PRINTER'S NO. 3178
No. 2288 Session of 2004
INTRODUCED BY REED, TURZAI, THOMAS, GOOD, ALLEN, BAKER, BALDWIN,
BOYD, CAPPELLI, CAUSER, COLEMAN, CORRIGAN, DALLY, DENLINGER,
FAIRCHILD, GINGRICH, GOODMAN, HARRIS, HENNESSEY, HICKERNELL,
HUTCHINSON, KENNEY, METCALFE, NICKOL, PAYNE, PETRARCA,
PICKETT, REICHLEY, SAYLOR, SCAVELLO, SCHRODER, STAIRS, STERN,
R. STEVENSON, T. STEVENSON, E. Z. TAYLOR, TIGUE, WILT,
YOUNGBLOOD AND ZUG, JANUARY 6, 2004
REFERRED TO COMMITTEE ON FINANCE, JANUARY 6, 2004
AN ACT
1 Establishing the Career Development Credit Program; and
2 providing for a fiscal cap, for carryforward and carryback
3 provisions, for assignment of credit, for credit against
4 qualified tax liability, for qualified employee, for
5 qualified and unqualified career development training
6 programs, for location of qualified career development
7 training programs, for qualified and unqualified training
8 costs, for application, assignment and allocation of capped
9 credits, for Pennsylvania S corporation shareholder and
10 limited liability company member pass-through, for reporting
11 requirements and for recapture and forfeiture.
12 TABLE OF CONTENTS
13 Section 1. Short title.
14 Section 2. Establishment.
15 Section 3. Purpose of act.
16 Section 4. Definitions.
17 Section 5. Fiscal cap.
18 Section 6. Assignment of credit.
19 Section 7. Credit against qualified tax liability.
20 Section 8. Qualified employee.
1 Section 9. Qualified career development training programs.
2 Section 10. Programs that do not qualify as career
3 development training programs.
4 Section 11. Required location of qualified career development
5 training programs.
6 Section 12. Qualified training costs.
7 Section 13. Training costs that are not qualified.
8 Section 14. Application for capped credits.
9 Section 15. Pennsylvania S corporation shareholder
10 pass-through.
11 Section 16. Pennsylvania limited liability company member
12 pass-through.
13 Section 17. Reporting requirements.
14 Section 18. Recapture provisions.
15 Section 19. Forfeiture provisions.
16 Section 20. Effective date.
17 The General Assembly of the Commonwealth of Pennsylvania
18 hereby enacts as follows:
19 Section 1. Short title.
20 This act shall be known and may be cited as the Career
21 Development Credit Program Act.
22 Section 2. Establishment.
23 The Career Development Credit Program is hereby established
24 in the Department of Revenue.
25 Section 3. Purpose of act.
26 Currently, Federal and State taxpayers provide about
27 $1,200,000,000 annually into work force development programs
28 aimed at assisting Pennsylvania businesses in training and
29 finding workers and assisting those workers in training and
30 finding jobs. The programs are administered by five State
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1 agencies and consist of 49 separate programs for work force
2 development, job training and education. That is almost double
3 the number of similar programs the State administered only 15
4 years ago. The business community believes that employers are
5 best able to recognize deficiency of job skills and that the
6 government should fund employers' training needs to reduce
7 training costs.
8 Section 4. Definitions.
9 The following words and phrases when used in this act shall
10 have the meanings given to them in this section unless the
11 context clearly indicates otherwise:
12 "CDC." The Career Development Credit Program established in
13 section 2.
14 "Department." The Department of Revenue of the Commonwealth.
15 "Highly compensated individual."
16 (1) An individual who is one of the following:
17 (i) an officer;
18 (ii) a shareholder owning more than 5% of the voting
19 power or value of all classes of stock of the employer;
20 or
21 (iii) an individual who, for the preceding taxable
22 year:
23 (A) received compensation from the employer in
24 excess of the Federal limitation (after adjustment by
25 the Secretary of the United States Treasury for
26 inflation) set forth in section 414(q)(1)(B) of the
27 Internal Revenue Code of 1986 (Public Law 99-514, 26
28 U.S.C. § 414(q)(1)(B), 1 et seq.); or
29 (B) is in the group consisting of the top 20% of
30 all full-time employees of the employer with at least
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1 three years of service when ranked on the basis of
2 compensation paid during the taxable year.
3 (2) A partner or self-employed individual.
4 "LLC." Limited liability company.
5 "Secretary." The Secretary of Revenue of the Commonwealth.
6 Section 5. Fiscal cap.
7 CDC funding shall be capped at $20,000,000 annually. Unused
8 credits may be carried forward for 15 taxable years. There are
9 no carryback provisions.
10 Section 6. Assignment of credit.
11 The amount of the CDC that a taxpayer may use against any one
12 qualified tax liability during any year may not exceed 50% of
13 that tax liability for that taxable year.
14 Section 7. Credit against qualified tax liability.
15 A CDC will be credited against the following liability for
16 taxes: corporate net income tax, capital stock and franchise
17 tax, the personal income tax liability on a shareholder pro rata
18 portion of its ownership of a Pennsylvania S corporation, and
19 personal income tax liability on a member's pro rata portion of
20 its ownership of a limited liability company.
