72 Pa. Stat. § 7602

Current through P.A. Acts 2023-32

Section 7602 - Imposition of tax

(a) That every domestic entity from which a report is required under section 601 hereof shall be subject to, and pay to the department annually, a tax which is the amount computed by multiplying each dollar of the capital stock value as defined insection 601( a) by the appropriate rate of tax as set forth in subsection (h); except that any domestic entity or company subject to the tax prescribed herein may elect to compute and pay its tax under and in accordance with the provisions of subsection (b) of this section 602 : Provided, That the provisions of this section shall not apply to the taxation of the capital stock of entities organized for manufacturing, processing, research or development purposes, which is invested in and actually and exclusively employed in carrying on manufacturing, processing, research or development within the State, except such entities as enjoy and exercise the right of eminent domain, but every entity organized for the purpose of manufacturing, processing, research or development except such entities as enjoy and exercise the right of eminent domain shall pay the State tax of the amount computed by multiplying each dollar of the capital stock value as defined insection 601(a) by the appropriate rate of tax as set forth in subsection (h) upon such proportion of its capital stock, if any, as may be invested in any property or business not strictly incident or appurtenant to the manufacturing, processing, research or development business, in addition to the local taxes assessed upon its property in the district where located, it being the object of this provision to relieve from State taxation only so much of the capital stock as is invested purely in the manufacturing, processing, research or development plant and business: and Provided further, That the provisions of this section shall not apply to the taxation of so much of the capital stock value attributable to student loan assets owned or held by an entity created for the securitization of student loans or by a trustee on its behalf.

(b)

(1) Every foreign entity from which a report is required under section 601 hereof shall be subject to and pay to the department annually, a franchise tax which is the amount computed by multiplying each dollar of the capital stock value as defined in section 601(a) by the appropriate rate of tax as set forth in subsection (h) upon a taxable value to be determined in the following manner. The capital stock value shall be ascertained in the manner prescribed in section 601(a) of this article. The taxable value shall then be determined by employing the relevant apportionment factors set forth in Article IV: Provided, That the manufacturing, processing, research and development exemptions contained under section 602(a) shall also apply to foreign corporations. In determining the relevant apportionment factors, the following shall apply:

(i) for taxable years beginning before January 1, 1999, the numerator of the property, payroll or sales factors shall not include any property, payroll or sales attributable to manufacturing, processing, research or development activities in the Commonwealth;

(ii) for taxable years beginning after December 31, 1998, the numerator of the property or payroll factors shall not include any property or payroll attributable to manufacturing, processing, research or development activities in the Commonwealth, and any property or payroll attributable to manufacturing, processing, research or development activities outside of the Commonwealth shall also be excluded from the numerator of the property or payroll factors. The provisions of this section shall not apply to the taxation of so much of the capital stock value attributable to student loan assets owned or held by an entity created for the securitization of student loans or by a trustee on its behalf. Any foreign corporation, joint-stock association, limited partnership or company subject to the tax prescribed herein may elect to compute and pay its tax under section 602(a): Provided, That any foreign corporation, joint-stock association, limited partnership or company electing to compute and pay its tax under section 602(a) shall be treated as if it were a domestic corporation for the purpose of determining which of its assets are exempt from taxation and for the purpose of determining the proportion of the value of its capital stock which is subject to taxation.

(2) The provisions of this article shall apply to the taxation of entities organized for manufacturing, processing, research or development purposes, but shall not apply to such entities as enjoy and exercise the right of eminent domain.

(c) Deleted. 1991, Aug. 4, P.L. 97, No. 22, § 22, imd. effective.

(d) It shall be the duty of the treasurer or other officers having charge of any domestic or foreign entity, upon which a tax is imposed by this section, to transmit the amount of tax to the department within the time prescribed by law: Provided, That for the purposes of this act interest in limited partnerships or joint-stock associations shall be deemed to be capital stock, and taxable accordingly: Provided, further, That entities liable to a tax under this section, shall not be required to pay any further tax on the mortgages, bonds, and other securities owned by them and in which the whole body of stockholders or members, as such, have the entire equitable interest in remainder; but entities owning or holding such securities as trustees, executors, administrators, guardians, or in any other manner than for the whole body of stockholders or members thereof as sole equitable owners in remainder, shall return and pay the tax imposed by this act upon all securities so owned or held by them, as in the case of individuals.

(e) Any holding company subject to the capital stock tax or the franchise tax imposed by this section may elect to compute the capital stock or franchise tax by applying the rate of tax provided in subsection (h) to ten per cent of the capital stock value as defined in section 601(a). If exercised, this election shall be in lieu of any other apportionment or allocation to which such company would otherwise be entitled.

(f) Every domestic corporation and every foreign corporation (i) registered to do business in Pennsylvania; (ii) which maintains an office in Pennsylvania; (iii) which has filed a timely election to be taxed as a regulated investment company with the Federal Government; and (iv) which duly qualifies to be taxed as a regulated investment company under the provisions of the Internal Revenue Code of 1954 as amended, shall be taxed as a regulated investment company and shall be subject to the capital stock or franchise tax imposed by section 602, in either case for the privilege of having an office in Pennsylvania, which tax shall be computed pursuant to the provisions of this subsection in lieu of all other provisions of this section 602. The tax shall be in an amount which is the sum of the amounts determined pursuant to clauses (1) and (2):

(1) The amount determined pursuant to this clause shall be seventy-five dollars ($75) times that number which is the result of dividing the net asset value of the regulated investment company by one million, rounded to the nearest multiple of seventy-five dollars ($75). Net asset value shall be determined by adding the monthly net asset values as of the last day of each month during the taxable period and dividing the total sum by the number of months involved. Each such monthly net asset value shall be the actual market value of all assets owned without any exemptions or exclusions, less all liabilities, debts and other obligations.

