HB 1129 — 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, repealing provisions relating to penalties and to repealer and effective date; establishing the Net Operating Loss Transfer Program; and imposing penalties.

PRINTER'S NO.     1258

                     THE GENERAL ASSEMBLY OF PENNSYLVANIA



                         HOUSE BILL
                         No. 1129
                                                Session of
                                                  2025

     INTRODUCED BY FRIEL, FRITZ, HANBIDGE, PIELLI, GIRAL, VENKAT,
        SANCHEZ, CEPEDA-FREYTIZ, MALAGARI, DONAHUE, HILL-EVANS,
        ZIMMERMAN, WEBSTER, GREEN AND BRENNAN, APRIL 4, 2025

     REFERRED TO COMMITTEE ON FINANCE, APRIL 4, 2025


                                    AN ACT
 1   Amending the act of March 4, 1971 (P.L.6, No.2), entitled "An
 2      act relating to tax reform and State taxation by codifying
 3      and enumerating certain subjects of taxation and imposing
 4      taxes thereon; providing procedures for the payment,
 5      collection, administration and enforcement thereof; providing
 6      for tax credits in certain cases; conferring powers and
 7      imposing duties upon the Department of Revenue, certain
 8      employers, fiduciaries, individuals, persons, corporations
 9      and other entities; prescribing crimes, offenses and
10      penalties," in corporate net income tax, repealing provisions
11      relating to penalties and to repealer and effective date;
12      establishing the Net Operating Loss Transfer Program; and
13      imposing penalties.
14      The General Assembly of the Commonwealth of Pennsylvania
15   hereby enacts as follows:
16      Section 1.    Parts VII and VIII of Article IV of the act of
17   March 4, 1971 (P.L.6, No.2), known as the Tax Reform Code of
18   1971, are repealed:
19                                [PART VII
20                                PENALTIES
21      Section 410.    Penalties.--(a)   Any person violating any of
22   the provisions of section 409 shall be guilty of a misdemeanor,
23   and shall, upon conviction thereof, be sentenced to pay a fine
 1   not exceeding one thousand dollars ($1,000) and costs of
 2   prosecution, or to undergo imprisonment for not more than six
 3   months, or both.
 4      (b)     Any person who shall wilfully make a false and
 5   fraudulent return of taxable income made taxable by this
 6   article, shall be guilty of wilful and corrupt perjury, and,
 7   upon conviction thereof, shall be subject to punishment as
 8   provided by law. Such penalty shall be in addition to any other
 9   penalties imposed by this article.
10      (c)     Any person, who wilfully fails, neglects, or refuses to
11   make a report or to pay the tax as herein prescribed, or who
12   shall refuse to permit the department to examine the books,
13   papers, and records of any corporation liable to pay tax under
14   this article, shall be guilty of a misdemeanor, and, upon
15   conviction thereof, shall be sentenced to pay a fine not
16   exceeding one thousand dollars ($1,000) and costs of
17   prosecution, or to undergo imprisonment not exceeding six
18   months, or both. Such penalty shall be in addition to any other
19   penalties imposed by this article.
20                                 PART VIII
21                          REPEALER; EFFECTIVE DATE
22      Section 411.     Repeal.--The act of May 16, 1935 (P.L.208),
23   known as the "Corporate Net Income Tax Act," is repealed.
24      Section 412.     Effective Date.--This article shall take effect
25   immediately, and the tax imposed shall apply to taxable years
26   beginning January 1, 1971 and thereafter.]
27      Section 2.     Article IV of the act is amended by adding parts
28   to read:
29                                  PART IX
30                    NET OPERATING LOSS TRANSFER PROGRAM

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 1   Section 421.    Definitions.
 2      The following words and phrases when used in this part shall
 3   have the meanings given to them in this section unless the
 4   context clearly indicates otherwise:
 5      "Allowable expenditures."     Costs incurred in connection with
 6   the operation of an eligible business, including the expenses of
 7   fixed assets, such as the construction, acquisition and
 8   development of real estate, materials, start-up, tenant fit-out,
 9   working capital, salaries and research and development
10   expenditures.
11      "Biotechnology."     The continually expanding body of
12   fundamental knowledge about the functioning of biological
13   systems from the macro level to the molecular and subatomic
14   levels, including novel products, services, technologies and
15   subtechnologies developed as a result of insights gained from
16   research advances, which add to that body of fundamental
17   knowledge.
18      "Biotechnology business."     A person that:
19          (1)     has headquarters or base of operations located in
20      this Commonwealth; and
21          (2)     is engaged in either of the following:
22                (i)    the research, development, production or
23          provision of biotechnology for the purpose of developing
24          or providing products or processes for specific
25          commercial or public purposes, including medical,
26          pharmaceutical, nutritional and other health-related
27          purposes, agricultural purposes and environmental
28          purposes; or
29                (ii)    the provision of services or products necessary
30          for research, development, production or the provision of

