HB 1610 — 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 for income taxes imposed by other states and providing for provisions for overtime pay; in corporate net income tax, further providing for definitions, for determination of net loss deduction, for imposition of tax, for reports and payment of tax, for timely mailing treated as timely filing and payment and for additional withholding requirements, repealing provisions relating to consolidated reports, further providing for extension of time to file reports, for changes made by Federal Government, for limitations on assessments, for definitions, for manufacturing innovation and reinvestment deduction, for enforcement, rules and regulations, inquisitorial powers of the department, for retention of records and for penalties; in tax credit and tax benefit administration, further providing for definitions and providing for application of tax credits or tax benefits to a unitary business; providing for working Pennsylvanians tax credit; and, in general provisions, further providing for estimated tax, for underpayment of estimated tax and for restatement of tax liability under treaties.

PRINTER'S NO.     1914

                     THE GENERAL ASSEMBLY OF PENNSYLVANIA



                         HOUSE BILL
                         No. 1610
                                               Session of
                                                 2025

     INTRODUCED BY FIEDLER, DALEY, SAMUELSON, KRAJEWSKI, SCOTT,
        DELLOSO, N. NELSON, SANCHEZ, PROBST, HANBIDGE, PIELLI, GIRAL,
        KHAN, NEILSON, CIRESI, HOHENSTEIN, SHUSTERMAN, FREEMAN,
        DONAHUE, HILL-EVANS, OTTEN, CERRATO AND GREEN, JUNE 12, 2025

     REFERRED TO COMMITTEE ON FINANCE, JUNE 12, 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, further providing
11      for definitions, for determination of net loss deduction, for
12      imposition of tax, for reports and payment of tax, for timely
13      mailing treated as timely filing and payment and for
14      additional withholding requirements, repealing provisions
15      relating to consolidated reports, further providing for
16      extension of time to file reports, for changes made by
17      Federal Government, for limitations on assessments, for
18      definitions, for manufacturing innovation and reinvestment
19      deduction, for enforcement, rules and regulations,
20      inquisitorial powers of the department, for retention of
21      records and for penalties; in tax credit and tax benefit
22      administration, providing for application of tax credits or
23      tax benefits to a unitary business; and, in general
24      provisions, further providing for estimated tax, for
25      underpayment of estimated tax and for restatement of tax
26      liability under treaties.
27      The General Assembly of the Commonwealth of Pennsylvania
28   hereby enacts as follows:
29      Section 1.    Section 401(3)1(a) and (b), (3)2(a)(17)(E) and
 1   (5) of the act of March 4, 1971 (P.L.6, No.2), known as the Tax
 2   Reform Code of 1971, are amended, (3)1 is amended by adding a
 3   phrase, (3)1(t) is amended by adding a paragraph, (3)2(a)(1) is
 4   amended by adding a subparagraph, (3)2(a)(9)(A) is amended by
 5   adding a unit, (3)4 is amended by adding phrases and the section
 6   is amended by adding clauses to read:
 7      Section 401.   Definitions.--The following words, terms, and
 8   phrases, when used in this article, shall have the meaning
 9   ascribed to them in this section, except where the context
10   clearly indicates a different meaning:
11      * * *
12      (3)   "Taxable income."   1.    (a)    In case the entire business
13   of the corporation is transacted within this Commonwealth, for
14   any taxable year which begins on or after January 1, 1971,
15   taxable income for the calendar year or fiscal year as returned
16   to and ascertained by the Federal Government before special
17   deductions provided for in 26 U.S.C. Ch. 1 Subch. B Pt. VIII
18   (relating to special deductions for corporations), not including
19   the deductions provided for in 26 U.S.C. § 243 (relating to
20   dividends received by corporations), or in the case of a
21   corporation participating in the filing of consolidated returns
22   to the Federal Government or that is not required to file a
23   return with the Federal Government, the taxable income which
24   would have been returned to and ascertained by the Federal
25   Government before special deductions provided for in 26 U.S.C.
26   Ch. 1 Subch. B Pt. VIII, not including the deductions provided
27   for in 26 U.S.C. § 243, if separate returns had been made to the
28   Federal Government for the current and prior taxable years,
29   subject, however, to any correction thereof, for fraud, evasion,
30   or error as finally ascertained by the Federal Government.

