PRINTER'S NO. 1532
No. 1210 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," reducing the rates of corporate net income tax
11 and capital stock and franchise tax and eliminating
12 manufacturing, processing, research and development
13 exemption.
14 The General Assembly of the Commonwealth of Pennsylvania
15 hereby enacts as follows:
16 Section 1. Section 402 of the act of March 4, 1971 (P.L.6,
17 No.2), known as the Tax Reform Code of 1971, amended June 30,
18 1995 (P.L.139, No.21), is amended to read:
19 Section 402. Imposition of Tax.--Every corporation shall be
20 subject to, and shall pay for the privilege of (i) doing
21 business in this Commonwealth; or (ii) carrying on activities in
22 this Commonwealth; (iii) having capital or property employed or
23 used in this Commonwealth; or (iv) owning property in this
1 Commonwealth, by or in the name of itself, or any person,
2 partnership, association, limited partnership, joint-stock
3 association, or corporation, a State excise tax at the rate of
4 twelve per cent per annum upon each dollar of taxable income of
5 such corporation received by, and accruing to, such corporation
6 during the calendar year 1971 and the first six months of 1972
7 and at the rate of eleven per cent per annum upon each dollar of
8 taxable income of such corporation received by, and accruing to,
9 such corporation during the second six months of calendar year
10 1972 through the calendar year 1973 and at the rate of nine and
11 one-half per cent per annum upon each dollar of taxable income
12 of such corporation received by, and accruing to, such
13 corporation during the calendar years 1974, 1975 and 1976 and at
14 the rate of ten and one-half per cent per annum upon each dollar
15 of taxable income of such corporation received by, and accruing
16 to, such corporation during the calendar year 1977 through the
17 calendar year 1984 and at the rate of nine and one-half per cent
18 per annum upon each dollar of taxable income of such corporation
19 received by and accruing to such corporation during the calendar
20 year 1985 through calendar year 1986 and at the rate of eight
21 and one-half per cent per annum upon each dollar of taxable
22 income of such corporation received by and accruing to such
23 corporation during the calendar year 1987 through the calendar
24 year 1990 and at the rate of ten and one-half per cent per annum
25 upon each dollar of taxable income of such corporation received
26 by and accruing to such corporation during calendar year 1991
27 through the calendar year 1994 and at the rate of nine and
28 ninety-nine hundredths per cent per annum upon each dollar of
29 taxable income of such corporation received by and accruing to
30 such corporation during the calendar year 1995 through calendar
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1 year 1998 and at the rate of seven and ninety-nine hundredths
2 per cent per annum upon each dollar of taxable income of such
3 corporation received by and accruing to such corporation during
4 the calendar year 1999 and during each calendar year thereafter,
5 with an additional surtax equal to one and seventy-five
6 hundredths per cent per annum upon each dollar of taxable income
7 of such corporation received by and accruing to such corporation
8 during calendar year 1991 and through calendar year 1993 and
9 with an additional surtax equal to one and forty-nine hundredths
10 per cent per annum upon each dollar of taxable income of such
11 corporation received by and accruing to such corporation during
12 calendar year 1994 and with no surtax during calendar year 1995
13 and each calendar year thereafter, except where a corporation
14 reports to the Federal Government on the basis of a fiscal year,
15 and has certified such fact to the department as required by
16 section 403 of this article, in which case, such tax, at the
17 rate of twelve per cent, shall be levied, collected, and paid
18 upon all taxable income received by, and accruing to, such
19 corporation during the first six months of the fiscal year
20 commencing in the calendar year 1972 and at the rate of eleven
21 per cent, shall be levied, collected, and paid upon all taxable
22 income received by, and accruing to, such corporation during the
23 second six months of the fiscal year commencing in the calendar
24 year 1972 and during the fiscal year commencing in the calendar
25 year 1973 and at the rate of nine and one-half per cent, shall
26 be levied, collected, and paid upon all taxable income received
27 by, and accruing to, such corporation during the fiscal year
28 commencing in the calendar years 1974, 1975 and 1976 and at the
29 rate of ten and one-half per cent, shall be levied, collected,
30 and paid upon all taxable income received by, and accruing to,
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1 such corporation during the fiscal year commencing in the
2 calendar year 1977 through the fiscal year commencing in 1984
3 and at the rate of nine and one-half per cent, shall be levied,
