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| THE GENERAL ASSEMBLY OF PENNSYLVANIA |
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| HOUSE BILL |
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| INTRODUCED BY PAYTON, THOMAS AND YOUNGBLOOD, MAY 16, 2012 |
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| REFERRED TO COMMITTEE ON FINANCE, MAY 16, 2012 |
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| AN ACT |
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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," in corporate net income tax, further providing |
11 | for definitions and for imposition of tax; in procedure and |
12 | administration, further providing for definitions, for |
13 | petition for reassessment and for petition procedure; further |
14 | providing for provisions relating to review by board; |
15 | providing for review by Tax Review Tribunal; and establishing |
16 | the Tax Review Tribunal and providing for its powers and |
17 | duties. |
18 | The General Assembly of the Commonwealth of Pennsylvania |
19 | hereby enacts as follows: |
20 | Section 1. Section 401(3)2(a) and 4(c) of the act of March |
21 | 4, 1971 (P.L.6, No.2), known as the Tax Reform Code of 1971, |
22 | amended or added December 23, 1983 (P.L.370, No.90), August 4, |
23 | 1991 (P.L.97, No.22), June 22, 2001 (P.L.353, No.23), June 29, |
24 | 2002 (P.L.559, No.89) and October 9, 2009 (P.L.451, No.48), are |
25 | amended, clause (3)2 is amended by adding a phrase and the |
26 | section is amended by adding clauses to read: |
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1 | Section 401. Definitions.--The following words, terms, and |
2 | phrases, when used in this article, shall have the meaning |
3 | ascribed to them in this section, except where the context |
4 | clearly indicates a different meaning: |
5 | * * * |
6 | (3) "Taxable income." * * * |
7 | 2. In case the entire business of any corporation, other |
8 | than a corporation engaged in doing business as a regulated |
9 | investment company as defined by the Internal Revenue Code of |
10 | 1986, is not transacted within this Commonwealth, the tax |
11 | imposed by this article shall be based upon such portion of the |
12 | taxable income of such corporation for the fiscal or calendar |
13 | year, as defined in subclause 1 hereof, and may be determined as |
14 | follows: |
15 | (a) Division of Income. |
16 | (1) As used in this definition, unless the context otherwise |
17 | requires: |
18 | (A) "Business income" means income arising from transactions |
19 | and activity in the regular course of the taxpayer's trade or |
20 | business and includes income from tangible and intangible |
21 | property if either the acquisition, the management or the |
22 | disposition of the property constitutes an integral part of the |
23 | taxpayer's regular trade or business operations. The term |
24 | includes all income which is apportionable under the |
25 | Constitution of the United States. |
26 | (B) "Commercial domicile" means the principal place from |
27 | which the trade or business of the taxpayer is directed or |
28 | managed. |
29 | (C) "Compensation" means wages, salaries, commissions and |
30 | any other form of remuneration paid to employes for personal |
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1 | services. |
2 | (D) "Nonbusiness income" means all income other than |
3 | business income. The term does not include income which is |
4 | apportionable under the Constitution of the United States. |
5 | (E) "Sales" means all gross receipts of the taxpayer not |
6 | allocated under this definition other than dividends received, |
7 | interest on United States, state or political subdivision |
8 | obligations and gross receipts heretofore or hereafter received |
9 | from the sale, redemption, maturity or exchange of securities, |
10 | except those held by the taxpayer primarily for sale to |
11 | customers in the ordinary course of its trade or business. |
12 | (F) "State" means any state of the United States, the |
13 | District of Columbia, the Commonwealth of Puerto Rico, any |
14 | territory or possession of the United States, and any foreign |
15 | country or political subdivision thereof. |
16 | (G) "This state" means the Commonwealth of Pennsylvania or, |
17 | in the case of application of this definition to the |
18 | apportionment and allocation of income for local tax purposes, |
19 | the subdivision or local taxing district in which the relevant |
20 | tax return is filed. |
21 | (2) Any taxpayer having income from business activity which |
22 | is taxable both within and without this State other than |
23 | activity as a corporation whose allocation and apportionment of |
24 | income is specifically provided for in section 401(3)2(b)(c) and |
25 | (d) shall allocate and apportion taxable income as provided in |
26 | this definition. |
27 | (3) For purposes of allocation and apportionment of income |
28 | under this definition, a taxpayer is taxable in another state if |
29 | in that state the taxpayer is subject to a net income tax, a |
30 | franchise tax measured by net income, a franchise tax for the |
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1 | privilege of doing business, or a corporate stock tax or if that |
2 | state has jurisdiction to subject the taxpayer to a net income |
3 | tax regardless of whether, in fact, the state does or does not. |
4 | (4) Rents and royalties from real or tangible personal |
5 | property, gains, interest, patent or copyright royalties, to the |
6 | extent that they constitute nonbusiness income, shall be |
7 | allocated as provided in paragraphs (5) through (8). |
8 | (5) (A) Net rents and royalties from real property located |
9 | in this State are allocable to this State. |
10 | (B) Net rents and royalties from tangible personal property |
11 | are allocable to this State if and to the extent that the |
12 | property is utilized in this State, or in their entirety if the |
13 | taxpayer's commercial domicile is in this State and the taxpayer |
14 | is not organized under the laws of or taxable in the state in |
15 | which the property is utilized. |
16 | (C) The extent of utilization of tangible personal property |
17 | in a state is determined by multiplying the rents and royalties |
18 | by a fraction, the numerator of which is the number of days of |
19 | physical location of the property in the state during the rental |
20 | or royalty period in the taxable year and the denominator of |
21 | which is the number of days of physical location of the property |
22 | everywhere during all rental or royalty periods in the taxable |
23 | year. If the physical location of the property during the rental |
24 | or royalty period is unknown or unascertainable by the taxpayer, |
25 | tangible personal property is utilized in the state in which the |
26 | property was located at the time the rental or royalty payer |
27 | obtained possession. |
28 | (6) (A) Gains and losses from sales or other disposition of |
29 | real property located in this State are allocable to this State. |
30 | (B) Gains and losses from sales or other disposition of |
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1 | tangible personal property are allocable to this State if the |
2 | property had a situs in this State at the time of the sale, or |
3 | the taxpayer's commercial domicile is in this State and the |
4 | taxpayer is not taxable in the state in which the property had a |
5 | situs. |
6 | (C) Gains and losses from sales or other disposition of |
7 | intangible personal property are allocable to this State if the |
8 | taxpayer's commercial domicile is in this State. |
9 | (7) Interest is allocable to this State if the taxpayer's |
10 | commercial domicile is in this State. |
11 | (8) (A) Patent and copyright royalties are allocable to |
12 | this State if and to the extent that the patent or copyright is |
13 | utilized by the payer in this State, or if and to the extent |
14 | that the patent copyright is utilized by the payer in a state in |
15 | which the taxpayer is not taxable and the taxpayer's commercial |
16 | domicile is in this State. |
17 | (B) A patent is utilized in a state to the extent that it is |
18 | employed in production, fabrication, manufacturing, or other |
19 | processing in the state or to the extent that a patented product |
20 | is produced in the state. If the basis of receipts from patent |
21 | royalties does not permit allocation to states or if the |
22 | accounting procedures do not reflect states of utilization, the |
23 | patent is utilized in the state in which the taxpayer's |
24 | commercial domicile is located. |
25 | (C) A copyright is utilized in a state to the extent that |
26 | printing or other publication originates in the state. If the |
27 | basis of receipts from copyright royalties does not permit |
28 | allocation to states or if the accounting procedures do not |
29 | reflect states of utilization, the copyright is utilized in the |
30 | state in which the taxpayer's commercial domicile is located. |
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1 | (9) (A) Except as provided in subparagraph (B): |
2 | (i) For taxable years beginning before January 1, 2007, all |
3 | business income shall be apportioned to this State by |
4 | multiplying the income by a fraction, the numerator of which is |
5 | the property factor plus the payroll factor plus three times the |
6 | sales factor and the denominator of which is five. |
7 | (ii) For taxable years beginning after December 31, 2006, |
8 | all business income shall be apportioned to this State by |
9 | multiplying the income by a fraction, the numerator of which is |
