PRINTER'S NO. 274
No. 269 Session of 1981
INTRODUCED BY GLADECK, KANUCK, SIEMINSKI, BELARDI, LEWIS, HAYES,
LEHR, SIRIANNI, PICCOLA, NAHILL, PHILLIPS, GRUPPO, FISCHER,
MILLER, DAIKELER, WILT, CESSAR, McVERRY, PUNT, MOWERY, ROCKS,
LASHINGER, E. Z. TAYLOR, PITTS, WILSON, GREENWOOD AND CLYMER,
JANUARY 27, 1981
REFERRED TO COMMITTEE ON BUSINESS AND COMMERCE,
JANUARY 27, 1981
AN ACT
1 Providing for a job creation economic expansion program.
2 The General Assembly of the Commonwealth of Pennsylvania
3 hereby enacts as follows:
4 Section 1. Short title.
5 This act shall be known and may be cited as the "Job Creation
6 Economic Expansion Act."
7 Section 2. Policy.
8 (a) It is hereby the declared public policy of the General
9 Assembly of the Commonwealth of Pennsylvania that a maximum
10 Statewide effort be directed toward the creation of jobs and the
11 expansion of business investment in the private sector.
12 (b) To encourage this economic growth, the General Assembly
13 by this act intends to provide a stimulus to business and
14 industry in the form of rebates related directly to the hiring
15 and rehiring of employees to fill either new or recreated
1 positions and tax credits related to the amount of new capital
2 investment in the Commonwealth.
3 Section 3. Definitions.
4 The following words and phrases when used in this act shall
5 have, unless the context clearly indicates otherwise, the
6 meanings given to them in this section:
7 "Average yearly employment." The number of employees
8 determined by dividing the total number of employees reported to
9 the Bureau of Labor and Industry on form UC-2 for each calendar
10 quarter, by four.
11 "Base year." The calendar year 1981.
12 "Base year index." The amount of unemployment compensation
13 contributions an employer made for calendar year 1981.
14 "Business." An individual proprietorship, partnership or
15 corporation.
16 "Department." The Department of Revenue.
17 "Employer." An individual proprietorship, partnership or
18 corporation employing one or more persons for a salary, wage,
19 commission or other compensation and subject to the act of
20 December 5, 1936 (2nd Sp.Sess., 1937 P.L.2897, No.1), known as
21 the "Unemployment Compensation Law."
22 "Individual." A natural person who operates a business
23 either as a sole proprietor or as a partner in a partnership and
24 is subject to tax under Article III of the act of March 4, 1971
25 (P.L.6, No.2), known as the "Tax Reform Code of 1971."
26 "Secretary." The Secretary of Revenue.
27 Section 4. Rebate for the creation of jobs.
28 There shall be allowed as an incentive for the creation of
29 jobs, a rebate to all employers, of their unemployment
30 compensation contribution in excess of the calculated base year
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1 index made to the Pennsylvania Unemployment Compensation Fund
2 because of their establishing or increasing employment in the
3 Commonwealth. The rebate shall be allowed and calculated as
4 follows:
5 (1) Calculation of the base year index shall be made by
6 each employer seeking to claim a job rebate under this act.
7 (2) For calendar year 1982 and any year thereafter in
8 which a rebate is allowed pursuant to paragraphs (3) and (4),
9 an employer shall be eligible for a rebate under this act if:
10 (i) such employer's yearly average employment for
11 the current year exceeds by at least five, the average
12 yearly employment for the base year; and
13 (ii) such employer's contributions to the
14 unemployment compensation fund for the current year
15 exceeds the base year index.
16 The rebate for any calendar year shall be the amount by which
17 the current year's contribution exceeds the employer's
18 calculated base year index. Such rebates shall be payable from
19 the General Fund.
20 (3) If the jobs so created were:
21 (i) Established in conjunction with capital
22 investment in a new business facility or an expanded
23 business facility such employer shall be entitled to a
24 rebate, as long as qualified, with respect to the number
25 of employees in excess of the base year average, for five
26 consecutive calendar years. In the event an employer,
27 initially qualifies hereunder but for any reason fails to
28 qualify in any of the succeeding years of eligibility,
29 such nonqualification shall terminate the right to any
30 future rebate.
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1 (ii) Established without concurrent capital
2 investment in any new or expanded business facility then
3 such employer shall be entitled to a rebate for two
4 consecutive calendar years. In the event such employer,
5 for any reason, does not qualify in the second year, such
6 nonqualification shall terminate the right to any future
7 rebate.
8 (4) (i) Eligibility for initial claims for rebates under
9 this act shall terminate with claims for calendar year
10 1985.
11 (ii) Any employer who has made an initial claim
12 within the above period shall be entitled the full number
13 of years of eligibility set out in paragraph (3) and
14 shall be entitled use of the carry over provision of
15 paragraph (6).
16 (5) In order to minimize the administrative costs in
17 affecting these rebates, the amount or allowable portion
18 thereof shall be returned to the employer in conjunction with
19 the personal or corporate income tax return of such employer
20 due next after the end of the calendar year of rebate
21 eligibility by reducing the amount of additional payment
22 required or by increasing the amount of refund otherwise due:
23 Provided, however, That any such rebate is not and shall not
24 be construed as affecting the tax liability of any taxpayer.
