Regular Session 2019-2020 House Bill 1100 P.N. 1593

PRINTER'S NO. 1593

THE GENERAL ASSEMBLY OF PENNSYLVANIA

HOUSE BILL

No.

1100

Session of

2019

INTRODUCED BY KAUFER, TURZAI, MIHALEK, KAIL, FRITZ, TOOHIL,

NELSON, PUSKARIC, O'NEAL, GILLESPIE, GREINER, ROTHMAN,

BERNSTINE, PYLE, STRUZZI, MOUL, KAUFFMAN, CAUSER, GREGORY,

ZIMMERMAN, OWLETT AND SCHMITT, APRIL 29, 2019

REFERRED TO COMMITTEE ON FINANCE, APRIL 29, 2019

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 energy and fertilizer manufacturing

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-L

ENERGY AND FERTILIZER MANUFACTURING TAX CREDIT

Section 1701-L. Scope of article.

This article establishes an energy and fertilizer

manufacturing tax credit.

Section 1702-L. 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:

"Ammonia." A compound of nitrogen and hydrogen, NH3, that is

a colorless gas with a characteristic pungent smell that

dissolves in water and gives a strongly alkaline solution.

"Company." A corporation, partnership, limited liability

company, limited liability partnership, business trust,

affiliate, unincorporated joint venture or other business entity

doing business in this Commonwealth.

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

"Downstream company." Includes a company that uses chemical

products or chemical compounds manufactured or processed by a

qualified taxpayer as a raw material in the company's production

process in this Commonwealth.

"Gallon." A United States liquid gallon equal to a volume of

231 cubic inches and equal to 3.785411784 liters or 0.13368

cubic feet, where volumetric measurements made at ambient

flowing conditions are typically adjusted for composition and to

standard conditions using established industry standard

practices.

"Methane." A colorless, odorless flammable gas that is the

product of biological decomposition of organic matter.

"Methanol." A toxic, colorless flammable liquid alcohol,

CH3OH, made by oxidizing methane.

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

(1) A partnership as defined in section 301(n.0).

(2) A Pennsylvania S corporation as defined in section

301(n.1).

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(3) An unincorporated entity subject to section 307.21.

"Qualified product." Methane used in creation of ammonia,

methanol and urea.

"Qualified tax liability." The liability for taxes imposed

under Articles III, IV, VI, VII, VIII, IX, XI and XV. The term

does not include tax withheld under section 316.1.

"Qualified taxpayer." A company that satisfies all of the

following:

(1) Purchases and uses Pennsylvania methane in the

manufacture of petrochemicals or fertilizers at a facility in

this Commonwealth that has been placed in service on or after

the effective date of this article.

(2) Had made a capital investment of at least

$1,000,000,000 in order to construct the facility and place

the facility into service in this Commonwealth.

(3) Has created at least 1,000 full-time equivalent jobs

during the construction phase in order to construct the

facility and place it into service in this Commonwealth.

"Tax credit." The energy and fertilizer manufacturing tax

credit provided under this article.

"Upstream company." Includes a company that is engaged in

the exploration, development, production, processing, refining

or transportation of natural gas, natural gas liquids or

petroleum in this Commonwealth.

"Urea." A colorless crystalline compound, H2NCONH2, that is

the main nitrogenous breakdown product of protein metabolism in

mammals and is excreted in urine.

Section 1703-L. Application and approval of tax credit.

(a) Rate.--The tax credit shall be equal to $0.05 per gallon

of qualified product that is purchased and used in the

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manufacturing of petrochemicals or fertilizers in this

Commonwealth by a qualified taxpayer.

(b) Application.--

(1) A qualified taxpayer may apply to the department for

a tax credit under this section.

(2) The application must be submitted to the department

by March 1 for the tax credit claimed for qualified products

purchased and used in manufacturing of petrochemicals or

fertilizers by the qualified taxpayer during the prior

calendar year. The application must be on the form required

by the department.

