PRINTER'S NO. 220
THE GENERAL ASSEMBLY OF PENNSYLVANIA
SENATE BILL
No.
266
Session of
2019
INTRODUCED BY HUGHES, YUDICHAK, BREWSTER, FONTANA, SANTARSIERO,
COSTA, TARTAGLIONE AND FARNESE, FEBRUARY 7, 2019
REFERRED TO FINANCE, FEBRUARY 7, 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," in manufacturing and investment tax credit,
further providing for definitions and for manufacturing tax
credit and providing for workforce development tax credit.
The General Assembly of the Commonwealth of Pennsylvania
hereby enacts as follows:
Section 1. The definition of "taxpayer" in section 1801-G of
the act of March 4, 1971 (P.L.6, No.2), known as the Tax Reform
Code of 1971, is amended and the section is amended by adding
definitions to read:
Section 1801-G. Definitions.
The following words and phrases when used in this part shall
have the meanings given to them in this section unless the
context clearly indicates otherwise:
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"Diverse and disadvantaged businesses." The term as defined
in 62 Pa.C.S. § 2201 (relating to definitions).
"Economically distressed municipality." A municipality that
meets any of the following criteria:
(1) Is a municipality which has been determined to be
financially distressed under section 203(f) of the act of
July 10, 1987 (P.L.246, No.47), known as the Municipalities
Financial Recovery Act.
(2) Is a city, borough, town or township with a market
value per capita below the fifth percentile of all such
cities, boroughs, towns and townships, as certified annually
by the State Tax Equalization Board.
(3) Is located in a county having a personal income per
capita below the 15th percentile of all counties, as
certified annually by the Department of Revenue.
(4) Is located in a county having an annual average
unemployment rate above the 70th percentile of all counties,
as determined annually by the Department of Labor and
Industry.
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"Taxpayer." An entity or a group of entities that is engaged
in the mechanical, physical or chemical transformation of
materials, substances or components into new products that are
creations of new items of tangible personal property for sale.
To qualify as a "taxpayer," a group of entities must:
(1) be comprised of individual entities that are engaged
in a similar line of manufacturing;
(2) have a formal written agreement between each of the
individual entities comprising the group; and
(3) ensure that each individual entity accounts for at
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least $100,000 and not more than $600,000 of the annual
taxable payroll requirement provided under section 1802-G.
* * *
Section 2. Section 1804-G of the act is amended to read:
Section 1804-G. Manufacturing tax credit.
(a) Maximum amount.--The department may award a
manufacturing tax credit of up to 5% of the taxpayer's increase
in annual taxable payroll if the annual taxable payroll
increases in year one by at least $1,000,000 above the base year
amount from the creation of new jobs up to the amount specified
in the commitment letter.
(b) Determination.--The annual taxable payroll in year one
for a new job shall be the sum of the amount of annual taxable
payroll in year one for the new jobs created above the taxable
payroll in the base year.
(c) Certificate.--After verification by the department that
the taxpayer has increased the annual taxable payroll in year
one by at least $1,000,000 above the base year amount from the
creation of new jobs up to the amount specified and any other
conditions required by the department and specified in the
commitment letter, the taxpayer shall receive a manufacturing
tax credit certificate and filing information.
(d) Applicable taxes.--A taxpayer may apply the
manufacturing tax credit to 100% of the taxpayer's qualified tax
liability.
(e) Term.--A taxpayer may claim the manufacturing tax credit
for a period determined by the department, not to exceed the
earlier of:
(1) five years from the date the taxpayer receives the
manufacturing tax credit certificate; or
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(2) six years from the start date.
(f) Availability.--A manufacturing tax credit shall be made
available by the department on a first-come, first-served basis.
(g) Limitation.--The following shall apply:
(1) For [each] the fiscal year beginning [after June 30,
2017,] July 1, 2017, and ending June 30, 2018, $4,000,000 in
manufacturing tax credits shall be made available to the
department and may be awarded by the department in accordance
with this part. [In any fiscal year, the department may
reissue, assign or award prior fiscal year manufacturing tax
credits which have been recaptured under section 1808-G(a) or
(b) and may award prior fiscal year manufacturing tax credits
not previously issued.]
(2) For each fiscal year beginning after June 30, 2018,
the following shall apply:
(i) Ten million five hundred thousand dollars in
manufacturing tax credits shall be made available to the
department and may be awarded by the department in
accordance with this part. In any fiscal year, the
department may reissue, assign or award prior fiscal year
manufacturing tax credits which have been recaptured
under section 1808-G(a) or (b) and may award prior fiscal
year manufacturing tax credits not previously issued.
(ii) No less than $2,500,000 of the tax credits
authorized under this part shall be restricted to
taxpayers that are diverse and disadvantaged businesses
or are claiming a credit for new jobs created in an
economically distressed municipality. For taxpayers
comprised of a group of entities to meet the requirements
of this paragraph, a majority of the increase in the
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taxpayers' annual taxable payroll must be attributable to
entities that are diverse and disadvantaged businesses or
have created new jobs in economically distressed
municipalities.
