SENATE AMENDED
PRIOR PRINTER'S NOS. 2234, 2417, 2749
PRINTER'S NO. 3245
THE GENERAL ASSEMBLY OF PENNSYLVANIA
HOUSE BILL
No.
1745
Session of
2023
INTRODUCED BY FRIEL, MARCELL, HILL-EVANS, T. DAVIS, McNEILL,
BRENNAN, MADDEN, HANBIDGE, ROZZI, SANCHEZ, WEBSTER, GUENST,
PROBST, KAZEEM, SHUSTERMAN, OTTEN, BOROWSKI, DALEY, TAKAC,
GREEN, ISAACSON, CERRATO, KHAN, PIELLI, KENYATTA AND WARREN,
OCTOBER 31, 2023
SENATOR HUTCHINSON, FINANCE, IN SENATE, AS AMENDED, JUNE 5, 2024
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
classes of income; and providing for 529 savings account
employer MATCHING contribution tax credit AND TUITION ACCOUNT
PROGRAMS.
The General Assembly of the Commonwealth of Pennsylvania
hereby enacts as follows:
Section 1. Section 303(a.7)(2)(i) of the act of March 4,
1971 (P.L.6, No.2), known as the Tax Reform Code of 1971, is
amended by adding a clause to read:
SECTION 1. SECTION 303(A.7)(2)(I)(B) OF THE ACT OF MARCH 4,
1971 (P.L.6, NO.2), KNOWN AS THE TAX REFORM CODE OF 1971, IS
AMENDED AND THE SECTION IS AMENDED BY ADDING A CLAUSE TO READ:
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Section 303. Classes of Income.--* * *
(a.7) The following apply:
* * *
(2) (i) The following shall not be subject to tax under
this article:
* * *
(B) [ANY ROLLOVER THAT IS EXCLUDABLE FROM TAX UNDER SECTION
529(C)(3)(C) OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED.]
ANY DISTRIBUTION THAT IS EXCLUDABLE FROM TAX UNDER SECTION 529
OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED.
* * *
(E) Any amount received by an employe through an employer's
MATCHING contribution to an account as defined under Article
XIX-J or an ABLE account contract under the act of April 18,
2016 (P.L.128, No.17), known as the "Pennsylvania ABLE Act." .
* * *
Section 2. The act is amended by adding an article ARTICLES
to read:
ARTICLE XIX-J
529 SAVINGS ACCOUNT EMPLOYER
MATCHING CONTRIBUTION TAX CREDIT
Section 1901-J. Scope of article.
This article relates to the 529 savings account employer
MATCHING contribution tax credit program.
Section 1902-J. Definitions.
The following words and phrases when used in this article
have the meanings given to them in this section unless the
context clearly indicates otherwise:
"ABLE account." An account under the act of April 18, 2016
(P.L.128, No.17), known as the Pennsylvania ABLE Act.
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"ABLE account contract." As defined in section 102 of the
Pennsylvania ABLE Act.
"Account." An account owned by an employee who has entered
into a Tuition Account Program Contract under the act of April
3, 1992 (P.L.28, No.11), known as the Tuition Account Programs
and College Savings Bond Act, or an ABLE account contract, or a
tuition account program contract or an ABLE account program
administered by another state, notwithstanding the named
beneficiary of the account.
"Contribution." A deposit of money into an employee-owned
account during the tax year.
"Department." The Treasury Department DEPARTMENT OF REVENUE
of the Commonwealth.
"MATCHING CONTRIBUTION." A DEPOSIT OF MONEY BY AN EMPLOYER
INTO AN EMPLOYEE-OWNED ACCOUNT DURING THE TAX YEAR THAT DOES NOT
EXCEED THE AMOUNT OF DEPOSITS MADE INTO THAT ACCOUNT BY THE
EMPLOYEE DURING THE SAME TAX YEAR.
" Pass-through entity. " Any of the following:
(1) A partnership as defined in section 301(n.0).
(2) A Pennsylvania S corporation as defined in section
301(n.1).
(3) An unincorporated entity subject to section 307.21.
