Bill Text: PA HB440 | 2013-2014 | Regular Session | Introduced

NOTE: There are more recent revisions of this legislation. Read Latest Draft

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Bill Title: In sales tax, further providing for definitions, for credit against tax and for local receivers of use tax; in personal income tax, further providing for definitions, for classes of income and for taxability of partners; providing for tax treatment determined at partnership level and for tax imposed at partnership level; further providing for income of a Pennsylvania S corporation, for income taxes imposed by other states, for general rule, for return of Pennsylvania S corporation and for requirements concerning returns, notices, records and statements; in corporate net income tax, further providing for definitions, for imposition of tax and for reports and payment of tax; and, in realty transfer tax, further providing for definitions, for imposition and for acquired company; further providing for coal waste removal and ultraclean fuels tax credit; and, in inheritance tax, further providing for exemption for poverty.

Spectrum: Strong Partisan Bill (Republican 49-4)

Status: (Engrossed - Dead) 2013-07-03 - Laid on the table [HB440 Detail]

Download: Pennsylvania-2013-HB440-Introduced.html

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PRINTER'S NO. 497

 

THE GENERAL ASSEMBLY OF PENNSYLVANIA

 

HOUSE BILL

No.

440

Session of 2013

 

 

 

INTRODUCED BY REED, BAKER, BLOOM, KOTIK, NEUMAN, LUCAS, SAYLOR, AUMENT, MILLARD, MICOZZIE, TALLMAN, PICKETT, SCHLEGEL CULVER, STEPHENS, MUSTIO, DAVIS, O'NEILL, M. K. KELLER, VEREB, CUTLER, FLECK, DUNBAR, C. HARRIS, MACKENZIE, KNOWLES, SIMMONS, OBERLANDER, CLYMER, SWANGER, HAHN, HESS, PETRI, HENNESSEY, MASSER, MAJOR, HEFFLEY, HICKERNELL, BENNINGHOFF, ROCK, GROVE, ROSS, GINGRICH, WATSON, MARSICO, GRELL, EVERETT, S. H. SMITH, MOUL, GILLEN, REESE, QUINN AND SABATINA, FEBRUARY 4, 2013

 

 

REFERRED TO COMMITEE ON FINANCE, FEBRUARY 4, 2013

 

 

 

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," in corporate net income, further providing for
definitions and for imposition of tax.

The General Assembly of the Commonwealth of Pennsylvania
hereby enacts as follows:

Section 1. Section 401(3)4(c) of the act of March 4, 1971
(P.L.6, No.2), known as the Tax Reform Code of 1971, amended
October 9, 2009 (P.L.451, No.48), is amended, clause (3)1 is
amended by adding a phrase and the section is amended by adding
clauses to read:

Section 401. Definitions.--The following words, terms, and

phrases, when used in this article, shall have the meaning
ascribed to them in this section, except where the context
clearly indicates a different meaning:

* * *

(3) "Taxable income." 1. * * *

(t) (1) Except as provided in paragraph (2), (3) or (4) for
taxable years beginning after December 31, 2013, no deduction
shall be allowed for an intangible expense or cost, or an
interest expense or cost, paid, accrued or incurred directly or
indirectly in connection with one or more transactions with an
affiliated entity. In calculating taxable income under this
paragraph, when the taxpayer is engaged in one or more
transactions with an affiliated entity that was subject to tax
in this Commonwealth or another state or possession of the
United States on a tax base that included the intangible expense
or cost, or the interest expense or cost, paid, accrued or
incurred by the taxpayer, the taxpayer shall receive a credit
against tax due in this Commonwealth in an amount equal to the
apportionment factor of the taxpayer in this Commonwealth
multiplied by the greater of the following:

(A) the tax liability of the affiliated entity with respect
to the portion of its income representing the intangible expense
or cost, or the interest expense or cost, paid, accrued or
incurred by the taxpayer; or

(B) the tax liability that would have been paid by the
affiliated entity under subparagraph (A) if that tax liability
had not been offset by a credit.

The credit issued under this paragraph shall not exceed the
taxpayer's liability in this Commonwealth attributable to the
net income taxed as a result of the adjustment required by this

paragraph.

(2) The adjustment required by paragraph (1) shall not apply
to a transaction that was directly related to a valid business
purpose.

(3) The adjustment required by paragraph (1) shall not apply
to a transaction between a taxpayer and an affiliated entity
domiciled in a foreign nation which has in force a comprehensive
income tax treaty with the United States providing for the
allocation of all categories of income subject to taxation, or
the withholding of tax, on royalties, licenses, fees and
interest for the prevention of double taxation of the respective
nations' residents and the sharing of information.

