PRIOR PRINTER'S NO. 1768 PRINTER'S NO. 1788
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,
MUSTO AND SALVATORE, MARCH 16, 1998
SENATOR HART, FINANCE, AS AMENDED, MARCH 17, 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; AND <--
11 PROVIDING FOR NET OPERATING LOSS 1997 TAX CREDIT.
12 The General Assembly of the Commonwealth of Pennsylvania
13 hereby enacts as follows:
14 Section 1. Section 401(3)2(a)4 of the act of March 4, 1971
15 (P.L.6, No.2), known as the Tax Reform Code of 1971, amended
16 June 30, 1995 (P.L.139, No.21), is amended to read:
17 Section 401. Definitions.--The following words, terms, and
18 phrases, when used in this article, shall have the meaning
19 ascribed to them in this section, except where the context
20 clearly indicates a different meaning:
21 * * *
1 (3) "Taxable income." * * *
2 2. In case the entire business of any corporation, other
3 than a corporation engaged in doing business as a regulated
4 investment company as defined by the Internal Revenue Code of
5 1954, as amended, is not transacted within this Commonwealth,
6 the tax imposed by this article shall be based upon such portion
7 of the taxable income of such corporation for the fiscal or
8 calendar year, as defined in subclause 1 hereof, and may be
9 determined as follows:
10 (a) Division of Income.
11 * * *
12 4. (a) For taxable years beginning in 1982 through taxable
13 years beginning in 1990 and for the taxable year beginning in
14 1995 and each taxable year thereafter, a net loss deduction
15 shall be allowed from taxable income as arrived at under
16 subclause 1 or, if applicable, subclause 2. For taxable years
17 beginning in 1991, 1992, 1993 and 1994, the net loss deduction
18 allowed for years prior to 1991 shall be suspended, and no
19 carryover of net losses from taxable years 1988, 1989, 1990,
20 1991, 1992 and 1993 shall be utilized in calculating net income
21 for the 1991, 1992, 1993 and 1994 taxable years, but such net
22 losses may be used as provided in paragraph (c) in calculating
23 net income for the 1995 taxable year and for two taxable years
24 thereafter.
25 (b) A net loss for a taxable year is the negative amount for
26 said taxable year determined under subclause 1 or, if
27 applicable, subclause 2. Negative amounts under subclause 1
28 shall be allocated and apportioned in the same manner as
29 positive amounts.
30 (c) (1) The net loss deduction shall be the lesser of one
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1 million dollars ($1,000,000) or the amount of the net loss or
2 losses which may be carried over to the taxable year or taxable
3 income as determined under subclause 1 or, if applicable,
4 subclause 2. In no event shall the net loss deduction include
5 more than five hundred thousand dollars ($500,000), in the
6 aggregate, of net losses from taxable years 1988 through 1994.
7 (2) A net loss for a taxable year may only be carried over
8 pursuant to the following schedule:
9 Taxable Year Carryover
10 1981 1 taxable year
11 1982 2 taxable years
12 1983-1987 3 taxable years
13 1988 2 taxable years plus
14 1 taxable year
15 starting with the
16 1995 taxable year
17 1989 1 taxable year plus
18 2 taxable years
19 starting with the
20 1995 taxable year
21 1990-1993 3 taxable years
22 starting with the
23 1995 taxable year
24 1994 1 taxable year
25 [1995 2 taxable years
26 1996 and thereafter 3 taxable years]
27 1995 and thereafter 10 taxable years
28 The earliest net loss shall be carried over to the earliest
29 taxable year to which it may be carried under this schedule. The
30 total net loss deduction allowed in any taxable year shall not
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1 exceed one million dollars ($1,000,000).
2 (d) No loss shall be a carryover from a taxable year when
3 the corporation elects to be treated as a Pennsylvania S
4 corporation pursuant to section 307 of Article III of this act
5 to a taxable year when the corporation is subject to the tax
6 imposed under this article.
7 (e) Paragraph (d) shall not prevent a taxable year when a
8 corporation is a Pennsylvania S corporation from being
9 considered a taxable year for determining the number of taxable
10 years to which a net loss may be a carryover.
11 (f) For purposes of the net loss deduction, the short
12 taxable year of a corporation, after the revocation or
13 termination of an election to be treated as a Pennsylvania S
14 corporation pursuant to sections 307.3 and 307.4 of Article III
15 of this act, shall be treated as a taxable year.
16 (g) In the case of a change in ownership by purchase,
17 liquidation, acquisition of stock or reorganization of a
18 corporation in the manner described in section 381 or 382 of the
19 Internal Revenue Code of 1954, as amended, the limitations
20 provided in the Internal Revenue Code with respect to net
21 operating losses shall apply for the purpose of computing the
22 portion of a net loss carryover recognized under paragraph
23 (3)4(c) of this section. When any acquiring corporation or a
24 transferor corporation participated in the filing of
25 consolidated returns to the Federal Government, the entitlement
26 of the acquiring corporation to the Pennsylvania net loss
27 carryover of the acquiring corporation or the transferor
28 corporation will be determined as if separate returns to the
29 Federal Government had been filed prior to the change in
30 ownership by purchase, liquidation, acquisition of stock or
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1 reorganization.
