Bill Text: PA SB1069 | 2009-2010 | Regular Session | Introduced

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Bill Title: In corporate net income tax, further providing for definitions, for imposition, for reports and payment and for consolidated reports; and in general provisions, further providing for underpayment of estimated tax.

Sponsorship: Partisan Bill (Democrat 13)

Status: (Introduced - Dead) 2009-08-07 - Referred to FINANCE [SB1069 Detail]

Download: Pennsylvania-2009-SB1069-Introduced.html

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PRINTER'S NO. 1371
THE GENERAL ASSEMBLY OF PENNSYLVANIA
SENATE BILL
No. 1069 Session of2009
INTRODUCED BY MELLOW, COSTA, TARTAGLIONE, LOGAN, O'PAKE, KASUNIC, HUGHES, WASHINGTON, KITCHEN, FONTANA, STACK, MUSTO AND STOUT, AUGUST 7, 2009
REFERRED TO FINANCE, AUGUST 7, 2009
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 tax, further providing
for definitions, for imposition, for reports and payment and
for consolidated reports; and in general provisions, further
providing for underpayment of estimated tax.
The General Assembly of the Commonwealth of Pennsylvania
hereby enacts as follows:
Section 1. Section 401(3)1(a) and (b) and 2(a) and (5) of
the act of March 4, 1971 (P.L.6, No.2), known as the Tax Reform
Code of 1971, amended or added December 23, 1983 (P.L.370,
No.90), July 1, 1985 (P.L.78, No.29), August 4, 1991 (P.L.97,
No.22), May 12, 1999 (P.L.26, No.4), June 22, 2001 (P.L.353,
No.23), June 29, 2002 (P.L.559, No.89) and July 12, 2006
(P.L.1137, No.116) are amended, clause (3)2 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. (a) In case the entire business
of the corporation is transacted within this Commonwealth, for
any taxable year which begins on or after January 1, 1971,
taxable income for the calendar year or fiscal year as returned
to and ascertained by the Federal Government, or in the case of
a corporation participating in the filing of consolidated
returns to the Federal Government or that is not required to
file a return with the Federal Government, the taxable income
which would have been returned to and ascertained by the Federal
Government if separate returns had been made to the Federal
Government for the current and prior taxable years, subject,
however, to any correction thereof, for fraud, evasion, or error
as finally ascertained by the Federal Government.
(b) Additional deductions shall be allowed from taxable
income on account of any dividends received from any other
corporation but only to the extent that such dividends are
included in taxable income as returned to and ascertained by the
Federal Government. For tax years beginning on or after January
1, 1991, additional deductions shall only be allowed for amounts
included, under section 78 of the Internal Revenue Code of 1986
(Public Law 99-514, 26 U.S.C. § 78), in taxable income returned
to and ascertained by the Federal Government and for the amount
of any dividends received from a foreign corporation included in
taxable income to the extent such dividends would be deductible
in arriving at Federal taxable income if received from a
20090SB1069PN1371 - 2 -
domestic corporation. For taxable years beginning on or after
January 1, 2010, if not otherwise allowed as a deduction, an
additional deduction is allowed for all dividends paid by one to
another of the included corporations of a unitary business to
the extent those dividends are included in business income of a
corporation that is required to determine its business income
pursuant to paragraph (1) of phrase (e) of subclause (2).
* * *
2. In case the entire business of any corporation, other
than a corporation engaged in doing business as a regulated
investment company as defined by the Internal Revenue Code of
1986, is not transacted within this Commonwealth, the tax
imposed by this article shall be based upon such portion of the
taxable income of such corporation for the fiscal or calendar
year, as defined in subclause 1 hereof, and may be determined as
follows:
(a) Division of Income.
(1) As used in this definition, unless the context otherwise
requires:
(A) "Business income" means income arising from transactions
and activity in the regular course of the taxpayer's trade or
business and includes income from tangible and intangible
property if either the acquisition, the management or the
disposition of the property constitutes an integral part of the
taxpayer's regular trade or business operations. The term
includes all income which is apportionable under the
Constitution of the United States.