(3) The department may require information necessary to

document the amount of qualified products purchased and used

in the manufacture of petrochemicals or fertilizers.

(1) The department shall review and approve or

disapprove the applications by March 20.

(2) Upon approval, the department shall issue a

certificate stating the amount of tax credit granted for

qualified products purchased and used in the manufacture of

petrochemicals or fertilizers in the prior calendar year.

Section 1704-L. Use of tax credits.

(a) Initial use.--Prior to sale or assignment of a tax

credit under section 1706-L, a qualified taxpayer must first use

a tax credit against the qualified tax liability incurred in the

taxable year for which the tax credit was approved.

(b) Eligibility.--The tax credit may be applied against up

to 20% of the qualified taxpayer's qualified tax liabilities

incurred in the taxable year for which the tax credit was

approved.

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the qualified taxpayer's liability only after all other

statutory tax credits and deductions available to the qualified

taxpayer have been used.

(d) Limit.--A qualified taxpayer that has been granted a tax

credit under this article shall be ineligible for any other tax

credit provided under this act.

Section 1705-L. Carryover, carryback and refund.

A tax credit cannot be carried back, carried forward or be

used to obtain a refund.

Section 1706-L. Sale or assignment.

(a) Authorization.--If a qualified taxpayer holds a tax

credit through the end of the calendar year in which the tax

credit was granted, the qualified taxpayer may sell or assign a

tax credit, in whole or in part.

(b) Application.--

(1) To sell or assign a tax credit, a qualified taxpayer

must file an application for the sale or assignment of the

tax credit with the Department of Community and Economic

Development. The application must be on a form required by

the Department of Community and Economic Development.

(2) To approve an application, the Department of

Community and Economic Development must receive:

(i) a finding from the department that the applicant

has:

(A) filed all required State tax reports and

returns for all applicable taxable years; and

(B) paid any balance of State tax due as

determined by assessment or determination by the

department and not under timely appeal; and

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(ii) in the case of a sale or assignment to a

company that is not an upstream company or downstream

company, a certification from the qualified taxpayer that

the qualified taxpayer has offered to sell or assign the

tax credit:

(A) exclusively to a downstream company for a

period of 30 days following approval of the tax

credit under section 1703-L(c); and

(B) to an upstream company or downstream company

for a period of 30 days following expiration of the

period under clause (A).

and Economic Development, a qualified taxpayer may sell or

assign, in whole or in part, a tax credit.

Section 1707-L. Purchasers and assignees.

(a) Time.--The purchaser or assignee under section 1706-L

must claim the tax credit in the calendar year in which the

purchase or assignment is made.

(b) Amount.--The amount of the tax credit that a purchaser

or assignee under section 1706-L may use against any one

qualified tax liability may not exceed 50% of any of the

qualified tax liabilities for the taxable year.

(1) A purchaser under section 1706-L may not sell or

assign the purchased tax credit.

(2) An assignee under section 1706-L may not sell or

assign the assigned tax credit.

(d) Notice.--The purchaser or assignee under section 1706-L

shall notify the department of the seller or assignor of the tax

credit in compliance with procedures specified by the

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department.

Section 1708-L. Pass-through entity.

(a) Election.--If a pass-through entity has an unused tax

credit, the pass-through entity may elect, in writing, according

to procedures established by the department, to transfer all or

a portion of the credit to shareholders, members or partners in

proportion to the share of the entity's distributive income to

which the shareholders, members or partners are entitled.

(b) Limitation.--The same unused tax credit under subsection

(a) may not be claimed by:

(1) the pass-through entity; and

(2) a shareholder, member or partner of the pass-through

entity.

under subsection (a) may use against any one qualified tax

liability may not exceed 20% of any qualified tax liabilities

for the taxable year.

(d) Time.--A transferee under subsection (a) must claim the

tax credit in the calendar year in which the transfer is made.

(e) Sale and assignment.--A transferee under subsection (a)

may not sell or assign the tax credit.

Section 1709-L. Administration.