2 * * *
3 Section 2. This act shall be retroactive to January 1, 1998. <--
4 Section 3. This act shall take effect immediately.
5 SECTION 2. THE ACT IS AMENDED BY ADDING AN ARTICLE TO READ: <--
6 ARTICLE XVII-C
7 NET OPERATING LOSS 1997 TAX CREDIT
8 SECTION 1701-C. DEFINITIONS.--THE FOLLOWING WORDS AND
9 PHRASES, WHEN USED IN THIS ARTICLE, SHALL HAVE THE MEANINGS
10 GIVEN TO THEM IN THIS SECTION, EXCEPT WHERE THE CONTEXT CLEARLY
11 INDICATES A DIFFERENT MEANING:
12 "DEPARTMENT." THE DEPARTMENT OF REVENUE OF THE COMMONWEALTH.
13 "EXPIRED LOSS." A NET OPERATING LOSS FOR A TAXABLE YEAR
14 BEGINNING IN 1991, 1992, 1993, 1994, 1995, 1996 OR 1997 THAT A
15 TAXPAYER IS UNABLE TO USE AS A DEDUCTION PURSUANT TO SECTION
16 401(3)4 OF THIS ACT IN CONNECTION WITH ITS 1997 TAX YEAR BECAUSE
17 OF THE DOLLAR AMOUNT LIMITATIONS IN SECTION 401(3)4(C) OF THIS
18 ACT.
19 "EXPIRED NOL TAX COST." THE DIFFERENCE BETWEEN (X) THE TAX
20 THAT WOULD HAVE BEEN PAYABLE UNDER ARTICLE IV OF THIS ACT WITH
21 RESPECT TO A TAXPAYER'S 1997 TAX YEAR ASSUMING THAT THE TAXPAYER
22 WOULD NOT HAVE BEEN ENTITLED TO A DEDUCTION FOR ITS EXPIRED
23 LOSSES, AND (Y) THE TAX THAT WOULD HAVE BEEN PAYABLE UNDER
24 ARTICLE IV OF THIS ACT WITH RESPECT TO THE TAXPAYER'S 1997 TAX
25 YEAR ASSUMING THAT THE TAXPAYER WOULD HAVE BEEN ENTITLED TO A
26 DEDUCTION FOR ITS EXPIRED LOSSES, IN EACH CASE ASSUMING FURTHER
27 THAT A CREDIT IS NOT AVAILABLE UNDER THIS ARTICLE.
28 "INDIVIDUAL CREDIT." THAT PORTION OF THE TOTAL CREDIT
29 AVAILABLE UNDER THIS ARTICLE THAT IS ALLOCATED TO A PARTICULAR
30 TAXPAYER BY THE DEPARTMENT OF REVENUE PURSUANT TO SECTION 1705-C
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1 OF THIS ACT.
2 "1997 TAX YEAR." THE TAXPAYER'S TAX YEAR BEGINNING IN 1997.
3 "TAXPAYER." AN ENTITY SUBJECT TO TAX UNDER ARTICLE IV OF
4 THIS ACT WITH RESPECT TO A TAX YEAR BEGINNING IN 1997.
5 "YEARLY CREDIT." ONE-FIFTH OF A TAXPAYER'S TOTAL INDIVIDUAL
6 CREDIT.
7 SECTION 1702-C. TAX CREDIT.--A TAXPAYER THAT HAS AN EXPIRED
8 LOSS MAY APPLY FOR A CREDIT PURSUANT TO THIS ARTICLE. UPON
9 APPROVAL OF THE APPLICATION AND ALLOCATION TO THE TAXPAYER OF
10 ITS INDIVIDUAL CREDIT, THE TAXPAYER MAY USE THE CREDIT IN THE
11 MANNER PROVIDED IN SECTION 1706-C OF THIS ACT.
12 SECTION 1703-C. LIMITATION ON TOTAL CREDITS.--THE TOTAL
13 AMOUNT OF CREDITS THAT MAY BE APPROVED BY THE DEPARTMENT UNDER
14 THIS ARTICLE SHALL NOT EXCEED TWENTY MILLION DOLLARS
15 ($20,000,000).
