PRINTER'S NO. 1046
No. 20 Session of 1999
INTRODUCED BY SAYLOR, TRELLO, BROWNE, McNAUGHTON, BENNINGHOFF,
DEMPSEY, HUTCHINSON, MAHER, MARKOSEK, PIPPY, RAYMOND, RUBLEY,
WILLIAMS, BAKER, FARGO, ARMSTRONG, BARD, BARRAR, BIRMELIN,
BUNT, CALTAGIRONE, CAWLEY, CHADWICK, L. I. COHEN, COY,
DeLUCA, EGOLF, FLICK, FORCIER, GEIST, GEORGE, GLADECK,
GODSHALL, HALUSKA, HERSHEY, KENNEY, LYNCH, MAITLAND, MARSICO,
MASLAND, MAYERNIK, McILHINNEY, MUNDY, ORIE, PLATTS, ROSS,
SCHRODER, SEMMEL, SERAFINI, SEYFERT, STAIRS, STEELMAN, STERN,
STEVENSON, STRITTMATTER, E. Z. TAYLOR, TULLI, WALKO, YEWCIC,
YOUNGBLOOD AND ZUG, MARCH 22, 1999
REFERRED TO COMMITTEE ON FINANCE, MARCH 22, 1999
AN ACT
1 Amending the act of March 4, 1971 (P.L.6, No.2), entitled "An
2 act relating to tax reform and State taxation by codifying
3 and enumerating certain subjects of taxation and imposing
4 taxes thereon; providing procedures for the payment,
5 collection, administration and enforcement thereof; providing
6 for tax credits in certain cases; conferring powers and
7 imposing duties upon the Department of Revenue, certain
8 employers, fiduciaries, individuals, persons, corporations
9 and other entities; prescribing crimes, offenses and
10 penalties," providing that corporations subject to the
11 corporate net income tax and capital stock and franchise tax
12 pay the higher of the taxes; reducing the minimum capital
13 stock and franchise tax; and reducing the millage transferred
14 to the Hazardous Sites Cleanup Fund.
15 The General Assembly of the Commonwealth of Pennsylvania
16 hereby enacts as follows:
17 Section 1. Section 402 of the act of March 4, 1971 (P.L.6,
18 No.2), known as the Tax Reform Code of 1971, amended June 30,
19 1995 (P.L.139, No.21), is amended to read:
20 Section 402. Imposition of Tax.--[Every] (a) Subject to the
1 provisions of subsection (b), every corporation shall be subject
2 to, and shall pay for the privilege of (i) doing business in
3 this Commonwealth; or (ii) carrying on activities in this
4 Commonwealth; (iii) having capital or property employed or used
5 in this Commonwealth; or (iv) owning property in this
6 Commonwealth, by or in the name of itself, or any person,
7 partnership, association, limited partnership, joint-stock
8 association, or corporation, a State excise tax at the rate of
9 twelve per cent per annum upon each dollar of taxable income of
10 such corporation received by, and accruing to, such corporation
11 during the calendar year 1971 and the first six months of 1972
12 and at the rate of eleven per cent per annum upon each dollar of
13 taxable income of such corporation received by, and accruing to,
14 such corporation during the second six months of calendar year
15 1972 through the calendar year 1973 and at the rate of nine and
16 one-half per cent per annum upon each dollar of taxable income
17 of such corporation received by, and accruing to, such
18 corporation during the calendar years 1974, 1975 and 1976 and at
19 the rate of ten and one-half per cent per annum upon each dollar
20 of taxable income of such corporation received by, and accruing
21 to, such corporation during the calendar year 1977 through the
22 calendar year 1984 and at the rate of nine and one-half per cent
23 per annum upon each dollar of taxable income of such corporation
24 received by and accruing to such corporation during the calendar
25 year 1985 through calendar year 1986 and at the rate of eight
26 and one-half per cent per annum upon each dollar of taxable
27 income of such corporation received by and accruing to such
28 corporation during the calendar year 1987 through the calendar
29 year 1990 and at the rate of ten and one-half per cent per annum
30 upon each dollar of taxable income of such corporation received
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1 by and accruing to such corporation during calendar year 1991
2 through the calendar year 1994 and at the rate of nine and
3 ninety-nine hundredths per cent per annum upon each dollar of
4 taxable income of such corporation received by and accruing to
5 such corporation during the calendar year 1995 and during each
6 calendar year thereafter, with an additional surtax equal to one