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 1      (b)   Additional deductions shall be allowed from taxable
 2   income on account of any dividends received from any other
 3   corporation but only to the extent that such dividends are
 4   included in taxable income as returned to and ascertained by the
 5   Federal Government. For tax years beginning on or after January
 6   1, 1991, additional deductions shall only be allowed for amounts
 7   included, under [section 78 of the Internal Revenue Code of 1986
 8   (Public Law 99-514, 26 U.S.C. § 78)] 26 U.S.C. § 78 (relating to
 9   gross up for deemed paid foreign tax credit), in taxable income
10   returned to and ascertained by the Federal Government and for
11   the amount of any dividends received from a foreign corporation
12   included in taxable income to the extent such dividends would be
13   deductible in arriving at Federal taxable income if received
14   from a domestic corporation. For taxable years beginning after
15   December 31, 2025, the additional deduction with respect to
16   dividends shall not be allowed for dividends between members of
17   a unitary business.
18      * * *
19      (p.1)   For taxable years beginning after December 31, 2025,
20   in the case of a corporation that is a member of a unitary
21   business, the term "taxable income" shall mean the combined
22   unitary income of the unitary business, as determined on a
23   water's-edge basis, plus the corporation's nonbusiness income.
24      * * *
25      (t)   * * *
26      (5)   The adjustment required under paragraph (1) shall not
27   apply to a transaction between the taxpayer and an affiliated
28   entity if the taxpayer and the affiliated entity file as part of
29   the same combined annual report in this State.
30      * * *

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 1      2.    In case the entire business of any corporation, other
 2   than a corporation engaged in doing business as a regulated
 3   investment company as defined by the Internal Revenue Code of
 4   1986, is not transacted within this Commonwealth, the tax
 5   imposed by this article shall be based upon such portion of the
 6   taxable income of such corporation for the fiscal or calendar
 7   year, as defined in subclause 1 hereof, and may be determined as
 8   follows:
 9      (a)     Division of Income.
10      (1)     As used in this definition, unless the context otherwise
11   requires:
12      * * *
13      (E.1)     Notwithstanding subparagraph (E), in regard to the
14   sale, redemption, maturity or exchange of securities, held by
15   the taxpayer primarily for sale to customers in the ordinary
16   course of its trade or business, sales shall only include the
17   net gains, equal to zero or above, received by the taxpayer.
18      * * *
19      (9)     (A)    Except as provided in subparagraph (B):
20      * * *
21      (vi)     (a)   For taxable years beginning after December 31,
22   2025, the combined unitary income of a unitary business, as
23   determined on a water's-edge basis, shall be apportioned to this
24   State by multiplying said income by the member's sales factor,
25   the numerator of which shall be the member's total sales in this
26   State during the tax period, and the denominator of which shall
27   be the combined total sales of all members of the unitary
28   business everywhere during the tax period. In computing the
29   sales of each member for purposes of apportionment, the
30   following sales are excluded from the numerator and denominator:

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 1      (I)    sales from transactions between or among members of the
 2   unitary business that are deferred under 26 CFR 1.1502-13
 3   (relating to intercompany transactions) for Federal taxable
 4   income purposes; and
 5      (II)    the sales of each member that are excluded from the
 6   unitary business pursuant to the definition of water's-edge
 7   basis.
 8      (b)    The Pennsylvania sales of each nontaxable member shall
 9   be determined based upon the apportionment rules applicable to
10   the member and shall be aggregated. Each taxable member of the
11   unitary business shall include in its sales factor numerator a
12   portion of the aggregate Pennsylvania sales of nontaxable
13   members during the tax period based on a ratio, the numerator of
14   which is the taxable member's Pennsylvania sales during the tax
15   period and the denominator of which is the aggregate
16   Pennsylvania sales of all the taxable members of the unitary
17   business during the tax period.
18      (c)    Nonbusiness income of each member of a unitary business
19   shall be allocated as provided in paragraphs (5) through (8) of
20   phrase (a) of subclause 2 of this definition.
21      (d)    A member of the unitary business shall be subject to tax
22   on its apportioned share of the combined unitary income of the
23   unitary business, as determined on a water's-edge basis, plus
24   its nonbusiness income or loss allocated to this State, minus
25   the member's net loss deduction, if applicable.
26      (e)    The aggregate of all such final sums of each member of
27   the unitary business from phrase (d) shall constitute the
28   portion of the unitary business's income subject to the tax
29   imposed by this article.
30      (f)    (1)   The Secretary of Revenue may distribute, apportion