16 SECTION 1704-C. MAXIMUM AMOUNT OF INDIVIDUAL CREDIT.--THE
17 MAXIMUM CREDIT THAT A TAXPAYER SHALL BE ENTITLED TO UNDER THIS
18 ARTICLE SHALL BE EQUAL TO ITS EXPIRED NOL TAX COSTS.
19 SECTION 1705-C. ALLOCATION OF INDIVIDUAL CREDITS.--(A) AS
20 QUICKLY AS PRACTICABLE FOLLOWING ENACTMENT OF THIS ARTICLE, THE
21 DEPARTMENT SHALL ADOPT REGULATIONS THAT PROVIDE A PROCEDURE
22 PURSUANT TO WHICH TAXPAYERS MAY APPLY FOR A CREDIT UNDER THIS
23 ARTICLE. THOSE REGULATIONS SHALL ESTABLISH A DATE, NOT EARLIER
24 THAN DECEMBER 31, 1998, BY WHICH A TAXPAYER APPLYING FOR A
25 CREDIT UNDER THIS ARTICLE MUST FILE ITS APPLICATION. FOLLOWING
26 THAT DATE, THE DEPARTMENT SHALL ALLOCATE THE TOTAL CREDIT
27 AVAILABLE UNDER THIS ARTICLE AMONG THOSE TAXPAYERS FILING
28 APPLICATIONS THAT HAVE BEEN ALLOWED BY THE DEPARTMENT, BASED
29 UPON THE RATIO OF THE ALLOWED EXPIRED NOL TAX COST OF EACH
30 TAXPAYER TO THE TOTAL ALLOWED EXPIRED NOL TAX COST OF ALL
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1 TAXPAYERS FILING ALLOWED APPLICATIONS.
2 (B) BECAUSE OF THE NEED TO ADOPT THE REGULATIONS REQUIRED BY
3 THIS SECTION AS QUICKLY AS POSSIBLE, THOSE REGULATIONS SHALL NOT
4 BE DEEMED TO BE AGENCY REGULATIONS FOR THE PURPOSES OF SECTION
5 612 OF THE ACT OF APRIL 9, 1929 (P.L.177, NO.175), KNOWN AS "THE
6 ADMINISTRATIVE CODE OF 1929," THE ACT OF OCTOBER 15, 1980
7 (P.L.950, NO.164), KNOWN AS THE "COMMONWEALTH ATTORNEYS ACT,"
8 THE ACT OF JUNE 25, 1982 (P.L.633, NO.181), KNOWN AS THE
9 "REGULATORY REVIEW ACT," OR ANY SIMILAR PROVISION OF LAW, BUT
10 SHALL BE SUBJECT TO THE OPPORTUNITY OF PUBLIC COMMENT
11 REQUIREMENT UNDER SECTION 201 OF THE ACT OF JULY 31, 1968
12 (P.L.769, NO.240), REFERRED TO AS THE COMMONWEALTH DOCUMENTS
13 LAW.
14 SECTION 1706-C. USE OF INDIVIDUAL CREDITS.--(A) A TAXPAYER
15 MAY USE ITS INDIVIDUAL CREDIT ONLY WITH RESPECT TO TAXABLE YEARS
16 BEGINNING IN 1997, 1998, 1999, 2000 AND 2001 AND ONLY IN THE
17 MANNER PROVIDED IN THIS SECTION. A PORTION OF THE TAXPAYER'S
18 INDIVIDUAL CREDIT THAT IS NOT SO USED SHALL EXPIRE AND SHALL NOT
19 BE CARRIED OVER WITH RESPECT TO ANY OTHER TAXABLE YEAR OR USED
20 FOR ANY OTHER PURPOSE.
21 (B) A TAXPAYER MAY USE NOT MORE THAN ONE OF ITS YEARLY
22 CREDITS WITH RESPECT TO EACH OF ITS FIVE TAXABLE YEARS BEGINNING
23 IN 1997, 1998, 1999, 2000 AND 2001, IN THE FOLLOWING MANNER:
24 (1) THE YEARLY CREDIT USED FOR A PARTICULAR TAXABLE YEAR
25 SHALL FIRST BE USED AS A CREDIT AGAINST THE TAX, IF ANY, PAYABLE
26 FOR THAT YEAR BY THE TAXPAYER UNDER ARTICLE IV OF THIS ACT.
27 (2) ANY AMOUNT OF THE YEARLY CREDIT THAT IS NOT USED AS
28 PROVIDED IN PARAGRAPH (1) SHALL BE USED AS A CREDIT AGAINST THE
29 TAX PAYABLE FOR THAT SAME YEAR BY THE TAXPAYER UNDER ARTICLE VI
30 OF THIS ACT.
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1 (3) ANY AMOUNT OF THE YEARLY CREDIT THAT IS NOT USED AS
2 PROVIDED IN PARAGRAPHS (1) AND (2) SHALL BE USED AS A CREDIT
3 AGAINST THE TAX ON USES, IF ANY, PAYABLE FOR THAT SAME YEAR BY
4 THE TAXPAYER UNDER SECTION 202(B) OF THIS ACT.
5 (4) ANY AMOUNT OF THE YEARLY CREDIT THAT IS NOT USED AS
6 PROVIDED IN PARAGRAPHS (1) THROUGH (3) SHALL EXPIRE AND SHALL
7 NOT BE CARRIED OVER WITH RESPECT TO ANY OTHER YEAR OR USED FOR
8 ANY OTHER PURPOSE.
9 SECTION 3. THE AMENDMENT OF SECTION 401(3)2(A)4 OF THE ACT
10 SHALL BE RETROACTIVE TO JANUARY 1, 1998.
11 SECTION 4. THIS ACT SHALL TAKE EFFECT AS FOLLOWS:
12 (1) THE ADDITION OF ARTICLE XVII-C OF THE ACT SHALL TAKE
13 EFFECT IN 60 DAYS.
14 (2) THE REMAINDER OF THIS ACT SHALL TAKE EFFECT
15 IMMEDIATELY.
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