7 and seventy-five hundredths per cent per annum upon each dollar
8 of taxable income of such corporation received by and accruing
9 to such corporation during calendar year 1991 and through
10 calendar year 1993 and with an additional surtax equal to one
11 and forty-nine hundredths per cent per annum upon each dollar of
12 taxable income of such corporation received by and accruing to
13 such corporation during calendar year 1994 and with no surtax
14 during calendar year 1995 and each calendar year thereafter,
15 except where a corporation reports to the Federal Government on
16 the basis of a fiscal year, and has certified such fact to the
17 department as required by section 403 of this article, in which
18 case, such tax, at the rate of twelve per cent, shall be levied,
19 collected, and paid upon all taxable income received by, and
20 accruing to, such corporation during the first six months of the
21 fiscal year commencing in the calendar year 1972 and at the rate
22 of eleven per cent, shall be levied, collected, and paid upon
23 all taxable income received by, and accruing to, such
24 corporation during the second six months of the fiscal year
25 commencing in the calendar year 1972 and during the fiscal year
26 commencing in the calendar year 1973 and at the rate of nine and
27 one-half per cent, shall be levied, collected, and paid upon all
28 taxable income received by, and accruing to, such corporation
29 during the fiscal year commencing in the calendar years 1974,
30 1975 and 1976 and at the rate of ten and one-half per cent,
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1 shall be levied, collected, and paid upon all taxable income
2 received by, and accruing to, such corporation during the fiscal
3 year commencing in the calendar year 1977 through the fiscal
4 year commencing in 1984 and at the rate of nine and one-half per
5 cent, shall be levied, collected, and paid upon all taxable
6 income received by and accruing to such corporation during the
7 fiscal year commencing in 1985 through the fiscal year
8 commencing in 1986 and at the rate of eight and one-half per
9 cent per annum upon each dollar of taxable income of such
10 corporation received by and accruing to such corporation during
11 the fiscal year commencing in 1987 through the fiscal year
12 commencing in 1990 and at the rate of ten and one-half per cent
13 per annum upon each dollar of taxable income of such corporation
14 received by and accruing to such corporation during the fiscal
15 year commencing in 1991 through the fiscal year commencing in
16 1994 and at the rate of nine and ninety-nine hundredths per cent
17 per annum upon each dollar of taxable income of such corporation
18 received by and accruing to such corporation during the fiscal
19 year commencing in 1995 and during each fiscal year thereafter,
20 with an additional surtax equal to one and seventy-five
21 hundredths per cent per annum upon each dollar of taxable income
22 of such corporation received by and accruing to such corporation
23 during the fiscal year commencing in 1991 and through fiscal
24 year 1993 and with an additional surtax equal to one and forty-
25 nine hundredths per cent per annum upon each dollar of taxable
26 income of such corporation received by and accruing to such
27 corporation during fiscal year 1994 and with no surtax during
28 the fiscal year commencing in 1995 and each fiscal year
29 thereafter. No penalty prescribed by subsection (e) of section
30 3003 shall be assessed against a corporation for the additional
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1 tax which may be due as a result of the increase in tax rate
2 from nine and one-half per cent to ten and one-half per cent
3 imposed retroactively by this section for the calendar year 1977
4 or for the fiscal year commencing in 1977.
5 (b) Notwithstanding any other provisions of this article or
6 Article VI to the contrary, commencing in the calendar year 2007
7 or the fiscal year commencing in 2007 and each calendar or
8 fiscal year thereafter, any corporation that is subject to tax
9 under this article and Article VI shall only be required to pay
10 one tax which shall be the higher of the tax liabilities under
11 this article or Article VI.