10 | the sum of fifteen times the property factor, fifteen times the |
11 | payroll factor and seventy times the sales factor and the |
12 | denominator of which is one hundred. |
13 | (iii) For taxable years beginning after December 31, 2008, |
14 | all business income shall be apportioned to this State by |
15 | multiplying the income by a fraction, the numerator of which is |
16 | the sum of eight and a half times the property factor, eight and |
17 | a half times the payroll factor and eighty-three times the sales |
18 | factor and the denominator of which is one hundred. |
19 | (iv) For taxable years beginning after December 31, 2009, |
20 | all business income shall be apportioned to this State by |
21 | multiplying the income by a fraction, the numerator of which is |
22 | the sum of five times the property factor, five times the |
23 | payroll factor and ninety times the sales factor and the |
24 | denominator of which is one hundred. |
25 | (v) For taxable years beginning after December 31, 2013, all |
26 | business income shall be apportioned to this State by |
27 | multiplying the income by the sales factor. |
28 | (B) For purposes of apportionment of the capital stock - |
29 | franchise tax as provided in section 602 of Article VI of this |
30 | act, the apportionment fraction shall be the property factor |
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1 | plus the payroll factor plus the sales factor as the numerator, |
2 | and the denominator shall be three. |
3 | (10) The property factor is a fraction, the numerator of |
4 | which is the average value of the taxpayer's real and tangible |
5 | personal property owned or rented and used in this State during |
6 | the tax period and the denominator of which is the average value |
7 | of all the taxpayer's real and tangible personal property owned |
8 | or rented and used during the tax period but shall not include |
9 | the security interest of any corporation as seller or lessor in |
10 | personal property sold or leased under a conditional sale, |
11 | bailment lease, chattel mortgage or other contract providing for |
12 | the retention of a lien or title as security for the sales price |
13 | of the property. |
14 | (11) Property owned by the taxpayer is valued at its |
15 | original cost. Property rented by the taxpayer is valued at |
16 | eight times the net annual rental rate. Net annual rental rate |
17 | is the annual rental rate paid by the taxpayer less any annual |
18 | rental rate received by the taxpayer from subrentals. |
19 | (12) The average value of property shall be determined by |
20 | averaging the values at the beginning and ending of the tax |
21 | period but the tax administrator may require the averaging of |
22 | monthly values during the tax period if reasonably required to |
23 | reflect properly the average value of the taxpayer's property. |
24 | (13) The payroll factor is a fraction, the numerator of |
25 | which is the total amount paid in this State during the tax |
26 | period by the taxpayer for compensation and the denominator of |
27 | which is the total compensation paid everywhere during the tax |
28 | period. |
29 | (14) Compensation is paid in this State if: |
30 | (A) The individual's service is performed entirely within |
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1 | the State; |
2 | (B) The individual's service is performed both within and |
3 | without this State, but the service performed without the State |
4 | is incidental to the individual's service within this State; or |
5 | (C) Some of the service is performed in this State and the |
6 | base of operations or if there is no base of operations, the |
7 | place from which the service is directed or controlled is in |
8 | this State, or the base of operations or the place from which |
9 | the service is directed or controlled is not in any state in |
10 | which some part of the service is performed, but the |
11 | individual's residence is in this State. |
12 | (15) The sales factor is a fraction, the numerator of which |
13 | is the total sales of the taxpayer in this State during the tax |
14 | period, and the denominator of which is the total sales of the |
15 | taxpayer everywhere during the tax period. |
16 | (16) Sales of tangible personal property are in this State |
17 | if the property is delivered or shipped to a purchaser, within |
18 | this State regardless of the f.o.b. point or other conditions of |
19 | the sale. |
20 | (17) Sales, other than sales of tangible personal property, |
21 | are in this State if: |
22 | (A) The income-producing activity is performed in this |
23 | State; or |
24 | (B) The income-producing activity is performed both in and |
25 | outside this State and a greater proportion of the income- |
26 | producing activity is performed in this State than in any other |
27 | state, based on costs of performance. |
28 | (18) If the allocation and apportionment provisions of this |
29 | definition do not fairly represent the extent of the taxpayer's |
30 | business activity in this State, the taxpayer may petition the |
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1 | Secretary of Revenue or the Secretary of Revenue may require, in |
2 | respect to all or any part of the taxpayer's business activity: |
3 | (A) Separate accounting; |
4 | (B) The exclusion of any one or more of the factors; |
5 | (C) The inclusion of one or more additional factors which |
6 | will fairly represent the taxpayer's business activity in this |
7 | State; or |
8 | (D) The employment of any other method to effectuate an |
9 | equitable allocation and apportionment of the taxpayer's income. |
10 | In determining the fairness of any allocation or apportionment, |
11 | the Secretary of Revenue may give consideration to the |
12 | taxpayer's previous reporting and its consistency with the |
13 | requested relief. |
14 | * * * |
15 | (e) Corporations That are Members of a Unitary Business. |
16 | (1) Notwithstanding any contrary provisions of this article, |
17 | for taxable years that begin on or after January 1, 2010, |
18 | business income of a corporation that is a member of a unitary |
19 | business that consists of two or more corporations, at least one |
20 | of which does not transact its entire business in this State, is |
21 | determined by combining the business income of either all |
22 | corporations, other than as set forth below, that are water's- |
23 | edge basis members or all corporations, other than as set forth |
24 | below, that are worldwide members of the unitary business. All |
25 | transactions among included corporations of the unitary business |
26 | are eliminated in determining the business income of a |
27 | corporation that is a member of that unitary business. Business |
28 | income of the following corporations is not included in the |
29 | determination of combined business income: |
30 | (i) any corporation subject to taxation under Article VII, |
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1 | VIII, IX or XV; |
2 | (ii) any corporation specified in the definition of |
3 | "institution" in section 701.5 that would be subject to taxation |
4 | under Article VII were it located, as defined in section 701.5, |
5 | in this State; |
6 | (iii) any corporation commonly known as a title insurance |
7 | company that would be subject to taxation under Article VIII |
8 | were it incorporated in this State; |
9 | (iv) any corporation specified as an insurance company, |
10 | association or exchange in Article IX that would be subject to |
11 | taxation under Article IX were its insurance business transacted |
12 | in this State; |
13 | (v) any corporation specified in the definition of |
14 | "institution" in section 1501 that would be subject to taxation |
15 | under Article XV were it located, as defined in section 1501, in |
16 | this State; |
17 | (vi) any corporation that is a small corporation, as defined |
18 | in section 301(s.2), or a qualified Subchapter S subsidiary, as |
19 | defined in section 301(o.3). |
20 | (2) Notwithstanding any contrary provisions of this article, |
21 | all corporations that are required to compute business income |
22 | under paragraph (1) are entitled to apportion such business |
23 | income when one corporation of the same unitary business is |
24 | entitled to apportion such business income. Notwithstanding any |
25 | contrary provisions of this article, for taxable years that |
26 | begin on or after January 1, 2010, the denominator of the |
27 | apportionment fraction of a corporation that is required to |
28 | compute its business income under paragraph (1) shall be |
29 | computed on a combined basis for all included corporations of |
30 | the unitary business. All transactions among included |
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1 | corporations of the unitary business are eliminated in computing |
2 | the numerator and denominator of the apportionment fraction of a |
3 | corporation that is required to compute its business income |
4 | under paragraph (1). The apportionment fraction of the following |
5 | corporations is not included in the determination of the |
6 | combined apportionment fraction: |
7 | (i) any corporation subject to taxation under Article VII, |
8 | VIII, IX or XV; |
9 | (ii) any corporation specified in the definition of |
10 | "institution" in section 701.5 that would be subject to taxation |
11 | under Article VII were it located, as defined in section 701.5, |
12 | in this State; |
13 | (iii) any corporation commonly known as a title insurance |
14 | company that would be subject to taxation under Article VIII |
15 | were it incorporated in this State; |