(2) The amount determined pursuant to this clause shall be the amount which is the result of multiplying the rate of taxation applicable for purposes of the personal income tax during the same taxable year times the apportioned undistributed personal income tax income of the regulated investment company.

For the purposes of this clause:

(A) Personal income tax income shall mean income to the extent enumerated and classified in section 303 .

(B) Undistributed personal income tax income shall mean all personal income tax income other than personal income tax income undistributed on account of the capital stock or foreign franchise tax, less all personal income tax income distributed to shareholders. At the election of the company, income distributed after the close of a taxable year, but deemed distributed during the taxable year for Federal income tax purposes, shall be deemed distributed during that year for purposes of this clause. If a company in a taxable year has both current income and income accumulated from a prior year, distributions during the year shall be deemed to have been made first from current income.

(C) Undistributed personal income tax income shall be apportioned to Pennsylvania by a fraction, the numerator of which is all income distributed during the taxable period to shareholders who are resident individuals, estates or trusts and the denominator of which is all income distributed during the taxable period. Resident trusts shall not include charitable, pension or profit-sharing, or retirement trusts.

(D) Personal income tax income and other income of a company shall each be deemed to be either distributed to shareholders or undistributed in the proportion each category bears to all income received by the company during the taxable year.

(g) In the event that a domestic or foreign entity is required to file a report pursuant to section 601(b) on other than an annual basis, the tax imposed by this section shall be prorated to reflect the portion of a taxable year for which the report is filed by multiplying the tax liability by a fraction equal to the number of days in the taxable year divided by three hundred sixty-five days.

(h) The rate of tax for purposes of the capital stock and franchise tax for taxable years beginning within the dates set forth shall be as follows:

Taxable Year	Regular Rate	Surtax	Total Rate
January 1, 1971, to December 31, 1986	10 mills	0	10 mills
January 1, 1987, to December 31, 1987	9 mills	0	9 mills
January 1, 1988, to December 31, 1990	9.5 mills	0	9.5 mills
January 1, 1991, to December 31, 1991	11 mills	2 mills	13 mills
January 1, 1992, to December 31, 1997	11 mills	1.75 mills	12.75 mills
January 1, 1998, to December 31, 1998	11 mills	.99 mills	11.99 mills
January 1, 1999, to December 31, 1999	10.99 mills	0	10.99 mills
January 1, 2000, to December 31, 2000	8.99 mills	0	8.99 mills
January 1, 2001, to December 31, 2001	7.49 mills	0	7.49 mills
January 1, 2002, to December 31, 2003	7.24 mills	0	7.24 mills
January 1, 2004, to December 31, 2004	6.99 mills	0	6.99 mills
January 1, 2005, to December 31, 2005	5.99 mills	0	5.99 mills
January 1, 2006, to December 31, 2006	4.89 mills	0	4.89 mills
January 1, 2007, to December 31, 2007	3.89 mills	0	3.89 mills
January 1, 2008, to December 31, 2011	2.89 mills	0	2.89 mills
January 1, 2012, to December 31, 2012	1.89 mills	0	1.89 mills
January 1, 2013, to December 31, 2013	.89 mills	0	.89 mills
January 1, 2014 to December 31, 2014	.67 mills	0	.67 mills
January 1, 2015 to December 31, 2015	.45 mills	0	.45 mills

(i) An entity subject to taxation under Article VII, VIII, IX or XV shall not be subject to the tax imposed by this article.

72 P.S. § 7602

Amended by P.L. 270 2013 No. 52, § 20.1, eff. 7/9/2013.

1971, March 4, P.L. 6, No. 2, art. VI, § 602. Amended 1971, Aug. 31, P.L. 362, No. 93, § 5; 1971, Sept. 9, P.L. 437, No. 105, § 3; 1974, July 20, P.L. 542, No. 186, § 1, imd. effective; 1978, July 1, P.L. 594, No. 114, § 2, imd. effective; 1983, Dec. 22, P.L. 360, No. 89, § 2, imd. effective; 1983, Dec. 23, P.L. 370, No. 90, § 8, effective Jan. 1, 1984; 1985, July 1, P.L. 78, No. 29, § 11, imd. effective; 1985, Dec. 19, P.L. 356, No. 102, § 1, imd. effective; 1987, July 13, P.L. 317, No. 58, § 4, imd. effective. Affected 1988, Oct. 18, P.L. 756, No. 108, § 1304, effective in 60 days. Amended 1991, Aug. 4, P.L. 97, No. 22, § 22, imd. effective; 1998, April 23, P.L. 239, No. 45, § 10, imd. effective; 1999, May 12, P.L. 26, No. 4, § 11, imd. effective; 1999, Dec. 15, P.L. 926, No. 63, § 1, eff. Jan. 1, 2000; 2000, May 24, P.L. 106, No. 23, § 7, imd. effective; 2002, June 29, P.L. 559, No. 89, § 17, effective July 1, 2002; 2003, Dec. 23, P.L. 250, No. 46, § 14, imd. effective; 2006, July 6, P.L. 319, No. 67, § 7, imd. effective; 2009, Oct. 9, P.L. 451, No. 48, § 8, imd. effective.