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 1   or allocate gross income, deductions, credits or allowances
 2   between and among two or more corporations, persons, entities,
 3   members or unitary businesses, whether or not incorporated,
 4   whether or not organized in the United States and whether or not
 5   affiliated, if:
 6      (A)    the corporations, persons, entities, members or unitary
 7   businesses are owned or controlled directly or indirectly by the
 8   same interests within the meaning of 26 U.S.C. § 482 (relating
 9   to allocation of income and deductions among taxpayers); and
10      (B)    the Secretary of Revenue determines that the
11   distribution, apportionment or allocation is necessary in order
12   to reflect an arm's length standard within the meaning of 26 CFR
13   1.482-1 (relating to allocation of income and deductions among
14   taxpayers) and to reflect clearly the income of those
15   corporations, persons, entities, members or unitary businesses.
16      (2)    The Secretary of Revenue shall apply the administrative
17   and judicial interpretations of 26 U.S.C. § 482 in administering
18   this section.
19      (g)    For taxable years beginning after December 31, 2025, any
20   member of a unitary business that would otherwise apportion its
21   share of the combined unitary income of the unitary business, as
22   determined on a water's-edge basis, under phrase (b), (c), (d)
23   or (e) of subclause 2 of this definition shall instead use a
24   sales factor as described in this section.
25      * * *
26      (17)    Sales, other than sales under paragraphs (16) and
27   (16.1), are in this State as follows:
28      * * *
29      (E)    [Gross receipts] Net gains, equal to zero or above, from
30   the sale, redemption, maturity or exchange of securities, held

20250HB1610PN1914                   - 6 -
 1   by the taxpayer primarily for sale to customers in the ordinary
 2   course of its trade or business, if the customers are in this
 3   State.
 4      * * *
 5      4.    * * *
 6      (h)    Subject to the limitations of this subclause, any member
 7   of a unitary business that has unused net loss from taxable
 8   years that began prior to January 1, 2026, or that generates net
 9   losses while a member of a unitary business may only take the
10   net loss deduction for taxable years beginning after December
11   31, 2025, to the extent of the member's share of taxable income
12   after allocation and apportionment and the net losses may not be
13   used by other members of the same unitary business except as
14   otherwise permitted by phrase (g) of subclause 2 of this
15   definition.
16      (i)    Any net loss realized for a taxable year unused by a
17   corporation which subsequently becomes a member of another
18   unitary business may only be used by that corporation except as
19   otherwise permitted by phrase (g) of subclause 2 of this
20   definition.
21      * * *
22      (5)    "Taxable year."   [The taxable year which the
23   corporation, or any consolidated group with which the
24   corporation participates in the filing of consolidated returns,
25   actually uses in reporting taxable income to the Federal
26   Government. With regard to the tax imposed by Article IV of this
27   act (relating to the Corporate Net Income Tax), the terms
28   "annual year," "fiscal year," "annual or fiscal year," "tax
29   year" and "tax period" shall be the same as the corporation's
30   taxable year, as defined in this paragraph.]

20250HB1610PN1914                    - 7 -
 1      1.   Except as set forth in subclause 2, the taxable year
 2   which the corporation, or any consolidated group with which the
 3   corporation participates in the filing of consolidated returns,
 4   actually uses in reporting taxable income to the Federal
 5   Government, or which the corporation would have used in
 6   reporting taxable income to the Federal Government had it been
 7   required to report its taxable income to the Federal Government.
 8   With regard to the tax imposed by Article IV, the terms "annual
 9   year," "fiscal year," "annual or fiscal year," "tax year" and
10   "tax period" shall be the same as the corporation's taxable
11   year, as defined in this subclause or subclause 2.
12      2.   All members of a unitary business shall have a common
13   taxable year for purposes of computing tax due under this
14   article. The taxable year shall be the common taxable year
15   adopted, in a manner prescribed by the department, by all
16   members of the unitary business. The common taxable year must be
17   used by all members of the unitary business in the year of
18   adoption and all future years unless otherwise permitted by the
19   department.
20      * * *
21      (12)    "Tax haven."   A jurisdiction that during the tax year
22   in question:
23      1.   has laws or practices that prevent effective exchange of
24   information for tax purposes with other governments on taxpayers
25   benefiting from the tax regime;
26      2.   has a tax regime which lacks transparency;
27      3.   facilitates the establishment of foreign-owned entities
28   without the need for a local substantive presence or prohibits
29   these entities from having any commercial impact on the local
30   economy;