16 | (iv) any corporation specified as an insurance company, |
17 | association or exchange in Article IX that would be subject to |
18 | taxation under Article IX were its insurance business transacted |
19 | in this State; |
20 | (v) any corporation specified in the definition of |
21 | "institution" in section 1501 that would be subject to taxation |
22 | under Article XV were it located, as defined in section 1501, in |
23 | this State; |
24 | (vi) any corporation that is a small corporation, as defined |
25 | in section 301(s.2), or a qualified Subchapter S subsidiary, as |
26 | defined in section 301(o.3). |
27 | (3) A corporation that is required to compute its business |
28 | income under paragraph (1) shall apportion such combined |
29 | business income by multiplying such combined business income by |
30 | a fraction which is the combined apportionment fraction set |
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1 | forth in paragraph (2). |
2 | (4) Nonbusiness income of a corporation that is required to |
3 | compute business income under paragraph (1) shall be allocated |
4 | as provided in paragraphs (5) through (8) of phrase (a) of |
5 | subclause 2 of the definition of "taxable income." |
6 | (5) Each corporation that is a member of a unitary business |
7 | that consists of two or more corporations determines its tax |
8 | liability based on its apportioned share of the combined |
9 | business income of the unitary business plus its nonbusiness |
10 | income or loss allocated to this State, minus its net loss |
11 | deduction. |
12 | (6) If any provision of this phrase operates so that an |
13 | amount is added to or deducted from taxable income for a taxable |
14 | year for any corporation of a unitary business that previously |
15 | had been added to or deducted from taxable income of any |
16 | corporation of the same unitary business, an appropriate |
17 | adjustment shall be made for the taxable year in order to |
18 | prevent double taxation or double deduction. If this adjustment |
19 | is not made by the appropriate corporation of the unitary |
20 | business, the Secretary of Revenue is authorized to make this |
21 | adjustment. |
22 | (7) The Secretary of Revenue has the authority and |
23 | responsibility to make adjustments to ensure that a corporation |
24 | does not incur an unfair penalty nor realize an unfair benefit |
25 | because it is required to compute its business income under |
26 | paragraph (1). Fairness shall be measured by whether the |
27 | corporation's income allocated and apportioned to this State |
28 | fairly reflects the corporation's share of the unitary business |
29 | conducted in this State in the taxable year. |
30 | * * * |
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1 | 4. * * * |
2 | (c) (1) [The] For taxable years beginning before January 1, |
3 | 2014, the net loss deduction shall be the lesser of: |
4 | (A) (I) For taxable years beginning before January 1, 2007, |
5 | two million dollars ($2,000,000); |
6 | (II) For taxable years beginning after December 31, 2006, |
7 | the greater of twelve and one-half per cent of taxable income as |
8 | determined under subclause 1 or, if applicable, subclause 2 or |
9 | three million dollars ($3,000,000); |
10 | (III) For taxable years beginning after December 31, 2008, |
11 | the greater of fifteen per cent of taxable income as determined |
12 | under subclause 1 or, if applicable, subclause 2 or three |
13 | million dollars ($3,000,000); |
14 | (IV) For taxable years beginning after December 31, 2009, |
15 | the greater of twenty per cent of taxable income as determined |
16 | under subclause 1 or, if applicable, subclause 2 or three |
17 | million dollars ($3,000,000); or |
18 | (B) The amount of the net loss or losses which may be |
19 | carried over to the taxable year or taxable income as determined |
20 | under subclause 1 or, if applicable, subclause 2. |
21 | (1.1) In no event shall the net loss deduction include more |
22 | than five hundred thousand dollars ($500,000), in the aggregate, |
23 | of net losses from taxable years 1988 through 1994. |
24 | (1.2) For taxable years beginning after December 31, 2013, |
25 | there shall be no maximum on the amount of the net loss |
26 | deduction. |
27 | (2) (A) A net loss for a taxable year may only be carried |
28 | over pursuant to the following schedule: |
29 | Taxable Year | Carryover | 30 | 1981 | 1 taxable year | | 1 | 1982 | 2 taxable years | 2 | 1983-1987 | 3 taxable years | 3 4 5 6 | 1988 | 2 taxable years plus 1 taxable year starting with the 1995 taxable year | 7 8 9 10 | 1989 | 1 taxable year plus 2 taxable years starting with the 1995 taxable year | 11 12 13 | 1990-1993 | 3 taxable years starting with the 1995 taxable year | 14 | 1994 | 1 taxable year | 15 | 1995-1997 | 10 taxable years | 16 | 1998 and thereafter | 20 taxable years |
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17 | (B) The earliest net loss shall be carried over to the |
18 | earliest taxable year to which it may be carried under this |
19 | schedule. [The] For taxable years beginning before January 1, |
20 | 2014, the total net loss deduction allowed in any taxable year |
21 | shall not exceed: |
22 | (I) Two million dollars ($2,000,000) for taxable years |
23 | beginning before January 1, 2007. |
24 | (II) The greater of twelve and one-half per cent of the |
25 | taxable income as determined under subclause 1 or, if |
26 | applicable, subclause 2 or three million dollars ($3,000,000) |
27 | for taxable years beginning after December 31, 2006. |
28 | (III) The greater of fifteen per cent of the taxable income |
29 | as determined under subclause 1 or, if applicable, subclause 2 |
30 | or three million dollars ($3,000,000) for taxable years |
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1 | beginning after December 31, 2008. |
2 | (IV) The greater of twenty per cent of the taxable income as |
3 | determined under subclause 1 or, if applicable, subclause 2 or |
4 | three million dollars ($3,000,000) for taxable years beginning |
5 | after December 31, 2009. |
6 | (C) For taxable years beginning after December 31, 2013, |
7 | there shall be no maximum on the amount of the net loss |
8 | deduction. |
9 | * * * |
10 | (8) "Unitary business." A single economic enterprise that |
11 | is made up of separate parts of a single corporation, of a |
12 | commonly controlled group of corporations, or both, that are |
13 | sufficiently interdependent, integrated and interrelated through |
14 | their activities so as to provide a synergy and mutual benefit |
15 | that produces a sharing or exchange of value among them and a |
16 | significant flow of value to the separate parts. A unitary |
17 | business includes only those parts and corporations which may be |
18 | included as a unitary business under the Constitution of the |
19 | United States. |
20 | (9) "Water's-edge basis." A system of reporting that |
21 | includes the business income and apportionment factor of certain |
22 | corporations of a unitary business, described as follows: |
23 | 1. The business income and apportionment factor of any |
24 | member incorporated in the United States or formed under the |
25 | laws of any state of the United States, the District of |
26 | Columbia, any territory or possession of the United States or |
27 | the Commonwealth of Puerto Rico. |
28 | 2. The business income and apportionment factor of any |
29 | member, regardless of the place incorporated or formed, if the |
30 | average of its property, payroll and sales factors within the |
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1 | United States is twenty per cent or more. |
2 | 3. The business income and apportionment factor of any |
3 | member which is a domestic international sales corporation as |
4 | described in sections 991, 992, 993 and 994 of the Internal |
5 | Revenue Code of 1986 (Public Law 99-514, 26 U.S.C. §§ 991, 992, |
6 | 993 and 994); a foreign sales corporation as described in former |
7 | sections 921, 922, 923, 924, 925, 926 and 927 of the Internal |
8 | Revenue Code of 1986 (Public Law 99-514, 26 U.S.C. §§ 921, 922, |
9 | 923, 924, 925, 926 and 927); or any member which is an export |
10 | trade corporation, as described in sections 970 and 971 of the |
11 | Internal Revenue Code of 1986 (Public Law 99-514 26 U.S.C. §§ |
12 | 970 and 971). |
13 | 4. Any member not described in subclauses 1, 2 and 3 shall |
14 | include the portion of its business income derived from or |
15 | attributable to sources within the United States, as determined |
16 | under the Internal Revenue Code of 1986 without regard to |
17 | Federal treaties, and its apportionment factor related thereto. |
18 | 5. Any member that is a "controlled foreign corporation" as |
19 | defined in section 957 of the Internal Revenue Code of 1986 |
20 | (Public Law 99-514, 26 U.S.C. § 957), to the extent the business |
21 | income of that member is income defined in section 952 of the |
22 | Internal Revenue Code of 1986 (Public Law 99-514, 26 U.S.C. § |
23 | 952), Subpart F income, not excluding lower-tier subsidiaries' |
24 | distributions of such income which were previously taxed, |
25 | determined without regard to Federal treaties, and the |
26 | apportionment factor related to that income; any item of income |
27 | received by a controlled foreign corporation and the |
28 | apportionment factor related to such income shall be excluded if |
29 | the corporation establishes to the satisfaction of the Secretary |
30 | of Revenue that such income was subject to an effective rate of |
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1 | income tax imposed by a foreign country greater than ninety per |
