2023 Pennsylvania Consolidated & Unconsolidated Statutes
Act 64 - TAX REFORM CODE OF 1971 - IMPOSITION OF TAX, TAXABILITY OF ESTATES, TRUSTS AND THEIR BENEFICIARIES AND MANUFACTURING INNOVATION AND REINVESTMENT DEDUCTION

Session of 2023

No. 2023-64

 

SB 815

 

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 personal income tax, further providing for imposition of tax and for taxability of estates, trusts and their beneficiaries; and, in corporate net income tax, further providing for manufacturing innovation and reinvestment deduction.

 

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

 

Section 1.  Sections 302, 305 and 407.7 of the act of March 4, 1971 (P.L.6, No.2), known as the Tax Reform Code of 1971, are amended to read:

Section 302.  Imposition of Tax.--(a)  [Every] Except as provided in subsection (c), every resident individual, estate or trust shall be subject to, and shall pay for the privilege of receiving each of the classes of income hereinafter enumerated in section 303, a tax upon each dollar of income received by that resident during that resident's taxable year at the rate of three and seven hundredths per cent.

(b)  [Every] Except as provided in subsection (c), every nonresident individual, estate or trust shall be subject to, and shall pay for the privilege of receiving each of the classes of income hereinafter enumerated in section 303 from sources within this Commonwealth, a tax upon each dollar of income received by that nonresident during that nonresident's taxable year at the rate of three and seven hundredths per cent.

(c)  The classes of income under section 303 received by a resident trust, and the classes of income received by a nonresident trust from sources within this Commonwealth, shall be taxable to the grantor of the trust or another person to the extent the grantor or other person is treated as the owner of the trust under sections 671, 672, 673, 674, 675, 676, 677, 678 and 679 of the Internal Revenue Code of 1986 (Public Law 99-514, 26 U.S.C. § 1 et seq.), as amended, whether or not such income is distributed or distributable to the beneficiaries of the trust or accumulated.

Section 305.  Taxability of Estates, Trusts and Their Beneficiaries.--[The] (a)  Except as provided in subsection (b), the income of a beneficiary of an estate or trust in respect of such estate or trust shall consist of that part of the income or gains received by the estate or trust for its taxable year ending within or with the beneficiary's taxable year which, under the governing instrument and applicable State law, is required to be distributed currently or is in fact paid or credited to said beneficiary. The income or gains of the estate or trust, if any, taxable to such estate or trust shall consist of the income or gains received by it which has not been distributed or credited to its beneficiaries.

(b)  Subsection (a) shall not apply to the extent the grantor or another person is taxable on the income of the trust under section 302(c).

Section 407.7.  Manufacturing Innovation and Reinvestment Deduction.--(a)  In order to be eligible to receive a manufacturing innovation and reinvestment deduction, a taxpayer must demonstrate to the department a private capital investment in excess of [sixty million dollars ($60,000,000)] fifty million dollars ($50,000,000) for the creation of new or refurbished manufacturing capacity within [three years of a designated start date.] the applicable time period specified in subsection (b). The department's calculation of eligible expenses for a qualified manufacturing innovation and reinvestment deduction shall include payments made in advance of the start date of a project if the payments are made for the purchase of, or partial payment for, new equipment for the project that exceeds one million dollars ($1,000,000) in value.

(b)  (1)  A taxpayer must advise the department in advance of the start date of any project for which the taxpayer may seek a qualified manufacturing innovation and reinvestment deduction. A taxpayer must attest the taxpayer's intent to meet the eligibility criteria and provide relevant information pertinent to the project's size and scope in a manner as determined by the department.

(2)  For a private capital investment of less than or equal to one hundred fifty million dollars ($150,000,000), the following shall apply:

(i)  The project must be completed within three years of the project's start date.

(ii)  Within five years of [a] the project's start date, [a] the taxpayer must complete to the department's satisfaction an application on a form and in a manner as determined by the department to attest that the project has been completed and the eligibility criteria has been satisfied.

