THE GENERAL ASSEMBLY OF PENNSYLVANIA

HOUSE BILL

INTRODUCED BY PEIFER, SAYLOR, SONNEY, FARRY, DENLINGER, S. H. SMITH, TURZAI, BAKER, BISHOP, BOBACK, BOYD, BROOKS, CALTAGIRONE, CARROLL, CAUSER, CLYMER, DAY, GEIST, GIBBONS, GINGRICH, GOODMAN, GRELL, GROVE, HANNA, HELM, HICKERNELL, HUTCHINSON, MAJOR, MILLARD, MILLER, MOUL, MUSTIO, OBERLANDER, O'NEILL, PAYTON, PHILLIPS, PICKETT, PYLE, QUINN, RAPP, REICHLEY, ROSS, SANTONI, SCAVELLO, SIPTROTH, K. SMITH, STERN, STEVENSON, SWANGER AND VULAKOVICH, JUNE 1, 2010

REFERRED TO COMMITTEE ON FINANCE, JUNE 1, 2010  

AN ACT

Amending the act of March 4, 1971 (P.L.6, No.2), entitled "An

act relating to tax reform and State taxation by codifying

and enumerating certain subjects of taxation and imposing

taxes thereon; providing procedures for the payment,

collection, administration and enforcement thereof; providing

for tax credits in certain cases; conferring powers and

imposing duties upon the Department of Revenue, certain

employers, fiduciaries, individuals, persons, corporations

and other entities; prescribing crimes, offenses and

penalties," reenacting and amending provisions relating to

employment incentive payments.

The General Assembly of the Commonwealth of Pennsylvania

hereby enacts as follows:

Section 1.  Section 1702-A of the act of March 4, 1971

(P.L.6, No.2), known as the Tax Reform Code of 1971, added

December 15, 1999 (P.L.926, No.63), is reenacted and amended to

read:

Section 1702-A.  Definitions.--The following words, terms and

phrases when used in this article shall have the meanings

ascribed to them in this section, except where the context

clearly indicates a different meaning:

"Department."  The Department of Revenue of the Commonwealth.

"Eligible individual" means any of the following:

(1)  A person who at any time within the twelve months

preceding the date of hire received general assistance.

(2)  A person who at any time within the twelve months

preceding the date of hire received temporary assistance to

needy families.

(3)  A person who:

(i)  has a physical or mental disability which, for such

individual, constitutes or results in a substantial handicap to

employment; and

(ii)  is referred to the employer upon completion of or while

receiving rehabilitative services pursuant to an individualized

written rehabilitation plan under a State plan for vocational

rehabilitation services approved under the Rehabilitation Act of

1973 (Public Law 93-112, 29 U.S.C. § 701 et seq.), or a program

of vocational rehabilitation carried out under Title I of the

Veterans' Rehabilitation and Education Amendments of 1980

(Public Law 96-466, 94 Stat. 2171).

(4)  A person who at any time within the twelve months

preceding the date of hire received compensation under the act

of December 5, 1936 (2nd Sp.Sess., 1937 P.L.2897, No.1), known

as the "Unemployment Compensation Law."

"Employment incentive payment" means the employment incentive

payment credit provided by this article.

"Pass-through entity" means any of the following:

(1)  A partnership, limited partnership, limited liability

company, business trust or other unincorporated entity that for

Federal income tax purposes is taxable as a partnership.

(2)  A Pennsylvania S corporation.

"Qualified first-year wages" means the qualified wages

attributable to service rendered by an eligible individual

during the one-year period beginning with the day the eligible

individual begins work for the employer.

"Qualified second-year wages" means the qualified wages

attributable to service rendered by an eligible individual

during the one-year period beginning one year after the eligible

individual begins work for the employer.

"Qualified tax liability" means the liability for taxes

imposed under Article III, IV, VII, VIII, IX or XV of this act.

The term includes the liability for taxes imposed under Article

III of this act on the owner or owners of a pass-through entity.

The term does not include amounts withheld or required to be

withheld from employees under Article III of this act.

"Qualified third-year wages" means the qualified wages

attributable to service rendered by an eligible individual

during the one-year period beginning two years after the

eligible individual begins work for the employer.

"Qualified wages" means wages as that term is defined in

section 51A(b)(5) of the Internal Revenue Code of 1986 (Public

Law 99-514, 26 U.S.C. § 51A(b)(5)).

"Taxpayer" means a person or entity subject to tax under

Article III, IV, VII, VIII, IX or XV of this act. This term

includes a pass-through entity.

Section 2.  Sections 1703-A, 1704-A and 1705-A of the act,

added December 15, 1999 (P.L.926, No.63), are reenacted to read:

Section 1703-A.  Employment Incentive Payments.--(a)  A

taxpayer who employs an eligible individual shall be entitled to

employment incentive payments as provided by this article.

