PRINTER'S NO. 3240

THE GENERAL ASSEMBLY OF PENNSYLVANIA

HOUSE BILL

No.

2259

Session of

2020

INTRODUCED BY ROWE, BERNSTINE, BOROWICZ, GROVE, LEWIS, MOUL,

POLINCHOCK, ROTHMAN, RYAN, SANKEY AND STRUZZI,

JANUARY 30, 2020

Pennsylvania; defining taxable income and requiring filing of

returns thereof; providing for the assessment, collection and

lien of said tax and for the disposition of proceeds thereof;

providing for administration and enforcement of the act by

the Department of Revenue; conferring powers and imposing

duties on certain persons, partnerships, associations,

corporations, school districts, State officers, employes and

departments; imposing penalties; and appropriating the

revenues derived from said tax."

The General Assembly of the Commonwealth of Pennsylvania

Section 2. Definitions.--The following words, terms and

phrases when used in this act shall have the meaning ascribed to

them in this section, except where the context clearly indicates

a different meaning.

"Association." A partnership, limited partnership, or any

other form of unincorporated enterprise owned by two or more

persons.

"Corporation." A corporation or joint stock association

organized under the laws of this Commonwealth, the United

States, or any other state, territory, or foreign country or

earnings or profits, accumulated after December thirty-first,

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one thousand nine hundred and thirty-four, to its stockholders

or members, whether in cash or in other property or in stock,

other than stock dividends as hereinafter defined.

"Fiduciary." A guardian, committee, trustee, executor,

administrator, receiver, conservator, or any person, whether

individual or corporate, acting in any fiduciary capacity for

any person, estate or trust.

"Person." Every natural person, fiduciary, association, or

corporation. Whenever used in any clause prescribing and

imposing a fine or imprisonment, or both, the term "person," as

applied to associations, shall mean the partners or members

thereof, and as applied to corporations, the officers thereof.

"Received." For the purpose of the computation of the net

income under this act, means "received or accrued" and the words

"received or accrued" shall be construed according to the method

of accounting upon the basis of which the net income is computed

under this act.

"Tax year." The calendar year upon the basis of which the

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net income of a taxpayer is computed under this act.

"Taxpayer." Any individual, trust or estate required to pay

a tax under the provisions of this act.

The singular shall include the plural, and the masculine

shall include the feminine and neuter.

ARTICLE II

IMPOSITION OF TAX

(1) Two per centum of the amount of net income not exceeding

five thousand dollars ($5,000.00);

(2) Two and one-half per centum of the amount of the net

income in excess of five thousand dollars ($5,000.00), but not

in excess of ten thousand dollars ($10,000.00);

(3) Three per centum of the amount of net income in excess

of ten thousand dollars ($10,000.00), but not in excess of

twenty-five thousand dollars ($25,000.00);

(4) Four per centum of the amount of net income in excess of

twenty-five thousand dollars ($25,000.00), but not in excess of

one hundred thousand dollars ($100,000.00);

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(7) Eight per centum of the amount of net income in excess

of one hundred thousand dollars ($100,000.00).

B. A like tax is hereby imposed, and shall be levied and

collected and paid annually, at the rates specified in this

section, upon and with respect to the entire net income as

herein defined, from all property owned and from every business,

trade, occupation or profession carried on in this Commonwealth

(1) Income received by estates of deceased persons during

the period of administration or settlement of the estate;

(2) Income accumulated in trust for the benefit of unborn or

unascertained persons or persons with contingent interests;

(3) Income held for future distribution under the terms of

the will or trust;

(4) Income which is to be distributed to the beneficiaries

periodically, whether or not at regular intervals, and the

income collected by a guardian of an infant to be held or

distributed as the court may direct; and

income be taxable to the estate or trust or to the beneficiaries

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thereof. The net income of an estate or trust shall be computed

in the same manner and on the same basis as provided for

individual taxpayers, and in cases under paragraphs (four) and

(five) of subsection A of this section the fiduciary shall

include in the return a statement of each beneficiary's

distributive share of such net income, whether or not

distributed before the close of the tax year for which the

during the period of administration or settlement there may be

deducted the amount of any income property paid or credited to

any legatee, heir or other beneficiary. In such cases the estate

or trust shall be allowed the same personal deductions as are

allowed to single persons under section three hundred and eight,

and in such cases an estate or trust created by a person not a

resident, and an estate of a person not a resident, shall be

subject to tax only to the extent to which individuals, other

than residents, are liable, by reason of the limitation as to

gross income provided in section three hundred and three,

the manner provided in subsection C of this section, but without

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the deduction of any amounts of income paid or credited to any

such beneficiary. In all other cases under paragraphs (four) and

(five) of subsection A of this section, the tax shall not be

paid by the fiduciary but there shall be included, in computing

the net income of each beneficiary, his distributive share,

whether distributed or not, of the net income of the estate or

trust for the tax year. In such cases the net income of a

pension or profit-sharing plan for the exclusive benefit of

some, or all, of his employes to which contributions are made by

such employer or employes, or both, for the purpose of

distributing to such employes the earnings and principal of the

fund accumulated by the trust in accordance with such plan,

shall not be taxable under this section but any amount actually

distributed, or made available to any distributee, shall be

taxable to him in the year in which so distributed or made

available to the extent that it exceeds the amounts paid in by

him.

income of the grantor.

