SENATE AMENDED
PRIOR PRINTER'S NOS. 3178, 3622 PRINTER'S NO. 4248
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, ZUG, CREIGHTON, WANSACZ, FORCIER, WATSON, HORSEY
AND O'NEILL, JANUARY 6, 2004
SENATOR EARLL, FINANCE, IN SENATE, AS AMENDED, JUNE 30, 2004
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," establishing a career development tax credit.
11 The General Assembly of the Commonwealth of Pennsylvania
12 hereby enacts as follows:
13 Section 1. The act of March 4, 1971 (P.L.6, No.2), known as
14 the Tax Reform Code of 1971, is amended by adding an article to
15 read:
16 ARTICLE XVII-C
17 CAREER DEVELOPMENT TAX CREDIT
18 Section 1701-C. Short title of article.
1 This article shall be known and may be cited as the Career
2 Development Tax Credit Act.
3 Section 1702-C. Definitions.
4 The following words and phrases when used in this article
5 shall have the meanings given to them in this section unless the
6 context clearly indicates otherwise:
7 "Career development tax credit," or "tax credit." The credit
8 provided under this article.
9 "Department." The Department of Revenue of the Commonwealth.
10 "Nonqualified individual."
11 (1) An individual who is one of the following:
12 (i) an officer of a business entity;
13 (ii) a member or shareholder owning more than 5% of
14 the voting power or value of all classes of stock of a
15 business entity; or
16 (iii) an individual who, for the preceding taxable
17 year:
18 (A) received compensation from the employer in
19 excess of the Federal limitation, after adjustment by
20 the Secretary of the United States Treasury for
21 inflation, set forth in section 414(q)(1)(B) of the
22 Internal Revenue Code of 1986 (Public Law 99-514, 26
23 U.S.C. § 414(q)(1)(B); or
24 (B) is in the group consisting of the top 20% of
25 all full-time employees of the employer with at least
26 three years of service when ranked on the basis of
27 compensation paid during the taxable year.
28 (2) A partner or self-employed individual.
29 (3) A physician.
30 (4) A veterinarian.
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1 (5) An attorney.
2 (6) An executive.
3 "Nonqualified training expense." All of the following:
4 (1) Expenditures either reimbursed or subject to
5 reimbursement through any Federal or State training program.
6 (2) Federal, State or local grants or other payments to
7 provide training or retraining.
8 (3) Capital expenses.
9 (4) Equipment, materials and software used beyond the
10 training program.
11 (5) Expenses for out-of-State travel.
12 (6) Convention or conference expenses, unless directly
13 related to a qualified career development training program.
14 "Qualified career development training program." A training
15 program that is certified by the Department of Labor and
16 Industry as meeting recognized industry standards, designed to
17 meet the special requirements of an employer, and conducted with
18 a commitment by the employer to continue to employ an individual
19 on successful completion of the training. The term does not
20 include the following:
21 (1) Any program in which 50% or more of the employee's
22 time is spent on activities other than those directly related
23 to the training program.
24 (2) An executive training program.
25 (3) A personal enrichment program.
26 (4) A general health program.
27 (5) A seminar or conference unless directly related to
28 the employee's job requirements.
29 "Qualified employee." A Commonwealth resident who is
30 employed in this Commonwealth by a taxpayer and who averages at
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1 least 30 hours of work per week at the time training commences
2 and for a period of 12 months following the employee's
3 completion of the qualified career development program. The term
4 excludes an individual who is a nonqualified individual.
5 "Qualified tax liability." The liability for taxes imposed
6 under Article III, IV or VI. The term shall include the
7 liability for taxes imposed under Article III on a shareholder
8 of a Pennsylvania S corporation.
9 "Qualified training expense." Wages paid to a qualified
10 employee during normal working hours while participating in a
11 qualified career development training program. The term includes
12 preskill and postskill assessment, direct costs of instructors,
13 instructional materials, instructional supplies, instructional
14 media, necessary training equipment, tuition reimbursement,
15 travel costs to and from class and other instructional
16 activities. The term excludes nonqualified training expense.
17 "Secretary." The Secretary of Revenue of the Commonwealth.
18 "Taxpayer." An entity THAT IS ENGAGED IN THE BUSINESS OF <--
19 MANUFACTURING AND subject to tax under Article III, IV or VI.
20 The term shall include the shareholder of a Pennsylvania S
21 corporation that receives a career development tax credit or the
22 member of a limited liability company that receives a career
23 development tax credit.
24 Section 1703-C. Tax credit for qualified training expenses.
25 (a) General rule.--A taxpayer who incurs qualified training
26 expenses in a taxable year may apply for a career development
27 tax credit as provided in this article. By September 15, a
28 taxpayer must submit an application to the department for
29 qualified training expense incurred in the taxable year that
30 ended in the prior calendar year.
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1 (b) Amount of tax credit.--A taxpayer that is qualified
2 under subsection (a) shall receive a career development tax
3 credit for the taxable year in the amount of 25% of the
4 taxpayer's total qualified training expense for the taxable
5 year.