25 The Department of Revenue is hereby authorized to pay the
26 rebates provided for herein.
27 (6) (i) The claim for any rebate in any year shall not
28 exceed one-half of the amount of tax liability on the tax
29 return used to affect the rebate.
30 (ii) In the event the full rebate cannot be claimed
19810H0269B0274 - 4 -
1 in any year, the unused portion of any year's entitlement
2 shall carry over and is hereby specifically allowed
3 without limit to be claimed in future years until the
4 full amount of the allowable rebate is received.
5 Section 5. Investment and plant expansion credits.
6 (a) Plant expansion credit:
7 (1) Beginning with the taxable year which commences in
8 the calendar year 1982 and each year thereafter, there shall
9 be allowed for all businesses, a credit against the tax
10 imposed by sections 302, 402 and 502 of the "Tax Reform Code
11 of 1971," for qualified investment in new or expanded plant
12 facilities within the Commonwealth of Pennsylvania.
13 (2) (i) The credit for corporations subject to tax
14 under section 402 or 502 of the "Tax Reform Code of
15 1971," shall be $100 for each $100,000 or a major
16 fraction thereof invested in a new or expanded business
17 facility.
18 (ii) The credit for individuals subject to tax under
19 section 302 of the "Tax Reform Code of 1971," shall be in
20 an amount for each $100,000 or major fraction thereof
21 invested in a new or expanded business facility
22 determined by multiplying $100 times the ratio that the
23 tax rate imposed by section 302 of the "Tax Reform Code
24 of 1971" bears to the tax rate imposed by section 402 of
25 the "Tax Reform Code of 1971."
26 (3) A new business facility shall mean a structure
27 including but not limited to a factory, mill, plant, refiner,
28 warehouse or other building within which people are
29 customarily employed or which is customarily used to house
30 machinery or equipment. In order to qualify as a new business
19810H0269B0274 - 5 -
1 facility, such facility shall meet the following
2 requirements:
3 (i) The facility must be used by the taxpayer in the
4 operation of a revenue-producing enterprise. A taxpayer
5 whose only activity respecting the facility is to lease
6 it cannot qualify the facility as a revenue-producing
7 enterprise. If the taxpayer uses a portion of the
8 facility in a qualifying manner and leases the remainder
9 to others, the taxpayer may claim only that portion of
10 the facility which qualifies.
11 (ii) The facility shall be acquired by or leased to
12 the taxpayer after December 31, 1981.
13 (iii) The facility cannot have been used immediately
14 prior to acquisition by the taxpayer as a revenue-
15 producing enterprise of the same or substantially
16 identical type. If the preceding owner or lessor of the
17 premises operated a revenue-producing enterprise of the
18 same or substantially the same type as that to be
19 operated by the taxpayer, then the taxpayer cannot claim
20 a credit.
21 (iv) The facility must not be used as a replacement
22 business facility.
23 (4) The expansion of an existing facility may qualify
24 for a credit under this section if, in addition to meeting
25 requirements of subparagraphs (i), (ii) and (iv) of paragraph
26 (3):
27 (i) the investment made to expand the facility
28 exceeds $1,000,000; or
29 (ii) the investment made to expand the facility is
30 in excess of 100% of the taxpayer's original investment
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1 in the facility being so expanded.
2 (5) (i) No credit shall be allowed for investment in a
3 replacement facility unless the investment exceeds
4 $3,000,000 or 300% of the taxpayer's original investment
5 in the old facility. In such case, the replacement
6 facility shall be considered an expanded business
7 facility for purposes of receiving this credit.
8 (ii) A replacement business facility is one which
9 replaces a facility which previously had been located
10 within the Commonwealth. It shall be presumed that a new
11 facility is a replacement for an old facility if either
12 of the following conditions are met:
13 (A) The old facility had been operated by the
14 taxpayer or a related taxpayer for three of the
15 preceding five years before the taxable year in which
16 commercial operations were commenced at the new
17 facility.
18 (B) The old facility was used by the taxpayer or
19 a related taxpayer in the operation of a revenue-
20 producing enterprise and the taxpayer continues to
21 operate the same or substantially the same type of
22 revenue-producing enterprise at the new facility.
23 (6) (i) In no case shall the credit granted in any year
24 exceed:
25 (A) For corporations the tax imposed pursuant to
26 section 402 or 502 of the "Tax Reform Code of 1971."
27 (B) For individuals that portion of the entire
28 tax imposed pursuant to section 302 of the "Tax
29 Reform Code of 1971" attributable to income from net
30 profits as defined by section 303(a)(2) of the "Tax
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1 Reform Code of 1971."
2 (ii) In the event the entire credit allowable cannot
3 be taken in the initial year of eligibility, the unused
4 portion may be carried over into the two succeeding
5 taxable years: Provided, however, That if the business in
6 the initial year of eligibility had a net loss from
7 operations, the allowable credit shall carry over and
8 shall be available initially in the first year in which
9 such business shows a net profit.