4 collected, and paid upon all taxable income received by and
5 accruing to such corporation during the fiscal year commencing
6 in 1985 through the fiscal year commencing in 1986 and at the
7 rate of eight and one-half per cent per annum upon each dollar
8 of taxable income of such corporation received by and accruing
9 to such corporation during the fiscal year commencing in 1987
10 through the fiscal year commencing in 1990 and at the rate of
11 ten and one-half per cent per annum upon each dollar of taxable
12 income of such corporation received by and accruing to such
13 corporation during the fiscal year commencing in 1991 through
14 the fiscal year commencing in 1994 and at the rate of nine and
15 ninety-nine hundredths per cent per annum upon each dollar of
16 taxable income of such corporation received by and accruing to
17 such corporation during the fiscal year commencing in 1995
18 through the fiscal year commencing in 1998 and at the rate of
19 seven and ninety-nine hundredths per cent per annum upon each
20 dollar of taxable income of such corporation received by and
21 accruing to such corporation during the fiscal year commencing
22 in 1999 and during each fiscal year thereafter, with an
23 additional surtax equal to one and seventy-five hundredths per
24 cent per annum upon each dollar of taxable income of such
25 corporation received by and accruing to such corporation during
26 the fiscal year commencing in 1991 and through fiscal year 1993
27 and with an additional surtax equal to one and forty-nine
28 hundredths per cent per annum upon each dollar of taxable income
29 of such corporation received by and accruing to such corporation
30 during fiscal year 1994 and with no surtax during the fiscal
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1 year commencing in 1995 and each fiscal year thereafter. No
2 penalty prescribed by subsection (e) of section 3003 shall be
3 assessed against a corporation for the additional tax which may
4 be due as a result of the increase in tax rate from nine and
5 one-half per cent to ten and one-half per cent imposed
6 retroactively by this section for the calendar year 1977 or for
7 the fiscal year commencing in 1977.
8 Section 2. The definitions of "processing" and "research and
9 development" in section 601 of the act are repealed.
10 Section 3. Section 602(a), (b) and (h) of the act, amended
11 May 12, 1999 (P.L.26, No.4), are amended to read:
12 Section 602. Imposition of Tax.--(a) That every domestic
13 entity from which a report is required under section 601 hereof,
14 shall be subject to, and pay to the department annually, a tax
15 which is the greater of (i) the amount computed by multiplying
16 each dollar of the capital stock value as defined in section
17 601(a) by the appropriate rate of tax as set forth in subsection
18 (h); or (ii) the minimum tax set forth in subsection (i), except
19 that any domestic entity or company subject to the tax
20 prescribed herein may elect to compute and pay its tax under and
21 in accordance with the provisions of subsection (b) of this
22 section 602: Provided, That, [except for the imposition of the
23 minimum tax set forth in subsection (i), the provisions of this
24 section shall not apply to the taxation of the capital stock of
25 entities organized for manufacturing, processing, research or
26 development purposes, which is invested in and actually and
27 exclusively employed in carrying on manufacturing, processing,
28 research or development within the State, except such entities
29 as enjoy and exercise the right of eminent domain, but every
30 entity organized for the purpose of manufacturing, processing,
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1 research or development except such entities as enjoy and
2 exercise the right of eminent domain shall pay the State tax of
3 the greater of (i) the amount computed by multiplying each
4 dollar of the capital stock value as defined in section 601(a)
5 by the appropriate rate of tax as set forth in subsection (h);
6 or (ii) the minimum tax set forth in subsection (i), upon such
7 proportion of its capital stock, if any, as may be invested in
8 any property or business not strictly incident or appurtenant to
9 the manufacturing, processing, research or development business,
10 in addition to the local taxes assessed upon its property in the
11 district where located, it being the object of this provision to
12 relieve from State taxation, except for imposition of the
13 minimum tax set forth in subsection (i), only so much of the
14 capital stock as is invested purely in the manufacturing,
15 processing, research or development plant and business: and
16 Provided further, That,] except for the imposition of the
17 minimum tax set forth in subsection (i), the provisions of this
18 section shall not apply to the taxation of so much of the
19 capital stock value attributable to student loan assets owned or
20 held by an entity created for the securitization of student
21 loans or by a trustee on its behalf.