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 1          a technology or biotechnology business.
 2      "Cost."   The expenses incurred in connection with the
 3   operation of an eligible business in this Commonwealth,
 4   including the expenses of fixed assets, such as the
 5   construction, acquisition and development of real estate,
 6   materials, start-up, tenant fit-out, working capital and any
 7   other expenses determined by the department to be necessary to
 8   carry out the purposes of this article.
 9      "Department."     The Department of Community and Economic
10   Development of the Commonwealth.
11      "Eligible business."     A biotechnology business or technology
12   business that, as of June 30 of the year in which the
13   biotechnology business or technology business files an
14   application for the program:
15          (1)   has been in operation in this Commonwealth for no
16      more than five years; and
17          (2)   has at least 15% of its total United States full-
18      time employees working in this Commonwealth.
19      "Fixed assets."     The construction, acquisition and
20   development of real estate, materials, start-up, tenant fit-out,
21   working capital, salaries, research and development expenditures
22   and any other expenses determined by the department to be
23   necessary to carry out the purposes of the program.
24      "Full-time employee."     As follows:
25          (1)   An individual who:
26                (i)    is employed by an eligible business for
27          consideration for at least 35 hours a week;
28                (ii)    renders any other standard of service generally
29          accepted by custom or practice as full-time employment
30          and whose wages are subject to withholding as provided

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 1           under 26 U.S.C. § 1400Z-2(c) (relating to special rules
 2           for capital gains invested in opportunity zones); or
 3                 (iii)   renders any other standard of service
 4           generally accepted by custom or practice as full-time
 5           employment and whose distributive share of income, gain,
 6           loss or deduction, or whose guaranteed payments, or any
 7           combination thereof, is subject to tax under this
 8           article.
 9           (2)   The term does not include a person who works as an
10      independent contractor or on a consulting basis for an
11      eligible business.
12      "Private financial assistance."       The term does not include a
13   loan.
14      "Program."    The Net Operating Loss Transfer Program
15   established under section 422.
16      "Purchasing taxpayer."     A taxpayer that purchases tax
17   benefits under this part.
18      "Selling taxpayer."     A taxpayer that is an eligible business
19   and sells tax benefits under this part.
20      "Tax benefit."     The amount of net loss accrued by a selling
21   taxpayer that would otherwise be allowable as a deduction from
22   taxable income under section 401(3).
23      "Tax benefit value."     The value of the tax benefit being sold
24   under this part, calculated by multiplying the amount of the tax
25   benefit by the corporate net income tax rate under section 402
26   that is in effect during the taxable year in which the tax
27   benefit is being sold.
28      "Technology business."     A business that:
29           (1)   has its headquarters or base of operations in this
30      Commonwealth;

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 1             (2)   owns, has filed for or has a valid license to use
 2      protected, proprietary intellectual property; and
 3             (3)   employs a combination of highly educated or trained
 4      managers and workers, or both, employed in this Commonwealth
 5      who use sophisticated scientific research service or
 6      production equipment, processes or knowledge to discover,
 7      develop, test, transfer or manufacture a product or service.
 8      "Working capital."     Liquid capital assets other than fixed
 9   assets.
10   Section 422.     Net Operating Loss Transfer Program.
11      (a)    Establishment.--
12             (1)   The Net Operating Loss Transfer Program is
13      established in the department to allow an eligible business
14      to sell tax benefits for use by purchasing taxpayers.
15             (2)   Tax benefits may be used by a purchasing taxpayer in
16      accordance with the program. A purchasing taxpayer may apply
17      the tax benefits to the purchasing taxpayer's tax liability
18      for the taxable year during which the tax benefits were
19      purchased, except that any tax benefits received by the
20      purchasing taxpayer plus any other net loss deduction
21      allowable under this article may not cause the purchasing
22      taxpayer's total net loss deduction to exceed the limits
23      established under section 401(3).
24      (b)    Approval of sale of tax benefits.--
25             (1)   The department, in consultation with the Department
26      of Revenue, shall review and approve applications by eligible
27      businesses to sell tax benefits in exchange for private
28      financial assistance to be contributed by a purchasing
29      taxpayer in an amount equal to at least 80% of the amount of
30      the tax benefit value.