(3)  For a private capital investment of more than one hundred fifty million one dollars ($150,000,001) and less than two hundred fifty million dollars ($250,000,000), the following shall apply:

(i)  The project must be completed within five years of the project's start date.

(ii)  Within seven years of the project's start date, the taxpayer must complete to the department's satisfaction an application on a form and in a manner as determined by the department to attest that the project has been completed and the eligibility criteria has been satisfied.

(4)  For a private capital investment of more than two hundred fifty million one dollars ($250,000,001) and less than three hundred fifty million dollars ($350,000,000), the following shall apply:

(i)  The project must be completed within seven years of the project's start date.

(ii)  Within nine years of the project's start date, the taxpayer must complete to the department's satisfaction an application on a form and in a manner as determined by the department to attest that the project has been completed and the eligibility criteria has been satisfied.

(5)  For a private capital investment of more than three hundred fifty million one dollars ($350,000,001), the department shall establish the time period from the project's start date in which the project must be completed and the time period in which the application as described in paragraph (4) must be completed.

(c)  Upon the receipt of the taxpayer's application, the Department of Revenue [must] shall make a finding [that] whether the applicant has filed all required State tax reports and returns for all applicable tax years and paid any balance of State tax due as determined at settlement, assessment or determination, and the department, then in conjunction with the Department of Revenue, shall make an eligibility or satisfaction determination within ninety days of submission. If the department makes a satisfaction determination, the department and the taxpayer shall execute a satisfaction commitment letter containing the following:

(1)  The number of new jobs created and their corresponding description.

(2)  The number of new jobs created during construction of the project.

(3)  The amount of private capital investment in the creation of new jobs.

(4)  The increase in the annual taxable payroll attributable to new manufacturing jobs.

(5)  A determination of the maximum allowable deduction against a taxpayer's qualified tax liability under this article.

(6)  Any other information as the department deems appropriate.

(d)  (1.1)  If the private capital investment is in excess of sixty million dollars ($60,000,000), but not more than one hundred million dollars ($100,000,000), the maximum allowable deduction shall be equal to thirty-seven and one-half per cent of the private capital investment utilized in the creation of new or refurbished manufacturing capacity. A taxpayer may utilize the deduction in an amount not to exceed seven and one-half per cent of the private capital investment utilized in the creation of new or refurbished manufacturing capacity in any one year of the succeeding ten tax years immediately following the department's satisfaction determination and the execution of a satisfaction commitment letter, up to the maximum allowable deduction. This paragraph shall only apply to applications made prior to January 1, 2024.

(1.2)  If [the] a taxpayer's private capital investment for a project exceeds [one hundred million dollars ($100,000,000)] fifty million dollars ($50,000,000), the maximum allowable deduction shall be equal to twenty-five per cent of the private capital investment utilized in the creation of new or refurbished manufacturing capacity. A taxpayer may utilize the deduction in an amount not to exceed five per cent of the private capital investment utilized in the creation of new or refurbished manufacturing capacity in any one year [of the succeeding ten tax years] during a time period equal to the time period specified in section 401(3)4(c)(2)(A) for the year immediately following the department's satisfaction determination and the execution of a satisfaction commitment letter, up to the maximum allowable deduction.

(3)  A taxpayer cannot use the deduction to reduce [its] the taxpayer's tax liability by more than fifty per cent of the tax liability under this article for the taxable year. The deduction is nontransferable and any unused portion in a tax year shall expire at the end of the corresponding tax year.

Section 2.  This act shall apply as follows:

(1)  The amendment of sections 302 and 305 of the act shall apply to tax years beginning on or after January 1 following the effective date of this section.

(2)  The amendment of section 407.7 of the act shall apply to tax years beginning after December 31, 2023.

Section 3.  This act shall take effect as follows:

(1)  The amendment of sections 302 and 305 of the act shall take effect in 60 days.

(2)  The remainder of this act shall take effect immediately.

 

APPROVED--The 14th day of December, A.D. 2023.

 

JOSH SHAPIRO