PRINTER'S NO. 605
THE GENERAL ASSEMBLY OF PENNSYLVANIA
SENATE BILL
No.
541
Session of
2019
INTRODUCED BY ARGALL, SCHWANK, MARTIN, FARNESE, KEARNEY,
KILLION, COSTA, J. WARD, YUDICHAK, BLAKE, BREWSTER, STEFANO,
LEACH AND DINNIMAN, APRIL 10, 2019
REFERRED TO FINANCE, APRIL 10, 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 historic preservation incentive tax credit,
further providing for definitions and for tax credit
certificates, establishing the Historic Rehabilitation Tax
Credit Administration Account, further providing for
carryover, carryback and assignment of credit and for pass-
through entity, providing for annual report to General
Assembly, further providing for application of Internal
Revenue Code and for limitation and providing for recapture.
The General Assembly of the Commonwealth of Pennsylvania
hereby enacts as follows:
Section 1. Sections 1702-H, 1703-H, 1705-H(d) and (e) and
1706-H of the act of March 4, 1971 (P.L.6, No.2), known as the
Tax Reform Code of 1971, are amended to read:
Section 1702-H. Definitions.
The following words and phrases when used in this article
shall have the meanings given to them in this section unless the
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context clearly indicates otherwise:
"Commission." The Pennsylvania Historical and Museum
Commission.
"Completed project." The completion of the [restoration]
rehabilitation of a qualified historic structure in accordance
with a qualified rehabilitation plan and the receipt of an
occupancy certificate for the structure.
"Department." The Department of Revenue of the Commonwealth.
"Internal Revenue Code." The Internal Revenue Code of 1986
(Public Law 99-514, 26 U.S.C. § 1 et seq.).
"Qualified expenditures." The costs and expenses incurred by
a qualified taxpayer in the [restoration] rehabilitation of a
qualified historic structure pursuant to a qualified
rehabilitation plan and which are defined as qualified
rehabilitation expenditures under section 47(c)(2) of the
Internal Revenue Code of 1986 (Public Law 99-514, 26 U.S.C. §
47(c)(2)).
"Qualified historic structure." A [commercial] building
located in this Commonwealth that qualifies as a certified
historic structure under section 47(c)(3) of the Internal
Revenue Code of 1986 (Public Law 99-514, 26 U.S.C. § 47(c)(3)).
"Qualified rehabilitation plan." A plan to rehabilitate a
qualified historic structure that is approved by the
Pennsylvania Historical and Museum Commission as being
consistent with the standards for rehabilitation and guidelines
for rehabilitation of historic buildings as adopted by the
United States Secretary of the Interior.
"Qualified tax liability." Tax liability imposed on a
taxpayer under Article III, IV, VI, VII, VIII, IX, XI or XV,
excluding any tax withheld by an employer under Article III.
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"Qualified taxpayer." Any natural person, corporation,
business trust, limited liability company, partnership, limited
liability partnership, association or any other form of legal
business entity that:
(1) Is subject to a tax imposed under Article III, IV,
VI, VII, VIII, IX, XI or XV, excluding any tax withheld by an
employer under Article III.
(2) Owns a qualified historic structure.
"Region." A community action team region as established by
the Department of Community and Economic Development.
"Workforce housing." A completed project in which at least
5% of the units meet the Department of Housing and Urban
Development's definition of "affordable" for individuals earning
80% of the area median income for a period of seven years after
the building is placed in service.
Section 1703-H. Tax credit certificates.
(a) Application.--
(1) A qualified taxpayer may apply to the Department of
Community and Economic Development for a tax credit
certificate under this section.
(2) The application shall be on the form required by the
Department of Community and Economic Development [and], shall
include a qualified rehabilitation plan[.], shall state
whether the project meets the definition of "workforce
housing" and, if applicable, shall include the plan for the
project to meet the definition of "workforce housing."
[(3) The application shall be filed on or before
February 1 for qualified expenditures incurred and to be
incurred in connection with the completed project.]
(3) The Department of Community and Economic Development
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shall establish an application processing fee. The fee
structure shall be tiered based on the amount of tax credits
requested and in no case shall exceed $2,000.
(4) The proceeds of the fee under paragraph (3) shall be
deposited into the Historic Rehabilitation Tax Credit
Administration Account, which is established as a special
fund in the State Treasury. The money in the account shall be
appropriated on a continuing basis to the Department of
Community and Economic Development and used by the commission
and the Department of Community and Economic Development to
offset the costs of the review of tax credit applications and
awarding of tax credit certificates.
(5) The Department of Community and Economic Development
shall begin accepting applications for credit certificates on
October 1 and close the initial application period on October
31.
(b) Review, recommendation and approval.--
(1) The Department of Community and Economic Development
shall forward applications received under this section to the
commission for review.
[(2) The commission shall review the proposed
rehabilitation plan, verify that the building is a qualified
historic structure and recommend approval or disapproval to
the Department of Community and Economic Development within
30 days of receipt of the application. The commission shall
notify the qualified taxpayer within 15 days of its
determination.]