20250HB1610PN1914                    - 8 -
 1      4.    explicitly or implicitly excludes the jurisdiction's
 2   resident taxpayers from taking advantage of the tax regime
 3   benefits or prohibits enterprises that benefit from the regime
 4   from operating in the jurisdiction's domestic market; or
 5      5.    has created a tax regime which is favorable for tax
 6   avoidance, based upon an overall assessment of relevant factors,
 7   including whether the jurisdiction has a significant untaxed
 8   offshore financial or services sector relative to its overall
 9   economy.
10      (13)    "Unitary business."   A single economic enterprise that
11   is made up of separate parts of a single corporation, of a
12   commonly controlled group of corporations, or both, that are
13   sufficiently interdependent, integrated and interrelated through
14   their activities so as to provide a synergy and mutual benefit
15   that produces a sharing or exchange of value among them and a
16   flow of value to the separate parts. A unitary business includes
17   all parts and corporations that are included in a unitary
18   business under the Constitution of the United States.
19      (14)    "Water's-edge basis."    A system of reporting that
20   includes the income and apportionment factors of certain members
21   of a unitary business, described as follows:
22      1.    Any member incorporated in the United States or formed
23   under the laws of any state of the United States, the District
24   of Columbia, any territory or possession of the United States or
25   the Commonwealth of Puerto Rico.
26      2.    Any member, regardless of the place incorporated or
27   formed, if at least twenty per cent of the member's sales factor
28   is within the United States, and the following shall apply:
29      (a)     For purposes of determining whether at least twenty per
30   cent of a member's sales factor is within the United States, the

20250HB1610PN1914                     - 9 -
 1   calculation must be performed on a stand-alone basis. Sales
 2   shall be gross figures without eliminations for transactions
 3   with other members of any unitary business.
 4      (b)    Whether sales are within the United States is based on
 5   the sales factor sourcing rules contained in clause (3)2.
 6      3.    Any member which is one of the following:
 7      (a)    A domestic international sales corporation as described
 8   in 26 U.S.C. Ch. 1 Subch. N Pt. IV Subpt. A (relating to
 9   treatment of qualifying corporations).
10      (b)    A foreign sales corporation as described in the former
11   26 U.S.C. §§ 921, 922, 923, 924, 925, 926 and 927.
12      (c)    An export trade corporation as described in 26 U.S.C.
13   Ch. 1 Subch. N Pt. III Subpt. G (relating to export trade
14   corporations).
15      4.    Any member not described in subclause 1, 2 or 3 shall
16   include the portion of the member's taxable income derived from
17   or attributable to sources within the United States, as
18   determined under 26 U.S.C. (relating to Internal Revenue Code)
19   without regard to Federal treaties, and its apportionment
20   factors related thereto.
21      5.    Any member that is a "controlled foreign corporation" as
22   defined in 26 U.S.C. § 957 (relating to controlled foreign
23   corporations; United States persons), to the extent the income
24   of that member is income defined in 26 U.S.C. § 952 (relating to
25   Subpart F income defined) as Subpart F income, not excluding
26   lower-tier subsidiaries' distributions of such income which were
27   previously taxed, determined without regard to Federal treaties,
28   and the apportionment factors related to that income; any item
29   of income received by a controlled foreign corporation and the
30   apportionment factors related to such income shall be excluded

20250HB1610PN1914                   - 10 -
 1   if the corporation establishes to the satisfaction of the
 2   Secretary of Revenue that such income was subject to an
 3   effective rate of income tax imposed by a foreign country
 4   greater than ninety per cent of the maximum rate of tax
 5   specified in 26 U.S.C. § 11 (relating to tax imposed). The
 6   effective rate of income tax determination shall be based upon
 7   the methodology under 26 CFR 1.954-1 (relating to foreign base
 8   company income).
 9      6.    Any member that is incorporated in or is doing business
10   in a tax haven unless it is proven to the satisfaction of the
11   secretary that such member is incorporated in or doing business
12   in a tax haven for a legitimate business purpose.
13      (15)    "Commonly controlled group."    For a corporation, the
14   corporation is a member of a group of two or more corporations
15   and more than fifty per cent of the voting stock or controlling
16   interest of each member of the group is directly or indirectly
17   owned by a common owner or by common owners, either corporate or
18   noncorporate, or by one or more of the member corporations of
19   the group.
20      (16)    "Combined unitary income."    The aggregate separate
21   company taxable income or loss of all members of a unitary
22   business subject to apportionment except:
23      1.    Income from an intercompany transaction between members
24   of a unitary business shall be deferred in a manner similar to
25   26 CFR 1.1502-13 for Federal taxable income purposes.
26      2.    Dividends paid by one member of a unitary business to
27   another.
28      3.    Income of the following corporations is not included in
29   the determination of combined unitary income:
30      (a)     any corporation subject to taxation under Article VII,

