1Amending the act of March 4, 1971 (P.L.6, No.2), entitled "An 
2act relating to tax reform and State taxation by codifying 
3and enumerating certain subjects of taxation and imposing 
4taxes thereon; providing procedures for the payment, 
5collection, administration and enforcement thereof; providing 
6for tax credits in certain cases; conferring powers and 
7imposing duties upon the Department of Revenue, certain 
8employers, fiduciaries, individuals, persons, corporations 
9and other entities; prescribing crimes, offenses and 
10penalties," establishing a career development tax credit.

11The General Assembly of the Commonwealth of Pennsylvania
12hereby enacts as follows:

13Section 1. The act of March 4, 1971 (P.L.6, No.2), known as 
14the Tax Reform Code of 1971, is amended by adding an article to 
15read:

16ARTICLE XVII-G.2

17CAREER DEVELOPMENT TAX CREDIT

18Section 1701-G.2. Short title of article.

19This article shall be known and may be cited as the Career
20Development Tax Credit Act.

21Section 1702-G.2. Definitions.

1The following words and phrases when used in this article
2shall have the meanings given to them in this section unless the
3context clearly indicates otherwise:

4"Career development tax credit" or "tax credit." The credit 
5provided under this article.

6"Department." The Department of Revenue of the Commonwealth.

7"Nonqualified individual."

8(1) An individual who is one of the following:

9(i) an officer of a business entity;

10(ii) a member or shareholder owning more than 5% of
11the voting power or value of all classes of stock of a
12business entity; or

13(iii) an individual who, for the preceding taxable
14year:

15(A) received compensation from an employer in 
16excess of the Federal limitation, after adjustment by 
17the Secretary of the United States Treasury for 
18inflation, set forth in section 414(q)(1)(B) of the 
19Internal Revenue Code of 1986 (Public Law 99-514, 26 
20U.S.C. § 414(q)(1)(B)); or

21(B) is in the group consisting of the top 20% of
22all full-time employees of the employer with at least
23three years of service when ranked on the basis of
24compensation paid during the taxable year.

25(2) A partner or self-employed individual.

26(3) A physician.

27(4) A veterinarian.

28(5) An attorney.

29(6) An executive.

30"Nonqualified training expense." All of the following:

1(1) Expenditures either reimbursed or subject to
2reimbursement through any Federal or State training program.

3(2) Federal, State or local grants or other payments to
4provide training or retraining.

5(3) Capital expenses.

6(4) Equipment, materials and software used beyond the
7training program.

8(5) Expenses for out-of-State travel.

9(6) Convention or conference expenses, unless directly
10related to a qualified career development training program.

11"Qualified career development training program." A training 
12program that is certified by the Department of Labor and 
13Industry as meeting recognized industry standards, designed to 
14meet the special requirements of an employer, and conducted with 
15a commitment by the employer to continue to employ an individual 
16on successful completion of the training. The term does not 
17include the following:

18(1) Any program in which 50% or more of the employee's
19time is spent on activities other than those directly related
20to the training program.

21(2) An executive training program.

22(3) A personal enrichment program.

23(4) A general health program.

24(5) A seminar or conference unless directly related to
25the employee's job requirements.

26"Qualified employee." A Commonwealth resident who is 
27employed in this Commonwealth by a taxpayer and who averages at 
28least 30 hours of work per week at the time training commences 
29and for a period of 12 months following the employee's 
30completion of the qualified career development program. The term 

1excludes an individual who is a nonqualified individual.

2"Qualified tax liability." The liability for taxes imposed 
3under Article III, IV or VI. The term includes the liability for 
4taxes imposed under Article III on a shareholder of a 
5Pennsylvania S corporation.

6"Qualified training expense." Wages paid to a qualified 
7employee during normal working hours while participating in a 
8qualified career development training program. The term includes 
9preskill and postskill assessment, direct costs of instructors, 
10instructional materials, instructional supplies, instructional 
11media, necessary training equipment, tuition reimbursement, 
12travel costs to and from class and other instructional 
13activities. The term excludes nonqualified training expense.

14"Secretary." The Secretary of Revenue of the Commonwealth.

15"Taxpayer." An entity that is engaged in the business of 
16manufacturing and subject to tax under Article III, IV or VI. 
17The term includes the shareholder of a Pennsylvania S 
18corporation that receives a career development tax credit or the 
19member of a limited liability company that receives a career 
20development tax credit.

21Section 1703-G.2. Tax credit for qualified training expenses.

22(a) General rule.--A taxpayer who incurs qualified training
23expenses in a taxable year may apply for a career development
24tax credit as provided in this article. By September 15, a
25taxpayer must submit an application to the department for
26qualified training expense incurred in the taxable year that
27ended in the prior calendar year.

28(b) Amount of tax credit.--A taxpayer that is qualified
29under subsection (a) shall receive a career development tax
30credit for the taxable year in the amount of 25% of the

1taxpayer's total qualified training expense for the taxable
2year.

