PRINTER'S NO. 980
No. 906 Session of 1999
INTRODUCED BY WILLIAMS, FLICK, YOUNGBLOOD, SHANER, TIGUE,
THOMAS, ORIE, COY, TRICH, READSHAW, TRELLO, ROBINSON,
STABACK, LAUGHLIN, SAINATO, MANN, WOJNAROSKI, DeWEESE,
HUTCHINSON, McCALL, MANDERINO, WALKO, BROWNE AND STEELMAN,
MARCH 15, 1999
REFERRED TO COMMITTEE ON FINANCE, MARCH 15, 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," further providing for the imposition of the
11 corporate net income tax and the capital stock and franchise
12 tax and for a new business tax credit relating to the capital
13 stock and franchise tax.
14 The General Assembly of the Commonwealth of Pennsylvania
15 hereby enacts as follows:
16 Section 1. Section 402 of the act of March 4, 1971 (P.L.6,
17 No.2), known as the Tax Reform Code of 1971, amended June 30,
18 1995 (P.L.139, No.21), is amended to read:
19 Section 402. Imposition of Tax.--[Every] (a) Subject to the
20 provisions of subsection (b), every corporation shall be subject
21 to, and shall pay for the privilege of (i) doing business in
22 this Commonwealth; or (ii) carrying on activities in this
1 Commonwealth; (iii) having capital or property employed or used
2 in this Commonwealth; or (iv) owning property in this
3 Commonwealth, by or in the name of itself, or any person,
4 partnership, association, limited partnership, joint-stock
5 association, or corporation, a State excise tax at the rate of
6 twelve per cent per annum upon each dollar of taxable income of
7 such corporation received by, and accruing to, such corporation
8 during the calendar year 1971 and the first six months of 1972
9 and at the rate of eleven per cent per annum upon each dollar of
10 taxable income of such corporation received by, and accruing to,
11 such corporation during the second six months of calendar year
12 1972 through the calendar year 1973 and at the rate of nine and
13 one-half per cent per annum upon each dollar of taxable income
14 of such corporation received by, and accruing to, such
15 corporation during the calendar years 1974, 1975 and 1976 and at
16 the rate of ten and one-half per cent per annum upon each dollar
17 of taxable income of such corporation received by, and accruing
18 to, such corporation during the calendar year 1977 through the
19 calendar year 1984 and at the rate of nine and one-half per cent
20 per annum upon each dollar of taxable income of such corporation
21 received by and accruing to such corporation during the calendar
22 year 1985 through calendar year 1986 and at the rate of eight
23 and one-half per cent per annum upon each dollar of taxable
24 income of such corporation received by and accruing to such
25 corporation during the calendar year 1987 through the calendar
26 year 1990 and at the rate of ten and one-half per cent per annum
27 upon each dollar of taxable income of such corporation received
28 by and accruing to such corporation during calendar year 1991
29 through the calendar year 1994 and at the rate of nine and
30 ninety-nine hundredths per cent per annum upon each dollar of
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1 taxable income of such corporation received by and accruing to
2 such corporation during the calendar year 1995 and during each
3 calendar year thereafter, with an additional surtax equal to one
4 and seventy-five hundredths per cent per annum upon each dollar
5 of taxable income of such corporation received by and accruing
6 to such corporation during calendar year 1991 and through
7 calendar year 1993 and with an additional surtax equal to one
8 and forty-nine hundredths per cent per annum upon each dollar of
9 taxable income of such corporation received by and accruing to
10 such corporation during calendar year 1994 and with no surtax
11 during calendar year 1995 and each calendar year thereafter,
12 except where a corporation reports to the Federal Government on
13 the basis of a fiscal year, and has certified such fact to the
14 department as required by section 403 of this article, in which
15 case, such tax, at the rate of twelve per cent, shall be levied,
16 collected, and paid upon all taxable income received by, and
17 accruing to, such corporation during the first six months of the
18 fiscal year commencing in the calendar year 1972 and at the rate
19 of eleven per cent, shall be levied, collected, and paid upon
20 all taxable income received by, and accruing to, such
21 corporation during the second six months of the fiscal year
22 commencing in the calendar year 1972 and during the fiscal year
23 commencing in the calendar year 1973 and at the rate of nine and
24 one-half per cent, shall be levied, collected, and paid upon all
25 taxable income received by, and accruing to, such corporation
26 during the fiscal year commencing in the calendar years 1974,
27 1975 and 1976 and at the rate of ten and one-half per cent,
28 shall be levied, collected, and paid upon all taxable income
29 received by, and accruing to, such corporation during the fiscal
30 year commencing in the calendar year 1977 through the fiscal
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1 year commencing in 1984 and at the rate of nine and one-half per
2 cent, shall be levied, collected, and paid upon all taxable
3 income received by and accruing to such corporation during the
4 fiscal year commencing in 1985 through the fiscal year
5 commencing in 1986 and at the rate of eight and one-half per
6 cent per annum upon each dollar of taxable income of such
7 corporation received by and accruing to such corporation during
8 the fiscal year commencing in 1987 through the fiscal year
9 commencing in 1990 and at the rate of ten and one-half per cent
10 per annum upon each dollar of taxable income of such corporation
11 received by and accruing to such corporation during the fiscal
12 year commencing in 1991 through the fiscal year commencing in
13 1994 and at the rate of nine and ninety-nine hundredths per cent
14 per annum upon each dollar of taxable income of such corporation
15 received by and accruing to such corporation during the fiscal
16 year commencing in 1995 and during each fiscal year thereafter,
17 with an additional surtax equal to one and seventy-five
18 hundredths per cent per annum upon each dollar of taxable income
19 of such corporation received by and accruing to such corporation
20 during the fiscal year commencing in 1991 and through fiscal
21 year 1993 and with an additional surtax equal to one and forty-
22 nine hundredths per cent per annum upon each dollar of taxable
23 income of such corporation received by and accruing to such
24 corporation during fiscal year 1994 and with no surtax during
25 the fiscal year commencing in 1995 and each fiscal year
26 thereafter. No penalty prescribed by subsection (e) of section
27 3003 shall be assessed against a corporation for the additional
28 tax which may be due as a result of the increase in tax rate
29 from nine and one-half per cent to ten and one-half per cent
30 imposed retroactively by this section for the calendar year 1977
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1 or for the fiscal year commencing in 1977.