(B) "Commercial domicile" means the principal place from
which the trade or business of the taxpayer is directed or
managed.
20090SB1069PN1371 - 3 -
(C) "Compensation" means wages, salaries, commissions and
any other form of remuneration paid to employes for personal
services.
(D) "Nonbusiness income" means all income other than
business income. The term does not include income which is
apportionable under the Constitution of the United States.
(E) "Sales" means all gross receipts of the taxpayer not
allocated under this definition other than dividends received,
interest on United States, state or political subdivision
obligations and gross receipts heretofore or hereafter received
from the sale, redemption, maturity or exchange of securities,
except those held by the taxpayer primarily for sale to
customers in the ordinary course of its trade or business.
(F) "State" means any state of the United States, the
District of Columbia, the Commonwealth of Puerto Rico, any
territory or possession of the United States, and any foreign
country or political subdivision thereof.
(G) "This state" means the Commonwealth of Pennsylvania or,
in the case of application of this definition to the
apportionment and allocation of income for local tax purposes,
the subdivision or local taxing district in which the relevant
tax return is filed.
(2) Any taxpayer having income from business activity which
is taxable both within and without this State other than
activity as a corporation whose allocation and apportionment of
income is specifically provided for in section 401(3)2(b)(c) and
(d) shall allocate and apportion taxable income as provided in
this definition.
(3) For purposes of allocation and apportionment of income
under this definition, a taxpayer is taxable in another state if
20090SB1069PN1371 - 4 -
in that state the taxpayer is subject to a net income tax, a
franchise tax measured by net income, a franchise tax for the
privilege of doing business, or a corporate stock tax or if that
state has jurisdiction to subject the taxpayer to a net income
tax regardless of whether, in fact, the state does or does not.
(4) Rents and royalties from real or tangible personal
property, gains, interest, patent or copyright royalties, to the
extent that they constitute nonbusiness income, shall be
allocated as provided in paragraphs (5) through (8).
(5) (A) Net rents and royalties from real property located
in this State are allocable to this State.
(B) Net rents and royalties from tangible personal property
are allocable to this State if and to the extent that the
property is utilized in this State, or in their entirety if the
taxpayer's commercial domicile is in this State and the taxpayer
is not organized under the laws of or taxable in the state in
which the property is utilized.
(C) The extent of utilization of tangible personal property
in a state is determined by multiplying the rents and royalties
by a fraction, the numerator of which is the number of days of
physical location of the property in the state during the rental
or royalty period in the taxable year and the denominator of
which is the number of days of physical location of the property
everywhere during all rental or royalty periods in the taxable
year. If the physical location of the property during the rental
or royalty period is unknown or unascertainable by the taxpayer,
tangible personal property is utilized in the state in which the
property was located at the time the rental or royalty payer
obtained possession.
(6) (A) Gains and losses from sales or other disposition of
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real property located in this State are allocable to this State.
(B) Gains and losses from sales or other disposition of
tangible personal property are allocable to this State if the
property had a situs in this State at the time of the sale, or
the taxpayer's commercial domicile is in this State and the
taxpayer is not taxable in the state in which the property had a
situs.
(C) Gains and losses from sales or other disposition of
intangible personal property are allocable to this State if the
taxpayer's commercial domicile is in this State.
(7) Interest is allocable to this State if the taxpayer's
commercial domicile is in this State.
(8) (A) Patent and copyright royalties are allocable to
this State if and to the extent that the patent or copyright is
utilized by the payer in this State, or if and to the extent
that the patent copyright is utilized by the payer in a state in
which the taxpayer is not taxable and the taxpayer's commercial
domicile is in this State.
(B) A patent is utilized in a state to the extent that it is
employed in production, fabrication, manufacturing, or other
processing in the state or to the extent that a patented product
is produced in the state. If the basis of receipts from patent
royalties does not permit allocation to states or if the
accounting procedures do not reflect states of utilization, the
patent is utilized in the state in which the taxpayer's
commercial domicile is located.
