PRIOR PRINTER'S NOS. 260, 2767 PRINTER'S NO. 3019
No. 238 Session of 1997
INTRODUCED BY BISHOP, BELARDI, TRELLO, RAMOS, YOUNGBLOOD,
PISTELLA, BOSCOLA, PESCI, L. I. COHEN, BELFANTI AND
WOJNAROSKI, FEBRUARY 4, 1997
AS RE-REPORTED FROM COMMITTEE ON APPROPRIATIONS, HOUSE OF
REPRESENTATIVES, AS AMENDED, MARCH 9, 1998
AN ACT
1 Providing for the exclusion from taxable personal income a <--
2 portion of severance compensation for permanently displaced
3 employees.
4 AMENDING THE ACT OF MARCH 4, 1971 (P.L.6, NO.2), ENTITLED "AN <--
5 ACT RELATING TO TAX REFORM AND STATE TAXATION BY CODIFYING
6 AND ENUMERATING CERTAIN SUBJECTS OF TAXATION AND IMPOSING
7 TAXES THEREON; PROVIDING PROCEDURES FOR THE PAYMENT,
8 COLLECTION, ADMINISTRATION AND ENFORCEMENT THEREOF; PROVIDING
9 FOR TAX CREDITS IN CERTAIN CASES; CONFERRING POWERS AND
10 IMPOSING DUTIES UPON THE DEPARTMENT OF REVENUE, CERTAIN
11 EMPLOYERS, FIDUCIARIES, INDIVIDUALS, PERSONS, CORPORATIONS
12 AND OTHER ENTITIES; PRESCRIBING CRIMES, OFFENSES AND
13 PENALTIES," FURTHER DEFINING THE TERM "COMPENSATION" TO
14 INCLUDE SEVERANCE PAY WITH EXCLUSIONS; AND ADDING DEFINITIONS
15 RELATING TO SEVERANCE PAY.
16 The General Assembly of the Commonwealth of Pennsylvania
17 hereby enacts as follows:
18 Section 1. Short title. <--
19 This act shall be known and may be cited as the Downsized
20 Employees Severance Tax Exclusion Act.
21 Section 2. Definitions.
22 The following words and phrases when used in this act shall
23 have the meanings given to them in this section unless the
1 context clearly indicates otherwise:
2 "Covered employer." An individual or private business which
3 employs 500 or more employees at any time in the preceding 12-
4 month period and which has not been adjudicated bankrupt.
5 "Mass layoff." The layoff of 100 or more employees employed
6 in a facility located in this Commonwealth by a covered employer
7 during any continuous period of 180 days, except that the term
8 shall not mean any layoff caused by a relocation or termination
9 necessitated by a flood or other natural disaster, national
10 emergency or act of war.
11 "Displaced." The layoff of an employee by an employer
12 without the written commitment to reinstate the employee within
13 180 days of the layoff. The term excludes the layoff of a
14 construction worker upon the completion of a construction
15 project or the layoff of seasonal employees who have a
16 reasonable expectation of continued employment.
17 Section 3. Exclusion.
18 Severance wages or compensation paid by a covered employer to
19 an employee who was displaced due to a mass layoff shall not be
20 deemed income within the meaning of Article III of the act of
21 March 4, 1971 (P.L.6, No.2), known as the Tax Reform Code of
22 1971.