20250HB1610PN1914                    - 11 -
 1   VIII, IX or XV;
 2      (b)    any corporation specified in the definition of
 3   "institution" in section 701.5 that would be subject to taxation
 4   under Article VII, were it doing business in this Commonwealth,
 5   as defined in section 701.5;
 6      (c)    any corporation commonly known as a title insurance
 7   company that would be subject to taxation under Article VIII,
 8   were it incorporated in this State;
 9      (d)    any corporation specified as an insurance company,
10   association or exchange in Article IX that would be subject to
11   taxation under Article IX, were it transacting insurance
12   business in this State;
13      (e)    any corporation specified in the definition of
14   "institution" in section 1501 that would be subject to taxation
15   under Article XV, were it located, as defined in section 1501,
16   in this State; or
17      (f)    any corporation that has filed a timely election and has
18   qualified to be taxed as a regulated investment company under
19   the provisions of the Internal Revenue Code of 1954, as amended.
20      (17)    "Member."   A corporation that is a member of a unitary
21   business. The term does not include a corporation listed in
22   clause (16)3.
23      (18)    "Taxable member."   A member which would be subject to
24   the tax imposed by this article under section 402 on a separate
25   entity basis for exercising, whether in its own name or through
26   any person, association, business trust, corporation, joint
27   venture, limited liability company, limited partnership,
28   partnership, member or other entity, any of the privileges
29   included in section 402(a)(1), (2), (3), (4) and (5).
30      (19)    "Nontaxable member."     A member which is not a taxable

20250HB1610PN1914                      - 12 -
 1   member.
 2      Section 2.     Section 401.1 of the act is amended by adding a
 3   subsection to read:
 4      Section 401.1.     Determination of Net Loss Deduction.--* * *
 5      (f)    For taxable years beginning after December 31, 2025,
 6   taxpayers filing combined annual reports must calculate the
 7   available net loss deduction on a taxable member by taxable
 8   member basis in accordance with the provisions of subclause 4 of
 9   section 401(3).
10      Section 3.     Sections 402(a) introductory paragraph and (5)
11   (iii) and 403(c), (d) and (f) of the act are amended and the
12   sections are amended by adding subsections to read:
13      Section 402.    Imposition of Tax.--(a)   A corporation shall be
14   subject to and shall pay an excise tax for exercising, whether
15   in its own name or through any person, association, business
16   trust, corporation, joint venture, limited liability company,
17   limited partnership, partnership, member or other entity, any of
18   the following privileges:
19      * * *
20      (5)    * * *
21      (iii)    There shall be a rebuttable presumption that a
22   corporation, or in the context of a unitary business, a member
23   of a unitary business with $500,000 or more of sales sourced in
24   the current tax year to this Commonwealth under section 401 has
25   substantial nexus in this Commonwealth without regard to
26   physical presence in this Commonwealth.
27      * * *
28      (d)    For purposes of this section the term "corporation"
29   shall include a unitary business, except where the context
30   clearly indicates a different meaning.

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 1      Section 403.     Reports and Payment of Tax.--* * *
 2      (a.1)     (1)   Each corporation that is a member of a unitary
 3   business that consists of two or more corporations, unless
 4   excluded by the provisions of this article, shall file as part
 5   of a combined annual report. The members of the unitary business
 6   shall designate one member that is subject to tax under this
 7   article to file the combined annual report and to act as agent
 8   on behalf of all other members of the unitary business. Each
 9   corporation that is a member of a unitary business shall be
10   liable for its tax liability under this article. The agent also
11   shall be liable for the aggregate amount of the unitary
12   business' tax liability pursuant to this article.
13      (2)     The oath or affirmation of the designated member's
14   president, vice president, treasurer, assistant treasurer or
15   other authorized officer shall constitute the oath or
16   affirmation of each corporation that is a member of that unitary
17   business.
18      (3)     The designated member shall transmit to the department
19   upon a form prescribed by the department a combined annual
20   report under oath or affirmation of the member's president, vice
21   president, treasurer, assistant treasurer or other authorized
22   officer.
23      (4)     In addition to the information required in subsection
24   (a), the combined annual report shall set forth:
25      (i)     All members included in the unitary business.
26      (ii)     All necessary data, both in the aggregate and for each
27   member of the unitary business, that sets forth the
28   determination of tax liability for each member of the unitary
29   business.
30      (iii)     Any other information that the department may require.