(C) A copyright is utilized in a state to the extent that
printing or other publication originates in the state. If the
basis of receipts from copyright royalties does not permit
allocation to states or if the accounting procedures do not
20090SB1069PN1371 - 6 -
reflect states of utilization, the copyright is utilized in the
state in which the taxpayer's commercial domicile is located.
(9) (A) Except as provided in subparagraph (B):
(i) For taxable years beginning before January 1, 2007, all
business income shall be apportioned to this State by
multiplying the income by a fraction, the numerator of which is
the property factor plus the payroll factor plus three times the
sales factor and the denominator of which is five.
(ii) For taxable years beginning after December 31, 2006,
all business income shall be apportioned to this State by
multiplying the income by a fraction, the numerator of which is
the sum of fifteen times the property factor, fifteen times the
payroll factor and seventy times the sales factor and the
denominator of which is one hundred.
(B) For purposes of apportionment of the capital stock -
franchise tax as provided in section 602 of Article VI of this
act, the apportionment fraction shall be the property factor
plus the payroll factor plus the sales factor as the numerator,
and the denominator shall be three.
(10) The property factor is a fraction, the numerator of
which is the average value of the taxpayer's real and tangible
personal property owned or rented and used in this State during
the tax period and the denominator of which is the average value
of all the taxpayer's real and tangible personal property owned
or rented and used during the tax period but shall not include
the security interest of any corporation as seller or lessor in
personal property sold or leased under a conditional sale,
bailment lease, chattel mortgage or other contract providing for
the retention of a lien or title as security for the sales price
of the property.
20090SB1069PN1371 - 7 -
(11) Property owned by the taxpayer is valued at its
original cost. Property rented by the taxpayer is valued at
eight times the net annual rental rate. Net annual rental rate
is the annual rental rate paid by the taxpayer less any annual
rental rate received by the taxpayer from subrentals.
(12) The average value of property shall be determined by
averaging the values at the beginning and ending of the tax
period but the tax administrator may require the averaging of
monthly values during the tax period if reasonably required to
reflect properly the average value of the taxpayer's property.
(13) The payroll factor is a fraction, the numerator of
which is the total amount paid in this State during the tax
period by the taxpayer for compensation and the denominator of
which is the total compensation paid everywhere during the tax
period.
(14) Compensation is paid in this State if:
(A) The individual's service is performed entirely within
the State;
(B) The individual's service is performed both within and
without this State, but the service performed without the State
is incidental to the individual's service within this State; or
(C) Some of the service is performed in this State and the
base of operations or if there is no base of operations, the
place from which the service is directed or controlled is in
this State, or the base of operations or the place from which
the service is directed or controlled is not in any state in
which some part of the service is performed, but the
individual's residence is in this State.
(15) The sales factor is a fraction, the numerator of which
is the total sales of the taxpayer in this State during the tax
20090SB1069PN1371 - 8 -
period, and the denominator of which is the total sales of the
taxpayer everywhere during the tax period.
(16) Sales of tangible personal property are in this State
if the property is delivered or shipped to a purchaser, within
this State regardless of the f.o.b. point or other conditions of
the sale.
(17) Sales, other than sales of tangible personal property
and sales set forth in paragraphs (17.1) and (17.2), are in this
State if:
(A) The income-producing activity is performed in this
State; or
(B) The income-producing activity is performed both in and
outside this State and a greater proportion of the income-
producing activity is performed in this State than in any other
state, based on costs of performance.
(17.1) Sales of services are in this State if sales are
derived from customers within this State. If part of the sales
with respect to a specific contract or other agreement to
perform services is derived from customers from within this
State, sales are in this State in proportion to the sales
derived from customers within this State to total sales with
respect to that contract or agreement.
(17.2) In order to determine sales in this State of any
railroad, truck, bus, airline, pipeline, natural gas or water
transportation company that is required to determine its
business income pursuant to paragraph (1) of phrase (e) of this
subclause such company must convert the relevant fraction set
forth in phrase (b), (c) or (d) of this subclause to gross
receipts. Sales in this State are the result of multiplying
total gross receipts from relevant transportation activities by
20090SB1069PN1371 - 9 -
the decimal equivalent of the relevant fraction set forth in
phrase (b), (c) or (d) of this subclause.