6 (c) Notification of approved tax credit.--By December 15 of
7 the calendar year following the close of the taxable year during
8 which the Pennsylvania qualified training expense was incurred,
9 the department shall notify the taxpayer of the amount of the
10 taxpayer's career development tax credit approved by the
11 department.
12 Section 1704-C. Carryover, carryback, refund and assignment of
13 tax credit.
14 (a) General rule.--If the taxpayer cannot use the entire
15 amount of the career development tax credit for the taxable year
16 in which the career development tax credit is first approved,
17 then the excess may be carried over to succeeding taxable years
18 and used as a credit against the qualified tax liability of the
19 taxpayer for those taxable years. Each time that the career
20 development tax credit is carried over to a succeeding taxable
21 year, it is to be reduced by the amount that was used as a
22 credit during the immediately preceding taxable year. The career
23 development tax credit provided by this article may be carried
24 over and applied to succeeding taxable years for no more than 15
25 taxable years following the first taxable year for which the
26 taxpayer was entitled to claim the credit.
27 (b) Taxable year in which tax credit applied.--A career
28 development tax credit approved by the department for qualified
29 training expenses in a taxable year first shall be applied
30 against the taxpayer's qualified tax liability for the current
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1 taxable year as of the date on which the credit was approved
2 before the career development tax credit is applied against any
3 tax liability under subsection (a).
4 (c) Limitation.--A taxpayer is not entitled to carry back or
5 obtain a refund of an unused career development tax credit.
6 Section 1705-C. Time limitations.
7 A taxpayer is not entitled to a career development tax credit
8 for qualified training expenses incurred in taxable years ending
9 after December 31, 2008.
10 Section 1706-C. Limitation on tax credits.
11 (a) General rule.--The total amount of career development
12 tax credits approved by the department shall not exceed
13 $20,000,000 in any fiscal year.
14 (b) Proration required.--If the total amount of career
15 development tax credits applied for by all taxpayers exceeds the
16 amount allocated for those credits, then the career development
17 tax credit to be received by each applicant shall be prorated by
18 the department among all applicants who have qualified for the
19 tax credit.
20 Section 1707-C. Pennsylvania S corporation shareholder pass-
21 through.
22 (a) General rule.--If a Pennsylvania S corporation does not
23 have an eligible tax liability against which the career
24 development tax credit may be applied, a shareholder of the
25 Pennsylvania S corporation is entitled to a tax credit equal to
26 the tax credit determined for the Pennsylvania S corporation for
27 the taxable year multiplied by the percentage of the
28 Pennsylvania S corporation's distributive income to which the
29 shareholder is entitled.
30 (b) Operation of tax credit.--The career development tax
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1 credit provided under subsection (a) is in addition to any
2 career development tax credit to which a shareholder of a
3 Pennsylvania S corporation is otherwise entitled under this
4 article. However, a Pennsylvania S corporation and a shareholder
5 of a Pennsylvania S corporation may not claim a tax credit for
6 the same qualified training expense.
7 Section 1708-C. Pennsylvania limited liability company member
8 pass-through.
9 (a) General rule.--If a limited liability company does not
10 have an eligible tax liability against which the career
11 development tax credit may be applied, a member of the limited
12 liability company is entitled to a tax credit equal to the tax
13 credit determined for the limited liability company for the
14 taxable year multiplied by the percentage of the limited
15 liability company's distributive income to which the member is
16 entitled.
17 (b) Operation of tax credit.--The career development tax
18 credit under subsection (a) is in addition to any career
19 development tax credit to which a member of a limited liability
20 company is otherwise entitled under this article. A limited
21 liability company and a member of a limited liability company
22 may not claim a tax credit for the same qualified training
23 expense.
24 Section 1709-C. Recapture of credit.
25 (a) General rule.--If an employee for whom a credit has been
26 awarded does not maintain continuous employment with the
27 taxpayer for a period of 12 months following the completion of
28 the qualified career development training program, the
29 department shall recapture any credit awarded to the taxpayer
30 for the qualified training expense of that employee.
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1 (b) Nonapplicability.--This section shall not apply if the
2 employee:
3 (1) is deceased;
4 (2) is disabled;
5 (3) voluntarily leaves employment; or
6 (4) is discharged for cause as certified by the
7 Department of Labor and Industry.
8 Section 1710-C. Report to General Assembly.
9 The secretary shall submit an annual report to the General
10 Assembly indicating the effectiveness of the career development
11 tax credit no later than March 15 following the year in which
12 the tax credits were approved. The report shall include the
13 names of all taxpayers utilizing the tax credit as of the date
14 of the report and the amount of tax credits approved and
15 utilized by each taxpayer. Notwithstanding any law providing for
16 the confidentiality of tax records, the information contained in
17 the report shall be public information. The report may also
18 include any recommendations for changes in the calculation or
19 administration of the tax credit.
20 Section 1711-C. Termination.
21 The department shall not approve a career development tax
22 credit for taxable years ending after December 31, 2008.
23 Section 1712-C. Regulations.
24 The secretary shall promulgate regulations necessary for the
25 implementation and administration of this article.
26 Section 2. This act shall apply to taxable years commencing
27 after December 31, 2003.
28 Section 3. This act shall take effect immediately.
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