12 Section 2. The definition of "Capital stock value" in
13 section 601 of the act, amended May 7, 1997 (P.L.85, No.7), is
14 amended to read:
15 Section 601. Definitions and Reports.--(a) The following
16 words, terms and phrases when used in this Article VI shall have
17 the meaning ascribed to them in this section, except where the
18 context clearly indicates a different meaning:
19 * * *
20 "Capital stock value." The amount computed pursuant to the
21 following formula: the product of one-half times the sum of the
22 average net income capitalized at the rate of nine and one-half
23 per cent plus seventy-five per cent of net worth, from which
24 product shall be subtracted [one hundred twenty-five thousand
25 dollars ($125,000)] the exclusion set forth in subsection (j),
26 the algebraic equivalent of which is (.5 X (average net
27 income/.095 + (.75) (net worth))) - [$125,000] the exclusion set
28 forth in subjection (j)
29 * * *
30 Section 3. Section 602 of the act, amended April 23, 1998
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1 (P.L.239, No.45), is amended to read:
2 Section 602. Imposition of Tax.--(a) [That] Subject to the
3 provisions of subsection (k), every domestic entity from which a
4 report is required under section 601 hereof, shall be subject
5 to, and pay to the department annually, a tax which is the
6 greater of (i) [three hundred dollars ($300) or (ii) the amount
7 computed at the rates provided in subsection (h) upon each
8 dollar of the capital stock value as defined in section 601(a)],
9 the amount computed by multiplying each dollar of the capital
10 stock value as defined in section 601(a) by the appropriate rate
11 of tax as set forth in subsection (h); or (ii) the minimum tax
12 set forth in subsection (i), except that any domestic entity or
13 company subject to the tax prescribed herein may elect to
14 compute and pay its tax under and in accordance with the
15 provisions of subsection (b) of this section 602: Provided,
16 That, except for the imposition of the [three hundred dollar
17 ($300)] minimum tax set forth in subsection (i), the provisions
18 of this section shall not apply to the taxation of the capital
19 stock of entities organized for manufacturing, processing,
20 research or development purposes, which is invested in and
21 actually and exclusively employed in carrying on manufacturing,
22 processing, research or development within the State, except
23 such entities as enjoy and exercise the right of eminent domain,
24 but every entity organized for the purpose of manufacturing,
25 processing, research or development except such entities as
26 enjoy and exercise the right of eminent domain shall pay the
27 State tax of the greater of (i) [three hundred dollars ($300) or
28 (ii) the amount computed at the rates provided in subsection (h)
29 upon each dollar of the capital stock value as defined in
30 section 601(a)] the amount computed by multiplying each dollar
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1 of the capital stock value as defined in section 601(a) by the
2 appropriate rate of tax as set forth in subsection (h); or (ii)
3 the minimum tax set forth in subsection (i), upon such
4 proportion of its capital stock, if any, as may be invested in
5 any property or business not strictly incident or appurtenant to
6 the manufacturing, processing, research or development business,
7 in addition to the local taxes assessed upon its property in the
8 district where located, it being the object of this provision to
9 relieve from State taxation, except for imposition of the [three
10 hundred dollar ($300) minimum tax under this section], minimum
11 tax set forth in subsection (i) only so much of the capital
12 stock as is invested purely in the manufacturing, processing,
13 research or development plant and business: and Provided
14 further, That, except for the imposition of the minimum tax set
15 forth in [this section] subsection (i), the provisions of this
16 section shall not apply to the taxation of so much of the
17 capital stock value attributable to student loan assets owned or
18 held by an entity created for the securitization of student
19 loans or by a trustee on its behalf.