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 1            (2)   A selling taxpayer's transferable tax benefits shall
 2      be limited to those which the selling taxpayer requests to
 3      transfer in its application to the department and may not, in
 4      total, exceed the maximum amount of tax benefits that the
 5      selling taxpayer is eligible to transfer.
 6            (3)   The department, in consultation with the Department
 7      of Revenue, shall establish rules for the repayment of all,
 8      or a portion of, an amount equal to the selling price of the
 9      tax benefit under section 427.
10      (c)   Approval of purchase of tax benefits.--
11            (1)   The department, in consultation with the Department
12      of Revenue, shall review and approve applications for the
13      purchase of tax benefits in exchange for private financial
14      assistance to be made by a purchasing taxpayer in an amount
15      equal to at least 80% of the amount of the tax benefit value.
16            (2)   The department may not approve an application of an
17      eligible business unless the eligible business certifies
18      that, as of the date of the application, the selling taxpayer
19      is operating as an eligible business and has no current
20      intention to cease operating as an eligible business.
21      (d)   Private financial assistance.--Private financial
22   assistance provided by a purchasing taxpayer under this article
23   must assist in funding expenses incurred in connection with the
24   operation of the eligible business in this Commonwealth,
25   including the expenses of fixed assets.
26      (e)   Distribution of tax benefits and private financial
27   assistance.--The Department of Revenue shall equally distribute
28   tax benefits based on the amount of tax benefits approved for
29   sale and the amount of private financial assistance committed by
30   purchasing taxpayers during a taxable year.

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 1   Section 423.     Authorization to approve certain transfers of tax
 2                  benefits.
 3      The department, in consultation with the Department of
 4   Revenue, shall approve the sale of tax benefits, subject to
 5   section 427.
 6   Section 424.     Eligibility.
 7      The department shall approve an eligible business as a
 8   selling taxpayer, if the eligible business submits an
 9   application to the department and the department, in
10   consultation with the Department of Revenue, finds that the
11   eligible business:
12            (1)   Meets any of the following:
13                  (i)    has protected and proprietary intellectual
14            property that is exclusive to the applicant;
15                  (ii)    has use/license technology or patents developed
16            in this Commonwealth;
17                  (iii)    provides technology to the agriculture
18            industry; or
19                  (iv)    generates at least 50% of its revenue in this
20            Commonwealth.
21            (2)   Has tax benefits that the selling taxpayer is
22      eligible to sell.
23            (3)   Has no positive net operating income for the past
24      two years.
25            (4)   Is subject to tax under this article and files all
26      required tax returns under this article.
27   Section 425.     Application to program.
28      (a)   Fee.--An application submitted by a selling taxpayer or
29   a purchasing taxpayer shall be accompanied by a nonrefundable
30   $2,500 application fee. An application must be received by the

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 1   department by June 30 of each fiscal year.
 2      (b)   Selling taxpayer application.--An application submitted
 3   to the department by a selling taxpayer must include all of the
 4   following:
 5            (1)   A spending certification form attesting to having
 6      spent the proceeds of the prior year's sale of tax benefits
 7      as allowable expenditures under this part.
 8            (2)   If a selling taxpayer was authorized to sell and
 9      sold tax benefits during the previous taxable year, a
10      spending certification form attesting to having spent any
11      private financial assistance received in exchange for the
12      sale of tax benefits on allowable expenditures as provided
13      for in this part.
14            (3)   A tax benefit identification form summarizing the
15      amount of tax benefits to be sold, the years that the tax
16      benefits were accrued and the tax benefit value of the tax
17      benefits to be sold.
18            (4)   A private financial assistance form specifying how
19      the selling taxpayer will expend the private financial
20      assistance for allowable expenditures for the operations of
21      the eligible business.
22            (5)   A description of and business plan or presentation
23      for the selling taxpayer's eligible business, demonstrating
24      that the eligible business is the primary business of the
25      selling taxpayer and that the applicant meets the definition
26      of an eligible business. If applicable, documentation of
27      protected proprietary intellectual property must be provided.
28            (6)   Financial statements for the two most recent full
29      years of operation or, if the selling taxpayer has been in
30      operation for less than two years, the selling taxpayer's