(18) If the allocation and apportionment provisions of this
definition do not fairly represent the extent of the taxpayer's
business activity in this State, the taxpayer may petition the
Secretary of Revenue or the Secretary of Revenue may require, in
respect to all or any part of the taxpayer's business activity:
(A) Separate accounting;
(B) The exclusion of any one or more of the factors;
(C) The inclusion of one or more additional factors which
will fairly represent the taxpayer's business activity in this
State; or
(D) The employment of any other method to effectuate an
equitable allocation and apportionment of the taxpayer's income.
In determining the fairness of any allocation or apportionment,
the Secretary of Revenue may give consideration to the
taxpayer's previous reporting and its consistency with the
requested relief.
* * *
(e) Corporations That are Members of a Unitary Business.
(1) Notwithstanding any contrary provisions of this article,
for taxable years that begin on or after January 1, 2010,
business income of a corporation that is a member of a unitary
business that consists of two or more corporations, at least one
of which does not transact its entire business in this State, is
determined by combining the business income of either all
corporations, other than as set forth below, that are water's-
edge basis members or all corporations, other than as set forth
below, that are worldwide members of the unitary business.
Business income from an intercompany transaction between
20090SB1069PN1371 - 10 -
included corporations of a unitary business shall be deferred in
the manner set forth under 26 CFR 1.1502-13 (relating to
intercompany transactions) in determining the business income of
a corporation that is a member of that unitary business.
Business income of the following corporations is not included in
the determination of combined business income:
(i) any corporation subject to taxation under Article VII,
VIII, IX or XV;
(ii) any corporation specified in the definition of
"institution" in section 701.5 that would be subject to taxation
under Article VII were it located, as defined in section 701.5,
in this State;
(iii) any corporation commonly known as a title insurance
company that would be subject to taxation under Article VIII
were it incorporated in this State;
(iv) any corporation specified as an insurance company,
association or exchange in Article IX that would be subject to
taxation under Article IX were its insurance business transacted
in this State;
(v) any corporation specified in the definition of
"institution" in section 1501 that would be subject to taxation
under Article XV were it located, as defined in section 1501, in
this State; or
(vi) any corporation that is a small corporation, as defined
in section 301(s.2), or a qualified Subchapter S subsidiary, as
defined in section 301(o.3).
(2) Notwithstanding any contrary provisions of this article,
all corporations that are required to compute business income
under paragraph (1) are entitled to apportion such business
income when one corporation of the same unitary business is
20090SB1069PN1371 - 11 -
entitled to apportion such business income. Notwithstanding any
contrary provisions of this article, for taxable years that
begin on or after January 1, 2010, the denominator of the
apportionment fraction of a corporation that is required to
compute its business income under paragraph (1) shall be
computed on a combined basis for all included corporations of
the unitary business. Gross receipts from an intercompany
transaction between included corporations of a unitary business
are eliminated unless the gross receipts are derived from
transactions that are deferred in the manner set forth under 26
CFR 1.1502-13 in computing the numerator and denominator of the
apportionment fraction of a corporation that is required to
compute its business income under paragraph (1). Gross receipts
from transactions that had been deferred in the manner set forth
in 26 CFR 1.1502-13 are included in a corporation's
apportionment fraction during the same taxable year that it
realizes business income that had been deferred due to the
transaction. The apportionment fraction of the following
corporations is not included in the determination of the
combined apportionment fraction:
(i) any corporation subject to taxation under Article VII,
VIII, IX or XV;
(ii) any corporation specified in the definition of
"institution" in section 701.5 that would be subject to taxation
under Article VII were it located, as defined in section 701.5,
in this State;
(iii) any corporation commonly known as a title insurance
company that would be subject to taxation under Article VIII
were it incorporated in this State;
(iv) any corporation specified as an insurance company,
20090SB1069PN1371 - 12 -
association or exchange in Article IX that would be subject to
taxation under Article IX were its insurance business transacted
in this State;
(v) any corporation specified in the definition of
"institution" in section 1501 that would be subject to taxation
under Article XV were it located, as defined in section 1501, in
this State;
(vi) any corporation that is a small corporation, as defined
in section 301(s.2), or a qualified Subchapter S subsidiary, as
defined in section 301(o.3).