20 (b) (1) [Every] Subject to the provisions of subsection
21 (k), foreign entity from which a report is required under
22 section 601 hereof, shall be subject to and pay to the
23 department annually, a franchise tax which is the greater of (i)
24 [three hundred dollars ($300) or (ii) the amount computed at the
25 rates provided in subsection (h) upon each dollar of the capital
26 stock value as defined in section 601(a)] the amount computed by
27 multiplying each dollar of the capital stock value as defined in
28 section 601(a) by the appropriate rate of tax as set forth in
29 subsection (h); or (ii) the minimum tax set forth in subsection
30 (i), upon a taxable value to be determined in the following
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1 manner. The capital stock value shall be ascertained in the
2 manner prescribed in section 601(a) of this article. The taxable
3 value shall then be determined by employing the relevant
4 apportionment factors set forth in Article IV: Provided, That
5 the manufacturing, processing, research and development
6 exemptions contained under section 602(a) shall also apply to
7 foreign corporations and in determining the relevant
8 apportionment factors the numerator of the property, payroll, or
9 sales factors shall not include any property, payroll or sales
10 attributable to manufacturing, processing, research or
11 development activities in the Commonwealth: and Provided
12 further, That, except for the imposition of the minimum tax set
13 forth in [this section] subsection (i), the provisions of this
14 section shall not apply to the taxation of so much of the
15 capital stock value attributable to student loan assets owned or
16 held by an entity created for the securitization of student
17 loans or by a trustee on its behalf. Any foreign corporation,
18 joint-stock association, limited partnership or company subject
19 to the tax prescribed herein may elect to compute and pay its
20 tax under section 602(a): Provided, That any foreign
21 corporation, joint-stock association, limited partnership or
22 company electing to compute and pay its tax under section 602(a)
23 shall be treated as if it were a domestic corporation for the
24 purpose of determining which of its assets are exempt from
25 taxation and for the purpose of determining the proportion of
26 the value of its capital stock which is subject to taxation.
27 (2) The provisions of this article shall apply to the
28 taxation of entities organized for manufacturing, processing,
29 research or development purposes, but shall not apply to such
30 entities as enjoy and exercise the right of eminent domain.
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1 (d) It shall be the duty of the treasurer or other officers
2 having charge of any domestic or foreign entity, upon which a
3 tax is imposed by this section, to transmit the amount of tax to
4 the department within the time prescribed by law: Provided, That
5 for the purposes of this act interest in limited partnerships or
6 joint-stock associations shall be deemed to be capital stock,
7 and taxable accordingly: Provided, further, That entities liable
8 to a tax under this section, shall not be required to pay any
9 further tax on the mortgages, bonds, and other securities owned
10 by them and in which the whole body of stockholders or members,
11 as such, have the entire equitable interest in remainder; but
12 entities owning or holding such securities as trustees,
13 executors, administrators, guardians, or in any other manner
14 than for the whole body of stockholders or members thereof as
15 sole equitable owners in remainder, shall return and pay the tax
16 imposed by this act upon all securities so owned or held by
17 them, as in the case of individuals.
18 (e) Any holding company subject to the capital stock tax or
19 the franchise tax imposed by this section may elect to compute
20 the capital stock or franchise tax by applying the rate of tax
21 provided in subsection (h) to ten per cent of the capital stock
22 value as defined in section 601(a), but in no case shall the tax
23 so computed be less than [three hundred dollars ($300)] the
24 minimum tax set forth in subsection (i). If exercised, this
25 election shall be in lieu of any other apportionment or
26 allocation to which such company would otherwise be entitled.
27 (f) Every domestic corporation and every foreign corporation
28 (i) registered to do business in Pennsylvania; (ii) which
29 maintains an office in Pennsylvania; (iii) which has filed a
30 timely election to be taxed as a regulated investment company
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1 with the Federal Government; and (iv) which duly qualifies to be
2 taxed as a regulated investment company under the provisions of
3 the Internal Revenue Code of 1954 as amended, shall be taxed as
4 a regulated investment company and shall be subject to the
5 capital stock or franchise tax imposed by section 602, in either
6 case for the privilege of having an office in Pennsylvania,
7 which tax shall be computed pursuant to the provisions of this
8 subsection in lieu of all other provisions of this section 602.