2 | cent of the maximum rate of tax specified in section 11 of the |
3 | Internal Revenue Code of 1986 (Public Law 99-54, 26 U.S.C. § |
4 | 11). The effective rate of income tax determination shall be |
5 | based upon the methodology set forth under 26 CFR 1.954-1 |
6 | (relating to foreign base company income). |
7 | 6. The business income and apportionment factor of any |
8 | member that is not described in subclauses 1, 2, 3, 4 and 5 and |
9 | that is doing business in a tax haven. The business income and |
10 | apportionment factor of a corporation doing business in a tax |
11 | haven shall be excluded if the corporation establishes to the |
12 | satisfaction of the Secretary of Revenue that its income was |
13 | subject to an effective rate of income tax imposed by a country |
14 | greater than ninety per cent of the maximum rate of tax |
15 | specified in section 11 of the Internal Revenue Code of 1986 |
16 | (Public Law 99-514, 26 U.S.C. § 11). |
17 | Section 2. Section 402(b) of the act, amended June 29, 2002 |
18 | (P.L.559, No.89), is amended to read: |
19 | Section 402. Imposition of Tax.--* * * |
20 | (b) The annual rate of tax on corporate net income imposed |
21 | by subsection (a) for taxable years beginning for the calendar |
22 | year or fiscal year on or after the dates set forth shall be as |
23 | follows: |
24 | Taxable Year | Tax Rate | 25 26 27 28 29 30 | January 1, 1995, [and each taxable year thereafter] through taxable years beginning after December | | | 1 | 31, 2009 | 9.99% | 2 3 4 | January 1, 2010, and each taxable year thereafter | 7.90% |
|
5 | * * * |
6 | Section 3. Sections 2701 and 2702(b) of the act, amended |
7 | October 18, 2006 (P.L.1149, No.119), are amended to read: |
8 | Section 2701. Definitions. |
9 | The following words and phrases when used in this article |
10 | shall have the meanings given to them in this section unless the |
11 | context clearly indicates otherwise: |
12 | ["Board." The Board of Finance and Revenue.] |
13 | "Department." The Department of Revenue of the Commonwealth. |
14 | "Return." The term includes a tax report. |
15 | "Secretary." The Secretary of Revenue of the Commonwealth. |
16 | Section 2702. Petition for reassessment. |
17 | * * * |
18 | (b) Special rule for shares taxes.--Notwithstanding any |
19 | provision of law to the contrary, section [1104.1 of the act of |
20 | April 9, 1929 (P.L.343, No.176), known as The Fiscal Code,] |
21 | 2703(g) shall constitute the exclusive method by which an appeal |
22 | from the assessment of the tax imposed by Article VII or VIII |
23 | may be made. |
24 | * * * |
25 | Section 4. Section 2703 of the act is amended by adding a |
26 | subsection to read: |
27 | Section 2703. Petition procedure. |
28 | * * * |
29 | (g) Special rule for shares taxes.--Upon sufficient cause |
30 | shown by a taxpayer that the payment of tax assessed under |
|
1 | Article VII or VIII would irreparably harm the taxpayer, the |
2 | department may take jurisdiction of a petition for refund |
3 | challenging the assessed tax without the tax being paid if the |
4 | petition is filed within two years after the mailing date of the |
5 | assessment. |
6 | Section 5. Section 2704 of the act, added October 18, 2006 |
7 | (P.L.1149, No.119), is repealed. |
8 | [Section 2704. Review by board. |
9 | (a) Petition for review of a decision and order.--Within 90 |
10 | days after the mailing date of the department's notice of |
11 | decision and order on a petition filed with it, a taxpayer may |
12 | petition the board to review the decision and order of the |
13 | department. |
14 | (b) Petition for review of denial by department's failure to |
15 | act.--A petition for review may be filed with the board within |
16 | 90 days after the mailing date of the department's notice to the |
17 | petitioner of its failure to dispose of the petition within the |
18 | time periods prescribed by section 2703(d) or (e). |
19 | (c) Contents of petition.-- |
20 | (1) A petition for review of the department's decision |
21 | and order on a petition for reassessment shall state all of |
22 | the following: |
23 | (i) The tax type and tax periods included within the |
24 | petition. |
25 | (ii) The amount of the tax that the taxpayer claims |
26 | to have been erroneously assessed. |
27 | (iii) The basis upon which the taxpayer claims that |
28 | the assessment is erroneous. |
29 | (2) A petition for review of the department's decision |
30 | and order on a petition for refund shall state all of the |
|
1 | following: |
2 | (i) The tax type and tax periods included within the |
3 | petition. |
4 | (ii) The amount of the tax that the taxpayer claims |
5 | to have been overpaid. |
6 | (iii) The basis of the taxpayer's claims for refund. |
7 | (3) A petition may satisfy the requirements of |
8 | paragraphs (1)(iii) or (2)(iii) by incorporating by reference |
9 | the petition filed with the department in which the basis of |
10 | the taxpayer's claim is specifically stated. |
11 | (d) Affidavit.--A petition shall be supported by an |
12 | affidavit by the petitioner or the petitioner's authorized |
13 | representative that the petition is not made for the purpose of |
14 | delay and that the facts set forth in the petition are true. |
15 | (e) Decision and order.--The board shall issue a decision |
16 | and order disposing of a petition on any basis as it deems to be |
17 | in accordance with law and equity. |
18 | (f) Time limit for decision and order.-- |
19 | (1) Except as provided in paragraph (2), the board shall |
20 | issue a decision and order disposing of a petition within six |
21 | months after receipt of the petition. |
22 | (2) If at the time of the filing of a petition |
23 | proceedings are pending in a court of competent jurisdiction |
24 | in which any claim made in the petition may be established, |
25 | the board, upon the written request of the petitioner, may |
26 | defer consideration of the petition until the final judgment |
27 | determining the question or questions involved in the |
28 | petition has been decided. If consideration of the petition |
29 | is deferred, the board shall issue a decision and order |
30 | disposing of the petition within six months after the final |
|
1 | judgment. |
2 | (g) Failure of board to take action.--The failure of the |
3 | board to dispose of the petition within the time period provided |
4 | for by subsection (f) shall act as a denial of the petition. |
5 | Notice of the board's failure to take action and the denial of |
6 | the petition shall be issued to the petitioner.] |
7 | Section 6. The act is amended by adding a section to read: |
8 | Section 2704.1. Review by Tax Review Tribunal. |
9 | (a) Petition for review of a decision and order.--Within 90 |
10 | days after the mailing date of the department's notice of |
11 | decision and order on a petition filed with it, a taxpayer may |
12 | petition the Tax Review Tribunal to review the decision and |
13 | order of the department. |
14 | (b) Petition for review of denial by department's failure to |
15 | act.--A petition for review may be filed with the Pennsylvania |
16 | Tax Review Tribunal within 90 days after the mailing date of the |
17 | department's notice to the petitioner of its failure to dispose |
18 | of the petition within the time periods prescribed by section |
19 | 2807(c). |
20 | Section 7. The act is amended by adding an article to read: |
21 | ARTICLE XXVIII |
22 | TAX REVIEW TRIBUNAL |
23 | Section 2801. Definitions. |
24 | The following words and phrases when used in this article |
25 | shall have the meanings given to them in this section unless the |
26 | context clearly indicates otherwise: |
27 | "Department." The Department of Revenue of the Commonwealth. |
28 | "Judge." An administrative law judge appointed to the |
29 | Pennsylvania Tax Review Tribunal pursuant to section 2802. |
30 | "Tribunal." The Tax Review Tribunal established in section |
|
1 | 2802. |
2 | Section 2802. Tax Review Tribunal; establishment. |
3 | (a) Establishment.--The Tax Review Tribunal is hereby |
4 | established as an administrative board in the Treasury |
5 | Department and independent from the department. |
6 | (b) Appointment of judges.--The tribunal shall consist of no |
7 | less than five qualified and competent administrative law |
8 | judges, including a chief administrative law judge. The |
9 | administrative law judges shall be appointed by the State |
10 | Treasurer, with the approval of the Board of Finance and |
11 | Revenue. The State Treasurer, with the approval of the Board of |
12 | Finance and Revenue, shall have the power to appoint as many |
13 | additional qualified and competent administrative law judges as |
14 | may be necessary to fulfill the duties of the tribunal. |
15 | (c) Temporary appointees.--If the docket of the tribunal is |
16 | congested or any judge of the tribunal is absent or unable to |
17 | perform the duties of the office, the State Treasurer, with the |
18 | approval of the Board of Finance and Revenue, may appoint |
19 | qualified and competent persons who meet the minimum standards |
20 | established by this article to temporarily serve as |
21 | administrative law judges until the docket is no longer |
22 | congested or the judge returns to the judge's official duties. |
23 | (d) Term of office.--Administrative law judges shall be |
24 | appointed for terms of five years. The administrative law judges |
25 | initially appointed upon the establishment of the tribunal shall |
26 | be given terms of varying lengths so that all judges' terms do |
27 | not expire in the same year. However, no appointment shall be |
