PRINTER'S NO. 1190
THE GENERAL ASSEMBLY OF PENNSYLVANIA
SENATE BILL
No.
961
Session of
2015
INTRODUCED BY DINNIMAN AND FONTANA, JULY 23, 2015
REFERRED TO FINANCE, JULY 23, 2015
AN ACT
Amending Title 12 (Commerce and Trade) of the Pennsylvania
Consolidated Statutes, in keystone innovation zones, further
providing for keystone innovation zone tax credits; and
providing for research and development tax credits for KIZ
companies; establishing KIZ Company Corporate Net Income Tax
Net Loss Deduction Transfer Program and providing for KIZ
company tax credits for new jobs.
The General Assembly of the Commonwealth of Pennsylvania
hereby enacts as follows:
Section 1. Section 3706(d) of Title 12 of the Pennsylvania
Consolidated Statutes is amended to read:
ยง 3706. Keystone innovation zone tax credits.
* * *
(d) Application of tax credit and election.--[A]
(1) Except as set forth in paragraph (2), a tax credit
approved under this section must be first applied against the
KIZ company's tax liability under Article III, IV or VI of
the act of March 4, 1971 (P.L.6, No.2), known as the Tax
Reform Code of 1971, for the taxable year during which the
tax credit is approved. If the amount of tax liability owed
by the KIZ company is less than the amount of the tax credit,
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the KIZ company may elect to carry forward the amount of the
remaining tax credit for a period not to exceed four
additional taxable years and to apply the credit against tax
liability incurred during those tax years; or the KIZ company
may elect to sell or assign a portion of the tax credit in
accordance with the provisions of subsection (f). A KIZ
company may not carry back or obtain a refund of an unused
keystone innovation zone tax credit.
(2) A KIZ company that is approved for a tax credit
under this section may elect not to apply the credit against
the KIZ company's tax liability as prescribed in this
subsection if the KIZ company submitted with its tax credit
application a current tax lien certificate issued by the
department showing that the KIZ company has no unpaid tax
liability due to the Commonwealth or a political subdivision.
A KIZ company that submitted a current tax lien certificate
with its application and is awarded a credit under subsection
(b) may immediately sell or assign the tax credit upon
receipt of notice of the award in accordance with subsection
(f).
* * *
Section 2. Title 12 is amended by adding sections to read:
ยง 3706.1. Research and development tax credits for KIZ
companies.
In addition to the provisions of Article XVII-B of the act of
March 4, 1971 (P.L.6, No.2), known as the Tax Reform Code of
1971, the following shall apply to research and development tax
credits awarded to KIZ companies:
(1) Notwithstanding any other provision of the Tax
Reform Code of 1971, a KIZ company that is approved for a
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research and development tax credit under Article XVII-B of
the Tax Reform Code of 1971 may elect not to apply the credit
against the KIZ company's qualified tax liability, as defined
in section 1702-B of the Tax Reform Code of 1971, if the
company submitted with its research and development tax
credit application a current tax lien certificate issued by
the department showing that the KIZ company has no unpaid tax
liability due to the Commonwealth or its political
subdivisions. A KIZ company that submitted a current tax lien
certificate with its application and is awarded a credit
under Article XVII-B of the Tax Reform Code of 1971 may
immediately sell or assign the tax credit upon receipt of
notice of the award in accordance with section 3706(f)
(relating to keystone innovation zone tax credits).
(2) The purchaser or assignee of a research and
development tax credit from a KIZ company also may claim the
tax credit against tax liability of the purchaser or assignee
under Article VII, VIII, IX or XV of the Tax Reform Code of
1971.
ยง 3706.2. KIZ Company Corporate Net Income Tax Net Loss
Deduction Transfer Program.