Section 3. Article XVIII-G of the act is amended by adding a
part to read:
PART III
WORKFORCE DEVELOPMENT TAX CREDIT
Section 1841-G. Definitions.
The following words and phrases when used in this part shall
have the meanings given to them in this section unless the
context clearly indicates otherwise:
"Department." The Department of Community and Economic
Development of the Commonwealth.
"Diverse and disadvantaged businesses." The term as defined
in 62 Pa.C.S. § 2201 (relating to definitions).
"Economically distressed municipality." A municipality that
meets any of the following criteria:
(1) Is a municipality which has been determined to be
financially distressed under section 203(f) of the act of
July 10, 1987 (P.L.246, No.47), known as the Municipalities
Financial Recovery Act.
(2) Is a city, borough, town or township with a market
value per capita below the fifth percentile of all such
cities, boroughs, towns and townships, as certified annually
by the State Tax Equalization Board.
(3) Is located in a county having a personal income per
capita below the 15th percentile of all counties, as
certified annually by the Department of Revenue.
(4) Is located in a county having an annual average
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unemployment rate above the 70th percentile of all counties,
as determined annually by the Department of Labor and
Industry.
"Employee." A new hire or existing employee for whom a
taxpayer makes a workforce development investment to prepare the
new hire or existing employee to perform a full-time job in the
manufacturing sector which has an average wage at least equal to
the county average wage where the job is located and which
includes employer-provided health benefits.
"Manufacturing." The mechanical, physical or chemical
transformation of materials, substances or components into new
products that are creations of new items of tangible personal
property for sale.
"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).
(3) An unincorporated entity subject to section 307.21.
"Qualified tax liability." A taxpayer's tax liability under
Article III, IV, VI, VII, VIII, IX, XI or XV.
"Taxpayer." An entity that is engaged in the business of
manufacturing in this Commonwealth.
"Workforce development." Information access, lifelong
learning and employee training and retraining programs. The term
includes:
(1) vocational education programs;
(2) programs in community colleges, technical colleges
and postsecondary education institutions authorized to grant
diplomas and certificates and specialized associate,
associate, baccalaureate and advanced degrees; and
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(3) transitional support and work support services or
activities which enable a taxpayer's new hires and current
employees to engage in or prepare for job related functions.
"Workforce development tax credit." A tax credit for which
the department has issued a certificate under this part.
Section 1842-G. Eligibility.
In order to be eligible to receive a workforce development
tax credit, a taxpayer must demonstrate to the department the
following:
(1) A workforce development investment in its employees
of at least $50,000.
(2) The ability to maintain the jobs for which the
workforce development investment was made for a period of at
least five years from the start date.
(3) The intent to maintain existing operations in this
Commonwealth for a period of at least five years from the
start date.
Section 1843-G. Procedure.
(a) Application.--A taxpayer applying to claim a workforce
development tax credit must complete and submit to the
department a workforce development tax credit application on a
form and in a manner as determined by the department.
(b) Approval.--If the department approves the taxpayer's
application, the department and the taxpayer shall execute a
commitment letter containing the following:
(1) A description of the jobs that require an investment
in workforce development.
(2) The number of jobs for which the taxpayer made a
workforce development investment.
(3) The amount of taxpayer's private capital invested in
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workforce development.
(4) A description of the workforce development training
undergone by the taxpayer's employees.
(5) The maximum workforce development tax credit amount
the taxpayer may claim.
(6) A signed statement that the taxpayer intends to
maintain existing operations in this Commonwealth for at
least five years from the start date.
(7) Any other information as the department deems
appropriate.
(c) Commitment letter.--After a commitment letter has been
signed by both the Commonwealth and the taxpayer, the taxpayer
must maintain the jobs for which the workforce development
investment was made for a period of at least five years and
continue operations in this Commonwealth for a period of five
years. If the taxpayer does not maintain the jobs for which the
workforce development investment was made or ceases operations
in this Commonwealth as provided for under this subsection, the
commitment letter shall be revoked and deemed to be null and
void.
Section 1844-G. Workforce development tax credit.
(a) Maximum amount.--The department may award a workforce
development tax credit of up to $100,000 or 50% of the
taxpayer's workforce development investment specified in
section 1843-G, whichever is less.
(b) Certificate.--After verification by the department that
the taxpayer has made an eligible workforce development
investment of at least $50,000 and any other conditions required
by the department and specified in the commitment letter, the
taxpayer shall receive a workforce development tax credit
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certificate and filing information.
(c) Applicable taxes.--A taxpayer may apply the workforce
development tax credit to 100% of the taxpayer's qualified tax
liability.
(d) Availability.--A workforce development tax credit shall
be made available by the department on a first-come, first-
served basis.
(e) Limitation.--The following shall apply:
(1) For each fiscal year beginning after June 30, 2018,
$2,000,000 in workforce development tax credits shall be made
available to the department and may be awarded by the
department in accordance with this part. In any fiscal year,
the department may reissue, assign or award prior fiscal year
workforce development tax credits which have been recaptured
under section 1848-G(a) or (b) and may award prior fiscal
year workforce development tax credits not previously issued.
