PRINTER'S NO. 2337
No. 1790 Session of 2007
INTRODUCED BY TURZAI, BAKER, BARRAR, BEAR, BENNINGHOFF, BOBACK,
BOYD, BROOKS, CALTAGIRONE, CAPPELLI, CAUSER, CIVERA, CLYMER,
COX, CREIGHTON, CUTLER, DALLY, DENLINGER, DePASQUALE, ELLIS,
EVERETT, FLECK, GABIG, GEIST, GEORGE, GIBBONS, GILLESPIE,
GINGRICH, GOODMAN, GRELL, HALUSKA, HARHART, HARRIS, HELM,
HENNESSEY, HERSHEY, HUTCHINSON, KAUFFMAN, M. KELLER, KENNEY,
KILLION, KORTZ, KOTIK, LONGIETTI, MACKERETH, MAJOR, MANN,
MANTZ, McGEEHAN, McILHATTAN, MENSCH, METCALFE, R. MILLER,
MILNE, MOUL, MOYER, MURT, MUSTIO, MYERS, NICKOL, O'NEILL,
PAYNE, PEIFER, PERRY, PETRI, PHILLIPS, PICKETT, PYLE,
QUIGLEY, RAPP, REED, REICHLEY, ROAE, ROSS, RUBLEY, SAYLOR,
SCAVELLO, SCHRODER, SONNEY, STABACK, STERN, R. STEVENSON,
SWANGER, J. TAYLOR, THOMAS, VEREB, VULAKOVICH, WANSACZ,
WOJNAROSKI, YOUNGBLOOD AND YUDICHAK, JULY 14, 2007
REFERRED TO COMMITTEE ON FINANCE, JULY 14, 2007
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," in personal income tax, further providing for
11 classes of income; and in inheritance tax, further providing
12 for transfers not subject to inheritance tax.
13 The General Assembly of the Commonwealth of Pennsylvania
14 hereby enacts as follows:
15 Section 1. Section 303(a.7) of the act of March 4, 1971
16 (P.L.6, No.2), known as the Tax Reform Code of 1971, added July
17 6, 2006 (P.L.319, No.67), is amended to read:
1 Section 303. Classes of Income.--(a) The classes of income
2 referred to above are as follows:
3 * * *
4 (a.7) The following apply:
5 (1) (i) An amount paid as a contribution into a qualified
6 tuition program shall be deductible from taxable income on the
7 annual personal income tax return. The amount paid as a
8 contribution to a qualified tuition program allowable as a
9 deduction under this subsection shall be subject to an annual
10 limitation not to exceed the threshold for exclusion from gifts
11 as provided in section 2503(b) of the Internal Revenue Code of
12 1986, as amended, per designated beneficiary. The deduction
13 shall not result in taxable income being less than zero. If the
14 annual contribution to a qualified tuition program exceeds the
15 annual limitation, the amount of the annual contribution that
16 exceeds the annual limitation may be carried forward and may be
17 deductible for up to five taxable years after the taxable year
18 in which the contribution is paid. The amount deducted in any
19 taxable year may not exceed the annual limitation.
20 (ii) For taxable years beginning after December 31, 2006,
21 deductions may be taken for a taxable year for the contributions
22 made during and up to April 15 of the succeeding year or the due
23 date of a taxpayer's State income tax return, excluding
24 extensions, whichever is later. A deduction for the same
25 contribution may not be taken more than once.
26 (2) (i) The following shall not be subject to tax under
27 this article:
28 (A) Any amount distributed from a qualified tuition program
29 that is excludable from tax under section 529(c)(3)(B) of the
30 Internal Revenue Code of 1986, as amended.
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1 (B) Any rollover that is excludable from tax under section
2 529(c)(3)(C) of the Internal Revenue Code of 1986, as amended.
3 (C) Undistributed earnings on a qualified tuition program.
4 (ii) A change in designated beneficiaries under section
5 529(c)(3)(C) of the Internal Revenue Code of 1986, as amended,
6 shall not constitute a taxable event under this article.
7 (3) Any amount distributed from a qualified tuition program
8 that is not described under paragraph (2) shall be taxable under
9 this article.
10 (4) For purposes of this subsection:
11 (i) The term "designated beneficiary" shall have the same
12 meaning as provided in section 529(e)(1) of the Internal Revenue
13 Code of 1986, as amended.
14 (ii) The term "qualified tuition program" shall have the
15 same meaning as provided in section 529(b)(1) of the Internal
16 Revenue Code of 1986, as amended.
17 * * *
18 Section 2. Section 2111 of the act is amended by adding a
19 subsection to read:
20 Section 2111. Transfers Not Subject to Tax.--* * *
21 (s) (1) Contributions made pursuant to a qualified tuition
22 program.
23 (2) Any increase in the value of contributions under
24 paragraph (1), the retention or transfer during life or as a
25 result of death of any legal interest in a qualified tuition
26 program.
27 (3) Payment of qualified higher education expenses of
28 beneficiaries made pursuant to a qualified tuition program.
29 Section 3. The addition of section 2111(s) of the act shall
30 apply to the estates of decedents dying on or after the
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1 effective date of this section.
2 Section 4. This act shall take effect as follows:
3 (1) The following provisions shall take effect in 60
4 days:
5 (i) The addition of section 2111(s) of the act.
6 (ii) Section 3 of this act.
7 (2) The remainder of this act shall take effect
8 immediately.
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