3(c) Notification of approved tax credit.--By December 15 of
4the calendar year following the close of the taxable year during
5which the qualified training expense was incurred, the
6department shall notify the taxpayer of the amount of the
7taxpayer's career development tax credit approved by the
8department.

9Section 1704-G.2. Carryover, carryback, refund and assignment
10of tax credit.

11(a) General rule.--If the taxpayer cannot use the entire
12amount of the career development tax credit for the taxable year
13in which the career development tax credit is first approved,
14then the excess may be carried over to succeeding taxable years
15and used as a credit against the qualified tax liability of the
16taxpayer for those taxable years. Each time that the career
17development tax credit is carried over to a succeeding taxable
18year, it is to be reduced by the amount that was used as a
19credit during the immediately preceding taxable year. The career
20development tax credit provided by this article may be carried
21over and applied to succeeding taxable years for no more than 15
22taxable years following the first taxable year for which the
23taxpayer was entitled to claim the credit.

24(b) Taxable year in which tax credit applied.--A career
25development tax credit approved by the department for qualified
26training expenses in a taxable year first shall be applied
27against the taxpayer's qualified tax liability for the current
28taxable year as of the date on which the credit was approved
29before the career development tax credit is applied against any
30tax liability under subsection (a).

1(c) Limitation.--A taxpayer is not entitled to carry back or
2obtain a refund of an unused career development tax credit.

3Section 1705-G.2. Time limitations.

4A taxpayer is not entitled to a career development tax credit
5for qualified training expenses incurred in taxable years ending
6after December 31, 2014.

7Section 1706-G.2. Limitation on tax credits.

8(a) General rule.--The total amount of career development
9tax credits approved by the department shall not exceed
10$20,000,000 in any fiscal year.

11(b) Proration required.--If the total amount of career
12development tax credits applied for by all taxpayers exceeds the
13amount allocated for those credits, then the career development
14tax credit to be received by each applicant shall be prorated by
15the department among all applicants who have qualified for the
16tax credit.

17Section 1707-G.2. Pennsylvania S corporation shareholder pass-
18through.

19(a) General rule.--If a Pennsylvania S corporation does not
20have an eligible tax liability against which the career
21development tax credit may be applied, a shareholder of the
22Pennsylvania S corporation is entitled to a tax credit equal to
23the tax credit determined for the Pennsylvania S corporation for
24the taxable year multiplied by the percentage of the
25Pennsylvania S corporation's distributive income to which the
26shareholder is entitled.

27(b) Operation of tax credit.--The career development tax
28credit provided under subsection (a) is in addition to any
29career development tax credit to which a shareholder of a
30Pennsylvania S corporation is otherwise entitled under this

1article. However, a Pennsylvania S corporation and a shareholder
2of a Pennsylvania S corporation may not claim a tax credit for
3the same qualified training expense.

4Section 1708-G.2. Pennsylvania limited liability company member
5pass-through.

6(a) General rule.--If a limited liability company does not
7have an eligible tax liability against which the career
8development tax credit may be applied, a member of the limited
9liability company is entitled to a tax credit equal to the tax
10credit determined for the limited liability company for the
11taxable year multiplied by the percentage of the limited
12liability company's distributive income to which the member is
13entitled.

14(b) Operation of tax credit.--The career development tax
15credit under subsection (a) is in addition to any career
16development tax credit to which a member of a limited liability
17company is otherwise entitled under this article. A limited
18liability company and a member of a limited liability company
19may not claim a tax credit for the same qualified training
20expense.

21Section 1709-G.2. Recapture of credit.

22(a) General rule.--If an employee for whom a credit has been
23awarded does not maintain continuous employment with the
24taxpayer for a period of 12 months following the completion of
25the qualified career development training program, the
26department shall recapture any credit awarded to the taxpayer
27for the qualified training expense of that employee.

28(b) Nonapplicability.--This section shall not apply if the
29employee:

30(1) is deceased;

1(2) is disabled;

2(3) voluntarily leaves employment; or

3(4) is discharged for cause as certified by the
4Department of Labor and Industry.

5Section 1710-G.2. Report to General Assembly.

6The secretary shall submit an annual report to the General
7Assembly indicating the effectiveness of the career development
8tax credit no later than March 15 following the year in which
9the tax credits were approved. The report shall include the
10names of all taxpayers utilizing the tax credit as of the date
11of the report and the amount of tax credits approved and
12utilized by each taxpayer. Notwithstanding any law providing for
13the confidentiality of tax records, the information contained in
14the report shall be public information. The report may also
15include any recommendations for changes in the calculation or
16administration of the tax credit.

17Section 1711-G.2. Termination.

18The department shall not approve a career development tax
19credit for taxable years ending after December 31, 2014.

20Section 1712-G.2. Regulations.

21The secretary shall promulgate regulations necessary for the
22implementation and administration of this article.

23Section 2. This act shall apply to taxable years commencing
24after December 31, 2012.

25Section 3. This act shall take effect immediately.