28 | for less than three years nor more than five years. |
29 | Administrative law judges may be reappointed upon the expiration |
30 | of their terms. |
|
1 | (e) Chief administrative law judge.--The State Treasurer, |
2 | with the approval of the Board of Finance and Revenue, shall |
3 | designate one of the administrative law judges as chief |
4 | administrative law judge. The chief administrative law judge |
5 | shall be responsible for assigning a hearing judge to every |
6 | cause, matter and proceeding coming before the tribunal. The |
7 | chief administrative law judge shall receive remuneration above |
8 | that of any other administrative law judge. |
9 | (f) Continuation in office.--Once appointed each judge shall |
10 | continue in office until the judge's term expires and until a |
11 | successor has been appointed and qualified. |
12 | (g) Vacancy.--A vacancy in the tribunal occurring otherwise |
13 | than by expiration of a term shall be filled for the unexpired |
14 | term. |
15 | (h) Removal.--The State Treasurer, with approval of the |
16 | Board of Finance and Revenue, may remove an administrative law |
17 | judge, after notice and an opportunity to be heard, for neglect |
18 | of duty, inability to perform duties or malfeasance in office. |
19 | (i) Location of offices.--The offices of the tribunal shall |
20 | be located separate and apart from the department. |
21 | Section 2803. Qualifications of judges and prohibition. |
22 | (a) Requirements.--Each judge of the tribunal must meet and |
23 | maintain the following minimum requirements: |
24 | (1) Be a citizen of the United States. |
25 | (2) Be a resident of this Commonwealth. |
26 | (3) Be an attorney in good standing before the Supreme |
27 | Court of Pennsylvania. |
28 | (4) Have at least five years experience in a position |
29 | requiring substantial knowledge of Pennsylvania tax law and |
30 | the tax appeal process. |
|
1 | (b) Oath of office.--Before entering upon the duties of |
2 | office, a judge shall take and subscribe to an oath or |
3 | affirmation to faithfully discharge the duties of the office. |
4 | (c) Prohibition.--Each judge shall be devoted full time |
5 | during business hours to the duties of the office. No person, |
6 | while a judge, shall engage in any other gainful employment or |
7 | business nor hold another office or position of profit in a |
8 | government of this Commonwealth, any other state or the United |
9 | States. |
10 | Section 2804. Administration. |
11 | (a) Executive administrator.--The State Treasurer, with |
12 | approval of the Board of Finance and Revenue, shall appoint an |
13 | executive administrator who shall be responsible for the day-to- |
14 | day administration and operation of the tribunal. |
15 | (b) Chief clerk.--The State Treasurer, with approval of the |
16 | Board of Finance and Revenue, shall appoint a chief clerk who |
17 | shall be responsible for recording all filings and maintaining a |
18 | record of all proceedings before the tribunal. The chief clerk |
19 | shall be responsible for certifying the record established at |
20 | the tribunal in the event of an appeal to Commonwealth Court. |
21 | (c) Expenditures.--The chief administrative law judge or his |
22 | designee may appoint and fix the compensation of accountants, |
23 | attorneys, stenographers and other employees and make other |
24 | expenditures, including expenditures for library, publications |
25 | and equipment, as necessary to permit the tribunal to |
26 | efficiently execute its functions. |
27 | (d) Limitation.--No employee of the tribunal shall act as |
28 | attorney, representative or accountant for others in a matter |
29 | involving any tax imposed or levied by the Commonwealth. |
30 | Section 2805. Jurisdiction of tribunal. |
|
1 | (a) Exclusive and final authority.--Except as permitted by |
2 | section 2817, the tribunal shall be the sole, exclusive and |
3 | final authority for the hearing, review and determination of |
4 | questions of law and fact arising under a decision and order of |
5 | the department pursuant to Article XXVII. Notwithstanding any |
6 | other provision of law, the tribunal shall have jurisdiction |
7 | over all matters relating to decisions of the department mailed |
8 | after December 31, 2009, regarding reassessment, |
9 | redetermination, resettlement or refund. |
10 | (b) Improper commencement.--Except as permitted by section |
11 | 2817, no person shall contest any matter within the jurisdiction |
12 | of the tribunal in any action, suit or proceeding in |
13 | Commonwealth Court or any other court of the Commonwealth. If a |
14 | person attempts to do so, then the action, suit or proceeding |
15 | shall be transferred to the tribunal. |
16 | (c) Amounts asserted as due.--The taxpayer shall have the |
17 | right to have the taxpayer's case heard by the tribunal prior to |
18 | the payment of any of the amounts asserted as due by the |
19 | department and prior to the posting of any bond except in any |
20 | case: |
21 | (1) Involving the denial of a claim for refund. |
22 | (2) Where a bond is required by statute. |
23 | (d) Characterization of certain petitions.--If the taxpayer |
24 | pays all or part of the tax or other amount at issue before the |
25 | tribunal has rendered a decision, the tribunal shall treat the |
26 | taxpayer's petition as a protest of a denial of a claim for |
27 | refund of the amount paid without further action on the part of |
28 | the taxpayer. |
29 | (e) Constitutionality issues.--The tribunal shall decide |
30 | questions regarding the constitutionality of the application of |
|
1 | statutes to the taxpayer and the constitutionality of |
2 | regulations promulgated by the department but shall not have the |
3 | power to declare a statute unconstitutional on its face. A |
4 | taxpayer desiring to challenge the constitutionality of a |
5 | statute on its face may file a petition with the tribunal with |
6 | respect to all issues other than the constitutional challenge |
7 | and preserving the constitutional challenge until the entire |
8 | matter, including the constitutional issue, is presented to the |
9 | Commonwealth Court. |
10 | Section 2806. Filing fees. |
11 | (a) Fees.--Upon filing a petition pursuant to Article XXVII, |
12 | the taxpayer shall pay to the chief clerk a fee in the amount of |
13 | $100, except that, in case of a petition filed in the small |
14 | claims division as provided for in section 2816, the fee shall |
15 | be $50. A similar fee shall be paid by other parties making an |
16 | appearance in the proceeding, except that no fee shall be |
17 | charged to a government body or government official appearing in |
18 | a representative capacity. |
19 | (b) Records related fees.--The tribunal may fix a fee, not |
20 | in excess of the fees charged and collected by the clerks of the |
21 | Commonwealth Court, for comparing or for preparing and comparing |
22 | a transcript of the record, or for copying any record, entry or |
23 | other paper and the comparison and certification thereof. |
24 | (c) Disposition of fees.--All fees and other money received |
25 | or collected by the tribunal shall be paid over to the State |
26 | Treasurer and shall be held in the General Fund as miscellaneous |
27 | receipts. |
28 | Section 2807. Pleadings. |
29 | (a) Commencement of proceeding.--A taxpayer may commence a |
30 | proceeding in the tribunal by filing a petition for review as |
|
1 | provided in Article XXVII. |
2 | (b) Taxpayer election.--A taxpayer may elect to proceed in |
3 | the small claims division of the tribunal by filing a petition |
4 | in the form prescribed by the tribunal for small claims. A |
5 | taxpayer may not revoke an election to proceed in the small |
6 | claims division and shall not have any further right to appeal |
7 | or bring suit. |
8 | (c) Answer.--The department shall file its answer with the |
9 | tribunal no later than 75 days after its receipt of the |
10 | tribunal's notification that the taxpayer has filed a petition. |
11 | Upon written request, the tribunal may grant up to 15 additional |
12 | days to file an answer. If the petitioner files an amended |
13 | petition as set forth in the preceding section, the department's |
14 | time period for filing its responsive pleading shall run from |
15 | the filing date of the amendment. The department shall serve a |
16 | copy on the taxpayer's representative or, if the taxpayer is not |
17 | represented, on the taxpayer, and shall file proof of service |
18 | with the answer. Material facts alleged in the petition, if not |
19 | expressly admitted or denied in the answer, shall be deemed |
20 | admitted. If the department fails to answer within the |
21 | prescribed time, all material facts alleged in the petition |
22 | shall be deemed admitted. |
23 | (d) Reply.--The taxpayer may file a reply in the tribunal |
24 | within 30 days after receipt of the answer. The taxpayer shall |
25 | serve a copy on the authorized representative of the department |
26 | and shall file proof of service with the reply. Material facts |
27 | alleged in the answer, if not expressly admitted or denied in |
28 | the reply, shall be deemed admitted. If the taxpayer does not |
29 | file a reply, all material facts alleged in the answer shall be |
30 | deemed denied. Upon the filing of a reply or 30 days after the |
|
1 | filing of the answer if no reply is filed, the controversy shall |
2 | be deemed at issue and scheduled for hearing. |
3 | (e) Amendment of pleading.--Either party may amend a |
4 | pleading once without leave at any time before the period for |
5 | responding to it expires. After expiration of the response |