(a) Establishment.--The KIZ Company Corporate Net Income Tax
Net Loss Deduction Transfer Program is established. The
department shall administer the program in accordance with this
section. The program shall allow KIZ companies in this
Commonwealth with unused net loss carryover deductions under
section 401 of the act of March 4, 1971 (P.L.6, No.2), known as
the Tax Reform Code of 1971, to transfer, in exchange for
private financial assistance, those unused deductions to other
corporate net income taxpayers in this Commonwealth, provided
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that the taxpayer receiving the unused deductions is not
affiliated with the KIZ company that is surrendering its unused
deductions.
(b) Affiliation.--For the purposes of subsection (a), the
test of affiliation is whether the same entity directly or
indirectly owns or controls 5% or more of the voting rights or
5% or more of the value of the classes of stock of both the
taxpayer receiving the unused deductions and the KIZ company
that is surrendering the unused deductions.
(c) Applications.--The department, in cooperation with the
Department of Revenue, shall accept, review and approve
applications by submitted KIZ companies. The application shall
be on the form prescribed by the department and must be received
on or before November 30 of each fiscal year.
(d) Contents of application.--At a minimum, the application
shall include:
(1) The name and tax identification number of the
applicant.
(2) The name, location and tax identification number of
the corporate net income taxpayer that will acquire the
corporate net income tax net loss deduction transfer
certificate from the applicant.
(3) The total amount of the corporate net income tax net
loss deduction the applicant seeks to transfer.
(4) A brief description of the applicant's KIZ company.
(5) A statement that the applicant is not prohibited
from participating in the program based on subsection (f).
(6) A brief summary of the intended use of the private
financial assistance to be received by the applicant under
subsection (h).
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(7) Any other information deemed relevant by the
department.
(e) Approvals.--Approvals of applications filed under
subsection (c) shall be issued in the form of corporate net
income tax net loss deduction transfer certificates. A corporate
net income tax net loss deduction transfer certificate shall not
be issued unless the applicant certifies that as of the date of
the receipt of the corporate net income tax net loss deduction
transfer certificate it is operating as a KIZ company and has no
current intention to cease operating as a KIZ company.
(f) Prohibitions.--No application for a corporate net income
tax net loss deduction transfer shall be approved if the KIZ
company:
(1) has demonstrated positive net operating income in
any of the two previous full years of ongoing operations as
determined on its financial statements issued according to
generally accepted accounting principles; or
(2) is directly or indirectly at least 50% owned or
controlled by another corporation that has demonstrated
positive net operating income in any of the two previous full
years of ongoing operations as determined on its financial
statements issued according to generally accepted accounting
principles or is part of a consolidated group of affiliated
corporations, as filed for Federal income tax purposes, that
in the aggregate has demonstrated positive net operating
income in any of the two previous full years of ongoing
operations as determined on its combined financial statements
issued according to generally accepted accounting principles.
(g) Carryover, carryback and refund of corporate net income
tax net operating loss deduction transfer certificate.--The
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following shall apply:
(1) A corporate net income tax net loss deduction
transfer certificate approved by the department in a taxable
year first shall be applied against recipient taxpayer's
corporate net income tax liability under Article IV of the
Tax Reform Code of 1971 for the current taxable year as of
the date on which the certificate was received.
(2) If the recipient of a corporate net income tax net
loss deduction transfer certificate cannot use the entire
amount of the certificate for the taxable year in which the
certificate is first approved, then the excess may be carried
over to succeeding taxable years and used against the
qualified tax liability of the taxpayer for those taxable
years. Each time the tax certificate is carried over to a
succeeding taxable year, it shall be reduced by the amount
that was used during the immediately preceding taxable year.
The certificate may be carried over and applied to succeeding
taxable years for no more than three taxable years following
the first taxable year for which the taxpayer received the
certificate.
(3) A recipient taxpayer is not entitled to carry back,
assign or obtain a refund of all or any portion of an unused
corporate net income tax net operating loss deduction
transfer certificate granted to the taxpayer under this
chapter.
