PRINTER'S NO. 431
No. 418 Session of 1999
INTRODUCED BY GREENLEAF, HART, LEMMOND, CORMAN, MUSTO, COSTA,
BOSCOLA, EARLL, HOLL, KASUNIC, MOWERY, O'PAKE, TOMLINSON,
WAUGH AND WHITE, FEBRUARY 22, 1999
REFERRED TO FINANCE, FEBRUARY 22, 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 capital franchise tax.
11 The General Assembly of the Commonwealth of Pennsylvania
12 hereby enacts as follows:
13 Section 1. Section 602 of the act of March 4, 1971 (P.L.6,
14 No.2), known as the Tax Reform Code of 1971, amended April 23,
15 1998 (P.L.239, No.45), is amended to read:
16 Section 602. Imposition of Tax.--(a) That every domestic
17 entity from which a report is required under section 601 hereof,
18 shall be subject to, and pay to the department annually, a tax
19 which is the greater of (i) [three hundred dollars ($300)] fifty
20 dollars ($50) or (ii) the amount computed at the rates provided
21 in subsection (h) upon each dollar of the capital stock value as
1 defined in section 601(a), except that any domestic entity or
2 company subject to the tax prescribed herein may elect to
3 compute and pay its tax under and in accordance with the
4 provisions of subsection (b) of this section 602: Provided,
5 That, except for the imposition of the [three hundred dollar
6 ($300)] fifty dollar ($50) minimum tax, the provisions of this
7 section shall not apply to the taxation of the capital stock of
8 entities organized for manufacturing, processing, research or
9 development purposes, which is invested in and actually and
10 exclusively employed in carrying on manufacturing, processing,
11 research or development within the State, except such entities
12 as enjoy and exercise the right of eminent domain, but every
13 entity organized for the purpose of manufacturing, processing,
14 research or development except such entities as enjoy and
15 exercise the right of eminent domain shall pay the State tax of
16 the greater of (i) [three hundred dollars ($300)] fifty dollars
17 ($50) or (ii) the amount computed at the rates provided in
18 subsection (h) upon each dollar of the capital stock value as
19 defined in section 601(a), upon such proportion of its capital
20 stock, if any, as may be invested in any property or business
21 not strictly incident or appurtenant to the manufacturing,
22 processing, research or development business, in addition to the
23 local taxes assessed upon its property in the district where
24 located, it being the object of this provision to relieve from
25 State taxation, except for imposition of the [three hundred
26 dollar ($300)] fifty dollar ($50) minimum tax under this
27 section, only so much of the capital stock as is invested purely
28 in the manufacturing, processing, research or development plant
29 and business: and Provided further, That, except for the
30 imposition of the minimum tax set forth in this section, the
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1 provisions of this section shall not apply to the taxation of so
2 much of the capital stock value attributable to student loan
3 assets owned or held by an entity created for the securitization
4 of student loans or by a trustee on its behalf.
5 (b) (1) Every foreign entity from which a report is
6 required under section 601 hereof, shall be subject to and pay
7 to the department annually, a franchise tax which is the greater
8 of (i) [three hundred dollars ($300)] fifty dollars ($50) or
9 (ii) the amount computed at the rates provided in subsection (h)
10 upon each dollar of the capital stock value as defined in
11 section 601(a), upon a taxable value to be determined in the
12 following manner. The capital stock value shall be ascertained
13 in the manner prescribed in section 601(a) of this article. The
14 taxable value shall then be determined by employing the relevant
15 apportionment factors set forth in Article IV: Provided, That
16 the manufacturing, processing, research and development
17 exemptions contained under section 602(a) shall also apply to
18 foreign corporations and in determining the relevant
19 apportionment factors the numerator of the property, payroll, or
20 sales factors shall not include any property, payroll or sales
21 attributable to manufacturing, processing, research or
22 development activities in the Commonwealth: and Provided
23 further, That, except for the imposition of the minimum tax set
24 forth in this section, the provisions of this section shall not
25 apply to the taxation of so much of the capital stock value
26 attributable to student loan assets owned or held by an entity
27 created for the securitization of student loans or by a trustee
28 on its behalf. Any foreign corporation, joint-stock association,
29 limited partnership or company subject to the tax prescribed
30 herein may elect to compute and pay its tax under section
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1 602(a): Provided, That any foreign corporation, joint-stock
2 association, limited partnership or company electing to compute
3 and pay its tax under section 602(a) shall be treated as if it
4 were a domestic corporation for the purpose of determining which
5 of its assets are exempt from taxation and for the purpose of
6 determining the proportion of the value of its capital stock
7 which is subject to taxation.
8 (2) The provisions of this article shall apply to the
9 taxation of entities organized for manufacturing, processing,
10 research or development purposes, but shall not apply to such
11 entities as enjoy and exercise the right of eminent domain.