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 1      (a.2)   A member of a unitary business of two or more
 2   corporations must determine the member's income and
 3   apportionment factors on a water's-edge basis.
 4      * * *
 5      (b.1)   It shall be the duty of each unitary business liable
 6   to pay tax under this article to pay estimated tax under section
 7   3003.2 and to make final payment of tax due for the taxable year
 8   with the combined annual report required by this section.
 9      (c)   The amount of all taxes, imposed under the provisions of
10   this article, not paid on or before the times as above provided,
11   shall bear interest as provided in section 806 of the act of
12   April 9, 1929 (P.L.343, No.176), known as "The Fiscal Code,"
13   from the date they are due and payable until paid, except that
14   if the taxable income has been, or is increased by the
15   Commissioner of Internal Revenue, or by any other agency or
16   court of the United States, interest shall be computed on the
17   additional tax due from thirty days after the corporation
18   receives notice of the change of income until paid: Provided,
19   however, That any corporation or designated member responsible
20   for filing a combined annual report may pay the full amount of
21   such tax, or any part thereof, together with interest due to the
22   date of payment, without prejudice to its right to present and
23   prosecute, an administrative petition or an appeal to court. If
24   it be thereafter determined that such taxes were overpaid, the
25   department shall enter a credit to the account of such
26   corporation or designated member, which may be used by it in the
27   manner prescribed by law.
28      (d)   If the officers of any corporation or designated member
29   shall neglect, or refuse to make any report as herein required,
30   or shall knowingly make any false report, a penalty of five

20250HB1610PN1914                  - 15 -
 1   hundred dollars ($500) plus an additional one per cent for every
 2   dollar of tax determined to be due in excess of twenty-five
 3   thousand dollars ($25,000) shall be added to the tax determined
 4   to be due. No amounts added to the tax shall bear any interest
 5   whatsoever.
 6      * * *
 7      (e.1)   If the members of a unitary business have a common
 8   taxable year that closes not upon December 31, but upon some
 9   other date, such unitary business shall make the combined annual
10   report, herein required, on or before the fifteenth day of the
11   month following what is or would be the due date of the return
12   to the Federal Government, subject in all other respects to the
13   provisions of this article.
14      (f)   If the corporation or any members of the unitary
15   business shall claim in its report or in its combined annual
16   report that the return made to the Federal Government was
17   inaccurate, the amount claimed [by it] to be the taxable income,
18   taxable under this article, and the basis of such claim of
19   inaccuracy, shall be fully specified.
20      Section 4.   Sections 403.1 and 403.2(b) and (e) of the act
21   are amended to read:
22      Section 403.1.   Timely Mailing Treated as Timely Filing and
23   Payment.--Notwithstanding the provisions of any State tax law to
24   the contrary, whenever a report or payment of all or any portion
25   of a State tax is required by law to be received by the
26   Pennsylvania Department of Revenue or other agency of the
27   Commonwealth on or before a day certain, the corporation shall
28   be deemed to have complied with such law if the letter
29   transmitting the report or payment of such tax which has been
30   received by the department is postmarked by the United States

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 1   Postal Service on or prior to the final day on which the payment
 2   is to be received.
 3      For the purposes of this article, presentation of a receipt
 4   indicating that the report or payment was mailed by registered
 5   or certified mail on or before the due date shall be evidence of
 6   timely filing and payment.
 7      For purposes of this section, the term "corporation" shall
 8   include a unitary business.
 9      Section 403.2.    Additional Withholding Requirements.--* * *
10      (b)   A partnership required to file a report under subsection
11   (a) shall withhold and pay to the department a tax on behalf of
12   its nonfiling corporate partners in an amount equal to its net
13   nonfiling corporate partners' shares of income and deductions as
14   reported to the Federal Government multiplied by the tax rate
15   applicable to the taxable year being reported. Any amount
16   withheld and paid to the department on behalf of a nonfiling
17   corporate partner shall be considered a tax payment by that
18   partner and credited to its account [as if it was directly paid
19   by the partner] or the account of the designated member of the
20   unitary business.
21      * * *
22      (e)   The following words, terms and phrases when used in this
23   section shall have the meaning ascribed to them in this section,
24   except where the context clearly indicates a different meaning:
25      "Net nonfiling corporate partners' shares of income and
26   deductions as reported to the Federal Government."   That portion
27   of the income, less the deductions:
28      (1)   reported on Schedule K of the Federal Form 1065, Return
29   of Partnership Income, filed with the Federal Government for the
30   taxable year; and