(h) Use of private financial assistance.--
(1) Private financial assistance shall assist in funding
expenses incurred in connection with the operation of the KIZ
company, including, but not limited to, the expenses of fixed
assets, such as the construction, acquisition and development
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of real estate, materials, start-up, tenant fit-out, working
capital, salaries, research and development expenditures and
other expenses determined by the department to be necessary
to carry out the purposes of this section.
(2) The department shall require a corporate net income
taxpayer that acquires a corporate net income tax net loss
deduction transfer certificate to enter into a written
agreement with the KIZ company concerning the terms and
conditions of the private financial assistance made in
exchange for the certificate. The written agreement may
contain terms concerning the maintenance by the KIZ company
of a headquarters or a base of operation in this
Commonwealth.
(i) Recapture.--The department, in consultation with the
Department of Revenue, shall establish rules for the recapture
of all of, or a portion of, the amount of a grant of a corporate
net income tax net loss deduction transfer from the KIZ company
having surrendered tax benefits under this section if the KIZ
company fails to use the private financial assistance received
for the surrender of tax benefits as required by this section or
fails to maintain a headquarters or a base of operation in this
Commonwealth during the five years following receipt of the
private financial assistance, except if the failure to maintain
a headquarters or a base of operation in this Commonwealth is
due to the liquidation of the KIZ company.
(j) Annual report.--Not later than one year following the
effective date of this section, and for each succeeding year in
which a financial assistance agreement entered into under this
section is in effect, the department shall prepare a report on
the program. The report shall include, but need not be limited
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to:
(1) A description of the demand for the program from KIZ
companies and financial institutions.
(2) The efforts made by the department to promote the
program.
(3) The total amount of financial assistance approved by
the department under the program.
(4) An assessment of the effectiveness of the program in
meeting the goals of this section.
(5) Recommendations for legislation to improve the
effectiveness of the program.
The department shall submit its report to the Governor and the
General Assembly.
(k) Limitations.--
(1) In no case shall the department approve the transfer
of more than $25,000,000 in corporate net income tax net
operating loss deductions in a year.
(2) The maximum lifetime value of net loss deduction
that a KIZ company shall be permitted to transfer is
$10,000,000.
(3) If the total amount of transferable tax benefits
requested to be transferred by approved applicants exceeds
$25,000,000 in a year, the department, in cooperation with
the Department of Revenue, shall develop a formula to
allocate the transfer of tax benefits by approved companies,
provided that:
(i) An eligible applicant with $250,000 or less of
transferable tax benefits shall be authorized to
surrender the entire amount of its transferable tax
benefits.
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(ii) An eligible applicant with more than $250,000
of transferable tax benefits shall be authorized to
surrender a minimum of $250,000 of its transferable tax
benefits.
ยง 3706.3. KIZ company tax credits for new jobs.
(a) Sale or assignment.--Notwithstanding any other provision
of the act of March 4, 1971 (P.L.6, No.2), known as the Tax
Reform Code of 1971, upon application to and approval by the
department, a KIZ company that is approved for a tax credit for
new jobs under Article XVIII-B of the Tax Reform Code of 1971
may sell or assign, in whole or in part, a tax credit granted to
the KIZ company under the article. The department shall
establish guidelines for the approval of applications under this
section.
(b) Purchaser or assignee.--The purchaser or assignee of a
portion of a tax credit under subsection (a) shall immediately
claim the credit in the taxable year in which the purchase or
assignment is made. The purchaser or assignee may claim the
credit against the tax liability of the purchaser or assignee
imposed under Article III, IV, VI, VII, VIII, IX or XV of the
Tax Reform Code of 1971. The credit may not be claimed against a
tax withheld by an employer from an employee under Article III
of the Tax Reform Code of 1971. The amount of the credit that a
purchaser or assignee may use against a tax liability may not
exceed 75% of the tax liability for the taxable year. The
purchaser or assignee may not carry over, carry back, obtain a
refund of or assign the tax credit. The purchaser or assignee
shall notify the Department of Revenue of the seller or assignor
of the tax credit in compliance with procedures specified by the
Department of Revenue.
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Section 3. This act shall take effect in 60 days.
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