified investment.

26Section 7. Section 1705-A of the act, added December 15,
271999 (P.L.926, No.63), is amended to read:

28Section 1705-A. Limitation on Credits.--[The total amount of
29employment incentive payments authorized by this article shall
30not exceed twenty-five million dollars ($25,000,000) in any

1fiscal year. To insure that credits are not claimed in excess of
2this amount, a taxpayer may claim the incentive payments only
3upon presentation of an authorizing certificate. Certificates
4will be issued to the taxpayer by the Department of Labor and
5Industry upon presentation to the Department of Labor and
6Industry of evidence of a qualifying offer of employment. If
7necessary to avoid certificate issuances in excess of the
8maximum authorized amount for any fiscal year, the department
9shall advise the Department of Labor and Industry of the total
10number of certificates which may be issued in each calendar
11quarter.] (a) Except in cases where an eligible individual 
12voluntarily leaves the employment of the taxpayer, becomes 
13disabled or is terminated for cause, no taxpayer shall be 
14entitled to receive a tax credit if the eligible individual is 
15employed by the taxpayer for less than one year.

16(b) If an eligible individual leaves the employment of the
17taxpayer voluntarily, becomes disabled or is terminated for
18cause in less than one year, the taxpayer shall refund to the
19Commonwealth the total amount of tax credit granted.

20(c) Credits may be claimed against taxes payable for tax
21years beginning January 1, 2013, and thereafter, and may be
22claimed for employees hired after December 31, 2012.

23(d) A taxpayer may not carry back or obtain a refund of an
24unused tax credit.

25(e) A taxpayer, upon application to and approval by the
26department, may sell or assign, in whole or in part, a tax
27credit granted to the taxpayer. The department shall establish
28guidelines for the approval of applications under this
29subsection.

30(f) The purchaser or assignee of a portion of a tax credit

1under subsection (e) shall immediately claim the credit in the
2taxable year in which the purchase or assignment is made. The
3amount of the tax credit that a purchaser or assignee may use
4against any one qualified tax liability may not exceed seventy-
5five percent of the qualified tax liability for the taxable
6year. The purchaser or assignee may not carry over, carry back,
7obtain a refund of or assign the tax credit. The purchaser or
8assignee shall notify the department of the seller or assignor
9of the tax credit in compliance with procedures specified by the
10department.

11Section 8. Section 1706-A of the act, amended November 19,
122004 (P.L.873, No.116), is amended to read:

13Section 1706-A. Time Limitations and Report.--[Employment
14incentive payments shall not be available for employees hired
15after December 31, 2009, unless reenacted by the General
16Assembly. Not later than July 1, 2004, and December 31, 2008,
17the Secretary of Public Welfare shall report to the General
18Assembly on the effectiveness of incentive payments to encourage
19the employment of general assistance and temporary assistance to
20needy families recipients and recommend whether the program
21should be continued. Credits may be claimed against taxes
22payable for tax years beginning January 1, 2000, and thereafter,
23and may be claimed for employees hired after December 31, 1999.]
24No later than June 1, 2014, and each June 1 thereafter, the 
25department shall submit a report on the effectiveness of the 
26employment incentive tax credits granted under this article. The 
27report shall include the names of taxpayers who were issued 
28employment incentive tax credits as of the date of the report. 
29The report may include recommendations for changes in the 
30calculation or administration of the employment incentive tax
 

1credits and other information as the department deems 
2appropriate. The report shall be submitted to all of the 
3following:

4(1) The chairman and minority chairman of the Appropriations
5Committee of the Senate.

6(2) The chairman and minority chairman of the Appropriations
7Committee of the House of Representatives.

8(3) The chairman and minority chairman of the Finance
9Committee of the Senate.

10(4) The chairman and the minority chairman of the Finance
11Committee of the House of Representatives.

12Section 9. The act is amended by adding a section to read:

13Section 1707-A. Guidelines.--The department, in conjunction
14with the Department of Revenue, shall develop written guidelines
15necessary for the implementation and administration of this
16article. The guidelines shall be posted on the department's
17publicly accessible Internet website.

18Section 10. This act shall take effect immediately.