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 1      most recent financial statement, if any.
 2            (7)   A list of all affiliates and subsidiaries of the
 3      selling taxpayer. A corporation is considered to be an
 4      affiliate or subsidiary of the selling taxpayer if the
 5      corporation is subject to tax under this article and one or
 6      more of the following applies:
 7                  (i)    the taxpayer is an entity or an affiliated group
 8            of corporations that directly or indirectly owns or
 9            controls 50% or greater of the selling taxpayer;
10                  (ii)    the taxpayer and the selling taxpayer are both
11            members of the same consolidated group of affiliated
12            corporations, as filed for Federal income tax purposes;
13            or
14                  (iii)    other test of affiliation as required by the
15            department.
16            (8)   Any other information required by the department.
17      (c)   Purchasing taxpayer application.--An application
18   submitted by a purchasing taxpayer must include all of the
19   following:
20            (1)   The name, address and telephone number of the
21      purchasing taxpayer.
22            (2)   A statement of the amount of tax benefits that the
23      purchasing taxpayer requests to receive.
24            (3)   An attestation that includes the following:
25                  (i)    a statement that the purchasing taxpayer has
26            committed to contributing private financial assistance to
27            the program;
28                  (ii)    the dollar amount of private financial
29            assistance the purchasing taxpayer will contribute, which
30            shall be equal to at least 80% of the amount of the tax

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 1            benefit value of the tax benefits the purchasing taxpayer
 2            requests to receive; and
 3                  (iii)    a statement that the purchasing taxpayer has
 4            the financial ability to contribute the amount specified
 5            under subparagraph (ii).
 6            (4)   A statement of the total amount of unused net
 7      operating loss carryover, if any, that the purchasing
 8      taxpayer has accrued.
 9            (5)   A list of all affiliates and subsidiaries of the
10      purchasing taxpayer. A corporation is considered to be an
11      affiliate or subsidiary of the purchasing taxpayer if the
12      corporation is subject to tax under this article and one or
13      more of the following applies:
14                  (i)    the corporation is an entity or an affiliated
15            group of corporations that directly or indirectly owns or
16            controls 50% or greater of the purchasing taxpayer;
17                  (ii)    the corporation and the purchasing taxpayer are
18            both members of the same consolidated group of affiliated
19            corporations, as filed for Federal income tax purposes;
20            or
21                  (iii)    any other test of affiliation as determined by
22            the department.
23            (6)   Other information required by the department.
24   Section 426.     Review of applications.
25      (a)   Review of application.--The department, in consultation
26   with the Department of Revenue, shall review a program
27   application received by the department to determine whether the
28   application meets all of the requirements of this part.
29      (b)   Approval.--The department shall approve an application
30   and shall notify a selling taxpayer or a purchasing taxpayer of

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 1   the approval if:
 2            (1)   The application was received on or before the June
 3      30 deadline.
 4            (2)   The applicant meets all of the requirements of this
 5      part.
 6      (c)   Denial.--The department shall deny an application if one
 7   or more of the following applies:
 8            (1)   The application was received after the June 30
 9      deadline.
10            (2)   The applicant does not meet all of the requirements
11      of this part.
12            (3)   The selling taxpayer has demonstrated positive net
13      operating income in any of the two previous full years of
14      ongoing operations as determined on its financial statements
15      issued in a manner as determined by the department.
16   Section 427.    Limitations on transfer of tax benefits.
17      (a)   On selling taxpayer.--
18            (1)   A selling taxpayer shall be subject to a lifetime
19      cap of $20,000,000 in tax benefits.
20            (2)   During each taxable year, a selling taxpayer that
21      meets all eligibility requirements shall be permitted to sell
22      an amount of tax benefits that may not exceed the lifetime
23      cap over a period of five taxable years.
24            (3)   The amount of tax benefits sold by a selling
25      taxpayer per taxable year may not exceed $5,000,000, except
26      if all selling taxpayers have sold their annual tax benefits
27      and there remains additional purchasing taxpayer demand under
28      the annual purchasing taxpayer cap, the department shall
29      allow selling taxpayers to exceed the individual selling
30      taxpayer annual cap and shall award the additional cap demand