(3) A corporation that is required to compute its business
income under paragraph (1) shall apportion such combined
business income by multiplying such combined business income by
a fraction which is the combined apportionment fraction set
forth in paragraph (2).
(4) Nonbusiness income of a corporation that is required to
compute business income under paragraph (1) shall be allocated
as provided in paragraphs (5) through (8) of phrase (a) of
subclause 2 of the definition of "taxable income."
(5) Each corporation that is a member of a unitary business
that consists of two or more corporations determines its tax
liability based on its apportioned share of the combined
business income of the unitary business plus its nonbusiness
income or loss allocated to this State, minus its net loss
deduction.
(6) If any provision of this phrase operates so that an
amount is added to or deducted from taxable income for a taxable
year for any corporation of a unitary business that previously
had been added to or deducted from taxable income of any
corporation of the same unitary business, an appropriate
20090SB1069PN1371 - 13 -
adjustment shall be made for the taxable year in order to
prevent double taxation or double deduction. If this adjustment
is not made by the appropriate corporation of the unitary
business, the Secretary of Revenue is authorized to make this
adjustment.
(7) The Secretary of Revenue has the authority and
responsibility to make adjustments to insure that a corporation
does not incur an unfair penalty nor realize an unfair benefit
because it is required to compute its business income under
paragraph (1). Fairness shall be measured by whether the
corporation's income allocated and apportioned to this State
fairly reflects the corporation's share of the unitary business
conducted in this State in the taxable year.
* * *
(5) "Taxable year." [The] 1. Except as set forth in
subclause 2, the taxable year which the corporation, or any
consolidated group with which the corporation participates in
the filing of consolidated returns, actually uses in reporting
taxable income to the Federal Government[.], or which the
corporation would have used in reporting taxable income to the
Federal Government had it been required to report its taxable
income to the Federal Government. With regard to the tax imposed
by Article IV of this act (relating to the Corporate Net Income
Tax), the terms "annual year," "fiscal year," "annual or fiscal
year," "tax year" and "tax period" shall be the same as the
corporation's taxable year, as defined in this [paragraph.]
subclause or subclause 2.
2. All corporations of a unitary business shall have a
common taxable year for purposes of computing tax due under this
article. The taxable year for such purposes is the common
20090SB1069PN1371 - 14 -
taxable year adopted, in a manner prescribed by the department,
by all corporations of a unitary business. The common taxable
year must be used by all corporations of that unitary business
in the year of adoption and all future years unless otherwise
permitted by the department.
* * *
(8) "Tax haven." A jurisdiction that at the beginning of a
taxable year is a tax haven as identified by the Organization
for Economic Co-operation and Development, plus the
sovereignties of Bermuda, the Cayman Islands, the Bailiwick of
Jersey and the Grand Duchy of Luxembourg.
(9) "Unitary business." A single economic enterprise that
is made up of separate parts of a single corporation, of a
commonly controlled group of corporations, or both, that are
sufficiently interdependent, integrated and interrelated through
their activities so as to provide a synergy and mutual benefit
that produces a sharing or exchange of value among them and a
significant flow of value to the separate parts. A unitary
business includes only those parts and corporations which may be
included as a unitary business under the Constitution of the
United States.
(10) "Water's-edge basis." A system of reporting that
includes the business income and apportionment factor of certain
corporations of a unitary business, described as follows:
1. The business income and apportionment factor of any
member incorporated in the United States or formed under the
laws of any state of the United States, the District of
Columbia, any territory or possession of the United States or
the Commonwealth of Puerto Rico.
2. The business income and apportionment factor of any
20090SB1069PN1371 - 15 -
member, regardless of the place incorporated or formed, if the
average of its property, payroll and sales factors within the
United States is twenty per cent or more.