(2.1) The commission shall review the proposed
rehabilitation plan in each application, verify that the
building is a qualified historic structure and by December 1
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provide the Department of Community and Economic Development
a list of eligible projects.
(2.2) The Department of Community and Economic
Development shall allocate the credits and release a list of
allocated projects within 15 days. Applicants with approved
allocations shall be provided with an award letter.
(2.3) Any amount of tax credit certificates up to the
annual program limit of $30,000,000 not awarded within the
initial application period shall be available on a first-
come, first-served basis through a process determined by the
Department of Community and Economic Development.
(3) The commission shall notify the Department of
Community and Economic Development of verification of a
completed project and notify the Department of Community and
Economic Development of the amount of qualified expenditures
incurred by the taxpayer in connection with the completed
project.
(4) If the Department of Community and Economic
Development has approved the application and received
notification of a completed project, it shall issue the
qualified taxpayer a tax credit certificate [by April 1]
within 45 days of the receipt of an approved, completed
project. A tax credit certificate issued under this section
shall not exceed [25%] either:
(i) twenty-five percent of qualified expenditures
determined by the commission to have been incurred by the
qualified taxpayer in connection with the completed
project[.]; or
(ii) thirty percent of qualified expenditures
determined by the commission to have been incurred by the
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qualified taxpayer in connection with a completed
workforce housing project.
(5) In granting tax credit certificates under this
article, the Department of Community and Economic
Development:
(i) Shall not grant more than [$3,000,000]
$30,000,000 in tax credit certificates in any fiscal year
exclusive of any tax credit certificates not awarded or
returned from previous fiscal years.
(ii) Shall not grant more than [$500,000] $2,500,000
in tax credit certificates to a single qualified taxpayer
in any fiscal year.
(iii) Shall assure that credits are awarded in an
equitable manner to each region in this Commonwealth.
However, credits allocated to a region that are unclaimed
shall be promptly reallocated to eligible projects in
other regions.
(6) Tax credits under this article shall be made
available on a first-come, first-served basis within the
limitation established under subsection (b)(5).
Section 1705-H. Carryover, carryback and assignment of credit.
* * *
(d) Sale or assignment.--The following shall apply:
(1) A qualified taxpayer or a purchaser or assignee of
the tax credit or a shareholder, member or partner of a pass-
through entity that was transferred the tax credit or a
portion of the tax credit from such pass-through entity
subject to section 1706-H, upon application to and approval
by the Department of Community and Economic Development, may
sell or assign[, in whole or in part,] a tax credit granted
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to the qualified taxpayer under this article[.] without
regard to its actual ability to use the credit against its
qualified tax liability. Any sale or assignment, whether by a
qualified taxpayer or a purchaser or assignee of the tax
credit or a shareholder, member or partner of a pass-through
entity, pursuant to this paragraph, may be of the whole tax
credit or any part or parts thereof.
(2) Before an application is approved, the department
must find that the applicant has filed all required State tax
reports and returns for all applicable taxable years and paid
any balance of State tax due as determined at settlement,
assessment or determination by the department.
(e) Purchasers and assignees.--[The purchaser or assignee of
all or a portion of a tax credit obtained under section 1703-H
shall immediately claim the credit in the taxable year in which
the purchase or assignment is made. The purchaser or assignee
may not carry forward, carry back or obtain a refund of or sell
or assign the tax credit. The purchaser or assignee shall notify
the department of the seller or assignor of the tax credit in
compliance with procedures specified by the department.]
(1) If a purchaser or assignee of all or a portion of a
tax credit obtained under section 1703-H cannot use the
entire amount of the tax credit for the taxable year in which
the tax credit was purchased or assigned, the excess may be
carried over to succeeding taxable years and used as a credit
against the qualified tax liability of the purchaser or
assignee for those taxable years.
(2) Each time the tax credit is carried over to a
succeeding taxable year, the tax credit shall be reduced by
the amount that was used as a credit during the immediately
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preceding taxable year.
(3) The tax credit obtained by the purchaser or assignee
may be carried over and applied to succeeding taxable years
for not more than seven taxable years following the first
taxable year for which the original qualified taxpayer was
entitled to claim the credit.
(4) The purchaser or assignee may not carry back the
credit or obtain a refund.
(5) The purchaser or assignee shall be permitted to make
a further sale or assignment of the credit. The purchaser or
assignee shall notify the department of the seller or
assignor of the tax credit in compliance with procedures
specified by the department.
Section 1706-H. Pass-through entity.
(a) General rule.--If a pass-through entity has any unused
tax credit under section 1705-H, it may elect, in writing,
according to procedures established by the department, to
transfer all or a portion of the credit to its shareholders,
members or partners in [proportion to the share of the entity's
distributive income to which the shareholder, member or partner
is entitled.] any manner agreed to by the shareholders, members
or partners without regard to their sharing or other economic
attributes. A shareholder, member or partner that is transferred
a tax credit or a portion of a tax credit may elect to sell or
assign that credit under the provisions of section 1705-H(d).