23 Section 4. Applicability.
24 This act shall apply to taxable years beginning after
25 December 31, 1997.
26 Section 5. Effective date.
27 This act shall take effect in 60 days.
28 SECTION 1. SECTION 301(D) OF THE ACT OF MARCH 4, 1971 <--
29 (P.L.6, NO.2), KNOWN AS THE TAX REFORM CODE OF 1971, AMENDED MAY
30 7, 1997 (P.L.85, NO.7), IS AMENDED AND THE SECTION IS AMENDED BY
19970H0238B3019 - 2 -
1 ADDING CLAUSES TO READ:
2 SECTION 301. DEFINITIONS.--THE FOLLOWING WORDS, TERMS AND
3 PHRASES WHEN USED IN THIS ARTICLE SHALL HAVE THE MEANING
4 ASCRIBED TO THEM IN THIS SECTION EXCEPT WHERE THE CONTEXT
5 CLEARLY INDICATES A DIFFERENT MEANING. UNLESS SPECIFICALLY
6 PROVIDED OTHERWISE, ANY REFERENCE IN THIS ARTICLE TO THE
7 INTERNAL REVENUE CODE SHALL INCLUDE THE INTERNAL REVENUE CODE OF
8 1986 (PUBLIC LAW 99-514, 26 U.S.C. § 1 ET SEQ.), AS AMENDED TO
9 JANUARY 1, 1997:
10 * * *
11 (D) "COMPENSATION" MEANS AND SHALL INCLUDE SALARIES, WAGES,
12 COMMISSIONS, BONUSES AND INCENTIVE PAYMENTS WHETHER BASED ON
13 PROFITS OR OTHERWISE, SEVERANCE PAY, FEES, TIPS AND SIMILAR
14 REMUNERATION RECEIVED FOR SERVICES RENDERED, WHETHER DIRECTLY OR
15 THROUGH AN AGENT, AND WHETHER IN CASH OR IN PROPERTY.
16 THE TERM "COMPENSATION" SHALL NOT MEAN OR INCLUDE: (I)
17 PERIODIC PAYMENTS FOR SICKNESS AND DISABILITY OTHER THAN REGULAR
18 WAGES RECEIVED DURING A PERIOD OF SICKNESS OR DISABILITY; OR
19 (II) DISABILITY, RETIREMENT OR OTHER PAYMENTS ARISING UNDER
20 WORKMEN'S COMPENSATION ACTS, OCCUPATIONAL DISEASE ACTS AND
21 SIMILAR LEGISLATION BY ANY GOVERNMENT; OR (III) PAYMENTS
22 COMMONLY RECOGNIZED AS OLD AGE OR RETIREMENT BENEFITS PAID TO
23 PERSONS RETIRED FROM SERVICE AFTER REACHING A SPECIFIC AGE OR
24 AFTER A STATED PERIOD OF EMPLOYMENT; OR (IV) PAYMENTS COMMONLY
25 KNOWN AS PUBLIC ASSISTANCE, OR UNEMPLOYMENT COMPENSATION
26 PAYMENTS BY ANY GOVERNMENTAL AGENCY; OR (V) PAYMENTS TO
27 REIMBURSE ACTUAL EXPENSES; OR (VI) PAYMENTS MADE BY EMPLOYERS OR
28 LABOR UNIONS, INCLUDING PAYMENTS MADE PURSUANT TO A CAFETERIA
29 PLAN QUALIFYING UNDER SECTION 125 OF THE INTERNAL REVENUE CODE
30 OF 1986 (PUBLIC LAW 99-514, 26 U.S.C. § 125), FOR EMPLOYE
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1 BENEFIT PROGRAMS COVERING HOSPITALIZATION, SICKNESS, DISABILITY
2 OR DEATH, SUPPLEMENTAL UNEMPLOYMENT BENEFITS OR STRIKE BENEFITS:
3 PROVIDED, THAT THE PROGRAM DOES NOT DISCRIMINATE IN FAVOR OF
4 HIGHLY COMPENSATED INDIVIDUALS AS TO ELIGIBILITY TO PARTICIPATE,
5 PAYMENTS OR PROGRAM BENEFITS; OR (VII) ANY COMPENSATION RECEIVED
6 BY UNITED STATES SERVICEMEN SERVING IN A COMBAT ZONE; OR (VIII)
7 PAYMENTS RECEIVED BY A FOSTER PARENT FOR IN-HOME CARE OF FOSTER
8 CHILDREN FROM AN AGENCY OF THE COMMONWEALTH OR A POLITICAL
9 SUBDIVISION THEREOF OR AN ORGANIZATION EXEMPT FROM FEDERAL TAX
10 UNDER SECTION 501(C)(3) OF THE INTERNAL REVENUE CODE OF 1954
11 WHICH IS LICENSED BY THE COMMONWEALTH OR A POLITICAL SUBDIVISION
12 THEREOF AS A PLACEMENT AGENCY; OR (IX) PAYMENTS MADE BY
13 EMPLOYERS OR LABOR UNIONS FOR EMPLOYE BENEFIT PROGRAMS COVERING
14 SOCIAL SECURITY OR RETIREMENT; OR (X) BENEFITS PAYABLE UNDER A