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Section 203. Partnerships.--Individuals carrying on business

in partnerships shall be liable for income tax only in their

individual capacity. There shall be included in computing the

net income of each partner his distributive share, whether

distributed or not, of the net income of the partnership for the

tax year. Taxpayers who are members of partnerships may be

required by the department to make a return stating the gross

Section 204. Initial Tax Levy.--The tax imposed by this

article shall first be levied, collected and paid in the year

one thousand nine hundred thirty-six upon and with respect to

taxable net income for the calendar year one thousand nine

hundred thirty-five.

ARTICLE III

COMPUTATION OF THE TAX

Section 301. Net Income.--The term "net income" means the

gross income of a taxpayer less the deductions allowed by this

article.

as in the opinion of the department does clearly reflect the

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income.

Section 303. Gross Income.--A. The term "gross income"

includes gains, profits and income derived from salaries, wages

or compensation for personal service, of whatever kind and in

whatever form paid, or from professions, vocations, trades,

businesses, commerce, or sales, or dealings in property, whether

real or personal, growing out of the ownership, or use of, or

included in the gross income for the tax year in which received

by the taxpayer.

B. The term "gross income" does not include the following

items:

(1) Amounts received under a life insurance contract paid by

reason of the death of the insured, whether in a single sum or

in installments, but if such amounts are held by the insurer

under an agreement to pay interest thereon, the interest

payments shall be included in gross income;

(2) The amount received by the insured as a return of

in gross income;

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in the case of an acquisition by one corporation of at least a

majority of the voting stock and at least a majority of the

total number of shares of all other classes of stock of another

corporation.

As used in this section, "control" means the ownership of at

least eighty per centum of the voting stock and at least eighty

per centum of the total number of shares of all other classes of

practice in trade or business of such taxpayer.

Section 307. General Deductions.--In computing net income

there shall be allowed as deductions--

A. All the ordinary and necessary expenses paid or incurred

during the tax year in carrying on any trade or business, or in

the production of income required to be included in gross income

under this article, including a reasonable allowance for

salaries or other compensation for personal service actually

rendered, and including rentals or other payments required to be

made as a condition to the continued use or possession for

the authority of the United States or of any of its possessions,

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(2) by the Commonwealth of Pennsylvania (except the net income

tax imposed by this act and taxes on liquid fuels), (3) by any

city, borough, town, township, school district or poor district

of this Commonwealth (except those assessed as local benefits

tending to increase the value of the property assessed), or (4)

by the authority of any other state, country or territory.

D. Losses sustained during the tax year and not compensated

any loss claimed to have been sustained in any sale or other

disposition of shares been sustained in any sale or other

disposition of shares of stock or security where it appears

that, within thirty days before or after the date of such sale

or other disposition, the taxpayer has acquired (otherwise than

by bequest or inheritance), or has entered into a contract or

option to acquire, substantially identical property, and the

property so acquired is held by the taxpayer for any period

after such sale or disposition. If such acquisition or the

contract or option to acquire is to the extent of part only of

from fires, storms, shipwrecks or other casualty, or from theft,

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and not compensated for by insurance or otherwise.

G. Debts ascertained to be worthless and charged off within

the tax year, and, when satisfied that a debt is recoverable

only in part, the department may allow such debt to be charged

off in part. In the case of a debt existing on January first,

one thousand nine hundred thirty-five, no more than its fair

market value on that date shall be deducted. A worthless debt

of property, the income from which is required to be included in

gross income under this article, used in the trade or business,

including a reasonable allowance for obsolescence. In case of

property held by one person for life with remainder to another

person, the deduction shall be computed as if the life tenant

were the absolute owner of the property, and shall be allowed to

the life tenant. In the case of property held in trust, the

allowable deduction shall be apportioned between the income

beneficiaries and the trustee in accordance with the pertinent

provisions of the instrument creating the trust, or in the

to be made under rules and regulations to be made by the

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department. The department may apportion such deductions

equitably between the lessor and lessee.