3. The business income and apportionment factor of any
member which is a domestic international sales corporation as
described in sections 991, 992, 993 and 994 of the Internal
Revenue Code of 1986 (Public Law 99-514, 26 U.S.C. §§ 991, 992,
993 and 994); a foreign sales corporation as described in former
sections 921, 922, 923, 924, 925, 926 and 927 of the Internal
Revenue Code of 1986 (formerly 26 U.S.C. §§ 921, 922, 923, 924,
925, 926 and 927); or any member which is an export trade
corporation, as described in sections 970 and 971 of the
Internal Revenue Code of 1986 (26 U.S.C. §§ 970 and 971).
4. Any member not described in subclauses 1, 2 and 3 shall
include the portion of its business income derived from or
attributable to sources within the United States, as determined
under the Internal Revenue Code of 1986 without regard to
Federal treaties, and its apportionment factor related thereto.
5. Any member that is a "controlled foreign corporation" as
defined in section 957 of the Internal Revenue Code of 1986 (26
U.S.C. § 957), to the extent the business income of that member
is income defined in section 952 of the Internal Revenue Code of
1986 (26 U.S.C. § 952), Subpart F income, not excluding lower-
tier subsidiaries' distributions of such income which were
previously taxed, determined without regard to Federal treaties,
and the apportionment factor related to that income; any item of
income received by a controlled foreign corporation and the
apportionment factor related to such income shall be excluded if
the corporation establishes to the satisfaction of the Secretary
of Revenue that such income was subject to an effective rate of
20090SB1069PN1371 - 16 -
income tax imposed by a foreign country greater than ninety per
cent of the maximum rate of tax specified in section 11 of the
Internal Revenue Code of 1986 (26 U.S.C. § 11). The effective
rate of income tax determination shall be based upon the
methodology set forth under 26 CFR 1.954-1 (relating to foreign
base company income).
6. The business income and apportionment factor of any
member that is not described in subclause 1, 2, 3, 4 and 5 and
that is doing business in a tax haven. The business income and
apportionment factor of a corporation doing business in a tax
haven shall be excluded if the corporation establishes to the
satisfaction of the Secretary of Revenue that its income was
subject to an effective rate of income tax imposed by a country
greater than ninety per cent of the maximum rate of tax
specified in section 11 of the Internal Revenue Code of 1986 (26
U.S.C. § 11).
(11) "Commonly controlled group." For a corporation, the
corporation is a member of a group of two or more corporations
and more than fifty per cent of the voting stock of each member
of the group is directly or indirectly owned by a common owner
or by common owners, either corporate or noncorporate, or by one
or more of the member corporations of the group.
(12) "Separate company." A corporation that is not a member
of a unitary business that consists of two or more corporations.
(13) "Tax." Includes interest, penalties and additions to
tax unless a more limited meaning is disclosed by the context.
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
20090SB1069PN1371 - 17 -
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%]
through taxable years ending December 31, 2010 9.99%
January 1, 2011, to December 31, 2011 9.49%
January 1, 2012, to December 31, 2012 8.99%
January 1, 2013, to December 31, 2013 8.49%
January 1, 2014, and each taxable year thereafter 7.99%
* * *
Section 3. Section 403 of the act is amended by adding
subsections to read:
Section 403. Reports and Payment of Tax.--* * *
(a.1) (1) Each corporation subject to tax under this
article is required to file an annual report in accordance with
this section. Each corporation that is a member of a unitary
business that consists of two or more corporations, unless
excluded by the provisions of this article, shall file as part
of a combined annual report. The corporations of the unitary
business shall designate one member that is subject to tax under
this article to file the combined annual report and to act as
agent on behalf of all other corporations that are members of
the unitary business. Each corporation that is a member of a
20090SB1069PN1371 - 18 -
unitary business is responsible for its tax liability under this
article.
(2) The oath or affirmation of the designated member's
president, vice president or other principal officer, and of its
treasurer or assistant treasurer shall constitute the oath or
affirmation of each corporation that is a member of that unitary
business.
(3) The designated member shall transmit to the department
upon a form prescribed by the department, an annual combined
report under oath or affirmation of its president, vice
president or other principal officer, and of its treasurer or
assistant treasurer. Such report shall set forth:
(i) All corporations included in the unitary business.
