PRINTER'S NO. 890
No. 737 Session of 2005
INTRODUCED BY BROWNE, CORMAN, PILEGGI, ORIE, RAFFERTY, WENGER,
PIPPY, GORDNER, D. WHITE, WONDERLING AND BOSCOLA,
JUNE 9, 2005
REFERRED TO FINANCE, JUNE 9, 2005
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, in personal income tax, for
11 definitions and for tax status election by small
12 corporations.
13 The General Assembly of the Commonwealth of Pennsylvania
14 hereby enacts as follows:
15 Section 1. Section 301(s.2) of the act of March 4, 1971
16 (P.L.6, No.2), known as the Tax Reform Code of 1971, amended May
17 12, 1999 (P.L.26, No.4), is amended to read:
18 Section 301. Definitions.--The following words, terms and
19 phrases when used in this article shall have the meaning
20 ascribed to them in this section except where the context
21 clearly indicates a different meaning, and, unless specifically
22 provided otherwise, any reference in this article to the
1 Internal Revenue Code of 1986 shall mean the Internal Revenue
2 Code of 1986 (Public Law 99-514, 26 U.S.C. § 1 et seq.), as
3 amended to January 1, 1997:
4 * * *
5 (s.2) "Small corporation" means any corporation which has a
6 valid election in effect under Subchapter S of Chapter 1 of the
7 Internal Revenue Code of 1986, as amended to January 1, [1997]
8 2005.
9 * * *
10 Section 2. Section 307 of the act, amended May 7, 1997
11 (P.L.85, No.7), is amended to read:
12 Section 307. Election by Small Corporation.--[Except as
13 provided in section 307.6, any] Any small corporation [that is
14 subject to the tax imposed under Article IV or owns a qualified
15 S corporation subsidiary that is subject to the tax imposed
16 under Article IV] may elect not to be taxed as a Pennsylvania S
17 corporation. Such election [shall be valid only if all the
18 shareholders] requires the consent of one hundred per cent of
19 the outstanding shares of the small corporation on the day on
20 which the election is made [consent to the election]. A
21 qualified Subchapter S subsidiary owned by a Pennsylvania S
22 corporation shall be treated as a Pennsylvania S corporation
23 whether or not an election has been made with respect to such
24 subsidiary.
25 Section 3. Sections 307.1, 307.4, 307.5 and 307.6 of the
26 act, added December 23, 1983 (P.L.370, No.90), are amended to
27 read:
28 Section 307.1. Manner of Making Election.--(a) An election
29 made pursuant to section 307 shall be made in such manner as
30 prescribed by the department.
20050S0737B0890 - 2 -
1 (b) An election under section 307 may be made for any
2 taxable year at any time during the preceding taxable year or at
3 any time on or before the [fifteenth day of the third month of
4 the current taxable year] due date or extended due date of the
5 small corporation's tax return under Article IV.
6 [Section 307.4. Termination by Corporation Ceasing to be a
7 Small Corporation.--(a) If a corporation ceases to be a small
8 corporation, as defined in section 301(s.2), the election under
9 section 307 shall terminate.
10 (b) Such termination shall be effective on the date on which
11 the corporation ceases to be a small corporation, as defined in
12 section 301(s.2).
13 Section 307.5. Revocation or Termination Year.--(a) The
14 portion of the revocation or termination year of a Pennsylvania
15 S corporation ending before the first day for which the
16 revocation or termination is effective shall be treated as a
17 short taxable year for which the corporation is a Pennsylvania S
18 corporation.
19 (b) The portion of such year beginning on the first day for
20 which the revocation or termination is effective shall be
21 treated as a short taxable year for which the corporation is
22 subject to the tax imposed by Article IV.
23 (c) The allocation of income and expense items to be taken
24 into consideration in each short year shall be made in
25 accordance with such regulations as may be issued by the
26 department.
27 Section 307.6. Election after Revocation or Termination.--If
28 a corporation has made an election under section 307 and if such
29 election has been revoked pursuant to section 307.3 or
30 terminated, such corporation, and any successor corporation,
20050S0737B0890 - 3 -
1 shall not be eligible to make an election under section 307 for
2 any taxable year prior to its fifth taxable year which begins
3 after the first taxable year for which such revocation or
4 termination is effective.]
5 Section 4. The amendment of sections 301(s.2), 307, 307.1,
6 307.4, 307.5 and 307.6 of the act shall apply to taxable years
7 beginning after December 31, 2005.
8 Section 5. This act shall take effect July 1, 2005, or
9 immediately, whichever is later.
E2L72VDL/20050S0737B0890 - 4 -