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 1      (2)    allocated on Federal Schedule K-1 to nonfiling corporate
 2   partners.
 3   If the entire business of the partnership is not transacted in
 4   this Commonwealth, the amount computed under this definition
 5   shall be apportioned to this Commonwealth as provided in section
 6   401(3)2 as if the partnership were a corporation subject to tax
 7   under this article.
 8      "Nonfiling corporate partner."        A partner which:
 9      (1)    is a corporation as defined in section 401; and
10      (2)    has [not] neither filed a tax report nor been included
11   in a combined annual report and has not paid the tax required by
12   sections 402 and 403 for the previous taxable year.
13      "Partner."    An owner of an interest in the partnership, in
14   whatever manner that owner and ownership interest are
15   designated.
16      "Partnership."     An entity classified as a partnership for
17   Federal income tax purposes.
18      (1)    The term includes:
19      (i)    a partnership, limited partnership, limited liability
20   partnership or limited liability company; and
21      (ii)     any syndicate, group, pool, joint venture, business
22   trust, association or other unincorporated organization through
23   or by which a business, financial operation or venture is
24   carried on.
25      (2)    The term does not include an entity that is:
26      (i)    listed on a United States national stock exchange; or
27      (ii)     described in section 401(1)1 or 2.
28      Section 5.    Section 404 of the act is repealed:
29      [Section 404.     Consolidated Reports.--The department shall
30   not permit any corporation owning or controlling, directly or

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 1   indirectly, any of the voting capital stock of another
 2   corporation or of other corporations, subject to the provisions
 3   of this article, to make a consolidated report, showing the
 4   combined net income.]
 5      Section 6.   Section 405 of the act is amended to read:
 6      Section 405.   Extension of Time to File Reports.--The
 7   department may, upon application made to it, in such form as it
 8   shall prescribe, on or prior to the last day for filing any
 9   annual report, and upon proper cause shown, grant to the
10   corporation, required to file such report, an extension of not
11   more than sixty days within which such report may be filed. If
12   the Federal income tax authorities grant an extension of time
13   for filing the reports with the Federal Government, the
14   department shall automatically grant an extension of time for
15   filing the annual report under this article until the fifteenth
16   day of the month following the termination of the Federal
17   extension, but the amount of tax due shall, in such cases,
18   nevertheless, be subject to interest from the due dates and at
19   the rates fixed by this article. For purposes of this section
20   the term "report," when used in the context of filings with the
21   department, shall include combined annual reports and the term
22   "corporation" shall include a unitary business.
23      Section 7.   Section 406(e) of the act is amended and the
24   section is amended by adding a subsection to read:
25      Section 406.   Changes Made by Federal Government.--* * *
26      (e)   The provisions of this section shall apply to every
27   corporation which was doing business in Pennsylvania in the year
28   for which the Federal income has been changed, irrespective of
29   whether or not such corporation or any member of a unitary
30   business has thereafter merged, consolidated, withdrawn or

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 1   dissolved. Any clearance certificate issued by the department
 2   shall be conditioned upon the requirement that in the event of a
 3   change in Federal income for any year for which taxes have been
 4   paid to the Commonwealth, the corporation or its successor or
 5   its officers or its directors shall file with the department a
 6   report of change and pay any additional State tax resulting
 7   therefrom.
 8      (f)   For purposes of this section, the term "corporation"
 9   shall include a unitary business.
10      Section 8.   Sections 407.3(f), 407.6(a)(5), (6) and (8) and
11   407.7(d)(3) of the act are amended to read:
12      Section 407.3.   Limitations on Assessments.--* * *
13      (f)   For purposes of this section[,]:
14      (1)   a report filed before the last day prescribed for filing
15   shall be deemed to have been filed on the last day[.]; and
16      (2)   the term "report" shall include combined annual reports.
17      Section 407.6.   Definitions.--(a)   For the purposes of this
18   part only, the following words, terms and phrases shall have the
19   meaning ascribed to them in this subsection, except where the
20   context clearly indicates a different meaning:
21      * * *
22      (5)   "Qualified manufacturing innovation and reinvestment
23   deduction."   An allowable deduction as determined, calculated
24   and executed in a commitment letter between the department and
25   the taxpayer. The deduction shall be applied to the taxable
26   income of the taxpayer to reduce a qualified tax liability of
27   the taxpayer following the allocation and apportionment of the
28   income of the taxpayer. If the taxpayer is a unitary business
29   filing a combined annual return, the deduction shall be applied
30   to the specific member of the unitary business which qualifies