(b) Limitation.--A pass-through entity and a shareholder,
member or partner of a pass-through entity shall not claim the
credit under subsection (a) for the same qualified expenditures.
(c) Application.--[A shareholder, member or partner of a
pass-through entity to whom a credit is transferred under
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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.]
(1) If a shareholder, member or partner of a pass-
through entity that is transferred a tax credit or a portion
of a tax credit under subsection (a) cannot use the entire
amount of the tax credit for the taxable year in which the
tax credit is transferred, the excess may be carried over to
succeeding taxable years and used as a credit against the
qualified tax liability of the shareholder, member or partner
for those taxable years.
(2) Each time the tax credit is carried over to a
succeeding taxable year, the tax credit shall be reduced by
the amount that was used as a credit during the immediately
preceding taxable year.
(3) The tax credit transferred to a shareholder, member
or partner may be carried over and applied to succeeding
taxable years for not more than seven taxable years following
the first taxable year for which the original qualified
taxpayer was entitled to claim the credit.
(4) A shareholder, member or partner may not carry back
the credit or obtain a refund.
(5) A shareholder, member or partner may sell or assign
the tax credit or a portion of a tax credit without regard to
its ability to use the tax credit against qualified tax
liability.
Section 2. The act is amended by adding a section to read:
Section 1707.1-H. Annual report to General Assembly.
(a) Report on tax credit.--By October 1, 2020, and October 1
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of each year thereafter, the Department of Community and
Economic Development shall submit a report on the tax credit
under this article to:
(1) The chairperson and minority chairperson of the
Appropriations Committee of the Senate.
(2) The chairperson and minority chairperson of the
Appropriations Committee of the House of Representatives.
(3) The chairperson and minority chairperson of the
Finance Committee of the Senate.
(4) The chairperson and minority chairperson of the
Finance Committee of the House of Representatives.
(b) Report content.--The report shall include:
(1) The list of projects that have been awarded tax
credits.
(2) The amount of Federal rehabilitation tax credits
received by each completed project.
(3) The amount of State historic preservation incentive
tax credits awarded per project.
(4) Total project costs and the amount of private
investment in each completed project.
(5) The total number of completed projects placed into
service in the past year that were vacant for at least 12
months prior to commencement of redevelopment work.
(6) The total number of completed projects placed into
service in the past year that had not paid property taxes for
at least 12 months prior to the commencement of redevelopment
work.
(7) The total number of temporary construction jobs and
permanent jobs created by completed projects placed into
service in the prior year.
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(8) The amount of completed workforce housing projects
placed into service in the prior year.
(c) Information to be posted on public Internet website.--
Notwithstanding any law providing for the confidentiality of tax
records, the information in the report shall be public
information and shall be posted on the Department of Community
and Economic Development's publicly accessible Internet website.
(d) Review of tax credit program.--The Department of
Community and Economic Development, in cooperation with the
commission, shall undertake a review of the Historic
Preservation Incentive Tax Credit Program to determine the
effectiveness of the program in preserving and rehabilitating
the Commonwealth's historic structures and the impact these
preservation efforts have in stimulating investment in this
Commonwealth. The results of the review shall be included in the
annual report due October 1, 2025.
Section 3. Sections 1708-H and 1709-H of the act are amended
to read:
Section 1708-H. Application of Internal Revenue Code.
The provisions of section 47 of the Internal Revenue Code and
the regulations promulgated regarding those provisions shall
apply to the department's interpretation and administration of
the credit provided under this article without regard to ratably
allocating the credit over a five-year period as required by
section 47(a) of the Internal Revenue Code. References to the
Internal Revenue Code shall mean the sections of the Internal
Revenue Code as existing on any date of interpretation of this
article, except, if those sections of the Internal Revenue Code
referenced in this article are repealed or terminated,
references to the Internal Revenue Code shall mean those
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sections last having full force and effect without regard to
ratably allocating the credit over a five-year period as
required by section 47(a) of the Internal Revenue Code. If after
repeal or termination the Internal Revenue Code sections are
revised or reenacted, references in this article to Internal
Revenue Code sections shall mean those revised or reenacted
sections.
Section 1709-H. Limitation.
Taxpayers shall not be entitled to apply for historic
preservation tax credits after [the seventh fiscal year
following the effective date of this article] February 1, 2031.
Section 4. The act is amended by adding a section to read:
Section 1710-H. Recapture.
In the event that a tax credit or a portion of a tax credit
is subject to recapture and the tax credit has been purchased,
assigned or transferred, the State shall pursue its recapture
remedies and rights against the qualified taxpayer that applied
for the credit. No redress shall be sought against an assignee,
purchaser or transferee of the tax credit if the assignee,
purchaser or transferee acquired the tax credit by way of an
arm's-length transaction, for value and without notice of
violation, fraud or misrepresentation.
Section 5. This act shall take effect in 60 days.
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