Section 6926.703 - Tax relief(a)Tax rate reduction.--A city of the first class shall reduce the rate of wage and net profits tax on residents and nonresidents levied under the act of August 5, 1932 (Sp.Sess., P.L. 45, No. 45), referred to as the Sterling Act, in order to be eligible to receive a property tax reduction allocation under Chapter 5. If the city elects to reduce taxes pursuant to this chapter, all money received from the fund shall be used to offset a reduction by the city in the fiscal year in which a payment under section 505(b) is received and each fiscal year thereafter in the rate of tax on wages and net profits for both residents and nonresidents as provided for in subsection (b). The reductions shall remain in effect for so long as a tax reduction allocation pursuant to Chapter 5 is paid to the city in an amount equal to the cost of such reductions.(b)Calculation of reduction.--(1) The city shall calculate the amount of the tax rate reductions so that they equal, based on estimates certified by the city's director of finance and approved by the Pennsylvania Intergovernmental Cooperation Authority prior to the implementation of the reductions, in combination with any reduction in the rate of unearned income tax imposed by a school district in the city of the first class required by the act of August 9, 1963 (P.L. 640, No. 338), entitled "An act empowering cities of the first class, coterminous with school districts of the first class, to authorize the boards of public education of such school districts to impose certain additional taxes for school district purposes, and providing for the levy, assessment and collection of such taxes," as a result of the reduction in the rate of wage and net profits tax, the amount paid to the city from the fund for tax reductions. The city shall each year transfer to the school district an amount equal to the cost of any reduction in the rate of unearned income tax, and the transfer shall not be subject to the provisions of section 696(h) of the Public School Code.(2) The tax rate reductions implemented by a city of the first class pursuant to this section shall be in addition to the following schedule of percentages of wage and net profits tax rate reductions:(i) On January 1, 2005, 2.9468% for residents and 1.5567% for nonresidents.(ii) On January 1, 2006, 0.6927% for residents and 1.2593% for nonresidents.(iii) On January 1, 2007, 0.9533% for residents and 0.4216% for nonresidents.(iv) On January 1, 2008, 0.9624% for residents and 0.8387% for nonresidents.(v) On January 1, 2009, 1.1851% for residents and 1.0526% for nonresidents.(c)Exceptions.--The wage and net profits tax rates may only be raised above the rates specified in subsection (b)(2) if all of the following apply: (1) The increase is approved by an affirmative vote of at least ten members of a city council of a city of the first class.(2) The Pennsylvania Intergovernmental Cooperation Authority certifies that a condition under paragraph (3) exists.(3) The increase is necessary to respond to any of the following: (i) A fiscal threat or condition, as certified by the city's director of finance, that occurs to the city as set forth in section 333(f) or an equivalent fiscal threat that affects the citizens of the city. It shall be the responsibility of the city's director of finance with the approval of the Pennsylvania Intergovernmental Cooperation Authority to ensure that any additional tax revenue raised is equal to the amount expended to respond to the fiscal threat or condition. If the amount of revenue raised through rate adjustment exceeds the amount necessary to respond, over the course of the city's approved financial plan to the fiscal threat, the excess amount shall be used for wage tax and net profits tax reduction in the immediately succeeding approved financial plan but only if the tax rate reduction, expressed as the difference between the two tax rates, would exceed .0002.(ii) A decrease of more than 2% in the amount of total tax collections plus any funds provided under this chapter from the preceding year's collections. Such a determination of a decrease must be attested to by the city's director of finance.(iii) A declaration by the Pennsylvania Intergovernmental Cooperation Authority that the city's five-year plan is disapproved pursuant to section 209 of the act of June 5, 1991 (P.L. 9, No. 6), known as the Pennsylvania Intergovernmental Cooperation Authority Act for Cities of the First Class.(iv) Federal or State law imposes a new unfunded mandate on the city that costs the city more than 1.5% of the city's total general fund expenditures in any fiscal year.(v) The cost to the city of an existing mandate imposed by Federal or State law increases by more than 1.5% of the city's total general fund expenditures in any fiscal year, and funds to pay for the increase are not appropriated to the city by the Federal or State government.(vi) Existing Federal or State funding is decreased by 1.5% of the city's total general fund expenditures in any fiscal year.(d)Excess funds.--If in any fiscal year the sums received by a city of the first class from the fund are in excess of the value of the tax rate reductions actually made by the city and the school district of the first class pursuant to subsection (a), the city shall, within 60 days following the certification by the director of finance, in consultation with the Secretary of the Budget and with the approval of the Pennsylvania Intergovernmental Cooperation Authority of the amount of the excess, do either of the following:(1) repay to the fund the excess sums; or(2) further reduce wage and net profits tax rates and unearned income tax rates, if required, in the fiscal year next following the determination of the excess, by an amount that will result in total tax rate reductions required for the amount received from the fund. To the extent the tax rate reduction provided for in this paragraph, expressed as the difference between the two tax rates, would not exceed .0002, this subsection shall not apply.(e)Insufficient funds.--If in any fiscal year the director of finance certifies, in consultation with the Secretary of the Budget and with the approval of the Pennsylvania Intergovernmental Cooperation Authority, that the amount of sums received by the city from the fund are less than the value of the tax rate reductions actually made by the city and school district of the first class pursuant to subsection (a), the city may, in the fiscal year next following the determination of the amount, increase the city's wage and net profits tax rate above the rates specified in subsection (b)(2) by an amount that will result in an overall tax rate reduction equal to that required for the amount received by the city from the fund. To the extent the tax rate increase provided for in this subsection, expressed as the difference between the two tax rates, would not exceed .0002, this subsection shall not apply. 2006, June 27, P.L. 1873, No. 1(Spec. Sess. No. 1), § 703, imd. effective.