PRINTER'S NO. 1688
No. 1281 Session of 2002
INTRODUCED BY SCHWARTZ, BODACK, COSTA, ERICKSON, O'PAKE, FUMO,
KASUNIC, STACK, TARTAGLIONE, KUKOVICH, MUSTO, ORIE AND PUNT,
JANUARY 29, 2002
REFERRED TO BANKING AND INSURANCE, JANUARY 29, 2002
AN ACT
1 Granting tax credits to employers who continue health insurance
2 coverage for laid-off employees.
3 The General Assembly of the Commonwealth of Pennsylvania
4 hereby enacts as follows:
5 Section 1. Short title.
6 This act shall be known and may be cited as the Tax Credit
7 for Continuation of Health Care Benefits.
8 Section 2. Definitions.
9 The following words and phrases when used in this act shall
10 have the meanings given to them in this section unless the
11 context clearly indicates otherwise:
12 "Department." The Department of Revenue of the Commonwealth.
13 "Qualified health care insurance expense." Fifty percent of
14 the expense incurred by an employer in continuing health care
15 insurance coverage for up to one year for any employee who is
16 laid off.
17 "Qualified tax liability." The liability for taxes imposed
1 under Article III, IV or VI of the act of March 4, 1971 (P.L.6,
2 No.2), known as the Tax Reform Code of 1971.
3 "Tax credit." The continuation of health care benefits tax
4 credit under this act.
5 "Taxpayer." An employer that is liable for taxes under
6 Article III, IV or VI of the act of March 4, 1971 (P.L.6, No.2),
7 known as the Tax Reform Code of 1971.
8 Section 3. Purpose.
9 It is the purpose of this act to provide fiscal incentives to
10 Commonwealth employers to encourage them to continue health care
11 benefits for laid-off employees.
12 Section 4. Credit for qualified health care insurance expense.
13 (a) Application for credit.--A taxpayer who incurs a
14 qualified health care insurance expense in a taxable year may
15 apply for a continuation of health care benefits tax credit as
16 provided in this act. In order to receive the credit, the
17 taxpayer must submit an application to the department by
18 September 15 for a qualified health care insurance expense
19 incurred in the taxable year that ended in the prior fiscal
20 year.
21 (b) Amount of credit.--A taxpayer that timely files under
22 subsection (a) may receive a tax credit for the taxable year up
23 to the amount of the total qualified health care insurance
24 expense incurred.
25 (c) Notification of approval from department.--By December
26 15 of the calendar year following the close of the taxable year
27 during which the qualified health care insurance expense was
28 incurred, the department shall notify the taxpayer of the amount
29 of the taxpayer's tax credit approved by the department.
30 Section 5. Use of credit.
20020S1281B1688 - 2 -
1 (a) Carryover.--
2 (1) The amount of the tax credit that a taxpayer may use
3 against any one qualified tax liability during any year may
4 not exceed 50% of the qualified tax liability for that
5 taxable year.
6 (2) If the taxpayer cannot use the entire amount of the
7 tax credit for the taxable year in which the tax credit is
8 first approved, then the excess may be carried over to
9 succeeding taxable years and used as a credit against the
10 qualified tax liability of the taxpayer for those taxable
11 years.
12 (3) Each time that the tax credit is carried over to a
13 succeeding taxable year, it shall be reduced by the amount
14 that was used as a credit during the immediately preceding
15 taxable year.
16 (4) The tax credit may be carried over and applied to
17 succeeding taxable years for not more than four taxable years
18 following the first taxable year for which the taxpayer was
19 entitled to claim the credit.
20 (b) Taxable year to which applied.--A tax credit approved by
21 the department for qualified health care insurance expense in a
22 taxable year first shall be applied against the taxpayer's
23 qualified tax liability for the current taxable year as of the
24 date on which the credit was approved before the tax credit is
25 applied against any tax liability under subsection (a).
26 (c) Limitations.--A taxpayer may not carry back, obtain a
27 refund of or assign an unused tax credit.
28 Section 6. Determination of qualified health care insurance
29 expenses.
30 The department shall require the documentation it deems
20020S1281B1688 - 3 -
1 necessary to determine which health care insurance expense is to
2 be deemed a qualified health care insurance expense for purposes
3 of computing the credit provided by this act.
4 Section 7. Time limitation.
5 The taxpayer is not entitled to a tax credit for qualified
6 health care insurance expenses incurred in taxable years ending
7 after December 31, 2006.
8 Section 8. Amount limitation.
9 The cumulative amount of tax credits approved by the
10 department shall not exceed $10,000,000.
11 Section 9. Pennsylvania S Corporation shareholder pass-through.
12 (a) General rule.--If a Pennsylvania S Corporation does not
13 have an eligible tax liability against which the tax credit may
14 be applied, a shareholder of the Pennsylvania S Corporation is
15 entitled to a tax credit equal to the tax credit determined for
16 the Pennsylvania S Corporation for the taxable year multiplied
17 by the percentage of the Pennsylvania S Corporation's
18 distributive income to which the shareholder is entitled.
19 (b) Double use of credit prohibited.--A Pennsylvania S
20 Corporation and a shareholder of a Pennsylvania S Corporation
21 may not claim a credit under this act for the same qualified
22 health care insurance expense.
23 Section 10. Report to General Assembly.
24 The department shall submit an annual report to the General
25 Assembly indicating the effectiveness of the credit provided by
26 this act not later than March 15 following the year in which the
27 credits are approved. The report shall include the number of
28 taxpayers utilizing the credit as of the date of the report and
29 the amount of credits approved and utilized. The report may also
30 include any recommendations for changes in the calculation or
20020S1281B1688 - 4 -
1 administration of the credit.
2 Section 11. Expiration.
3 The department may not approve a tax credit for taxable years
4 ending after December 31, 2006.
5 Section 12. Regulations.
6 The department shall promulgate regulations necessary for the
7 implementation and administration of this act.
8 Section 13. Applicability.
9 This act shall apply to tax years beginning after December
10 31, 2001.
11 Section 14. Effective date.
12 This act shall take effect immediately.
A23L72BIL/20020S1281B1688 - 5 -