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A03494
THE GENERAL ASSEMBLY OF PENNSYLVANIA
HOUSE BILL
No.
1745
Session of
2023
INTRODUCED BY FRIEL, MARCELL, HILL-EVANS, T. DAVIS, McNEILL,
BRENNAN, MADDEN, HANBIDGE, ROZZI, SANCHEZ, WEBSTER, GUENST,
PROBST, KAZEEM, SHUSTERMAN, OTTEN, BOROWSKI, DALEY, TAKAC,
GREEN, ISAACSON AND CERRATO, OCTOBER 31, 2023
AS REPORTED FROM COMMITTEE ON EDUCATION, HOUSE OF
REPRESENTATIVES, AS AMENDED, DECEMBER 12, 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," in personal income tax, further providing for
classes of income; and providing for 529 savings account
employer contribution tax credit.
The General Assembly of the Commonwealth of Pennsylvania
hereby enacts as follows:
Section 1. Section 303(a.7)(2)(i) of the act of March 4,
1971 (P.L.6, No.2), known as the Tax Reform Code of 1971, is
amended by adding a clause to read:
Section 303. Classes of Income.--* * *
(a.7) The following apply:
* * *
(2) (i) The following shall not be subject to tax under
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this article:
* * *
(E) Any amount received by an employe through an employer's
contribution to an account under Article XIX-J. OWNED BY AN
EMPLOYE WHO HAS ENTERED INTO A TUITION ACCOUNT PROGRAM CONTRACT
UNDER THE ACT OF APRIL 3, 1992 (P.L.28, NO.11), KNOWN AS THE
"TUITION ACCOUNT PROGRAMS AND COLLEGE SAVINGS BOND ACT." as
defined under Article XIX-J.
* * *
Section 2. The act is amended by adding an article to read:
ARTICLE XIX-J
529 SAVINGS ACCOUNT EMPLOYER
CONTRIBUTION TAX CREDIT
Section 1901-J. Scope of article.
This article relates to the 529 savings account employer
contribution tax credit program.
Section 1902-J. Definitions.
The following words and phrases when used in this article
have the meanings given to them in this section unless the
context clearly indicates otherwise:
"Account." An account owned by an employee who has entered
into a Tuition Account Program Contract under the act of April
3, 1992 (P.L.28, No.11), known as the Tuition Account Programs
and College Savings Bond Act, OR A TUITION ACCOUNT PROGRAM
CONTRACT ADMINISTERED BY ANOTHER STATE, notwithstanding the
named beneficiary of the account.
"Contribution." A deposit of money into an employee-owned
account during the tax year.
"Department." The TREASURY Department of Revenue of the
Commonwealth.
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" 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.
" STATE TAX LIABILITY. " ANY OF THE TAXES DUE UNDER ARTICLE
III, IV, VII, VIII, IX, XV OR XX OR A TAX UNDER ARTICLE XVI OF
THE ACT OF MAY 17, 1921 (P.L.682, NO.284), KNOWN AS THE
INSURANCE COMPANY LAW OF 1921 . THE TERM SHALL NOT INCLUDE ANY
TAX WITHHELD BY AN EMPLOYER FROM AN EMPLOYEE UNDER ARTICLE III.
"Tax credit." The 529 savings account employer contribution
tax credit established under section 1903-J.
"Tuition Account Program Contract." As defined in section
302 of the Tuition Account Programs and College Savings Bond
Act.
Section 1903-J. Credit for employer contributions to tuition
savings accounts.
(a) Tax credit.--For taxable years beginning after December
31, 2023, and ending before January 1, 2029, an employer that
makes a contribution to an account owned by an employee under
the Tuition Account Guaranteed Savings Program OR TUITION
ACCOUNT INVESTMENT PROGRAM this article may claim a tax credit
against the employer's State tax liability.
(b) Amount of tax credit.--The amount of the tax credit
under subsection (a) shall be equal to 25% of the employer's
aggregate contributions made to accounts owned by employees
during the tax year.
(c) Contribution limit for employers.--The total amount of
contributions that an employer may make to accounts owned by
employees shall be no more than $500 per employee during the tax
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year.
(d) Proof of contribution.--In order to receive the tax
credit, an employer shall provide the department with proof that
the employer has made qualifying contributions to employee-owned
accounts under this article at the time of filing the employer's
tax return.
Section 1904-J. Carryover, carryback and , assignment AND PASS-
THROUGH of credit.
(a) General rule.--If the amount of the tax credit allowed
under this article exceeds the employer's tax liability in the
tax year in which the tax credit is approved, the excess tax
credit may be carried over to succeeding tax years for a period
not to exceed three years to reduce the employer's tax liability
during those tax years. The following shall apply:
(1) A tax credit that is carried over to succeeding tax
years must be applied first to the earliest tax year
possible.
(2) Any credit remaining after three tax years following
the initial approval of a tax credit under this article shall
not be refunded or credited to the employer.
(b) No carryback or refund.--An employer approved for a tax
credit is not entitled to carry back or obtain a refund of all
or any portion of an unused tax credit granted to the employer
under this article.
(C) PASS-THROUGH ENTITY.--IF AN EMPLOYER IS A PASS-THROUGH
ENTITY AND HAS AN UNUSED TAX CREDIT UNDER SECTION 1903-J, THE
EMPLOYER MAY ELECT IN WRITING, ACCORDING TO PROCEDURES
ESTABLISHED BY THE DEPARTMENT OF REVENUE, 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
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WHICH THE SHAREHOLDER, MEMBER OR PARTNER IS ENTITLED. THE
FOLLOWING APPLY:
(1) THE SAME UNUSED TAX CREDIT UNDER SUBSECTION (B) MAY
NOT BE CLAIMED BY:
(I) THE PASS-THROUGH ENTITY; AND
(II) A SHAREHOLDER, MEMBER OR PATRON OF THE PASS-
THROUGH ENTITY.
(2) A SHAREHOLDER, MEMBER OR PARTNER OF A PASS-THROUGH
ENTITY TO WHOM A CREDIT IS TRANSFERRED UNDER THIS SUBSECTION
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 1905-J. Departmental duties.
(a) Guidelines.--The department shall publish guidelines and
may promulgate regulations necessary for the implementation and
administration of this article.
(b) Verification of contributions.--The department shall
coordinate with the Treasury Department to obtain PROVIDE THE
DEPARTMENT OF REVENUE WITH information necessary to verify that
an employer applying for a tax credit under this article has
made contributions to employees' accounts and the aggregate
amount of contributions made.
Section 1906-J. Nondiscrimination in contributions.
(a) Accounts owned by employees.--An employee who owns an
account shall have equal opportunity to receive a contribution
from the employer.
(b) Duty of employers.--If an employer chooses to make
contributions to employee-owned accounts for the purposes of
claiming the tax credit, the employer shall make equal
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contributions during the tax year to any employee that either
owns an account or chooses to open an account while employed by
the employer.
(c) Rights of employees.--An employee who owns an account
may voluntarily opt out of an employer contribution benefit
during any tax year. An employee who opts out of a contribution
benefit from the employer during one tax year may elect to
receive the contribution benefit during another succeeding tax
year.
Section 1907-J. Report to General Assembly.
(a) Annual report.--No later than July 1, 2024, and each
July 1 thereafter, the department shall submit a report to the
General Assembly indicating the effectiveness of the tax credit
under this article.
(b) Information required.--The report required under
subsection (a) shall include the following information:
(1) The number of tax credits approved under this
article.
(2) The amount of tax credits approved under this
article.
(3) The number of tax credits denied and the reason for
denial.
Section 3. This act shall take effect in 60 days.
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