(ii) All necessary data, both in the aggregate and for each
corporation of the unitary business, that sets forth the
determination of tax liability for each corporation of the
unitary business.
(iii) Any other information that the department may require.
(a.2) (1) Activities that evidence a significant flow of
value among commonly controlled corporations, include, but are
not limited to, the following:
(i) Assisting in the acquisition of equipment.
(ii) Assisting with filling personnel needs.
(iii) Lending funds or guaranteeing loans.
(iv) Interplay in the area of corporate expansion.
(v) Providing technical assistance.
(vi) Supervising.
(vii) Providing general operational guidance.
(viii) Providing overall operational strategic advice.
(ix) Common use of trade names and patents.
20090SB1069PN1371 - 19 -
(2) Significant flow of value must be more than the flow of
funds arising out of passive investment and consists of more
than periodic financial oversight.
(a.3) (1) With respect to a commonly controlled group of
corporations, the presence of any of these factors creates a
presumption of a unitary business:
(i) Corporations engaged in the same type of business.
(ii) Corporations engaged in different steps in a vertically
structured enterprise.
(iii) Strong centralized management of corporations.
(2) A corporation newly formed by a corporation that is a
member of a unitary business is rebuttably presumed to be a
member of the unitary business.
(3) A corporation that owns a controlling interest in two or
more corporations of a unitary business is rebuttably presumed
to be a member of the unitary business.
(4) A corporation that permits one or more other
corporations of a unitary business to substantially use its
patents, trademarks, service marks, logo-types, trade secrets,
copyrights or other proprietary assets or that is principally
engaged in loaning money to one or more other corporations of a
unitary business is rebuttably presumed to be a member of the
unitary business. This presumption only applies to a commonly
controlled group of corporations.
(a.4) As far as applicable to a specific unitary business,
unless there is a revision of applicable State law or unless a
corporation is not included under the provisions of this
article, there is a rebuttable presumption for all tax years
that begin in years 2010 and 2011 that a unitary business of two
or more corporations includes at least all corporations that are
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part of a unitary business under the law of any state of the
United States in which the corporation files a tax report or tax
return of combined net income for the same tax year.
(a.5) Unless an election is made to use a worldwide basis of
accounting, a corporation that is a member of a unitary business
of two or more corporations must determine its business income
and apportionment factor upon a water's-edge basis. This basis
applies to all corporations of the unitary business. If an
election is made to use a worldwide basis of accounting, all
corporations of the unitary business must make the election,
upon a form, prescribed, prepared and furnished by the
department. This election binds all corporations of the unitary
business for the period of time that the election remains in
effect. An initial election is binding for a period of seven
years. Subsequent elections are binding for a period of five
years.
* * *
Section 4. Section 404 of the act is amended to read:
Section 404. Consolidated Reports.--The department shall not
permit any corporation owning or controlling, directly or
indirectly, any of the voting capital stock of another
corporation or of other corporations, subject to the provisions
of this article, to make a consolidated report[, showing the
combined net income].
