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PRINTER'S NO. 592
THE GENERAL ASSEMBLY OF PENNSYLVANIA
HOUSE BILL
No.
653
Session of
2023
INTRODUCED BY FREEMAN, JAMES, D. WILLIAMS, MADDEN, SANCHEZ,
HILL-EVANS, ZIMMERMAN, DELLOSO, WARREN, NEILSON AND CIRESI,
MARCH 21, 2023
REFERRED TO COMMITTEE ON FINANCE, MARCH 21, 2023
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 tax credits for rehabilitation and
reconstruction of certain factory and mill buildings and for
a business 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-M
FACTORY OR MILL BUILDING
ECONOMIC REVITALIZATION
Section 1701-M. Definitions.
The following words and phrases when used in this article
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shall have the meanings given to them in this section unless the
context clearly indicates otherwise:
"Certifiable building." A factory or mill complex or a
building the use of which conforms to the comprehensive plan and
local land use management ordinances of the municipality in
which the factory or mill complex or building is located and
that:
(1) was constructed prior to January 1, 1973;
(2) has at least one floor, excluding a basement;
(3) has been, is or will be used primarily for
manufacturing, processing, wholesale trade and other
commercial purposes;
(4) is proposed for substantial rehabilitation;
(5) has been at a minimum 75% vacant for a minimum of 24
months at the time of submission by the municipality;
(6) is designated by the municipality for consideration
as a certifiable building as provided in this article; and
(7) meets any other requirement established by the
department.
"Certified building." A building with respect to which the
department has issued a written notice of final designation as a
certified building in accordance with section 1703-M.
"Certified building owner." An individual, partnership,
corporation, limited liability company or other entity which is
the owner of record of a certified building and may include one
or more successors in title to the owner of the building at the
time the building received written notice of final designation
as a certified building in accordance with section 1703-M. The
term includes the owner of a leasehold interest with a minimum
term of 30 years, with respect to which a memorandum of lease
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has been recorded in the office of the recorder of deeds of the
county.
"Department." The Department of Community and Economic
Development of the Commonwealth.
"Eligible business." Any business, corporation, sole
proprietorship, partnership, limited partnership or limited
liability company or other entity that:
(1) is located in a certified building after the
building has undergone substantial rehabilitation;
(2) is engaged principally in manufacturing, processing,
wholesale trade or other commercial business activities;
(3) has total Pennsylvania salaries and wages that
exceed the total Pennsylvania salaries and wages paid to its
employees in the prior calendar year;
(4) has received certification from the department in
accordance with rules and regulations of the department; and
(5) as part of its annual certification:
(i) obtains certificates of good standing from the
Department of Revenue, the Corporation Bureau of the
Department of State and the appropriate municipal
authority;
(ii) provides the department an affidavit stating
under oath that the entity seeking certification as an
eligible business has not within the preceding 12 months
from the date of application for certification changed
its legal status or location solely for the purpose of
gaining favorable treatment under this article; and
(iii) meets any other requirement as may be set
forth by the department.
"Factory or mill complex." One or more factory or mill
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buildings, located on the same or contiguous parcels of land,
each of which, at one time, had the same owner or owners.
"Qualified employee." A full-time employee of an eligible
business whose business activity originates and terminates from
within the eligible business and certified building on a daily
basis, who is employed by the eligible business at the end of
the calendar year and who is a resident of this Commonwealth.
"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.
"Rehabilitation and reconstruction costs." As follows:
(1) Only those amounts incurred and paid by the
certified building owner, after issuance of the notice of
final designation of the building, solely and exclusively for
the rehabilitation of the certified building and which are
incurred and paid by the certified building owner to acquire
tangible personal property and structural components of the
certified building which:
(i) are depreciated under 26 U.S.C. § 167 (relating
to depreciation);
(ii) have a useful life of three years or more as
evidenced by the tax depreciation method taken and shown
on the Federal tax return of the certified building
owner; and
(iii) are acquired by purchase as defined in 26
U.S.C. § 179(d) (relating to election to expense certain
depreciable business assets) .
(2) The term does not include amounts incurred or paid
with respect to tangible personal property and structural
components of the certified building which the certified
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building owner leases from any other person or corporation.