10 (b) Investment credit:
11 (1) Beginning with the taxable year which commences in
12 the calendar year 1982 and each year thereafter, there shall
13 be allowed for all businesses a credit against the tax
14 imposed by sections 302, 402 and 502 of the "Tax Reform Code
15 of 1971" for qualified investment in tangible personal
16 property predominantly used within the Commonwealth.
17 (2) (i) The credit for corporations subject to tax under
18 sections 402 and 502 of the "Tax Reform Code of 1971"
19 shall equal 5% of the qualifying investment placed in
20 service during the current taxable year. If the tax
21 liability of the corporation computed before any credits
22 exceeds $25,000 the credit may not exceed $25,000 plus
23 50% of the tax liability over that amount.
24 (ii) In no case shall the credit for a corporation
25 in any year exceed its tax liability for that year
26 imposed pursuant to section 402 or 502 of the "Tax Reform
27 Code of l971."
28 (iii) The credit for individuals subject to tax
29 under section 302 of the "Tax Reform Code of 1971" shall
30 equal such percent of the qualified investment found by
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1 multiplying 5% by the ratio that the tax rate imposed by
2 section 302 of the "Tax Reform Code of 1971" bears to the
3 tax rate imposed by section 402 of the "Tax Reform Code
4 of 1971," placed in service during the current taxable
5 year.
6 (iv) In no case shall the credit for an individual
7 in any year exceed that portion of the entire tax
8 liability for said year imposed by section 302 of the
9 "Tax Reform Code of 1971" attributable to income from net
10 profits as defined by section 303(a)(2) of the "Tax
11 Reform Code of 1971."
12 (3) The amount of qualifying investment is the sum of
13 the basis of new qualifying property and up to $100,000 of
14 the cost of used qualifying property. If the qualifying
15 property has a useful life of less than seven, but at least
16 five years, the amount of qualifying investment shall be only
17 two-thirds of the basis or cost. If the qualifying property
18 has a useful life of less than five, but at least three
19 years, the amount of the qualifying investment shall be only
20 one-third of the basis or cost. No credit shall be allowed
21 for property with a useful life less than three years.
22 (4) A qualifying investment is one made in depreciable
23 or amortizable tangible personal property, or tangible
24 property, other than a building or its components, used as an
25 integral part of manufacturing, extraction, or production, or
26 elevators and escalators, or research and development
27 facilities, or facilities for the bulk storage of fungible
28 commodities. Property used predominately to furnish lodging
29 is not qualifying property except for investment in a hotel
30 or motel furnishing accommodations predominately to
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1 transients, and vending machines, washing machines and dryers
2 in lodging facilities. Livestock, except for horses, is
3 qualifying property if, within a one-year period starting six
4 months before the date of acquisition, substantially
5 identical livestock is disposed of without any credit
6 recapture, provided that the amount of the credit will be
7 allowed only on the excess of the cost of the acquired
8 livestock over the amount realized on the disposition. No
9 credit shall be allowed for investment for movie and
10 television films and tape, or for property used by a tax
11 exempt organization, or used by or leased to or by a
12 governmental unit. Lessors are eligible for the credit only
13 if the leased property has been manufactured or produced by
14 the lessor or if the term of the lease is less than 50% of
15 the useful life of the leased property and the lessor's
16 business expense deductions, other than rental payments are
17 reimbursed expenses, related to the property are more than
18 15% of the rental income from the property for the first year
19 of the lease.
20 (5) Where property is disposed of before the end of its
21 estimated useful life, the tax for the year of disposal shall
22 be increased by the difference between the credit originally
23 allowed and the credit that would have been allowed if the
24 computation had been based on the actual period of use.
25 Property is disposed of if it is transferred to a
26 nonqualifying use.
27 Section 6. Procedure and enforcement.
28 (a) The secretary shall provide appropriate forms to
29 calculate and allow the rebate and credits authorized by this
30 act and the secretary may require the submission of copies of
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1 Federal Form 940, UC-2's or other data as he determines.
2 (b) The department shall enforce the provisions of this act
3 and is hereby empowered to prescribe, adopt, promulgate and
4 enforce rules and regulations relating to any matter or thing
5 pertaining to the administration and enforcement of the
6 provisions of this act and the allowance or rebate credits and
7 penalties imposed by this act. The Department of Labor and
8 Industry shall fully cooperate with the Department of Revenue in
9 setting up procedures for necessary exchanges of information
10 necessitated by provisions of this act.
11 (c) The Secretaries of Revenue and Labor and Industry or any
12 agent authorized in writing by them, are hereby authorized to
13 examine the books, papers and records and to investigate the
14 character of any business in order to verify the accuracy of any
15 report made. Every such business is hereby directed and required
16 to give to these departments, or their duly authorized agent,
17 the means, facilities and opportunity for such examination and
18 investigations, as are hereby provided and authorized.
19 Section 7. Penalty.
20 Any person who shall willfully make a false and fraudulent
21 return shall be guilty of willful and corrupt perjury, and in
22 addition to any other punishment, shall be liable to pay to the
23 department three times the amount of the fraudulent claim.
24 Section 8. Effective date.
25 This act shall take effect in 60 days.
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