2 (b) Notwithstanding any other provisions of this article or
3 Article VI to the contrary, beginning calendar year 1999 or the
4 fiscal year beginning in 2000 and each calendar or fiscal year
5 thereafter, any taxpayer who is liable for taxes under this
6 article and Article VI shall only be required to pay one tax
7 which shall be the higher of the tax liabilities under this
8 article or Article VI.
9 Section 2. Section 602 of the act, amended April 23, 1998
10 (P.L.239, No.45), is amended to read:
11 Section 602. Imposition of Tax.--(a) [That] Subject to the
12 provisions of subsection (i), every domestic entity from which a
13 report is required under section 601 hereof, shall be subject
14 to, and pay to the department annually, a tax which is the
15 greater of (i) three hundred dollars ($300) or (ii) the amount
16 computed at the rates provided in subsection (h) upon each
17 dollar of the capital stock value as defined in section 601(a),
18 except that any domestic entity or company subject to the tax
19 prescribed herein may elect to compute and pay its tax under and
20 in accordance with the provisions of subsection (b) of this
21 section 602: Provided, That, except for the imposition of the
22 three hundred dollar ($300) minimum tax, the provisions of this
23 section shall not apply to the taxation of the capital stock of
24 entities organized for manufacturing, processing, research or
25 development purposes, which is invested in and actually and
26 exclusively employed in carrying on manufacturing, processing,
27 research or development within the State, except such entities
28 as enjoy and exercise the right of eminent domain, but every
29 entity organized for the purpose of manufacturing, processing,
30 research or development except such entities as enjoy and
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1 exercise the right of eminent domain shall pay the State tax of
2 the greater of (i) three hundred dollars ($300) or (ii) the
3 amount computed at the rates provided in subsection (h) upon
4 each dollar of the capital stock value as defined in section
5 601(a), upon such proportion of its capital stock, if any, as
6 may be invested in any property or business not strictly
7 incident or appurtenant to the manufacturing, processing,
8 research or development business, in addition to the local taxes
9 assessed upon its property in the district where located, it
10 being the object of this provision to relieve from State
11 taxation, except for imposition of the three hundred dollar
12 ($300) minimum tax under this section, only so much of the
13 capital stock as is invested purely in the manufacturing,
14 processing, research or development plant and business: and
15 Provided further, That, except for the imposition of the minimum
16 tax set forth in this section, the provisions of this section
17 shall not apply to the taxation of so much of the capital stock
18 value attributable to student loan assets owned or held by an
19 entity created for the securitization of student loans or by a
20 trustee on its behalf.
21 (b) (1) [Every] Subject to the provisions of subsection
22 (i), every foreign entity from which a report is required under
23 section 601 hereof, shall be subject to and pay to the
24 department annually, a franchise tax which is the greater of (i)
25 three hundred dollars ($300) or (ii) the amount computed at the
26 rates provided in subsection (h) upon each dollar of the capital
27 stock value as defined in section 601(a), upon a taxable value
28 to be determined in the following manner. The capital stock
29 value shall be ascertained in the manner prescribed in section
30 601(a) of this article. The taxable value shall then be
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1 determined by employing the relevant apportionment factors set
2 forth in Article IV: Provided, That the manufacturing,
3 processing, research and development exemptions contained under
4 section 602(a) shall also apply to foreign corporations and in
5 determining the relevant apportionment factors the numerator of
6 the property, payroll, or sales factors shall not include any
7 property, payroll or sales attributable to manufacturing,
8 processing, research or development activities in the
9 Commonwealth: and Provided further, That, except for the
10 imposition of the minimum tax set forth in this section, the
11 provisions of this section shall not apply to the taxation of so
12 much of the capital stock value attributable to student loan
13 assets owned or held by an entity created for the securitization
14 of student loans or by a trustee on its behalf. Any foreign
15 corporation, joint-stock association, limited partnership or
16 company subject to the tax prescribed herein may elect to
17 compute and pay its tax under section 602(a): Provided, That any
18 foreign corporation, joint-stock association, limited
19 partnership or company electing to compute and pay its tax under
20 section 602(a) shall be treated as if it were a domestic
21 corporation for the purpose of determining which of its assets
22 are exempt from taxation and for the purpose of determining the
23 proportion of the value of its capital stock which is subject to
24 taxation.