(b)  No employment incentive payment shall be provided for:

(1)  The employment of a person who displaces any other

individual from employment except persons discharged for cause

as certified by the Department of Labor and Industry.

(2)  The employment of a person closely related, as defined

by clauses (1) through (8) of section 152(a) of the Internal

Revenue Code of 1986 (Public Law 99-514, 26 U.S.C. § 152(a)(1)

through(8)), to the taxpayer or, if the taxpayer is a

corporation, to an individual who owns, directly or indirectly,

more than 50% of the outstanding stock of the taxpayer.

(3)  Wages paid to an individual during the time period for

which the employer received federally funded or State funded job

training payments for that individual.

(c)  The employment incentive payment shall be calculated on

an annual basis as provided in clauses (1) and (2):

(1)  The employment incentive payment shall be the sum of

thirty per cent of the first nine thousand dollars ($9,000) of

qualified first-year wages, twenty per cent of the first nine

thousand dollars ($9,000) of qualified second-year wages and ten

per cent of the first nine thousand dollars ($9,000) of

qualified third-year wages.

(2)  A taxpayer eligible to receive a credit under clause (1)

shall be eligible to receive an additional employment incentive

payment as provided in this clause if:

(i)  the taxpayer provides or pays for day care services for

the children of an eligible individual; or

(ii)  the taxpayer provides or pays for transportation

services that enable an eligible individual to travel to and

from work.

The additional employment incentive payments under this clause

shall be the expenses incurred by the taxpayer for services

listed in subclauses (i) and (ii), but in no case shall the

additional employment incentive payment for each eligible

individual exceed eight hundred dollars ($800) during the first

year of employment, six hundred dollars ($600) during the second

year of employment or four hundred dollars ($400) during the

third year of employment.

(d)  The employment incentive payment shall be utilized as a

credit against a qualified tax liability to which the taxpayer

is subject. The employment incentive payment applicable to a

pass-through entity shall be allocated in the same manner as

income is allocated.

(e)  (1)  Except in cases where an eligible individual

voluntarily leaves the employment of the taxpayer, becomes

disabled or is terminated for cause, no taxpayer shall be

entitled to receive an employment incentive payment if the

eligible individual is employed by the taxpayer for less than

one year.

(2)  If the eligible individual leaves the employment of the

taxpayer voluntarily, becomes disabled or is terminated for

cause in less than one year, the employment incentive payment

shall be reduced by the proportion of the year not worked.

(f)  The total employment incentive payment credit shall not

exceed ninety per cent of the total taxes paid by the employer

against which the employment incentive payments may be claimed

as a credit.

(g)  Employment incentive payments unused as a tax credit in

a taxable year may be carried over against a qualified tax

liability in the ten immediately subsequent taxable years.

(h)  For the purposes of computing a tax liability against

which the employment incentive payments may be applied,

deductions from taxable income shall be reduced by the

employment incentive payments.

Section 1704-A.  Administration and Regulations.--The

department, in cooperation with the Department of Public Welfare

and the Department of Labor and Industry, shall administer the

provisions of this article, promulgate appropriate rules,

regulations and forms for that purpose and make such

determinations as may be required. Determinations made with

respect to the employment incentive payment provided in this

section may be reviewed and appealed in the manner provided by

law for other corporate or personal tax credits.

Section 1705-A.  Limitation on Credits.--The total amount of

employment incentive payments authorized by this article shall

not exceed [twenty-five] seven million dollars [($25,000,000)]

($7,000,000) in any fiscal year. To insure that credits are not

claimed in excess of this amount, a taxpayer may claim the

incentive payments only upon presentation of an authorizing

certificate. Certificates will be issued to the taxpayer by the

Department of Labor and Industry upon presentation to the

Department of Labor and Industry of evidence of a qualifying

offer of employment. If necessary to avoid certificate issuances

in excess of the maximum authorized amount for any fiscal year,

the department shall advise the Department of Labor and Industry

of the total number of certificates which may be issued in each

calendar quarter.

Section 3.  Section 1706-A of the act, amended November 19,

2004 (P.L.873, No.116), is reenacted and amended to read:

Section 1706-A.  Time Limitations and Report.--Employment

incentive payments shall not be available for employees hired

after December 31, [2009, unless reenacted by the General

Assembly] 2012. Not later than July 1, [2004, and December 31,

2008] 2011, the Secretary of Public Welfare and the Secretary of

Labor and Industry shall report to the General Assembly on the

effectiveness of incentive payments to encourage the employment

of general assistance [and], temporary assistance to needy

families and unemployment compensation recipients and recommend

whether the program should be continued. Credits may be claimed

against taxes payable for tax years beginning January 1, 2000,

and thereafter, and may be claimed for employees hired after

December 31, 1999.

Section 4.  The reenactment and amendment of sections 1702-A,

1703-A, 1704-A, 1705-A and 1706-A of the act shall be

retroactive to January 1, 2010.

Section 5.  This act shall take effect immediately.