6 | period, a pleading may be amended only with the written consent |
7 | of the adverse party or with the permission of the tribunal. The |
8 | tribunal shall freely grant consent to amend upon just terms. |
9 | Except as otherwise ordered by the tribunal, there shall be an |
10 | answer or reply to an amended pleading if an answer or reply is |
11 | required to the pleading being amended. Filing of the answer, |
12 | or, if the answer has already been filed, the amended answer, |
13 | shall be made no later than 75 days after filing of the amended |
14 | petition. Filing of the reply or, if the reply has already been |
15 | filed, the amended reply, shall be made within 30 days after |
16 | filing of the amended answer. The taxpayer may not amend a |
17 | petition after expiration of the time for filing a petition, if |
18 | the amendment would have the effect of conferring jurisdiction |
19 | on the tribunal over a matter which otherwise would not come |
20 | within its jurisdiction. An amendment of a pleading shall relate |
21 | back to the time of filing of the original pleading unless the |
22 | tribunal shall order otherwise either on motion of a party or on |
23 | the tribunal's own initiative. |
24 | Section 2808. Presiding judge. |
25 | (a) Requirements for presiding judge.--There shall preside |
26 | at the taking of evidence and conduct of all hearings one or |
27 | more administrative law judges assigned by the chief |
28 | administrative law judge as provided in section 2802. The |
29 | functions of all presiding judges shall be conducted in an |
30 | impartial manner. Any judge may at any time withdraw from a |
|
1 | proceeding if the judge deems himself disqualified, and the |
2 | chief administrative law judge may require a withdrawal upon the |
3 | appeal of any party from a decision of the presiding judge not |
4 | to withdraw. Upon disqualification of any judge, the chief |
5 | administrative law judge shall assign the matter to another |
6 | judge. |
7 | (b) Authority of presiding judge.--The presiding judge shall |
8 | have authority, subject to the provisions of this article and |
9 | the published rules of the tribunal, to: |
10 | (1) Administer oaths and affirmations. |
11 | (2) Issue subpoenas authorized by law. |
12 | (3) Rule upon offers of proof and receive relevant |
13 | evidence, take or cause depositions to be taken whenever the |
14 | ends of justice would be served thereby. |
15 | (4) Regulate the course of the hearing. |
16 | (5) Hold conferences for settlement or simplification of |
17 | the issues by consent of the parties. |
18 | (6) Dispose of procedural requests or similar matters. |
19 | (7) Make decisions or recommend decisions in conformity |
20 | within this article. |
21 | (8) Take any other action authorized by law or the rules |
22 | of the tribunal. |
23 | (c) Presiding judge to decide.--The same presiding judge |
24 | shall to the fullest extent possible preside at the reception of |
25 | all evidence in a particular case to which the judge has been |
26 | assigned. The same presiding judge who presides at the reception |
27 | of evidence shall issue the proposed decision and order on the |
28 | petition except where the presiding judge becomes unavailable to |
29 | the tribunal. |
30 | Section 2809. Procedures in general. |
|
1 | (a) Admissibility of evidence.--Any oral or documentary |
2 | evidence may be received, but the tribunal shall as a matter of |
3 | policy provide for the exclusion of irrelevant, immaterial or |
4 | unduly repetitious evidence. |
5 | (b) Submission of evidence.--A party is entitled to present |
6 | the party's case or defense by oral or documentary evidence, to |
7 | submit rebuttal evidence and to conduct cross-examination as |
8 | required for a full and true disclosure of the facts. The |
9 | tribunal may adopt rules for the submission of all or part of |
10 | the evidence in written form. |
11 | (c) Record, briefs and argument.--The transcript of a |
12 | hearing, the transcript of testimony and exhibits, together with |
13 | all papers and motions filed in the proceeding, constitutes the |
14 | exclusive record for decision. Briefing and oral argument shall |
15 | be held in accordance with rules established by the tribunal. |
16 | (d) Official notice of facts.--When the tribunal's decision |
17 | rests on official notice of a material fact not appearing in the |
18 | evidence in the record, upon notification that facts are about |
19 | to be or have been noticed, any party adversely affected shall |
20 | have the opportunity upon timely request to show that the facts |
21 | are not properly noticed or that alternative facts should be |
22 | noticed. The tribunal in its discretion shall determine whether |
23 | written presentations suffice or whether oral argument, oral |
24 | evidence or cross-examination is appropriate in the |
25 | circumstances. Nothing in this subsection shall affect the |
26 | application by the tribunal in appropriate circumstances of the |
27 | doctrine of judicial notice. |
28 | (e) Actions of parties and counsel.--A party who fails to be |
29 | represented at a scheduled conference or hearing after being |
30 | notified of the conference or hearing, shall be deemed to have |
|
1 | waived the opportunity to participate in the conference or |
2 | hearing and shall not be permitted thereafter to reopen the |
3 | disposition of any matter accomplished at the conference or |
4 | hearing, or to recall for further examination of witnesses who |
5 | were excused, unless the presiding judge shall determine that |
6 | failure to be represented was unavoidable and that the interests |
7 | of the other parties would not be prejudiced by permitting the |
8 | reopening or further examination. If the actions of a party or |
9 | counsel in a proceeding shall be determined by a panel of |
10 | administrative law judges assigned by the chief administrative |
11 | law judge, after due notice and opportunity for hearing, to be |
12 | obstructive to the orderly conduct of the proceeding and |
13 | inimical to the public interest, the panel may reject any claim |
14 | for relief or dismiss any proceeding and, with respect to |
15 | counsel, may impose sanctions upon counsel or a party as |
16 | appropriate or bar further participation by that counsel in any |
17 | proceedings before the tribunal. |
18 | (f) Interlocutory appeals.--An interlocutory appeal from a |
19 | ruling of a presiding judge shall be allowed to a panel of |
20 | administrative law judges assigned by the chief administrative |
21 | law judge upon certification by the presiding judge that the |
22 | ruling involves a material question which should be resolved at |
23 | that time. Notwithstanding the presiding judge's certification, |
24 | the panel shall have the authority to dismiss summarily the |
25 | interlocutory appeal if it should appear that the certification |
26 | was improvident. An interlocutory appeal shall not result in a |
27 | stay of the proceedings except upon a finding by the presiding |
28 | judge or the panel that extraordinary circumstances exist. |
29 | Section 2810. Prehearing procedures. |
30 | (a) Conferences.--The presiding judge shall have the |
|
1 | authority to hold one or more prehearing conferences during the |
2 | course of the proceeding on the judge's motion or at the request |
3 | of a party to the proceeding. The presiding judge may direct the |
4 | parties to exchange their evidentiary exhibits and witness lists |
5 | at a prehearing conference. Where good cause exists, the parties |
6 | may at any time amend, by deletion or supplementation, their |
7 | evidentiary exhibits and witness lists. |
8 | (b) Disclosure of information on witnesses.--At the |
9 | prehearing conference or at some other reasonable time prior to |
10 | the hearing as determined by rule of the tribunal or order of |
11 | the president judge, each party to the proceeding shall make |
12 | available to the other parties to the proceeding the names of |
13 | the witnesses the party expects to call and the subject matter |
14 | of the witnesses' expected testimony. Where good cause exists, |
15 | the parties shall have the right at any time to amend, by |
16 | deletion or supplementation, the list of names of the witnesses |
17 | the parties plan to call and the subject matter of the expected |
18 | testimony of those witnesses. |
19 | (c) Scheduling.--The presiding judge shall have the |
20 | authority to impose schedules on the parties to the proceeding |
21 | specifying the periods of time during which the parties may |
22 | pursue discovery. The schedules and time periods shall be set |
23 | with a view to accelerating disposition of the case to the |
24 | fullest extent consistent with fairness. |
25 | Section 2811. Oaths and subpoenas. |
26 | (a) Oaths.--Any employee of the tribunal designated in |
27 | writing for the purpose by the chief administrative law judge |
28 | may administer oaths. |
29 | (b) Subpoenas.--A judge or the chief clerk of the tribunal, |
30 | on the request of any party to the proceeding, shall have the |
|
1 | power to issue subpoenas requiring the attendance of witnesses |
2 | and giving of testimony and subpoenas duces tecum requiring the |
3 | production of any returns, books, papers, documents and |
4 | correspondence and other evidence pertaining to the matter under |
5 | inquiry in the manner prescribed by the Pennsylvania Rules of |
6 | Civil Procedure. |
7 | Section 2812. Discovery. |
8 | (a) Informal discovery preferred.--The parties to a |
9 | proceeding shall make reasonable effort in good faith to achieve |
10 | discovery by informal means before invoking the formal discovery |