25 (2) The provisions of this article shall apply to the
26 taxation of entities organized for manufacturing, processing,
27 research or development purposes, but shall not apply to such
28 entities as enjoy and exercise the right of eminent domain.
29 (d) [It] Subject to the provisions of subsection (i), it
30 shall be the duty of the treasurer or other officers having
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1 charge of any domestic or foreign entity, upon which a tax is
2 imposed by this section, to transmit the amount of tax to the
3 department within the time prescribed by law: Provided, That for
4 the purposes of this act interest in limited partnerships or
5 joint-stock associations shall be deemed to be capital stock,
6 and taxable accordingly: Provided, further, That entities liable
7 to a tax under this section, shall not be required to pay any
8 further tax on the mortgages, bonds, and other securities owned
9 by them and in which the whole body of stockholders or members,
10 as such, have the entire equitable interest in remainder; but
11 entities owning or holding such securities as trustees,
12 executors, administrators, guardians, or in any other manner
13 than for the whole body of stockholders or members thereof as
14 sole equitable owners in remainder, shall return and pay the tax
15 imposed by this act upon all securities so owned or held by
16 them, as in the case of individuals.
17 (e) [Any] Subject to the provisions of subsection (i), any
18 holding company subject to the capital stock tax or the
19 franchise tax imposed by this section may elect to compute the
20 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). If
24 exercised, this election shall be in lieu of any other
25 apportionment or allocation to which such company would
26 otherwise be entitled.
27 (f) [Every] Subject to the provisions of subsection (i),
28 every domestic corporation and every foreign corporation (i)
29 registered to do business in Pennsylvania; (ii) which maintains
30 an office in Pennsylvania; (iii) which has filed a timely
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1 election to be taxed as a regulated investment company with the
2 Federal Government; and (iv) which duly qualifies to be taxed as
3 a regulated investment company under the provisions of the
4 Internal Revenue Code of 1954 as amended, shall be taxed as a
5 regulated investment company and shall be subject to the capital
6 stock or franchise tax imposed by section 602, in either case
7 for the privilege of having an office in Pennsylvania, which tax
8 shall be computed pursuant to the provisions of this subsection
9 in lieu of all other provisions of this section 602. The tax
10 shall be in an amount which is the greater of three hundred
11 dollars ($300) or the sum of the amounts determined pursuant to
12 clauses (1) 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] Subject to the provisions of subsection (i), in the
26 event that a domestic or foreign entity is required to file a
27 report pursuant to section 601(b) on other than an annual basis,
28 the tax imposed by this section, including the three hundred
29 dollar ($300) minimum tax, shall be prorated to reflect the
30 portion of a taxable year for which the report is filed by
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1 multiplying the tax liability by a fraction equal to the number
2 of days in the taxable year divided by three hundred sixty-five
3 days.
4 (h) The rate of tax for purposes of the capital stock and
5 franchise tax for taxable years beginning within the dates set
6 forth shall be as follows:
7 Taxable Year Regular Rate Surtax Total Rate
8 January 1, 1971, to
9 December 31, 1986 10 mills 0 10 mills
10 January 1, 1987, to
11 December 31, 1987 9 mills 0 9 mills
12 January 1, 1988, to
13 December 31, 1990 9.5 mills 0 9.5 mills
14 January 1, 1991, to
15 December 31, 1991 11 mills 2 mills 13 mills
16 January 1, 1992, to
17 December 31, 1997 11 mills 1.75 mills 12.75 mills
18 January 1, 1998, and
19 each year thereafter 11 mills .99 mills 11.99 mills
20 (i) Notwithstanding any other provision of Article IV or
21 this article to the contrary, beginning calendar year 1999 or
22 the fiscal year beginning in 1999 and each calendar or fiscal
23 year thereafter, any taxpayer who is liable for taxes under
24 Article IV and this article shall only be required to pay one
25 tax which shall be the higher of the tax liabilities under
26 Article IV or this article.
27 Section 3. The amendments of sections 402 and 602 of the act
28 shall apply to the tax years beginning on or after January 1,
29 1999, and to each tax year thereafter.
30 Section 4. This act shall take effect immediately.
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