9 The tax shall be in an amount which is the greater of [three
10 hundred dollars ($300)] the minimum tax set forth in subsection
11 (i) or the sum of the amounts determined pursuant to clauses (1)
12 and (2):
13 (1) The amount determined pursuant to this clause shall be
14 seventy-five dollars ($75) times that number which is the result
15 of dividing the net asset value of the regulated investment
16 company by one million, rounded to the nearest multiple of
17 seventy-five dollars ($75). Net asset value shall be determined
18 by adding the monthly net asset values as of the last day of
19 each month during the taxable period and dividing the total sum
20 by the number of months involved. Each such monthly net asset
21 value shall be the actual market value of all assets owned
22 without any exemptions or exclusions, less all liabilities,
23 debts and other obligations.
24 (2) The amount determined pursuant to this clause shall be
25 the amount which is the result of multiplying the rate of
26 taxation applicable for purposes of the personal income tax
27 during the same taxable year times the apportioned undistributed
28 personal income tax income of the regulated investment company.
29 For the purposes of this clause:
30 (A) Personal income tax income shall mean income to the
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1 extent enumerated and classified in section 303.
2 (B) Undistributed personal income tax income shall mean all
3 personal income tax income other than personal income tax income
4 undistributed on account of the capital stock or foreign
5 franchise tax, less all personal income tax income distributed
6 to shareholders. At the election of the company, income
7 distributed after the close of a taxable year, but deemed
8 distributed during the taxable year for Federal income tax
9 purposes, shall be deemed distributed during that year for
10 purposes of this clause. If a company in a taxable year has both
11 current income and income accumulated from a prior year,
12 distributions during the year shall be deemed to have been made
13 first from current income.
14 (C) Undistributed personal income tax income shall be
15 apportioned to Pennsylvania by a fraction, the numerator of
16 which is all income distributed during the taxable period to
17 shareholders who are resident individuals, estates or trusts and
18 the denominator of which is all income distributed during the
19 taxable period. Resident trusts shall not include charitable,
20 pension or profit-sharing, or retirement trusts.
21 (D) Personal income tax income and other income of a company
22 shall each be deemed to be either distributed to shareholders or
23 undistributed in the proportion each category bears to all
24 income received by the company during the taxable year.
25 (g) In the event that a domestic or foreign entity is
26 required to file a report pursuant to section 601(b) on other
27 than an annual basis, the tax imposed by this section, including
28 the [three hundred dollar ($300)] minimum tax, shall be prorated
29 to reflect the portion of a taxable year for which the report is
30 filed by multiplying the tax liability by a fraction equal to
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1 the number of days in the taxable year divided by three hundred
2 sixty-five days.
3 (h) The rate of tax for purposes of the capital stock and
4 franchise tax for taxable years beginning within the dates set
5 forth shall be as follows:
6 Taxable Year Regular Rate Surtax Total Rate
7 January 1, 1971, to
8 December 31, 1986 10 mills 0 10 mills
9 January 1, 1987, to
10 December 31, 1987 9 mills 0 9 mills
11 January 1, 1988, to
12 December 31, 1990 9.5 mills 0 9.5 mills
13 January 1, 1991, to
14 December 31, 1991 11 mills 2 mills 13 mills
15 January 1, 1992, to
16 December 31, 1997 11 mills 1.75 mills 12.75 mills
17 January 1, 1998, [and
18 each year thereafter]
19 to December 31, 1998 11 mills .99 mills 11.99 mills
20 January 1, 1999, to
21 December 31, 1999 10.99 mills 0 10.99 mills
22 January 1, 2000, to
23 December 31, 2000 10 mills 0 10 mills
24 January 1, 2001, to
25 December 31, 2001 9 mills 0 9 mills