(4) The adjustment required by paragraph (1) shall not apply 
to a transaction where an affiliated entity directly or 
indirectly paid, accrued or incurred a payment to a person who 
is not an affiliated entity, if the payment is paid, accrued or 
incurred on the intangible expense or cost, or interest expense 
or cost, and is equal to or less than the taxpayer's 
proportional share of the transaction. The taxpayer's 
proportional share shall be based on relative sales, assets, 
liabilities or another reasonable method.

* * *

4. * * *

(c) (1) The net loss deduction shall be the lesser of:

(A) (I) For taxable years beginning before January 1, 2007,
two million dollars ($2,000,000);

(II) For taxable years beginning after December 31, 2006,
the greater of twelve and one-half per cent of taxable income as
determined under subclause 1 or, if applicable, subclause 2 or
three million dollars ($3,000,000);

(III) For taxable years beginning after December 31, 2008,
the greater of fifteen per cent of taxable income as determined
under subclause 1 or, if applicable, subclause 2 or three
million dollars ($3,000,000);

(IV) For taxable years beginning after December 31, 2009,
the greater of twenty per cent of taxable income as determined
under subclause 1 or, if applicable, subclause 2 or three
million dollars ($3,000,000); [or]

(V) For taxable years beginning after December 31, 2014, the 
greater of twenty-nine per cent of taxable income as determined 
under subclause 1 or, if applicable, subclause 2 or four million 
dollars ($4,000,000);

(VI) For taxable years beginning after December 31, 2015, 
the greater of thirty-eight per cent of taxable income as 
determined under subclause 1 or, if applicable, subclause 2 or 
five million dollars ($5,000,000);

(VII) For taxable years beginning after December 31, 2016, 
the greater of forty-seven per cent of taxable income as 
determined under subclause 1 or, if applicable, subclause 2 or 
six million dollars ($6,000,000);

(VIII) For taxable years beginning after December 31, 2017, 
the greater of fifty-six per cent of taxable income as 
determined under subclause 1 or, if applicable, subclause 2 or 
seven million dollars ($7,000,000);

(IX) For taxable years beginning after December 31, 2018, 
the greater of sixty-four per cent of taxable income as 
determined under subclause 1 or, if applicable, subclause 2 or 
eight million dollars ($8,000,000);

(X) For taxable years beginning after December 31, 2019, the 
greater of seventy-three per cent of taxable income as 

determined under subclause 1 or, if applicable, subclause 2 or 
nine million dollars ($9,000,000);

(XI) For taxable years beginning after December 31, 2020, 
the greater of eighty-two per cent of taxable income as 
determined under subclause 1 or, if applicable, subclause 2 or 
ten million dollars ($10,000,000);

(XII) For taxable years beginning after December 31, 2021, 
the greater of ninety-one per cent of taxable income as 
determined under subclause 1 or, if applicable, subclause 2 or 
eleven million dollars ($11,000,000);

(XIII) For taxable years beginning after December 31, 2022,
taxable income as determined under subclause 1 or, if
applicable, subclause 2; or

(B) The amount of the net loss or losses which may be
carried over to the taxable year or taxable income as determined
under subclause 1 or, if applicable, subclause 2.

(1.1) In no event shall the net loss deduction include more
than five hundred thousand dollars ($500,000), in the aggregate,
of net losses from taxable years 1988 through 1994.

(2) (A) A net loss for a taxable year may only be carried
over pursuant to the following schedule:

Taxable Year	Carryover
1981	1 taxable year
1982	2 taxable years
1983-1987	3 taxable years
1988	2 taxable years plus 1 taxable year starting with the 1995 taxable year
1989	1 taxable year plus 2 taxable years starting with the 1995 taxable year
1990-1993	3 taxable years starting with the 1995 taxable year
1994	1 taxable year
1995-1997	10 taxable years
1998 and thereafter	20 taxable years

(B) The earliest net loss shall be carried over to the
earliest taxable year to which it may be carried under this
schedule. The total net loss deduction allowed in any taxable
year shall not exceed:

(I) Two million dollars ($2,000,000) for taxable years
beginning before January 1, 2007.

(II) The greater of twelve and one-half per cent of the
taxable income as determined under subclause 1 or, if
applicable, subclause 2 or three million dollars ($3,000,000)
for taxable years beginning after December 31, 2006.

(III) The greater of fifteen per cent of the taxable income
as determined under subclause 1 or, if applicable, subclause 2
or three million dollars ($3,000,000) for taxable years
beginning after December 31, 2008.

(IV) The greater of twenty per cent of the taxable income as
determined under subclause 1 or, if applicable, subclause 2 or
three million dollars ($3,000,000) for taxable years beginning
after December 31, 2009.

(V) The greater of twenty-nine per cent of taxable income as 
determined under subclause 1 or, if applicable, subclause 2 or 
four million dollars ($4,000,000) for taxable years beginning 

after December 31, 2014.