22 (b) [(1)] Every foreign entity from which a report is
23 required under section 601 hereof, shall be subject to and pay
24 to the department annually, a franchise tax which is the greater
25 of (i) the amount computed by multiplying each dollar of the
26 capital stock value as defined in section 601(a) by the
27 appropriate rate of tax as set forth in subsection (h); or (ii)
28 the minimum tax set forth in subsection (i), upon a taxable
29 value to be determined in the following manner. The capital
30 stock value shall be ascertained in the manner prescribed in
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1 section 601(a) of this article. The taxable value shall then be
2 determined by employing the relevant apportionment factors set
3 forth in Article IV: Provided, [That the manufacturing,
4 processing, research and development exemptions contained under
5 section 602(a) shall also apply to foreign corporations and in
6 determining the relevant apportionment factors the numerator of
7 the property, payroll, or sales factors shall not include any
8 property, payroll or sales attributable to manufacturing,
9 processing, research or development activities in the
10 Commonwealth: and Provided further,] That, except for the
11 imposition of the minimum tax set forth in subsection (i), the
12 provisions of this section shall not apply to the taxation of so
13 much of the capital stock value attributable to student loan
14 assets owned or held by an entity created for the securitization
15 of student loans or by a trustee on its behalf. Any foreign
16 corporation, joint-stock association, limited partnership or
17 company subject to the tax prescribed herein may elect to
18 compute and pay its tax under section 602(a): Provided, That any
19 foreign corporation, joint-stock association, limited
20 partnership or company electing to compute and pay its tax under
21 section 602(a) shall be treated as if it were a domestic
22 corporation for the purpose of determining which of its assets
23 are exempt from taxation and for the purpose of determining the
24 proportion of the value of its capital stock which is subject to
25 taxation.
26 [(2) The provisions of this article shall apply to the
27 taxation of entities organized for manufacturing, processing,
28 research or development purposes, but shall not apply to such
29 entities as enjoy and exercise the right of eminent domain.]
30 * * *
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1 (h) The rate of tax for purposes of the capital stock and
2 franchise tax for taxable years beginning within the dates set
3 forth shall be as follows:
4 Taxable Year Regular Rate Surtax Total Rate
5 January 1, 1971, to
6 December 31, 1986 10 mills 0 10 mills
7 January 1, 1987, to
8 December 31, 1987 9 mills 0 9 mills
9 January 1, 1988, to
10 December 31, 1990 9.5 mills 0 9.5 mills
11 January 1, 1991, to
12 December 31, 1991 11 mills 2 mills 13 mills
13 January 1, 1992, to
14 December 31, 1997 11 mills 1.75 mills 12.75 mills
15 January 1, 1998,
16 to December 31, 1998 11 mills .99 mills 11.99 mills
17 January 1, 1999, and each
18 [year thereafter 10.99 mills 0 10.99 mills]
19 year thereafter 8.49 mills 0 8.49 mills
20 * * *
21 Section 4. This act shall apply to the tax years beginning
22 after December 31, 1998.
23 Section 5. This act shall be retroactive to January 1, 1999.
24 Section 6. This act shall take effect immediately.
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