12 (d) It shall be the duty of the treasurer or other officers
13 having charge of any domestic or foreign entity, upon which a
14 tax is imposed by this section, to transmit the amount of tax to
15 the department within the time prescribed by law: Provided, That
16 for the purposes of this act interest in limited partnerships or
17 joint-stock associations shall be deemed to be capital stock,
18 and taxable accordingly: Provided, further, That entities liable
19 to a tax under this section, shall not be required to pay any
20 further tax on the mortgages, bonds, and other securities owned
21 by them and in which the whole body of stockholders or members,
22 as such, have the entire equitable interest in remainder; but
23 entities owning or holding such securities as trustees,
24 executors, administrators, guardians, or in any other manner
25 than for the whole body of stockholders or members thereof as
26 sole equitable owners in remainder, shall return and pay the tax
27 imposed by this act upon all securities so owned or held by
28 them, as in the case of individuals.
29 (e) Any holding company subject to the capital stock tax or
30 the franchise tax imposed by this section may elect to compute
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1 the capital stock or franchise tax by applying the rate of tax
2 provided in subsection (h) to ten per cent of the capital stock
3 value as defined in section 601(a), but in no case shall the tax
4 so computed be less than [three hundred dollars ($300)] fifty
5 dollars ($50). If exercised, this election shall be in lieu of
6 any other apportionment or allocation to which such company
7 would otherwise be entitled.
8 (f) Every domestic corporation and every foreign corporation
9 (i) registered to do business in Pennsylvania; (ii) which
10 maintains an office in Pennsylvania; (iii) which has filed a
11 timely election to be taxed as a regulated investment company
12 with the Federal Government; and (iv) which duly qualifies to be
13 taxed as a regulated investment company under the provisions of
14 the Internal Revenue Code of 1954 as amended, shall be taxed as
15 a regulated investment company and shall be subject to the
16 capital stock or franchise tax imposed by section 602, in either
17 case for the privilege of having an office in Pennsylvania,
18 which tax shall be computed pursuant to the provisions of this
19 subsection in lieu of all other provisions of this section 602.
20 The tax shall be in an amount which is the greater of [three
21 hundred dollars ($300)] fifty dollars ($50) or the sum of the
22 amounts determined pursuant to clauses (1) and (2):
23 (1) The amount determined pursuant to this clause shall be
24 seventy-five dollars ($75) times that number which is the result
25 of dividing the net asset value of the regulated investment
26 company by one million, rounded to the nearest multiple of
27 seventy-five dollars ($75). Net asset value shall be determined
28 by adding the monthly net asset values as of the last day of
29 each month during the taxable period and dividing the total sum
30 by the number of months involved. Each such monthly net asset
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1 value shall be the actual market value of all assets owned
2 without any exemptions or exclusions, less all liabilities,
3 debts and other obligations.
4 (2) The amount determined pursuant to this clause shall be
5 the amount which is the result of multiplying the rate of
6 taxation applicable for purposes of the personal income tax
7 during the same taxable year times the apportioned undistributed
8 personal income tax income of the regulated investment company.
9 For the purposes of this clause:
10 (A) Personal income tax income shall mean income to the
11 extent enumerated and classified in section 303.
12 (B) Undistributed personal income tax income shall mean all
13 personal income tax income other than personal income tax income
14 undistributed on account of the capital stock or foreign
15 franchise tax, less all personal income tax income distributed
16 to shareholders. At the election of the company, income
17 distributed after the close of a taxable year, but deemed
18 distributed during the taxable year for Federal income tax
19 purposes, shall be deemed distributed during that year for
20 purposes of this clause. If a company in a taxable year has both
21 current income and income accumulated from a prior year,
22 distributions during the year shall be deemed to have been made
23 first from current income.
24 (C) Undistributed personal income tax income shall be
25 apportioned to Pennsylvania by a fraction, the numerator of
26 which is all income distributed during the taxable period to
27 shareholders who are resident individuals, estates or trusts and
28 the denominator of which is all income distributed during the
29 taxable period. Resident trusts shall not include charitable,
30 pension or profit-sharing, or retirement trusts.
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1 (D) Personal income tax income and other income of a company
2 shall each be deemed to be either distributed to shareholders or
3 undistributed in the proportion each category bears to all
4 income received by the company during the taxable year.
5 (g) In the event that a domestic or foreign entity is
6 required to file a report pursuant to section 601(b) on other
7 than an annual basis, the tax imposed by this section, including
8 the [three hundred dollar ($300)] fifty dollar ($50) minimum
9 tax, shall be prorated to reflect the portion of a taxable year
10 for which the report is filed by multiplying the tax liability
11 by a fraction equal to the number of days in the taxable year
12 divided by three hundred sixty-five days.
13 (h) The rate of tax for purposes of the capital stock and
14 franchise tax for taxable years beginning within the dates set
15 forth shall be as follows:
16 Taxable Year Regular Rate Surtax Total Rate
17 January 1, 1971, to
18 December 31, 1986 10 mills 0 10 mills
19 January 1, 1987, to
20 December 31, 1987 9 mills 0 9 mills
21 January 1, 1988, to
22 December 31, 1990 9.5 mills 0 9.5 mills
23 January 1, 1991, to
24 December 31, 1991 11 mills 2 mills 13 mills
25 January 1, 1992, to
26 December 31, 1997 11 mills 1.75 mills 12.75 mills
27 January 1, 1998, and
28 each year thereafter 11 mills .99 mills 11.99 mills
29 Section 2. This act shall apply retroactively to tax years
30 beginning on and after January 1, 1999.
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1 Section 3. This act shall take effect immediately.
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