26 January 1, 2002, to
27 December 31, 2002 8 mills 0 8 mills
28 January 1, 2003, to
29 December 31, 2003 7 mills 0 7 mills
30 January 1, 2004, to
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1 December 31, 2004 6 mills 0 6 mills
2 January 1, 2005, to
3 December 31, 2005 5 mills 0 5 mills
4 January 1, 2006, and
5 each year thereafter 4 mills 0 4 mills
6 (i) The minimum amount of capital stock and franchise tax
7 for the taxable years beginning within the dates set forth shall
8 be as follows:
9 Taxable Minimum
10 Year Beginning Tax
11 January 1, 1971 to December 31, 1983 No minimum tax imposed
12 January 1, 1984 to December 31, 1990 $75 minimum tax
13 January 1, 1991 to December 31, 1998 $300 minimum tax
14 January 1, 1999, and each
15 year thereafter $200 minimum tax
16 (j) The exclusion from capital stock value for the taxable
17 years beginning within the dates set forth shall be as follows:
18 Taxable Year Beginning Exclusion from Capital
19 Stock Value
20 January 1, 1971, to
21 December 31, 1986 None
22 January 1, 1987, to
23 December 31, 1987 $ 50,000
24 January 1, 1988, to
25 December 31, 1990 100,000
26 January 1, 1991, to
27 December 31, 1993 50,000
28 January 1, 1994, to
29 December 31, 1994 75,000
30 January 1, 1995, to
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1 December 31, 1996 100,000
2 January 1, 1997, to
3 December 31, 1998 125,000
4 January 1, 1999, to
5 December 31, 1999 150,000
6 January 1, 2000, to
7 December 31, 2000 175,000
8 January 1, 2001, to
9 December 31, 2001 200,000
10 January 1, 2002, to
11 December 31, 2002 225,000
12 January 1, 2003, to
13 December 31, 2003 250,000
14 January 1, 2004, to
15 December 31, 2004 275,000
16 January 1, 2005, to
17 December 31, 2005 300,000
18 January 1, 2006, and each
19 year thereafter 325,000
20 (k) Notwithstanding any other provisions of this article or
21 Article IV to the contrary, beginning calendar year 2007 or the
22 fiscal year beginning in 2007 and each calendar or fiscal year
23 thereafter, any corporation that is subject to tax under this
24 article and Article IV shall only be required to pay one tax
25 which shall be the higher of the tax liabilities under this
26 article or Article IV.
27 Section 2. Section 602.3 of the act, amended or added August
28 4, 1991 (P.L.97, No.22) and December 13, 1991 (P.L.373, No.40),
29 is amended to read:
30 Section 602.3. Deposit of Proceeds; Appropriation.--(a) The
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1 proceeds resulting from [one-half] one-quarter mill of the tax
2 imposed pursuant to this article as determined by the Secretary
3 of Revenue shall be transferred to the Hazardous Sites Cleanup
4 Fund. The proceeds from any taxable year beginning in 1991
5 resulting from one-quarter mill of the tax imposed pursuant to
6 this article as determined by the Secretary of Revenue shall be
7 transferred to the State Lottery Fund. The transfers required by
8 this subsection shall be made by June 15 and December 15 of each
9 appropriate calendar year.
10 (b) The funds deposited in the Hazardous Sites Cleanup Fund
11 and the State Lottery Fund are hereby appropriated out of this
12 account upon authorization by the Governor.
13 [(c) The transfer of any proceeds resulting from the one-
14 half mill tax imposed pursuant to this article to the Hazardous
15 Site Cleanup Fund as authorized in subsection (a) shall not be
16 applicable to fiscal year 1991-1992. In lieu of the 1991-1992
17 fiscal year transfer, the Governor shall authorize the transfer
18 of proceeds in excess of seventeen million dollars ($17,000,000)
19 from the revenue resulting from the one-half mill tax imposed
20 pursuant to this article to the Hazardous Site Cleanup Fund
21 pursuant to the transfer schedule set forth in subsection (a).
22 The Governor may transfer any unexpended portion of the
23 seventeen million dollars ($17,000,000) to the Hazardous Site
24 Cleanup Fund.]
25 Section 4. This act shall apply to the tax years beginning
26 on or after January 1, 1999.
27 Section 5. This act shall take effect immediately.
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