J. In the case of a taxpayer other than a resident of the

State, the deduction allowed in this section shall be allowed

only if and to the extent that they are connected with income

arising from sources within the State and taxable under this act

to a nonresident taxpayer, and the proper apportionment and

account of living expenses:

A. In the case of a single person, a personal exemption of

one thousand dollars ($1,000.00), or in the case of the head of

a family, or a married person living with husband or wife, a

personal deduction of one thousand five hundred dollars

($1,500.00). A husband and wife living together shall receive

but one personal deduction. If such husband and wife make

separate returns, the personal deduction may be taken by either

or divided between them.

B. Four hundred dollars ($400.00) for each person (other

year, such deduction shall be apportioned under rules and

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regulations prescribed by the department in accordance with the

number of months before and after such change. For the purposes

of this subsection, a fractional part of a month shall be

disregarded unless it amounts to more than half a month, in

which case it shall be considered as a month.

Section 309. Items Not Deductible.--In computing net income

no deduction shall in any case be allowed in respect of--

good the exhaustion thereof for which an allowance is or has

been made, or

D. Premiums paid on any life insurance policy covering the

life of any officer or employe or of any person financially

interested in any trade or business carried on by the taxpayer

when the taxpayer is directly or indirectly a beneficiary under

such policy.

Section 310. Credit for Taxes in Case of Taxpayers, Other

than Residents of the Commonwealth.--Whenever a taxpayer, other

than a resident of the Commonwealth, has become liable to income

subject to taxation under this act bears to his entire income

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upon which the tax so payable to such other state, county or

city was imposed: Provided, That such credit shall be allowed

only if the laws of said state, county or city--(1) grant a

substantially similar credit to residents of this Commonwealth

subject to income tax under such laws, or (2) impose a tax upon

the personal incomes of its residents derived from sources in

this Commonwealth and exempt from taxation the personal income

given or contributed in each of the ten preceding calendar

years, ninety per centum or more of his net income in each year

to any corporation, or trust, or community chest, fund or

foundation, organized and operated exclusively for religious,

charitable, scientific, literary, or educational purposes, or

for the prevention of cruelty to children or animals, no part of

the net earnings of which inures to the benefit of any private

shareholder or individual, and no substantial part of the

activities of which is carrying on propaganda, or otherwise

attempting, to influence legislation, such net income so given

year of one thousand dollars ($1,000.00) or over, if single, or,

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if married, and not living with husband or wife, or of one

thousand five hundred dollars ($1,500.00) or over, if married

and living with husband or wife, or a gross income for the tax

year of five thousand dollars or over, regardless of the amount

of his net income, shall make, under oath or affirmation, a

return as hereinafter provided, stating specifically the items

of his gross income and the deductions and credits allowed by

income of each shall be included in a single joint return, in

which case the tax shall be computed on the aggregate income. If

the taxpayer is unable to make his own return, the rturn shall

be made by a duly authorized agent or by the guardian or other

person charged with the care of the person or property of such

taxpayer. A taxpayer other than a resident shall not be entitled

to the deductions authorized by section three hundred and seven

unless he shall make, under oath or affirmation, a complete

return of his gross income both within and without the State.

B. Returns shall be in such form, and shall contain such

and furnish such return forms, but the failure of any taxpayer

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to receive or procure a return form shall not excuse him from

making a return.

C. The department may, upon application made to it, in such

form as it may prescribe, on or prior to the last day for filing

any report, and upon proper cause shown, grant a reasonable

extension of time for the filing of any return, within which

time such return may be filed without penalty except as herein

or officer making any return or report required by this act for

the taking of which oath or affirmation no charge shall be made.

Any such agent who shall make any charge for administering such

oath or affirmation shall be deemed guilty of a misdemeanor,

and, upon conviction thereof, shall be sentenced to pay a fine

not exceeding five hundred dollars ($500.00), or to undergo

imprisonment not exceeding one (1) year, either, or both, in the

discretion of the court.

E. Each taxpayer shall, or in cases where an agent,

guardian, committee, fiduciary or other person makes the return

interest thereon at the rate of six per centum per annum from

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the time when the return was originally required to be filed to

the time of payment.

Section 402. Returns in Cases of Changed Residence.--If a

taxpayer, during the tax year, changes his status from that of

resident to that of nonresident, or from that of nonresident to

that of resident, he shall file two returns: One as a resident

covering the fraction of the year during which he was a

sources during the fraction of the year in which he was a

resident, and his net income from sources within the State

during the fraction of the year in which he was a nonresident,

shall be less than one thousand dollars ($1,000.00) in the case

of a taxpayer who is single or married and not living with

husband or wife, or under one thousand five hundred dollars

($1,500.00) in the case of a taxpayer who is married and living

with husband or wife, no return shall be required under this

section unless the aggregate of the taxpayer's gross income from

all sources during the fraction of the year in which he was a

of its gross income and the deductions allowed by this act, and

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shall include in the return the names and addresses of the

persons who would be entitled to share in the net income if

distributed and the amount of the distributive share of each

person. The return shall be sworn to or affirmed by any one of

the partners.