11 | mechanisms authorized by this article. |
12 | (b) Depositions.--Any party to the proceeding shall be able |
13 | to take depositions of witnesses upon oral examination or |
14 | written questions for purposes of discovering relevant, |
15 | unprivileged information. To that end, a party may obtain |
16 | subpoenas requiring the attendance of witnesses and the |
17 | production of returns, books, papers, documents, correspondence |
18 | and other evidence pertaining to the matter under inquiry. |
19 | (c) Interrogatories.--Any party to a proceeding may serve |
20 | written interrogatories upon any other party for purposes of |
21 | discovering relevant, unprivileged information. A party served |
22 | with interrogatories may, before the time prescribed by the |
23 | tribunal for answering the interrogatories, apply to the |
24 | presiding judge for the holding of a prehearing conference for |
25 | the mutual exchange of evidence exhibits and other information. |
26 | Each interrogatory which requests information not previously |
27 | supplied at a prehearing conference or hearing shall be answered |
28 | separately and fully in writing under oath unless it is objected |
29 | to, in which event the reasons for the objections shall be |
30 | stated in lieu of an answer. The party upon whom the |
|
1 | interrogatories have been served shall serve a copy of the |
2 | answers and objections within the time prescribed by the |
3 | tribunal unless otherwise specified, upon the party submitting |
4 | the interrogatories. The party submitting the interrogatories |
5 | may petition the presiding officer for an order compelling an |
6 | answer to an interrogatory or interrogatories to which there has |
7 | been an objection or other failure to answer. |
8 | (d) Requests for admissions.--A party to a proceeding may |
9 | serve upon any other party a written request for the admission |
10 | of any relevant, unprivileged, undisputed facts, the genuineness |
11 | of any document described in the request, the admissibility of |
12 | evidence, the order of proof and other similar matters. The |
13 | parties shall stipulate, to the fullest extent to which complete |
14 | or qualified agreement can or fairly should be reached, all |
15 | matters not privileged which are relevant to the proceeding. |
16 | (e) Protective orders.--The presiding judge shall have the |
17 | authority, upon motion by a party or by the person from whom |
18 | discovery is sought, and for good cause shown, to make any order |
19 | which justice requires to protect the party or person. |
20 | (f) Fees and mileage costs.--Any witness subpoenaed or whose |
21 | deposition is taken shall receive fees and mileage costs. |
22 | (g) Other discovery.--The tribunal may provide for other |
23 | forms of discovery. |
24 | (h) Enforcement.--The tribunal may enforce its orders on |
25 | discovery and other procedural issues, among other means, by |
26 | deciding issues wholly or partly against the offending party. |
27 | Section 2813. Hearings. |
28 | (a) Proceedings.--Proceedings before the tribunal shall be |
29 | tried de novo and, to the extent permissible under the |
30 | Constitution of the United States and the Constitution of |
|
1 | Pennsylvania, without a jury. |
2 | (b) Role of tribunal.--Except as set forth in this article |
3 | or otherwise precluded by law, the tribunal shall take evidence, |
4 | conduct hearings and issue final and interlocutory decisions. |
5 | (c) Hearings to be public; exceptions.-- |
6 | (1) Except as set forth in paragraph (2), all hearings |
7 | of the tribunal shall be transcribed and open to the public. |
8 | (2) On motion of either party the tribunal shall issue a |
9 | protective order or an order closing part or all of the |
10 | hearing from the public when the party opposing disclosure of |
11 | certain information shows good cause to protect the |
12 | information from being disclosed to the public. |
13 | (d) Evidence.--The tribunal shall admit relevant evidence if |
14 | it is probative of a material fact in controversy. The tribunal |
15 | shall exclude irrelevant and unduly repetitious evidence. A rule |
16 | of privilege recognized by law applies. |
17 | (e) Testimony.--Testimony may be given only on oath or |
18 | affirmation. |
19 | (f) Pleadings to conform to proof.--The petition and other |
20 | pleadings in the proceeding shall be deemed to conform to the |
21 | proof presented at the hearing unless a party satisfies the |
22 | tribunal that presentation of the evidence would unfairly |
23 | prejudice the party in maintaining its position on the merits or |
24 | unless deeming the taxpayer's petition to conform to the proof |
25 | would confer jurisdiction on the tribunal over a matter that |
26 | would not otherwise come within its jurisdiction. |
27 | (g) Official reporting.--Proceedings before the tribunal, |
28 | except those before the small claims division as provided for in |
29 | section 2816 shall be officially reported. The Commonwealth |
30 | shall pay the expense of reporting from the appropriation for |
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1 | the tribunal. |
2 | Section 2814. Decisions. |
3 | (a) Decision in writing.--The tribunal shall render its |
4 | decision in writing, including a concise statement of the facts |
5 | found and the conclusions of law reached. The tribunal's |
6 | decision shall, subject to law, grant the relief, invoke the |
7 | remedies and issue the orders as it deems appropriate to carry |
8 | out its decision. |
9 | (b) Failure to render decision.--If the tribunal fails to |
10 | render a decision within the prescribed time period, either |
11 | party may institute an action in mandamus to compel the issuance |
12 | of a decision. |
13 | (c) Precedent.--Except as provided in section 2816(k), the |
14 | tribunal's interpretation of a taxing statute subject to contest |
15 | in one case shall be followed by the tribunal in subsequent |
16 | cases involving the same statute, and its application of a |
17 | statute to the facts of one case shall be followed by the |
18 | tribunal in subsequent cases involving the same material facts |
19 | unless the tribunal's interpretation or application conflicts |
20 | with that of an appellate court or the tribunal provides |
21 | satisfactory reasons for reversing prior precedent, provided: |
22 | (1) It is necessarily involved and essential to the |
23 | determination of the case. |
24 | (2) There is a full consideration of the question by the |
25 | tribunal. |
26 | (3) The decision is a professed deliberate determination |
27 | of the question. |
28 | Section 2815. Proposed decision; review by panel. |
29 | (a) Proposed decision and order.--The presiding judge shall |
30 | issue a proposed decision and order, including proposed findings |
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1 | of fact and conclusions of law, within six months after |
2 | submission of the last brief filed subsequent to completion of |
3 | the hearing or, if briefs are not submitted, then no later than |
4 | six months after completion of the hearing. |
5 | (b) Final order; submission to panel.--The proposed decision |
6 | and order shall be subject to review by a panel of |
7 | administrative law judges assigned by the chief administrative |
8 | law judge upon the filing of exceptions pursuant to subsection |
9 | (c). The panel shall include the presiding judge that issued the |
10 | proposed decision and order. If no exceptions are filed, the |
11 | proposed decision and order shall become final, without further |
12 | action. |
13 | (c) Exceptions procedure.-- |
14 | (1) Within 15 days of the issuance of the proposed |
15 | decision and order, a party may file exceptions to the |
16 | proposed decision and order including: |
17 | (i) alternative proposed findings of fact or |
18 | conclusions of law, if appropriate; and |
19 | (ii) the supporting reasons for the exceptions and |
20 | any alternative proposed findings of fact or conclusions |
21 | of law. |
22 | (2) Within 30 days of the filing of exceptions to the |
23 | proposed decision and order, the panel shall either: |
24 | (i) issue an order adopting the proposed decision |
25 | and order as the final decision and order of the |
26 | tribunal; or |
27 | (ii) issue an alternative decision and order, |
28 | including findings of fact and conclusions of law, as the |
29 | final decision and order of the tribunal. |
30 | (d) Record.--The record shall show the ruling on each |
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1 | finding of fact, conclusion of law or exception presented. All |
2 | decisions and orders, including proposed decisions and orders, |
3 | are a part of the record and shall include a statement of: |
4 | (1) Findings and conclusions, and the reasons or basis |
5 | for the findings and conclusions, on all material issues of |
6 | fact, law or discretion presented on the record. |
7 | (2) The appropriate rule, order, relief or denial |
8 | thereof. |
9 | (e) Decision final.--A final decision and order shall |
10 | finally decide the matters in controversy unless any party to |
11 | the matter timely appeals the decision as provided for in |
12 | section 2817. |
13 | (f) Effect.--A final decision and order shall have the same |
14 | effect and shall be enforced in the same manner as a judgment of |
15 | any court of competent jurisdiction. |
16 | Section 2816. Small claims division. |
17 | (a) Establishment.--There is hereby established a small |
18 | claims division of the tribunal. |
19 | (b) Judge to preside.--An administrative law judge assigned |
20 | by the chief administrative law judge as provided in section |