" State tax liability. " Any of the taxes due under Article
III, IV, VII, VIII, IX, XV or XX or a tax under Article XVI of
the act of May 17, 1921 (P.L.682, No.284), known as The
Insurance Company Law of 1921 . The term shall not include any
tax withheld by an employer from an employee under Article III.
"Tax credit." The 529 savings account employer MATCHING
contribution tax credit established under section 1903-J.
"Tuition Account Program Contract." As defined in section
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302 of the Tuition Account Programs and College Savings Bond
Act.
Section 1903-J. Credit for employer MATCHING contributions to
tuition savings accounts and ABLE accounts .
(a) Tax credit.--For taxable years beginning after December
31, 2023 2024 , and ending before January 1, 2029 2030 , an
employer that makes a MATCHING contribution to an account owned
by an employee under this article or an ABLE account may claim a
tax credit against the employer's State tax liability.
(b) Amount of tax credit.--The amount of the tax credit
under subsection (a) shall be equal to 25% of the employer's
aggregate MATCHING contributions made to accounts owned by
employees during the tax year.
(c) Contribution limit for employers.--The total amount of
contributions that an employer may make to accounts owned by
employees shall be no more than $500 per employee during the tax
year.
(C) TAX CREDIT LIMIT FOR EMPLOYERS.--THE TOTAL AMOUNT OF
MATCHING CONTRIBUTIONS TO ACCOUNTS OWNED BY EMPLOYEES FOR WHICH
AN EMPLOYER MAY CLAIM A TAX CREDIT SHALL BE NO MORE THAN $500
PER EMPLOYEE DURING THE TAX YEAR.
(d) Proof of MATCHING contribution.--In order to receive the
tax credit, an employer shall provide the department with proof
that the employer has made qualifying MATCHING contributions to
employee-owned accounts under this article at the time of filing
the employer's tax return.
(E) PROOF OF EMPLOYEE CONTRIBUTION.--IN A MANNER PRESCRIBED
BY THE EMPLOYER, AN EMPLOYEE SHALL PROVIDE TO THE EMPLOYER
EVIDENCE OF THE TOTAL AMOUNT DEPOSITED INTO THE EMPLOYEE'S
ACCOUNT DURING THE PREVIOUS TAX YEAR.
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Section 1904-J. Carryover, carryback , assignment and pass-
through of credit.
(a) General rule.--If the amount of the tax credit allowed
under this article exceeds the employer's tax liability in the
tax year in which the tax credit is approved, the excess tax
credit may be carried over to succeeding tax years for a period
not to exceed three years to reduce the employer's tax liability
during those tax years. The following shall apply:
(1) A tax credit that is carried over to succeeding tax
years must be applied first to the earliest tax year
possible.
(2) Any credit remaining after three tax years following
the initial approval of a tax credit under this article shall
not be refunded or credited to the employer.
(b) No carryback or refund.--An employer approved for a tax
credit is not entitled to carry back or obtain a refund of all
or any portion of an unused tax credit granted to the employer
under this article.
(c) Pass-through entity.--If an employer is a pass-through
entity and has an unused tax credit under section 1903-J, the
employer may elect in writing, according to procedures
established by the Department of Revenue DEPARTMENT , to transfer
all or a portion of the credit to shareholders, members or
partners in proportion to the share of the entity's distributive
income to which the shareholder, member or partner is entitled.
The following apply:
(1) The same unused tax credit under subsection (b) may
not be claimed by:
(i) the pass-through entity; and
(ii) a shareholder, member or patron of the pass-
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through entity.
(2) A shareholder, member or partner of a pass-through
entity to whom a credit is transferred under this subsection
shall immediately claim the credit in the taxable year in
which the transfer is made. The shareholder, member or
partner may not carry forward, carry back, obtain a refund of
or sell or assign the credit.
Section 1905-J. Departmental duties.
(a) Guidelines.-- The department shall publish guidelines and
may promulgate regulations necessary for the implementation and
administration of this article.
(b) Verification of contributions.--The department shall
provide the Department of Revenue with information necessary to
verify that an employer applying for a tax credit under this
article has made contributions to employees' accounts and the
aggregate amount of contributions made.
Section 1906-J. Nondiscrimination in MATCHING contributions.