(VI) The greater of thirty-eight per cent of taxable income 
as determined under subclause 1 or, if applicable, subclause 2 
or five million dollars ($5,000,000) for taxable years beginning 
after December 31, 2015.

(VII) The greater of forty-seven per cent of taxable income 
as determined under subclause 1 or, if applicable, subclause 2 
or six million dollars ($6,000,000) for taxable years beginning 
after December 31, 2016.

(VIII) The greater of fifty-six per cent of taxable income 
as determined under subclause 1 or, if applicable, subclause 2 
or seven million dollars ($7,000,000) for taxable years 
beginning after December 31, 2017.

(IX) The greater of sixty-four per cent of taxable income as 
determined under subclause 1 or, if applicable, subclause 2 or 
eight million dollars ($8,000,000) for taxable years beginning 
after December 31, 2018.

(X) The greater of seventy-three per cent of taxable income 
as determined under subclause 1 or, if applicable, subclause 2 
or nine million dollars ($9,000,000) for taxable years beginning 
after December 31, 2019.

(XI) The greater of eighty-two per cent of taxable income as 
determined under subclause 1 or, if applicable, subclause 2 or 
ten million dollars ($10,000,000) for taxable years beginning 
after December 31, 2020.

(XII) The greater of ninety-one per cent of taxable income 
as determined under subclause 1 or, if applicable, subclause 2 
or eleven million dollars ($11,000,000) for taxable years 
beginning after December 31, 2021.

(XIII) For taxable years beginning after December 31, 2022,

taxable income as determined under subclause 1 or, if
applicable, subclause 2.

* * *

(8) "Intangible expense or cost." Royalties, licenses or
fees paid for the acquisition, use, maintenance, management,
ownership, sale, exchange or other disposition of patents,
patent applications, trade names, trademarks, service marks,
copyrights, mask works or other similar expenses or costs.

(9) "Interest expense or cost." A deduction allowed under
section 163 of the Internal Revenue Code of 1986 (26 U.S.C. §
163) to the extent that such deduction is directly related to an
intangible expense or cost.

(10) "Affiliated entity." A person with a relationship to 
the taxpayer during all or any portion of the taxable year that 
is any of the following:

(i) a stockholder who is an individual, or a member of the 
stockholder's family as set forth in section 318 of the Internal 
Revenue Code of 1986 (26 U.S.C. § 318), if the stockholder and 
the members of the stockholder's family own, directly, 
indirectly, beneficially or constructively, in the aggregate, 
more than fifty per cent of the value of the taxpayer's 
outstanding stock;

(ii) a stockholder, or a stockholder's partnership, limited 
liability company, estate, trust or corporation, if the 
stockholder and the stockholder's partnerships, limited 
liability companies, estates, trusts and corporations own 
directly, indirectly, beneficially or constructively, in the 
aggregate, more than fifty per cent of the value of the 
taxpayer's outstanding stock;

(iii) a corporation, or a party related to the corporation 

in a manner that would require an attribution of stock from the 
corporation to the party or from the party to the corporation 
under the attribution rules of the Internal Revenue Code of 
1986, if the taxpayer owns, directly, indirectly, beneficially 
or constructively, more than fifty per cent of the value of the 
corporation's outstanding stock. The attribution rules of 
section 318 of the Internal Revenue Code of 1986 shall apply for 
purposes of determining whether the ownership requirements of 
this definition have been met;

(iv) a component member as defined in section 1563(b) of the
Internal Revenue Code of 1986 (26 U.S.C. § 1563(b)); or

(v) a person to or from whom there is attribution of stock
ownership in accordance with section 1563(e) of the Internal
Revenue Code of 1986.

(11) "Valid business purpose." A purpose, other than the 
avoidance or reduction of taxation, which alone or in 
combination with other purposes constitute the primary 
motivation for a business activity or transaction. A transaction 
done at arm's length terms shall be presumed to be directly 
related to a valid business purpose.

Section 2. Section 402(b) of the act, amended June 29, 2002 
(P.L.559, No.89), is amended to read:

Section 402. Imposition of Tax.--* * *

(b) The annual rate of tax on corporate net income imposed
by subsection (a) for taxable years beginning for the calendar
year or fiscal year on or after the dates set forth shall be as
follows:

Taxable Year	Tax Rate
[January 1, 1995, and each taxable year thereafter	9.99%]
January 1, 1995, and each taxable year through December 31, 2013	9.99%
January 1, 2014, through December 31, 2014	9.75%
January 1, 2015, through December 31, 2015	9.25%
January 1, 2016, through December 31, 2016	8.75%
January 1, 2017, through December 31, 2017	8.25%
January 1, 2018, through December 31, 2018	7.75%
January 1, 2019, and each taxable year thereafter	6.99%

* * *

Section 3. This act shall take effect immediately.