For purposes of this paragraph, any contract or agreement to
lease or rent or for a license to use the property shall be
considered a lease unless the contract or agreement is
treated for Federal income tax purposes of the certified
building owner as an installment purchase rather than a
lease.
"Salaries and wages." Salaries, wages, tips and other
compensation as defined in 26 U.S.C. § 61 (relating to gross
income defined).
"Substantial rehabilitation." Rehabilitation and
reconstruction costs of a certified building in a dollar amount
that equals or exceeds 20% of the appraised market value of the
certified building prior to rehabilitation or reconstruction, as
the prior market value is determined by a Commonwealth licensed
and certified appraiser who is independent of the certified
building owner or owners and their affiliated corporations and
any tenants of the certified building and their affiliated
corporations.
Section 1702-M. Building certification process.
(a) Initial consideration.--A municipality shall submit to
the department a list of industrial factory or mill structures
located within the municipality for consideration by the
department as to whether any of these structures qualify as
certifiable buildings. The department shall notify the
municipality as to which structures qualify as certifiable
buildings.
(b) Designation.--Eighteen months following the effective
date of this section, any building designated by the department
as a certifiable building may be submitted by the municipality
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to the department for preliminary designation as a certified
building if the municipality has given notice to the department:
(1) that within six months of the designation, the
municipality agrees to adopt an ordinance to:
(i) expedite the building permit review and approval
process required in the municipality for the
rehabilitation of certified buildings;
(ii) provide design standards in the municipality
which encourage historic preservation of certified
buildings and that conform to rehabilitation design
standards developed and recommended by the Pennsylvania
Historical and Museum Commission and the United States
Secretary of the Interior's Standards for the Treatment
of Historic Properties; and
(iii) require the review and approval by the
Pennsylvania Historical and Museum Commission be obtained
for the rehabilitation of any certified building in the
municipality;
(2) that within six months of the designation, the
municipality agrees to establish a program for eligible
businesses which coordinates the economic development
activities of State and local business assistance programs
and agencies; and
(3) that the building has been determined eligible for
listing on the National Register of Historic Places or is
already listed on the National Register of Historic Places.
(c) Treatment as separate building.--A portion of a building
may be treated as a separate building for purposes of this
article if:
(1) it consists of a clearly identifiable part of a
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certifiable building, including, without limitation, one or
more wings, stories or other separable portions of a
certifiable building;
(2) it is held by a single owner, whether in fee or as a
condominium, cooperative or leasehold interest; and
(3) at least one eligible business reasonably could be
operated within the confines of the portion of the building.
Section 1703-M. Notice of final designation of certified
building.
Upon notice to the department that the municipality has
satisfied the requirements of section 1702-M(b)(1) and (2), the
department shall provide to the municipality and to the
certified building owner a written notice of final designation,
which notice shall include a statement that an independent
appraisal is required in order to document substantial
rehabilitation.
Section 1704-M. Certified building rehabilitation.
(a) General rule.--A certified building shall be treated as
having been substantially rehabilitated only if the
reconstruction and rehabilitation expenditures incurred during
the 32-month period selected by the certified building owner and
ending with or within the taxable year in which the
rehabilitated certified building is first placed in service by
the certified building owner meet the definition of "substantial
rehabilitation." For purposes of determining whether the
certified building has been substantially rehabilitated, the
market value of the certified building shall be determined at
the beginning of the first day of the 32-month period.
(b) Special rule for phased rehabilitation.--In the case of
any rehabilitation which may reasonably be expected to be
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completed in phases set forth in architectural, engineering and
relevant historic preservation plans, documentation and
specifications completed before the rehabilitation begins,
subsection (a) shall be applied by substituting a 60-month
period for the 32-month period.
Section 1705-M. Tax credit.
(a) General rule.--A certified building owner may be allowed
a tax credit against the qualified tax liability of the owner.
(b) Eligible costs.--The taxpayer may claim a tax credit for
the rehabilitation and reconstruction costs of a certified
building which has been substantially rehabilitated. Once
substantial rehabilitation is established by the taxpayer, the
taxpayer may claim a tax credit for all rehabilitation and
reconstruction costs incurred with respect to the certified
building within five years from the date of final designation of
the certified building under section 1703-M.