21 | 2802 shall preside over proceedings within the jurisdiction of |
22 | the small claims division. |
23 | (c) Amounts in controversy.--If the taxpayer elects in its |
24 | petition for review filed pursuant to Article XXVII, the small |
25 | claims division shall have jurisdiction over any proceeding with |
26 | respect to any calendar year for which the net amount of the tax |
27 | deficiencies and claimed refunds in controversy does not exceed |
28 | $25,000, exclusive of interest and penalties. |
29 | (d) Jurisdiction.--If the taxpayer elects in its petition |
30 | for review filed pursuant to Article XXVII and the department |
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1 | agrees in its answer to the taxpayer's petition, the small |
2 | claims division shall have jurisdiction over any proceeding |
3 | regardless of the amount in controversy. |
4 | (e) Answer.--No later than 30 days after receipt of notice |
5 | that the taxpayer has filed a petition in proper form or at |
6 | other times as the tribunal may order, the department shall file |
7 | with the tribunal an answer similar to that required by section |
8 | 2807. |
9 | (f) Withdrawal.--At any time prior to entry of judgment, a |
10 | taxpayer may withdraw a proceeding in the small claims division |
11 | by notifying the chief clerk of the tribunal in writing. A |
12 | withdrawal shall be with prejudice and shall not have the effect |
13 | of revoking the election to proceed in the small claims |
14 | division. |
15 | (g) Hearings informal.--Hearings in the small claims |
16 | division shall be informal, and the judge may receive evidence |
17 | as the judge deems appropriate for determination of the case. |
18 | Testimony shall be given under oath or affirmation. |
19 | (h) Time frame.--The presiding judge shall issue a final |
20 | decision and order, including findings of fact and conclusions |
21 | of law, within 90 days after the closing of the record. |
22 | (i) Record.--The record shall show the ruling on each |
23 | finding of fact and conclusion of law. All decisions and orders |
24 | are a part of the record and shall include a statement of: |
25 | (1) Findings and conclusions, and the reasons or basis |
26 | for the findings and conclusions, on all material issues of |
27 | fact, law or discretion presented on the record. |
28 | (2) The appropriate rule, order, relief or denial |
29 | thereof. |
30 | (j) Decision final.--A final decision and order of the small |
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1 | claims division shall be conclusive upon all parties and may not |
2 | be appealed. A decision and order of the small claims division |
3 | shall not be considered as precedent in any other case, hearing |
4 | or proceeding. |
5 | (k) Inapplicability.--Sections 2815, 2818, 2819 and this |
6 | section shall not apply to proceedings in the small claims |
7 | division. |
8 | Section 2817. Appeals. |
9 | (a) Individual review.--The taxpayer or the department shall |
10 | be entitled to judicial review of a final decision of the |
11 | tribunal, except a final decision of the small claims division, |
12 | in accordance with Pa.R.A.P. Ch. 15 (relating to judicial review |
13 | of governmental determinations). |
14 | (b) Review of interlocutory decision.--The taxpayer or the |
15 | department may obtain judicial review of an interlocutory |
16 | decision of the tribunal by filing a petition as provided in |
17 | Pa.R.A.P. Ch. 13 (relating to interlocutory appeals by |
18 | petition). |
19 | (c) Record.--The record on judicial review shall include the |
20 | decision and order of the tribunal, the stenographic transcript |
21 | of the hearing before the tribunal, the pleadings, exhibits, |
22 | documents and other items admitted into evidence. |
23 | Section 2818. Representation. |
24 | (a) Taxpayer.--Appearances in proceedings conducted by the |
25 | tribunal may be by the taxpayer or by an attorney admitted to |
26 | practice in this Commonwealth. Parties may also be represented |
27 | by an attorney who is a member of or is employed by an |
28 | accounting or other professional services firm, by an accountant |
29 | licensed in this Commonwealth or by an enrolled agent authorized |
30 | to practice before the Internal Revenue Service provided the |
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1 | representation does not constitute the unauthorized practice of |
2 | law as determined by the Supreme Court of this Commonwealth. |
3 | (b) Department.--The department shall be represented by its |
4 | authorized representative in all proceedings before the |
5 | tribunal. |
6 | Section 2819. Publication of decisions. |
7 | Except for decisions issued by the small claims division, the |
8 | chief clerk shall cause the final decisions of the tribunal to |
9 | be indexed and published in print or electronic format as it |
10 | deems best adapted for public convenience. Publications shall be |
11 | made permanently available and constitute the official reports |
12 | of the tribunal. |
13 | Section 2820. Service of process. |
14 | (a) Personal service.--The mailing by first class mail, |
15 | postage prepaid, to the address of the taxpayer, as given on the |
16 | taxpayer's petition, or to the address of the taxpayer's |
17 | representative of record, if any, or to the usual place of |
18 | business of the department, or its representative of record, |
19 | shall constitute personal service on the other party. The |
20 | tribunal may by rule prescribe that notice by other means shall |
21 | constitute personal service and may in any individual case order |
22 | that notice be given to additional persons or by other means. |
23 | (b) Date.--Mailing by registered or certified mail and |
24 | delivery by a private delivery service approved by the Internal |
25 | Revenue Service in accordance with section 7502(f) of the |
26 | Internal Revenue Code of 1986 (Public Law 99-514, 26 U.S.C. § |
27 | 7502(f)), of any pleading, decision, order, notice or other |
28 | document in respect to proceedings before the tribunal shall be |
29 | deemed to have occurred on the date of mailing or the date of |
30 | submission to the private delivery service. |
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1 | Section 2821. Code of ethics. |
2 | (a) General rule.--The administrative law judges and the |
3 | officers and employees of the tribunal shall conform to the |
4 | following code of ethics. An administrative law judge, officer |
5 | or employee of the tribunal must: |
6 | (1) Avoid impropriety and the appearance of impropriety |
7 | in all activities. |
8 | (2) Perform all duties impartially and diligently. |
9 | (3) Not participate in any ex parte communications |
10 | regarding matters before the tribunal. |
11 | (4) Abstain publicly from expressing, other than in |
12 | public session, personal views on the merits of a matter |
13 | pending before the tribunal. |
14 | (5) Observe the standards of fidelity and diligence that |
15 | apply to the position of judge, office or employee. |
16 | (6) Disqualify himself from proceedings in which |
17 | impartiality might be reasonably questioned. |
18 | (7) Regulate extracurricular activities to minimize the |
19 | risk of conflict with official duties. An administrative law |
20 | judge, officer or employee of the tribunal may speak, write |
21 | or lecture, and any reimbursed expenses, honoraria, royalties |
22 | or other money received in connection therewith shall be |
23 | disclosed annually. Disclosure statements shall be filed with |
24 | the executive administrator of the tribunal and shall be open |
25 | to public inspection during the normal business hours of the |
26 | tribunal during the tenure of the administrative law judge, |
27 | officer or employee. |
28 | (8) Conform to additional rules as the tribunal may |
29 | prescribe. |
30 | (b) Ex parte communications.--Ex parte communications |
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1 | prohibited in this section shall mean any off-the-record |
2 | communications to or by any administrative law judge, officer or |
3 | employee of the tribunal regarding the merits or any fact in |
4 | issue of any matter pending before the tribunal. |
5 | (c) Removal for violation.--An administrative law judge, |
6 | officer or employee of the tribunal who violates the provisions |
7 | of subsection (a) shall be subject to removal from office after |
8 | notice and an opportunity to be heard. |
9 | (d) Construction.-- Nothing in this act shall be interpreted |
10 | to prohibit the administrative law judges, officers and |
11 | employees of the tribunal from serving in the Pennsylvania |
12 | National Guard and the reserves of the armed forces of the |
13 | United States while appointed to or employed by the tribunal. |
14 | Section 2822. Rules and forms. |
15 | The tribunal is authorized to promulgate and adopt all |
16 | reasonable regulations and forms as necessary or appropriate to |
17 | carry out the intent and purposes of this article. |
18 | Section 2823. Application of rules of administrative practice |
19 | and procedure. |
20 | Except where inconsistent with this article and the |
21 | regulations adopted by the tribunal, all actions and proceedings |
22 | before the tribunal are subject to 2 Pa.C.S. Ch. 5 Subch. A |
23 | (relating to practice and procedure of Commonwealth agencies) |
24 | and Ch. 7 Subch. A (relating to judicial review of Commonwealth |
25 | agency action) and 1 Pa. Code Pt. II (relating to general rules |
26 | of administrative practice and procedure). |
27 | Section 8. This act shall take effect immediately. |
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