Section 404. Fiduciary Returns.--Every fiduciary (except

receivers appointed by authority of law in possession of part

single, or, if married and not living with husband or wife, or

one thousand five hundred dollars ($1,500.00) or over if married

and living with husband or wife, or whose gross income for the

tax year is five thousand dollars ($5,000.00) or over,

regardless of the amount of his net income.

B. If he acts--(a) for an estate of a deceased person during

the period of administration or settlement whether or not the

income of such estate during such period of administration or

settlement is properly paid or credited to any legatee, heir or

other beneficiary, (b) for an estate or trust the income of

($1,000.00) or over, or the gross income for the tax year is

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official purposes and except in accordance with proper judicial

order or as otherwise provided by law, and any person or agent

divulging such information shall be deemed guilty of a

misdemeanor, and, upon conviction thereof, shall be sentenced to

pay a fine not in excess of five hundred dollars ($500.00) and

costs of prosecution, or to undergo imprisonment for not more

than three (3) years, or both, in the discretion of the court.

officer, or his authorized representative, an abstract of the

return of income of any individual, or supply him with

information concerning any item of income contained in any

return, or disclosed by the report of any investigation of the

income or return of income of any individual; but such

permission shall be granted, or such information furnished, to

such officer or his representative only if the statutes of the

United States, or of such other state as the case may be, grant

substantially similar privileges to the proper officer of this

State charged with the administration of the personal income tax

the control, receipt, custody, disposal or payment of interest

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(other than interest coupons payable to bearer), rent, salaries,

wages, premiums, annuities, compensations, remunerations,

emoluments or other fixed or determinable annual or periodical

gains, profits, and income amounting to one thousand dollars

($1,000.00) or over, shall, on or before the fifteenth day of

May, make a return under oath or affirmation to the department

containing complete information concerning the amount of all

as the department shall prescribe, and shall contain a statement

that the individual, officer or employe of the Commonwealth,

political subdivision thereof, or corporation or member or

partner of the association making the return, verifies the

information contained in the return. Upon conviction of making a

false statement in such return, the person making the same shall

be subject to the penalties provided by the laws of the

Commonwealth for perjury.

Every person who fails, refuses or neglects to file a return,

in accordance with the provisions of this section, shall be

prescribed in this act, and as such shall be a lien upon the

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franchises and property both real and personal of the taxpayer

against whom the same are assessed, after the same has been

entered and docketed of record by the prothonotary of the county

where the resident's franchises or property are situated.

B. The department may at any time transmit to the

prothonotaries of the respective counties of the Commonwealth,

to be by them entered of record, certified copies of all liens

and not petition for reassessment thereof has been filed, or if

such taxes, interest and penalties are not paid after all

appeals have finally been disposed of, the department shall call

upon the Department of Justice to collect the same in like

manner as is provided by law for the collection of other

Commonwealth taxes.

ARTICLE VI

VIOLATIONS

Section 601. Violations; Penalties.--Any person who shall

fail, neglect or refuse to make any report required by this act,

disclosure of the amount of net income to avoid the payment of

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the whole or any part of the tax, shall be guilty of a

misdemeanor and shall be sentenced to pay a fine not exceeding

one thousand dollars ($1,000.00) and costs of prosecution, or

undergo imprisonment not exceeding three (3) years, or both, in

the discretion of the court.

Such fine shall be in addition to any penalty imposed by any

other section or subsection of this act.

fine or costs, or both, and shall be audited and paid as are

costs of like character in said county.

ARTICLE VII

DISPOSITION AND USE OF TAX

Section 701. Disposition and Use of Tax.--All taxes,

interest and penalties received, recovered, paid or collected

under the provisions of this act shall be paid by the department

into the State School Fund of the State Treasury. Two per centum

of such moneys shall be transferred, on or before the first day

of January and July of each year during which the tax imposed by

balance, less such sums as shall be reserved for the payment of

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refunds as provided in this act, shall be available only for the

payment of any appropriations made at any time by the General

Assembly to the Department of Public Instruction for payment to

school districts for salaries of members of the teaching and

supervisory staffs of elementary schools and junior high

schools, in accordance with the provisions of law.

ARTICLE VIII

be unconstitutional, the decision of the court shall not affect

or impair any of the remaining provisions of this act; it is

hereby declared as the legislative intent that this act would

have been adopted had such unconstitutional sentence, section,

clause, or part thereof, not been included herein.

Section 803. Effective Date.--This act shall become

effective immediately upon final enactment.]

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

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