(c) Amount.--The tax credit shall be 25% of the
rehabilitation and reconstruction costs of the certified
building. The tax credit shall be allowable in the year the
substantially rehabilitated certified building is first placed
into service, which is the year in which, under the taxpayer's
depreciation practice, the period for depreciation with respect
to the property begins or the year in which the property is
placed in a condition or state of readiness and availability for
its specifically assigned function, whichever is earlier.
(d) Limitations.--Amounts of unused tax credit may be
carried over and offset against the taxpayer's qualified tax
liability for a period not to exceed the following seven taxable
years. A taxpayer is not entitled to carry back, obtain a refund
for, sell or assign an unused tax credit.
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Section 1706-M. Business tax credit.
A taxpayer who owns and operates an eligible business within
a certified building that has been substantially rehabilitated
is allowed a tax credit against the qualified tax liability of
the taxpayer as follows:
(1) A tax credit equal to 100% of the total amount of
Pennsylvania salaries and wages as are paid to qualified
employees in excess of Pennsylvania salaries and wages paid
to the same employees in the prior calendar year. The maximum
tax credit allowable per taxable year under the provisions of
this paragraph is $7,000 per qualified employee.
(2) A tax credit provided in paragraph (1) shall not
offset any tax liability in years other than the year in
which the taxpayer qualifies for the tax credit. A taxpayer
is not entitled to carry back, obtain a refund of, sell or
assign an unused tax credit.
(3) In the case of multiple business owners, the tax
credit provided in paragraph (1) is apportioned according to
the ownership interests of the eligible business.
Section 1707-M. Interest income.
(a) Loans to eligible businesses.--A taxpayer is allowed a
tax credit of 15% of the qualified tax liability of the taxpayer
for interest earned and paid on loans made to eligible
businesses, solely and exclusively for expenditures within the
certified building.
(b) Loans for substantial rehabilitation.--The taxpayer is
further allowed a tax credit of 100% of the qualified tax
liability of the taxpayer for interest earned on loans made
solely and exclusively for the purpose of substantial
rehabilitation.
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(c) Limitation.--A tax credit under this section shall not
offset any tax liability in taxable years other than the year in
which the taxpayer qualifies for the tax credit. A taxpayer is
not entitled to carry back, obtain a refund of, sell or assign
an unused tax credit.
(d) Amount.--The taxpayer is allowed a maximum tax credit of
$12,000 per taxable year under subsection (a). The taxpayer is
allowed a maximum tax credit of $25,000 per taxable year under
subsection (b).
Section 1708-M. Revocation of certification.
The department may revoke the certification of any building
certified under section 1703-M, and may revoke the eligibility
of any business defined as an eligible business, for
noncompliance with the provisions of this article.
Section 1709-M. Limitation.
The total aggregate amount of tax credits approved under this
article shall not exceed $13,000,000 in a fiscal year.
Section 1710-M. Penalties.
(a) Failure to maintain operations.--A certified building
owner that receives a tax credit and fails to substantially
maintain existing operations in the certified building for which
the tax credit is claimed for a period of five years from the
date the tax credit is first allowable shall be required to
refund to the Commonwealth the total amount of credit or credits
granted.
(b) Waiver.--The department may waive the penalty outlined
in subsection (a) if it is determined that a certified building
owner's operations were not maintained because of circumstances
beyond the owner's control, which circumstances include natural
disasters, unforeseen industry trends or a loss of a major
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supplier or market.
Section 1711-M. Regulations.
The department shall promulgate regulations as may be
necessary to administer this article.
Section 1712-M. Report to General Assembly.
(a) Report.--No later than June 1, 2024, and September 1 of
each year thereafter, the Secretary of Community and Economic
Development shall submit a report to the General Assembly
summarizing the effectiveness of the tax credits provided by
this article. The report shall include the names of all
taxpayers utilizing any tax credit under this article as of the
date of the report and the amount of credit approved for and
utilized by each taxpayer. The report may also include any
recommendations for changes in the calculation or administration
of the tax credits. The report shall be submitted 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.
(b) Public information.--Notwithstanding any law providing
for the confidentiality of tax records, the information in the
report shall be public information, and all report information
shall be posted on the department's publicly accessible Internet
website.
Section 2. The addition of Article XVII-M of the act applies
to tax years beginning after December 31, 2023.
Section 3. This act shall take effect immediately.
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