(a) Audits and assessments.--The department has the

following powers:

(1) To audit a qualified taxpayer claiming a tax credit

to ascertain the validity of the amount claimed.

(2) To issue an assessment against a qualified taxpayer

for an improperly issued tax credit. The procedures,

collection, enforcement and appeals of an assessment made

under this section shall be governed by Article II.

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(b) Guidelines and regulations.--The department shall

develop written guidelines for the implementation of this

article. The guidelines shall be in effect until the department

promulgates regulations for the implementation of the provisions

of this article.

Section 1710-L. Reports to General Assembly.

(a) Annual report.--By October 1, 2020, and each October 1

thereafter, the department shall submit a report on the tax

credit provided under this article to the chairperson and

minority chairperson of the Appropriations Committee of the

Senate, the chairperson and minority chairperson of the

Appropriations Committee of the House of Representatives, the

chairperson and minority chairperson of the Finance Committee of

the Senate and the chairperson and minority chairperson of the

Finance Committee of the House of Representatives. The report

must include the names of the qualified taxpayers utilizing the

tax credit as of the date of the report and the amount of tax

credits approved for, utilized by or sold or assigned by a

qualified taxpayer.

(b) Reconciliation report.--On May 1, 2030, the Department

of Community and Economic Development shall submit to the

Secretary of the Senate and the Chief Clerk of the House of

Representatives a reconciliation report on the effectiveness of

this article. The report shall include, at a minimum, the

following information for the preceding 10 years:

(1) The name and business address of all qualified

taxpayers who have been granted tax credits under this

article.

(2) The amount of tax credits granted to each qualified

taxpayer.

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(3) The total number of jobs created by the qualified

taxpayer, upstream company and downstream company and any

companies that provide goods, utilities or other services

that support the business operations of the qualified

taxpayer, upstream company and downstream company. This

paragraph includes the average annual salary and hourly wage

information.

(4) The amount of taxes paid under Article II by the

qualified taxpayer, upstream company and downstream company

and any companies that provide goods, utilities or other

services that support the business operations of the

qualified taxpayer, upstream company and downstream company.

(5) The amount of taxes withheld from employees or paid

by members, partners or shareholders of the pass-through

entities under Article III of the qualified taxpayer,

upstream company and downstream company and any companies

that provide goods, utilities or other services that support

the business operations of the qualified taxpayer, upstream

company and downstream company.

(6) The amount of taxes paid under Article IV by the

qualified taxpayer, upstream company and downstream company

and any companies that provide goods, utilities or other

services that support the business operations of the

qualified taxpayer, upstream company and downstream company.

(7) The amount of taxes paid under Article VI by the

qualified taxpayer, upstream company and downstream company

and any companies that provide goods, utilities or other

services that support the business operations of the

qualified taxpayer, upstream company and downstream company.

(8) The amount of taxes paid under Article XI by the

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qualified taxpayer, upstream company and downstream company

and any companies that provide goods, utilities or other

services that support the business operations of the

qualified taxpayer, upstream company and downstream company.

(9) The amount of any other State or local taxes paid by

the qualified taxpayer, upstream company and downstream

company and any companies that provide goods, utilities or

other services that support the business operations of the

qualified taxpayer, upstream company and downstream company.

(10) Any other information pertaining to the economic

impact of this article on this Commonwealth.

subsection (b) reveals that the total amount of the tax credits

granted under this article exceeds the total amount of tax

revenue reported under subsection (b)(4), (5), (6), (7), (8) and

(9), the report must include any recommendation for changes in

the calculation of the credit.

(d) Publication.--The reports required by this section shall

be public records and shall be available electronically on the

publicly accessible Internet website of either the department or

the Department of Community and Economic Development. The

reports required under this section shall not contain

"confidential proprietary information" as the term is defined in

section 102 of the act of February 14, 2008 (P.L.6, No.3), known

as the Right-to-Know Law.

Section 1711-L. Expiration.

This article shall expire December 31, 2050.

Section 2. This act shall take effect in 60 days.

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