21 Section 8. Qualified employee.
22 The credit for worker training is allowed for an employee who
23 is a Commonwealth resident, is employed in this Commonwealth by
24 the taxpayer, averages at least 30 hours of work per week (at
25 the time training commences and for a period of 12 months
26 following the employee's completion of the program) and is in a
27 position that is not classified as one of the following:
28 (1) highly compensated;
29 (2) physician;
30 (3) veterinarian;
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1 (4) legal;
2 (5) accounting; or
3 (6) executive.
4 Section 9. Qualified career development training programs.
5 Qualified training programs are those that meet recognized
6 industry standards or recognized basic skill levels required by
7 the firms, thus increasing the employee's potential for
8 continued employment or work performance. If the eligible
9 training program requires activities to be conducted while on
10 the job, the employee must be under direct supervision during
11 the training and no more than 50% of the employee's time may be
12 spent fulfilling normal employment functions. Training program
13 activities must be directly related to the eligible employee's
14 current job function.
15 Section 10. Programs that do not qualify as career development
16 training programs.
17 Executive and personal enrichment programs, orientation
18 programs, general health programs and seminars and conferences
19 not directly related to the employee's job description do not
20 qualify as career development training programs.
21 Section 11. Required location of qualified career development
22 training programs.
23 Training must take place within this Commonwealth unless
24 training is not available in this Commonwealth or is available
25 at a lower price out of this Commonwealth.
26 Section 12. Qualified training costs.
27 Wages paid to eligible employees during normal working hours
28 while participating in an eligible training program are eligible
29 training costs. Eligible training expenses include: preskill and
30 postskill assessment, direct costs of instructors, instructional
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1 materials, instructional supplies, instructional media,
2 necessary training equipment, tuition reimbursement, travel
3 costs to and from class and other instructional activities. An
4 eligible training expense would qualify as a business or
5 education deduction for Commonwealth business taxation purposes
6 but would be limited to expenses for career development
7 training.
8 Section 13. Training costs that are not qualified.
9 The following training costs are not qualified under this
10 act:
11 (1) Expenditures either reimbursed or subject to
12 reimbursement through any Federal or State training program.
13 (2) Federal, State or local grants or other payments
14 received by the employer to provide training or retraining.
15 (3) Costs for consumables (calculators, pencils, etc.).
16 (4) Employers' capital expenses.
17 (5) Equipment, materials and software used beyond the
18 training program.
19 (6) Expenses for out-of-State travel.
20 (7) Convention or conference expenses, unless directly
21 related to a qualifying training program.
22 Section 14. Application for capped credits.
23 (a) General rule.--A taxpayer who incurs a Commonwealth
24 career development or job training expense in a taxable year may
25 apply for a CDC by submitting an application to the department
26 by September 15. The application must contain the qualified
27 career development and job training expenses incurred in the
28 taxable year that ended in the prior calendar year.
29 (b) Assignment of capped credits.--By December 15 of the
30 calendar year, the department shall notify the taxpayer of the
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1 amount of the approved taxpayer's CDC.
2 (c) Allocation of capped credits.--The allocation of capped
3 credits is determined by the following formula: taxpayer's
4 career development credit equals the amount allocated for those
5 credits times career development credits applied for by
6 applicant, divided by the total of all career development
7 credits applied for by all applicants.
8 Section 15. Pennsylvania S corporation shareholder pass-
9 through.
10 If a Pennsylvania S corporation does not have an eligible tax
11 liability against which the CDC may be applied, a shareholder of
12 the Pennsylvania S corporation is entitled to a CDC equal to the
13 CDC determined for the Pennsylvania S corporation for the
14 taxable year multiplied by the percentage of the Pennsylvania S
15 corporation's distributive income to which the shareholder is
16 entitled. A Pennsylvania S corporation and a shareholder of a
17 Pennsylvania S corporation may not claim a credit under this
18 article for the same qualified job training expense.
19 Section 16. Pennsylvania limited liability company member pass-
20 through.
21 If a Pennsylvania limited liability company (LLC) does not
22 have an eligible tax liability against which the CDC may be
23 applied, a member of the Pennsylvania LLC is entitled to a CDC
24 equal to the CDC determined for the Pennsylvania LLC for the
25 taxable year multiplied by the percentage of the Pennsylvania
26 LLC's distributive income to which the member is entitled. A
27 Pennsylvania LLC and a member of a Pennsylvania LLC may not
28 claim a credit under this article for the same qualified job-
29 training expense.
30 Section 17. Reporting requirements.
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1 The secretary shall submit an annual report to the General
2 Assembly indicating the effectiveness of the credit no later
3 than March 15 following the year in which the credits were
4 approved. The report shall include the number of taxpayers
5 utilizing the credit, the amount approved and utilized and any
6 suggestions for improvements.
7 Section 18. Recapture provisions.
8 The credit allowed shall be recaptured if the employee
9 involuntarily, other than as the result of death or disability,
10 no longer qualifies as a qualifying employee of the employer or
11 if the employer terminates the employee at any time during the
12 12-month period following the employee's completion of the
13 training program.
14 Section 19. Forfeiture provisions.
15 A taxpayer forfeits a credit allowed under this act if the
16 taxpayer was not eligible for the credit at the time the
17 taxpayer applied for the credit. A taxpayer that forfeits a
18 credit under this act is liable for all past taxes avoided as a
19 result of the credit.
20 Section 20. Effective date.
21 This act shall take effect in 60 days.
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