(a) Accounts owned by employees.--An employee who owns an
account shall have equal opportunity to receive a MATCHING
contribution from the employer.
(b) Duty of employers.--If an employer chooses to make
MATCHING contributions to employee-owned accounts for the
purposes of claiming the tax credit, the employer shall make
equal MATCHING contributions during the tax year to any employee
that either owns an account or chooses to open an account while
employed by the employer.
(c) Rights of employees.--An employee who owns an account
may voluntarily opt out of an employer MATCHING contribution
benefit during any tax year. An employee who opts out of a
MATCHING contribution benefit from the employer during one tax
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year may elect to receive the MATCHING contribution benefit
during another succeeding tax year.
Section 1907-J. Report to General Assembly.
(a) Annual report.--No later than July 1, 2024, and each
July 1 thereafter, the department shall submit a report to the
General Assembly indicating the effectiveness of the tax credit
under this article.
(b) Information required.--The report required under
subsection (a) shall include the following information:
(1) The number of tax credits approved under this
article.
(2) The amount of tax credits approved under this
article.
(3) The number of tax credits denied and the reason for
denial.
ARTICLE XXIX-I
TUITION ACCOUNT PROGRAMS
SECTION 2901-I. DEFINITIONS.
THE FOLLOWING WORDS AND PHRASES WHEN USED IN THIS ARTICLE
SHALL HAVE THE MEANINGS GIVEN TO THEM IN THIS SECTION UNLESS THE
CONTEXT CLEARLY INDICATES OTHERWISE:
"ACCOUNT." AS DEFINED IN SECTION 302 OF THE ACT OF APRIL 3,
1992 (P.L.28, NO.11), KNOWN AS THE TUITION ACCOUNT PROGRAMS AND
COLLEGE SAVINGS BOND ACT.
"ACCOUNT OWNER." AS DEFINED IN SECTION 302 OF THE TUITION
ACCOUNT PROGRAMS AND COLLEGE SAVINGS BOND ACT.
"BENEFICIARY." AS DEFINED IN SECTION 302 OF THE TUITION
ACCOUNT PROGRAMS AND COLLEGE SAVINGS BOND ACT.
" TUITION ACCOUNT PROGRAM CONTRACT." AS DEFINED IN SECTION
302 OF THE TUITION ACCOUNT PROGRAMS AND COLLEGE SAVINGS BOND
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ACT.
SECTION 2902-I. FEES.
NOTWITHSTANDING SECTION 313(C) OF THE ACT OF APRIL 3, 1992
(P.L.28, NO.11), KNOWN AS THE TUITION ACCOUNT PROGRAMS AND
COLLEGE SAVINGS BOND ACT, THE TREASURY DEPARTMENT MAY NOT IMPOSE
A FEE ON THE TERMINATION OF AN ACCOUNT IF THE TERMINATION WAS A
RESULT OF THE DEATH OR DISABILITY OF THE BENEFICIARY.
SECTION 2903-I. TAXATION OF PAYMENT.
NOTWITHSTANDING SECTION 313(D) OF THE ACT OF APRIL 3, 1992
(P.L.28, NO.11), KNOWN AS THE TUITION ACCOUNT PROGRAMS AND
COLLEGE SAVINGS BOND ACT, IF A TUITION ACCOUNT PROGRAM CONTRACT
IS TERMINATED UNDER SECTION 313(A) OF THE TUITION ACCOUNT
PROGRAMS AND COLLEGE SAVINGS BOND ACT, A PAYMENT RECEIVED BY AN
ACCOUNT OWNER FROM THE TREASURY DEPARTMENT SHALL NOT BE
CONSIDERED IN THE CLASSES OF INCOME UNDER SECTION 303 FOR THE
PURPOSE OF COMPUTING THE TAX UNDER ARTICLE III.
Section 3. This act shall take effect in 60 days. AS
FOLLOWS:
(1) THE FOLLOWING SHALL TAKE EFFECT IMMEDIATELY:
(I) THE AMENDMENT OF SECTION 303(A.7)(2)(I)(B) OF
THE ACT.
(II) THIS SECTION.
(2) THE REMAINDER OF THIS ACT SHALL TAKE EFFECT IN 60
DAYS.
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