HB 1357 — An Act amending the act of March 4, 1971 (P.L.6, No.2), known as the Tax Reform Code of 1971, in personal income tax, further providing for definitions and providing for provisions for overtime pay.

PRINTER'S NO.   1545

                     THE GENERAL ASSEMBLY OF PENNSYLVANIA



                         HOUSE BILL
                         No. 1357
                                               Session of
                                                 2025

     INTRODUCED BY CEPHAS, KHAN, McNEILL, GIRAL, HILL-EVANS, HADDOCK,
        DONAHUE, LEADBETER, HOHENSTEIN, KENYATTA, CERRATO AND GREEN,
        APRIL 30, 2025

     REFERRED TO COMMITTEE ON FINANCE, APRIL 30, 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 personal income tax, further providing for
11      definitions and providing for provisions for overtime pay.
12      The General Assembly of the Commonwealth of Pennsylvania
13   hereby enacts as follows:
14      Section 1.    Section 301(d) of the act of March 4, 1971
15   (P.L.6, No.2), known as the Tax Reform Code of 1971, is amended
16   and the section is amended by adding a subsection to read:
17      Section 301.    Definitions.--Any reference in this article to
18   the Internal Revenue Code of 1986 shall mean the Internal
19   Revenue Code of 1986 (Public Law 99-514, 26 U.S.C. § 1 et seq.),
20   as amended to January 1, 1997, unless the reference contains the
21   phrase "as amended" and refers to no other date, in which case
22   the reference shall be to the Internal Revenue Code of 1986 as
 1   it exists as of the time of application of this article. The
 2   following words, terms and phrases when used in this article
 3   shall have the meaning ascribed to them in this section except
 4   where the context clearly indicates a different meaning: (Intro.
 5   par.
 6      * * *
 7      (d)   "Compensation" means and shall include salaries, wages,
 8   commissions, bonuses, overtime pay and incentive payments
 9   whether based on profits or otherwise, fees, tips and similar
10   remuneration received for services rendered, whether directly or
11   through an agent, and whether in cash or in property. The term
12   "compensation" shall include any part of a distribution under a
13   plan described in section 409A(d)(1) of the Internal Revenue
14   Code of 1986 (Public Law 99-514, 26 U.S.C. § 409A(d)(1)), as
15   amended, attributable to an elective deferral of income or the
16   income on any elective deferral of income, whether paid or
17   payable during employment or to a retired person upon or after
18   retirement from service.
19      The term "compensation" shall not mean or include: (i)
20   periodic payments for sickness and disability other than regular
21   wages received during a period of sickness or disability; or
22   (ii) disability, retirement or other payments arising under
23   workmen's compensation acts, occupational disease acts and
24   similar legislation by any government; or (iii) payments
25   commonly recognized as old age or retirement benefits paid to
26   persons retired from service after reaching a specific age or
27   after a stated period of employment; or (iv) payments commonly
28   known as public assistance, or unemployment compensation
29   payments by any governmental agency; or (v) payments to
30   reimburse actual expenses; or (vi) payments made by employers or

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 1   labor unions, including payments made pursuant to a cafeteria
 2   plan qualifying under section 125 of the Internal Revenue Code
 3   of 1986 (Public Law 99-514, 26 U.S.C. § 125), for employe
 4   benefit programs covering hospitalization, sickness, disability
 5   or death, supplemental unemployment benefits or strike benefits:
 6   Provided, That the program does not discriminate in favor of
 7   highly compensated individuals as to eligibility to participate,
 8   payments or program benefits; or (vii) any compensation received
 9   by United States servicemen serving in a combat zone; or (viii)
10   payments received by a foster parent for in-home care of foster
11   children from an agency of the Commonwealth or a political
12   subdivision thereof or an organization exempt from Federal tax
13   under section 501(c)(3) of the Internal Revenue Code of 1954
14   which is licensed by the Commonwealth or a political subdivision
15   thereof as a placement agency; or (ix) payments made by
16   employers or labor unions for employe benefit programs covering
17   social security or retirement; (x) personal use of an employer's
18   owned or leased property or of employer-provided services.
19      * * *
20      (n.3)   "Overtime pay" means salaries or wages paid to
21   employes for hours of work officially ordered or approved in
22   excess of forty hours per week or eight hours per day, as
23   applicable, according to 5 U.S.C. § 5542 (relating to overtime
24   rates; computation).
25      * * *
26      Section 2.   The act is amended by adding a section to read:
27      Section 357.1.   Provisions for Overtime Pay.--(a)   An
28   employer required to withhold tax under section 316.1 shall
29   withhold tax from an employe's compensation pursuant to the
30   requirement of this article for all hours worked by the employe,

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 1   including overtime hours as provided for under 5 U.S.C. § 5542
 2   (relating to overtime rates; computation).
 3      (b)   An employer may not reduce or deny the availability of
 4   overtime hours to employes pursuant to 5 U.S.C. § 5542 as a sole
 5   result of the deduction under subsection (c), provided that
 6   overtime hours would have otherwise been available to the same
 7   employes under similar circumstances. An employer found to be in
 8   violation of this subsection is subject to a fine of two
 9   thousand dollars ($2,000).
10      (c)   When calculating taxable income on the annual personal
11   income tax return, a taxpayer who received overtime pay during
12   the taxable year shall be eligible to deduct an amount equal to
13   the amount of overtime pay received. If the amount of deduction
14   that the taxpayer is eligible to receive under this section
15   causes the taxpayer's tax liability under this article to be
16   less than zero, the department shall refund the excess amount to
17   the taxpayer.
18      Section 3.   This act shall apply to taxable years commencing
19   on or after December 31, 2025.
20      Section 4.   This act shall take effect immediately.




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