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 1      on a pro rata basis.
 2      (b)    On purchasing taxpayer.--
 3             (1)   A purchasing taxpayer may purchase no more than
 4      $100,000,000 in tax benefits per taxable year.
 5             (2)   Tax benefits awarded to a purchasing taxpayer shall
 6      be reduced by the percentage of available tax benefits sold
 7      by selling taxpayers that are affiliates or subsidiaries of
 8      the purchasing taxpayer, pursuant to the information provided
 9      on the application materials required under section 425.
10   Section 428.     Repayment of tax benefits.
11      (a)    Forfeiture.--
12             (1)   If a selling taxpayer fails to use the private
13      financial assistance received for the sale of tax benefits in
14      a manner prescribed under this part, or fails to maintain a
15      headquarters or a base of operation in this Commonwealth
16      during the five years following receipt of the private
17      financial assistance, the selling taxpayer shall forfeit and
18      remit the face value of the sold tax benefits to the
19      Department of Revenue in accordance with subsections (c) and
20      (d).
21             (2)   The face value of the sold tax benefits shall be the
22      amount of tax benefits the department approved for sale by
23      the selling taxpayer.
24      (b)    Exception.--The forfeiture requirement in subsection (a)
25   pertaining to the failure to maintain a headquarters or a base
26   of operation in this Commonwealth shall not apply if the failure
27   is due to the liquidation of the eligible business.
28      (c)    Prorated certificate.--If a selling taxpayer fails to
29   maintain a headquarters or base of operation in this
30   Commonwealth during the five years following the receipt of the

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 1   private financial assistance, the Department of Revenue shall
 2   allow the selling taxpayer to retain 20% of the face value of
 3   the sold tax benefit for each full year the selling taxpayer
 4   remained in this Commonwealth, except that the selling taxpayer
 5   forfeits and remits to the department the remaining amount of
 6   the face value of the sold tax benefit.
 7      (d)   Failure to use benefits.--If a selling taxpayer uses the
 8   private financial assistance received in exchange for the sale
 9   of tax benefits for expenditures that are not allowable
10   expenditures, the Department of Revenue shall require the
11   selling taxpayer to remit 100% of the amount of the expenditures
12   that are not allowable expenditures.
13   Section 429.    Fraudulent application information.
14      A selling taxpayer or purchasing taxpayer that, with intent
15   to defraud the Commonwealth, willfully submits or causes to be
16   submitted, a program application under section 425 which
17   contains false information commits a misdemeanor and, upon
18   conviction, shall be sentenced to pay a fine not exceeding
19   $2,000 or undergo imprisonment not exceeding three years, or
20   both.
21   Section 430.    Report.
22      (a)   Duty.--Not later than one year following the effective
23   date of this section, and not later than March 1 of each year
24   thereafter, the department, in consultation with the Department
25   of Revenue, shall prepare a report on the program.
26      (b)   Contents.--The report shall include:
27            (1)   A description of the demand for the program from
28      eligible businesses.
29            (2)   The efforts made by the department to promote the
30      program.

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 1            (3)   The total amount of tax benefits approved for
 2      transfer by the department under the program.
 3            (4)   An assessment of the effectiveness of the program in
 4      meeting the goals of this part.
 5      (c)   Submission.--The department shall submit the report to
 6   the Governor and the General Assembly, including recommendations
 7   for legislation to improve the effectiveness of the program.
 8   Section 431.    Regulations and guidelines.
 9      (a)   Promulgation.--The department, in consultation with the
10   Department of Revenue, shall promulgate regulations to implement
11   this part.
12      (b)   Guidelines.--The department, in consultation with the
13   Department of Revenue, shall develop written guidelines for the
14   implementation of this part. The guidelines shall be in effect
15   until the department promulgates regulations for the
16   implementation of this part.
17                                   PART X
18                                 PENALTIES
19   Section 481.    Penalties.
20      A person that:
21            (1)   Violates section 409 shall be guilty of a
22      misdemeanor and shall, upon conviction, be sentenced to pay a
23      fine not exceeding $1,000 and costs of prosecution, or to
24      imprisonment for not more than six months, or both.
25            (2)   Willfully makes a false and fraudulent return of
26      taxable income made taxable by this article, shall be guilty
27      of willful and corrupt perjury and, upon conviction, be
28      subject to punishment as provided by law.
29            (3)   Willfully fails, neglects or refuses to make a
30      report or to pay the tax as prescribed or refuses to permit

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1      the department to examine the books, papers and records of
2      any corporation liable to pay tax under this article, shall
3      be guilty of a misdemeanor and, upon conviction, be sentenced
4      to pay a fine of not more than $1,000 and costs of
5      prosecution, or to imprisonment for not more than six months,
6      or both.
7   The penalties under this section shall be in addition to any
8   other penalties imposed by this article.
9      Section 3.   This act shall take effect in 60 days.




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