Pennsylvania SB 656: An Act amending the act of March 4, 1971 (P.L.6, No.2), known as the Tax Reform Code of 1971, in corporate net income tax, further providing for definitions, for reports and payment of tax and for consolidated reports; and, in general provisions, further providing for underpayment of estimated tax.

Bill Text

PRINTER'S NO. 695
THE GENERAL ASSEMBLY OF PENNSYLVANIA
SENATE BILL
No. 656
Session of
2025
INTRODUCED BY TARTAGLIONE, COLLETT, FONTANA, KEARNEY, STREET,
COMITTA, HUGHES, HAYWOOD, COSTA, KANE AND SANTARSIERO,
APRIL 28, 2025
REFERRED TO FINANCE, APRIL 28, 2025
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 reports and payment of tax 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), (b) and (t) and (5) of the
act of March 4, 1971 (P.L.6, No.2), known as the Tax Reform Code
of 1971, are amended, (3)2(a)(9)(A) is amended by adding a unit,
(3)1 and (3)4 are amended by adding phrases 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
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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 before special
deductions provided for in 26 U.S.C. Ch. 1 Subch. B Pt. VIII
(relating to special deductions for corporations), 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 before special deductions provided for
in 26 U.S.C. Ch. 1 Subch. B Pt. VIII 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
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in arriving at Federal taxable income if received from a
domestic corporation. For taxable years beginning after December
31, 2025 , the additional deduction with respect to dividends
shall not be allowed for dividends between members of a unitary
group.
* * *
(p.1) For taxable years after December 31, 2025 , in the case
of a corporation that is a member of a unitary business, the
term "taxable income" shall mean the combined unitary income of
the unitary business, as determined on a water's-edge basis.
* * *
(t) (1) Except as provided in paragraph (2), (3) or (4) for
taxable years beginning after December 31, 2014, and in addition
to any authority the department has on the effective date of
this paragraph to deny a deduction related to a fraudulent or
sham transaction, no deduction shall be allowed for an
intangible expense or cost, or an interest expense or cost,
paid, accrued or incurred directly or indirectly in connection
with one or more transactions with an affiliated entity. In
calculating taxable income under this paragraph, when the
taxpayer is engaged in one or more transactions with an
affiliated entity that was subject to tax in this Commonwealth
or another state or possession of the United States on a tax
base that included the intangible expense or cost, or the
interest expense or cost, paid, accrued or incurred by the
taxpayer, the taxpayer shall receive a credit against tax due in
this Commonwealth in an amount equal to the apportionment factor
of the taxpayer in this Commonwealth multiplied by the greater
of the foll