(2) For each fiscal year beginning after June 30, 2018,
no less than $250,000 of the workforce development tax
credits authorized under this part shall be restricted to
taxpayers that are diverse and disadvantaged businesses or
are claiming a credit for workforce development in an
economically distressed municipality.
Section 1845-G. Limitations.
The following shall apply to workforce development tax
credits:
(1) If a taxpayer cannot use the entire amount of the
workforce development tax credit for the taxable year in
which the workforce development 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
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the taxpayer for the taxable years. Each time the workforce
development tax credit is carried over to a succeeding
taxable year, the workforce development tax credit shall be
reduced by the amount of the workforce development tax credit
used as a credit during the immediately preceding taxable
year. The workforce development tax credit 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 was entitled to claim the credit.
(2) A workforce development tax credit approved by the
department in a taxable year shall first be applied against a
taxpayer's qualified tax liability for the current taxable
year as of the date on which the credit was approved before
the workforce development tax credit can be applied against
any tax liability under paragraph (1).
(3) A taxpayer shall not be entitled to carry back or
obtain a refund of all or any portion of an unused workforce
development tax credit granted to the taxpayer under this
part.
Section 1846-G. Sale or assignment.
(a) Application.--A taxpayer, upon application to and
approval by the department, may sell or assign, in whole or in
part, a workforce development tax credit granted to the
taxpayer. The following shall apply:
(1) The department and the Department of Revenue shall
jointly issue guidelines for the approval of applications
under this subsection.
(2) Before an application is approved, the Department of
Revenue must make a finding that the applicant has filed all
required State tax reports and returns for all applicable
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taxable years and paid any balance of State tax due as
determined at settlement, assessment or determination by the
Department of Revenue.
(3) Notwithstanding any other provision of law, the
Department of Revenue must settle, assess or determine the
tax of an applicant under this subsection within 90 days of
the filing of each required final return or report in
accordance with section 806.1(a)(5) of the act of April 9,
1929 (P.L.343, No.176), known as The Fiscal Code.
(b) Use by purchaser or assignee.--The purchaser or assignee
of all or a portion of a workforce development tax credit under
subsection (a) must immediately claim the credit in the taxable
year in which the purchase or assignment is made. The following
shall apply:
(1) The amount of the workforce development tax credit
that a purchaser or assignee may use against any one
qualified tax liability may not exceed 50% of the qualified
tax liability for the taxable year.
(2) The purchaser or assignee may not carry forward,
carry back or obtain a refund of or sell or assign the
workforce development tax credit.
(3) The purchaser or assignee shall notify the
Department of Revenue of the seller or assignor of the
workforce development tax credit in compliance with
procedures specified by the Department of Revenue.
Section 1847-G. Pass-through entity.
(a) General rule.--If a pass-through entity has any unused
tax credits under section 1845-G, the entity may elect in
writing, according to procedures established by the Department
of Revenue, to transfer all or a portion of the credit to
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shareholders, members or partners in proportion of the share of
the entity's distributive income to which the shareholder,
member or partner is entitled.
(b) Limitation.--A pass-through entity and a shareholder,
member or partner of a pass-through entity may not claim the
credit under subsection (a) for the same workforce development
investment.
(c) Application.--A shareholder, member or partner of a
pass-through entity to whom a credit is transferred under
subsection (a) shall immediately claim the credit in the taxable
year in which the transfer is made. The shareholder, member or
partner may not carry forward, carry back, obtain a refund of or
sell or assign the credit.
Section 1848-G. Penalties.
(a) Failure to maintain operations.--A taxpayer that
receives a workforce development tax credit and fails to
maintain existing operations related to the workforce
development tax credits in this Commonwealth for a period of at
least five years from the date the certificate is issued under
section 1844-G(b) must refund to the Commonwealth the total
amount of workforce development tax credits granted. The
Department of Revenue may issue an assessment, including
interest, additions and penalties, for the total amount of each
workforce development tax credit to be refunded to the
Commonwealth.
(b) Failure to maintain jobs.--A taxpayer which receives a
workforce development tax credit and fails to maintain the jobs
related to the workforce development tax credits for a period of
at least five years from the date the certificate is issued
under section 1844-G(b) must refund to the Commonwealth the
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total amount of workforce development tax credits granted. The
Department of Revenue may issue an assessment, including
interest, additions and penalties, for the total amount of
workforce development tax credits to be refunded to the
Commonwealth.
(c) Waiver.--The department may waive the penalties under
subsections (a) and (b) if it is determined that a taxpayer's
existing operations and jobs were not maintained because of
circumstances beyond the taxpayer's control. Circumstances shall
include natural disasters, unforeseen industry trends or a loss
of a major supplier or market.
Section 1849-G. Guidelines.
The department shall develop and publish guidelines necessary
to implement this part.
Section 4. This act shall take effect in 60 days.
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