15 SUPPLEMENTAL UNEMPLOYMENT BENEFIT PLAN WHETHER OR NOT THEY BEAR
16 A UNIFORM RELATIONSHIP TO THE TOTAL COMPENSATION OR TO THE BASIC
17 OR REGULAR RATE OF COMPENSATION RECEIVED UNDER FEDERAL OR STATE
18 LAW BY A PLAN PARTICIPANT, SUCH BENEFITS MAY BE PAYABLE ON A
19 PERIODIC BASIS OR IN THE FORM OF CASH.
20 * * *
21 (I.3) "HIGHLY COMPENSATED PARTICIPANT" MEANS: (I) AN
22 OFFICER; (II) A SHAREHOLDER OWNING MORE THAN FIVE PER CENT OF
23 THE VOTING SHARES OR VALUE OF ALL CLASSES OF STOCK OF THE
24 EMPLOYER; (III) AN INDIVIDUAL WHO FOR THE PRECEDING TAXABLE YEAR
25 IS IN THE GROUP CONSISTING OF THE TOP TWENTY PER CENT OF ALL
26 FULL-TIME EMPLOYES OF THE EMPLOYER WITH AT LEAST THREE YEARS OF
27 SERVICE WHEN RANKED ON THE BASIS OF COMPENSATION PAID DURING THE
28 TAXABLE YEAR; (IV) A PARTNER OR OTHER SELF-EMPLOYED INDIVIDUAL;
29 OR (V) A SPOUSE OR DEPENDENT OF A HIGHLY COMPENSATED INDIVIDUAL.
30 * * *
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1 (S.01) "SEVERANCE PAY" INCLUDES WITHOUT LIMITATION ANY
2 PAYMENT MADE UPON SEPARATION FROM EMPLOYMENT TO A HIGHLY
3 COMPENSATED INDIVIDUAL PURSUANT TO ANY PROGRAM UNDER WHICH THE
4 AMOUNT OF CONTRIBUTIONS, THE AMOUNT OF EARNING ON CONTRIBUTIONS
5 OR ALLOCATION OF CONTRIBUTIONS OR EARNINGS AND THE AMOUNT OF
6 BENEFITS ARE CONTINGENT UPON A CHANGE IN OWNERSHIP OR CONTROL OF
7 ANY ENTERPRISE OR IN THE OWNERSHIP OF A SUBSTANTIAL PORTION OF
8 THE ASSETS OF ANY ENTERPRISE.
9 * * *
10 (T.1) "SUPPLEMENTAL UNEMPLOYMENT BENEFIT PLAN" MEANS A PLAN,
11 PROGRAM OR ARRANGEMENT ESTABLISHED OR MAINTAINED BY AN EMPLOYER
12 OR BY AN EMPLOYE ORGANIZATION, OR BOTH, UNDER WHICH:
13 (1) NO BENEFIT IS PAYABLE, OR SUBJECT TO ANTICIPATION,
14 ASSIGNMENT OR PLEDGE BY ANY PLAN PARTICIPANT EXCEPT UPON LAY-OFF
15 OR INVOLUNTARY SEPARATION FROM THE EMPLOYMENT OF THE EMPLOYER
16 (WHETHER OR NOT SUCH SEPARATION IS TEMPORARY) RESULTING DIRECTLY
17 FROM: (I) A PERMANENT REDUCTION IN FORCE; (II) PLANT CLOSING;
18 (III) CHANGE IN ORGANIZATIONAL STRUCTURE; (IV) DISCONTINUANCE OF
19 AN OPERATION; OR (V) THE PARTICIPANT'S FAILURE TO MEET OR
20 MAINTAIN STANDARDS OF PERFORMANCE FOR THE POSITION DUE TO
21 INABILITY TO CARRY OUT THE RESPONSIBILITIES OF THE POSITION,
22 HEALTH, OBSOLESCENCE, FAILURE TO MEET THE CHANGED
23 RESPONSIBILITIES OF THE POSITION OR SIMILAR CIRCUMSTANCE BEYOND
24 THE CONTROL OF THE PARTICIPANT; AND
25 (2) NO BENEFIT IS PAYABLE, OR SUBJECT IN ANY MANNER TO
26 ANTICIPATION, ASSIGNMENT OR PLEDGE BY ANY PLAN PARTICIPANT WHO:
27 (I) IS SEPARATED OR DISCHARGED BECAUSE OF THE REFUSAL TO ACCEPT
28 ANOTHER POSITION WITH REASONABLY COMPARABLE COMPENSATION OR THE
29 COMMISSION OF ILLEGAL ACTS, OR INSUBORDINATION, FAILURE OR
30 REFUSAL TO COMPLY WITH RULES OR REGULATIONS OR SIMILAR ACTS
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1 WITHIN THE CONTROL OF THE PARTICIPANT; OR (II) VOLUNTARILY
2 SEPARATES FROM SERVICE BY RETIREMENT OR OTHERWISE.
3 * * *
4 SECTION 2. THIS ACT SHALL APPLY TO TAXABLE YEARS BEGINNING
5 ON OR AFTER JANUARY 1, 1999.
6 SECTION 3. THIS ACT SHALL TAKE EFFECT IMMEDIATELY.
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