PRINTER'S NO. 1768
No. 1363 Session of 1998
INTRODUCED BY CONTI, HART, WHITE, HELFRICK, LEMMOND, TOMLINSON,
TILGHMAN, ROBBINS, WILLIAMS, PICCOLA, COSTA, BRIGHTBILL,
AFFLERBACH, WAGNER, O'PAKE, EARLL, PUNT, MOWERY, KASUNIC AND
MUSTO, MARCH 16, 1998
REFERRED TO FINANCE, MARCH 16, 1998
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 for net loss carryover.
11 The General Assembly of the Commonwealth of Pennsylvania
12 hereby enacts as follows:
13 Section 1. Section 401(3)2(a)4 of the act of March 4, 1971
14 (P.L.6, No.2), known as the Tax Reform Code of 1971, amended
15 June 30, 1995 (P.L.139, No.21), is amended to read:
16 Section 401. Definitions.--The following words, terms, and
17 phrases, when used in this article, shall have the meaning
18 ascribed to them in this section, except where the context
19 clearly indicates a different meaning:
20 * * *
21 (3) "Taxable income." * * *
1 2. In case the entire business of any corporation, other
2 than a corporation engaged in doing business as a regulated
3 investment company as defined by the Internal Revenue Code of
4 1954, as amended, is not transacted within this Commonwealth,
5 the tax imposed by this article shall be based upon such portion
6 of the taxable income of such corporation for the fiscal or
7 calendar year, as defined in subclause 1 hereof, and may be
8 determined as follows:
9 (a) Division of Income.
10 * * *
11 4. (a) For taxable years beginning in 1982 through taxable
12 years beginning in 1990 and for the taxable year beginning in
13 1995 and each taxable year thereafter, a net loss deduction
14 shall be allowed from taxable income as arrived at under
15 subclause 1 or, if applicable, subclause 2. For taxable years
16 beginning in 1991, 1992, 1993 and 1994, the net loss deduction
17 allowed for years prior to 1991 shall be suspended, and no
18 carryover of net losses from taxable years 1988, 1989, 1990,
19 1991, 1992 and 1993 shall be utilized in calculating net income
20 for the 1991, 1992, 1993 and 1994 taxable years, but such net
21 losses may be used as provided in paragraph (c) in calculating
22 net income for the 1995 taxable year and for two taxable years
23 thereafter.
24 (b) A net loss for a taxable year is the negative amount for
25 said taxable year determined under subclause 1 or, if
26 applicable, subclause 2. Negative amounts under subclause 1
27 shall be allocated and apportioned in the same manner as
28 positive amounts.
29 (c) (1) The net loss deduction shall be the lesser of one
30 million dollars ($1,000,000) or the amount of the net loss or
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1 losses which may be carried over to the taxable year or taxable
2 income as determined under subclause 1 or, if applicable,
3 subclause 2. In no event shall the net loss deduction include
4 more than five hundred thousand dollars ($500,000), in the
5 aggregate, of net losses from taxable years 1988 through 1994.
6 (2) A net loss for a taxable year may only be carried over
7 pursuant to the following schedule:
8 Taxable Year Carryover
9 1981 1 taxable year
10 1982 2 taxable years
11 1983-1987 3 taxable years
12 1988 2 taxable years plus
13 1 taxable year
14 starting with the
15 1995 taxable year
16 1989 1 taxable year plus
17 2 taxable years
18 starting with the
19 1995 taxable year
20 1990-1993 3 taxable years
21 starting with the
22 1995 taxable year
23 1994 1 taxable year
24 [1995 2 taxable years
25 1996 and thereafter 3 taxable years]
26 1995 and thereafter 10 taxable years
27 The earliest net loss shall be carried over to the earliest
28 taxable year to which it may be carried under this schedule. The
29 total net loss deduction allowed in any taxable year shall not
30 exceed one million dollars ($1,000,000).
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1 (d) No loss shall be a carryover from a taxable year when
2 the corporation elects to be treated as a Pennsylvania S
3 corporation pursuant to section 307 of Article III of this act
4 to a taxable year when the corporation is subject to the tax
5 imposed under this article.
6 (e) Paragraph (d) shall not prevent a taxable year when a
7 corporation is a Pennsylvania S corporation from being
8 considered a taxable year for determining the number of taxable
9 years to which a net loss may be a carryover.
10 (f) For purposes of the net loss deduction, the short
11 taxable year of a corporation, after the revocation or
12 termination of an election to be treated as a Pennsylvania S
13 corporation pursuant to sections 307.3 and 307.4 of Article III
14 of this act, shall be treated as a taxable year.
15 (g) In the case of a change in ownership by purchase,
16 liquidation, acquisition of stock or reorganization of a
17 corporation in the manner described in section 381 or 382 of the
18 Internal Revenue Code of 1954, as amended, the limitations
19 provided in the Internal Revenue Code with respect to net
20 operating losses shall apply for the purpose of computing the
21 portion of a net loss carryover recognized under paragraph
22 (3)4(c) of this section. When any acquiring corporation or a
23 transferor corporation participated in the filing of
24 consolidated returns to the Federal Government, the entitlement
25 of the acquiring corporation to the Pennsylvania net loss
26 carryover of the acquiring corporation or the transferor
27 corporation will be determined as if separate returns to the
28 Federal Government had been filed prior to the change in
29 ownership by purchase, liquidation, acquisition of stock or
30 reorganization.
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1 * * *
2 Section 2. This act shall be retroactive to January 1, 1998.
3 Section 3. This act shall take effect immediately.
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