Section 5. Section 3003.3(d) of the act, amended October 18,
2006 (P.L.1149, No.119), is amended and the section is amended
by adding subsections to read:
Section 3003.3. Underpayment of Estimated Tax.--* * *
(d) Notwithstanding the provisions of the preceding
subsections, other than as set forth in subsection (d.1),
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interest with respect to any underpayment of any installment of
estimated tax shall not be imposed if the total amount of all
payments of estimated tax made on or before the last date
prescribed for the payment of such installment equals or exceeds
the amount which would have been required to be paid on or
before such date if the estimated tax were an amount equal to
the tax computed at the rates applicable to the taxable year,
including any minimum tax imposed, but otherwise on the basis of
the facts shown on the report of the taxpayer for, and the law
applicable to, the safe harbor base year, adjusted for any
changes to sections 401, 601, 602 and 1101 enacted for the
taxable year, if a report showing a liability for tax was filed
by the taxpayer for the safe harbor base year. If the total
amount of all payments of estimated tax made on or before the
last date prescribed for the payment of such installment does
not equal or exceed the amount required to be paid per the
preceding sentence, but such amount is paid after the date the
installment was required to be paid, then the period of
underpayment shall run from the date the installment was
required to be paid to the date the amount required to be paid
per the preceding sentence is paid. Provided, that if the total
tax for the safe harbor base year exceeds the tax shown on such
report by ten per cent or more, the total tax adjusted to
reflect the current tax rate shall be used for purposes of this
subsection. In the event that the total tax for the safe harbor
base year exceeds the tax shown on the report by ten per cent or
more, interest resulting from the utilization of such total tax
in the application of the provisions of this subsection shall
not be imposed if, within forty-five days of the mailing date of
each assessment, payments are made such that the total amount of
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all payments of estimated tax equals or exceeds the amount which
would have been required to be paid on or before such date if
the estimated tax were an amount equal to the total tax adjusted
to reflect the current tax rate. In any case in which the
taxable year for which an underpayment of estimated tax may
exist is a short taxable year, in determining the tax shown on
the report or the total tax for the safe harbor base year, the
tax will be reduced by multiplying it by the ratio of the number
of installment payments made in the short taxable year to the
number of installment payments required to be made for the full
taxable year.
(d.1) (1) Notwithstanding the provisions of subsections
(a), (b) and (c), interest with respect to any underpayment of
any installment of estimated corporate net income tax for any
tax year that begins in year 2010 or 2011 shall not be imposed
if the total amount of all payments of estimated corporate net
income tax made on or before the last date prescribed for the
payment of such installment equals or exceeds the amount which
would have been required to be paid on or before such date if
the estimated tax were an amount equal to the tax shown on the
report of the taxpayer for the safe harbor base year, if a
report showing a liability for tax was filed by the taxpayer for
the safe harbor base year.
(2) If the total amount of all payments of estimated tax
made on or before the last date prescribed for the payment of
such installment does not equal or exceed the amount required to
be paid under paragraph (1), but such amount is paid after the
date the installment was required to be paid, then the period of
underpayment shall run from the date the installment was
required to be paid to the date the amount required to be paid
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under paragraph (1) is paid.
(3) If the total tax for the safe harbor base year exceeds
the tax shown on such report by ten per cent or more, the total
tax shall be used for purposes of this subsection. In the event
that the total tax for the safe harbor base year exceeds the tax
shown on the report by ten per cent or more, interest resulting
from the utilization of the total tax in the application of the
provisions of this subsection shall not be imposed if, within
forty-five days of the mailing date of a notice from the
department increasing the total tax, payments are made such that
the total amount of all payments of estimated tax equals or
exceeds the amount which would have been required to be paid on
or before such date if the estimated tax were an amount equal to
the total tax.
(4) In any case in which the taxable year for which an
underpayment of estimated tax may exist is a short taxable year,
in determining the tax shown on the report or the total tax for
the safe harbor base year, the tax shall be reduced by
multiplying it by the ratio of the number of installment
payments made in the short taxable year to the number of
installment payments required to be made for the full taxable
year.
(d.2) (1) If there is a substantial underpayment, as
defined in subsection (a), of any installment of estimated
corporate net income tax or estimated capital stock/franchise
tax for any taxable year beginning in 2010 or 2011, there shall
be imposed additional interest in an amount determined at one
hundred twenty per cent of the annual rate as provided by law
upon the entire underpayment for the period of the substantial
underpayment.
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(2) The additional interest imposed by this subsection is in
addition to any other interest imposed on underpayments by this
section.
Section 6. The amendment or addition of the following
provisions shall apply to taxable years beginning after December
31, 2009:
(1) Section 401(3)1(a) and (b) and 2(a) and (e), (5),
(8), (9), (10), (11), (12) and (13) of the act.
(2) Section 402(b) of the act.
(3) Section 403(a.1), (a.2), (a.3), (a.4) and (a.5) of
the act.
(4) Section 404 of the act.
(5) Section 3003.3(d), (d.1) and (d.2) of the act.
Section 7. This act shall take effect immediately.
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