PRINTER'S NO. 1531
No. 1209 Session of 1999
INTRODUCED BY WAGNER, NOVEMBER 18, 1999
REFERRED TO FINANCE, NOVEMBER 18, 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," eliminating the manufacturing, processing,
11 research and development capital stock and franchise
12 exemption; and providing for a manufacturing, processing,
13 research and development capital stock and franchise tax
14 credit.
15 The General Assembly of the Commonwealth of Pennsylvania
16 hereby enacts as follows:
17 Section 1. Section 602(a) and (b) of the act of March 4,
18 1971 (P.L.6, No.2), known as the Tax Reform Code of 1971,
19 amended May 12, 1999 (P.L.26, No.4), are amended to read:
20 Section 602. Imposition of Tax.--(a) That every domestic
21 entity from which a report is required under section 601 hereof,
22 shall be subject to, and pay to the department annually, a tax
23 which is the greater of (i) the amount computed by multiplying
1 each dollar of the capital stock value as defined in section
2 601(a) by the appropriate rate of tax as set forth in subsection
3 (h); or (ii) the minimum tax set forth in subsection (i), except
4 that any domestic entity or company subject to the tax
5 prescribed herein may elect to compute and pay its tax under and
6 in accordance with the provisions of subsection (b) of this
7 section 602: Provided, That, [except for the imposition of the
8 minimum tax set forth in subsection (i), the provisions of this
9 section shall not apply to the taxation of the capital stock of
10 entities organized for manufacturing, processing, research or
11 development purposes, which is invested in and actually and
12 exclusively employed in carrying on manufacturing, processing,
13 research or development within the State, except such entities
14 as enjoy and exercise the right of eminent domain, but every
15 entity organized for the purpose of manufacturing, processing,
16 research or development except such entities as enjoy and
17 exercise the right of eminent domain shall pay the State tax of
18 the greater of (i) the amount computed by multiplying each
19 dollar of the capital stock value as defined in section 601(a)
20 by the appropriate rate of tax as set forth in subsection (h);
21 or (ii) the minimum tax set forth in subsection (i), upon such
22 proportion of its capital stock, if any, as may be invested in
23 any property or business not strictly incident or appurtenant to
24 the manufacturing, processing, research or development business,
25 in addition to the local taxes assessed upon its property in the
26 district where located, it being the object of this provision to
27 relieve from State taxation, except for imposition of the
28 minimum tax set forth in subsection (i), only so much of the
29 capital stock as is invested purely in the manufacturing,
30 processing, research or development plant and business: and
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1 Provided further, That,] except for the imposition of the
2 minimum tax set forth in subsection (i), the provisions of this
3 section shall not apply to the taxation of so much of the
4 capital stock value attributable to student loan assets owned or
5 held by an entity created for the securitization of student
6 loans or by a trustee on its behalf.
7 (b) [(1)] Every foreign entity from which a report is
8 required under section 601 hereof, shall be subject to and pay
9 to the department annually, a franchise tax which is the greater
10 of (i) the amount computed by multiplying each dollar of the
11 capital stock value as defined in section 601(a) by the
12 appropriate rate of tax as set forth in subsection (h); or (ii)
13 the minimum tax set forth in subsection (i), upon a taxable
14 value to be determined in the following manner. The capital
15 stock value shall be ascertained in the manner prescribed in
16 section 601(a) of this article. The taxable value shall then be
17 determined by employing the relevant apportionment factors set
18 forth in Article IV: Provided, [That the manufacturing,
19 processing, research and development exemptions contained under
20 section 602(a) shall also apply to foreign corporations and in
21 determining the relevant apportionment factors the numerator of
22 the property, payroll, or sales factors shall not include any
23 property, payroll or sales attributable to manufacturing,
24 processing, research or development activities in the
25 Commonwealth: and Provided further,] That, except for the
26 imposition of the minimum tax set forth in subsection (i), the
27 provisions of this section shall not apply to the taxation of so
28 much of the capital stock value attributable to student loan
29 assets owned or held by an entity created for the securitization
30 of student loans or by a trustee on its behalf. Any foreign
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1 corporation, joint-stock association, limited partnership or
2 company subject to the tax prescribed herein may elect to
3 compute and pay its tax under section 602(a): Provided, That any
4 foreign corporation, joint-stock association, limited
5 partnership or company electing to compute and pay its tax under
6 section 602(a) shall be treated as if it were a domestic
7 corporation for the purpose of determining which of its assets
8 are exempt from taxation and for the purpose of determining the
9 proportion of the value of its capital stock which is subject to
10 taxation.
11 [(2) The provisions of this article shall apply to the
12 taxation of entities organized for manufacturing, processing,
13 research or development purposes, but shall not apply to such
14 entities as enjoy and exercise the right of eminent domain.]
15 * * *
16 Section 2. The act is amended by adding a section to read:
17 Section 602.6. Manufacturing, Processing, Research and
18 Development Tax Credit.--(a) There is hereby established a
19 capital stock and franchise tax credit for property and payroll
20 used within this Commonwealth for manufacturing, processing,
21 research and development as calculated under subsection (b).
22 (b) The amount of the tax credit under subsection (a) shall
23 be calculated as follows:
24 (1) Calculate the amount of capital stock and franchise tax
25 under section 602.
26 (2) Calculate the credit by multiplying the expenses in
27 Pennsylvania related to property and payroll associated with
28 manufacturing, processing, research and development by two per
29 cent.
30 (3) Subtract the amount obtained under clause (2) from the
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1 amount obtained under clause (1).
2 (4) Subject to the limitation under subsection (c), the
3 result is the amount of credit against the capital stock and
4 franchise tax due the Commonwealth.
5 (c) Any tax credit authorized under this section shall be
6 limited to ninety-eight per cent of the capital stock and
7 franchise tax due the Commonwealth under subsection (b)(1).
8 (d) This section shall apply to tax years beginning after
9 December 31, 1999.
10 Section 3. This act shall take effect immediately.
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