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 1   under this part. Such member shall reduce taxable income
 2   following allocation and the apportionment of the combined
 3   unitary income of the unitary business, as determined on a
 4   water's-edge basis, and the application of any net loss of the
 5   member.
 6      (6)    "Qualified tax liability."       A taxpayer's tax liability
 7   under this article. In the case of a unitary business, the term
 8   only includes the portion of the unitary business's overall tax
 9   liability under this article associated with the taxable member
10   qualified to receive the deduction under this part.
11      * * *
12      (8)    "Taxpayer."    An employer subject to the tax under this
13   article. For purposes of this definition, an employer shall
14   include a member of a unitary business.
15      * * *
16      Section 407.7.      Manufacturing Innovation and Reinvestment
17   Deduction.--* * *
18      (d)    * * *
19      (3)    (i)     A taxpayer cannot use the deduction to reduce the
20   taxpayer's tax liability by more than fifty per cent of the tax
21   liability under this article for the taxable year. For a unitary
22   business, the limitation shall apply to the portion of the tax
23   liability of the unitary business under this article associated
24   with the taxable member which qualifies for the deduction under
25   this section.
26      (ii)    The deduction is nontransferable and any unused portion
27   in a tax year shall expire at the end of the corresponding tax
28   year.
29      Section 9.      Section 408 of the act is amended by adding a
30   subsection to read:

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 1      Section 408.     Enforcement; Rules and Regulations;
 2   Inquisitorial Powers of the Department.--* * *
 3      (e)     As used in this section, the term "corporation" shall
 4   include a unitary business.
 5      Section 10.    Sections 409 and 410(c) of the act are amended
 6   to read:
 7      Section 409.     Retention of Records.--Each corporation shall
 8   maintain and keep for a period of three years after any report
 9   is filed under this article, such record or records of its
10   business within this Commonwealth for the period covered by such
11   report and other pertinent papers, as may be required by the
12   department. For purposes of this section, the term "corporation"
13   shall include a unitary business.
14      Section 410.     Penalties.--* * *
15      (c)     Any person, who wilfully fails, neglects, or refuses to
16   make a report or to pay the tax as herein prescribed, or who
17   shall refuse to permit the department to examine the books,
18   papers, and records of any corporation liable to pay tax under
19   this article, shall be guilty of a misdemeanor, and, upon
20   conviction thereof, shall be sentenced to pay a fine not
21   exceeding one thousand dollars ($1,000) and costs of
22   prosecution, or to undergo imprisonment not exceeding six
23   months, or both. Such penalty shall be in addition to any other
24   penalties imposed by this article. For purposes of this
25   subsection, the term "corporation" shall include a unitary
26   business.
27      Section 11.    The act is amended by adding a section to read:
28   Section 1710-A.1.    Application of tax credits or tax benefits to
29                 a unitary business.
30      For purposes of determining the amount of tax credit or tax

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 1   benefit which is applicable to the tax due by a unitary business
 2   under Article IV, any tax credit or tax benefit awarded to or
 3   conferred upon a corporation which is a member of a unitary
 4   business shall be calculated as if that member is a separate
 5   company and can only be applied against that portion of the
 6   unitary business's annual tax liability associated with that
 7   member which receives the tax credit or tax benefit. For
 8   purposes of this article, the term "unitary business" shall have
 9   the same meaning as in section 401(13) and the term "member"
10   shall have the same meaning as in section 401(17).
11      Section 12.   Section 3003.2(b)(2) and (4.3) and (c)(1) of the
12   act are amended and subsection (a) is amended by adding a
13   paragraph to read:
14      Section 3003.2.   Estimated Tax.--(a)   The following taxpayers
15   are required to pay estimated tax:
16      * * *
17      (1.1)   Every unitary business subject to the corporate net
18   income tax imposed by Article IV, commencing with the calendar
19   year 2026 and fiscal years beginning during the calendar year
20   2026 and each taxable year thereafter, shall make payments of
21   estimated corporate net income tax.
22      * * *
23      (b)   The following words, terms and phrases when used in this
24   section and section 3003.3 shall have the following meanings
25   ascribed to them:
26      * * *
27      (2)   "Estimated corporate net income tax."   The amount which
28   the corporation or the unitary business estimates as the amount
29   of tax imposed by section 402 of Article IV for the taxable
30   year.

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 1      * * *
 2      (4.3)   "Person."   Any natural person, association, fiduciary,
 3   partnership, corporation, unitary business or other entity,
 4   including the Commonwealth, its political subdivisions and
 5   instrumentalities and public authorities. Whenever used in any
 6   clause prescribing and imposing a penalty or imposing a fine or
 7   imprisonment, or both, the term "person," as applied to an
 8   association, shall include the members thereof [and], as applied
 9   to a corporation, the officers thereof and as applied to a
10   unitary business, the officers of the designated member.
11      * * *
12      (c)    Estimated tax shall be paid as follows:
13      (1)    Payments of estimated corporate net income tax shall be
14   made in equal installments on or before the fifteenth day of the
15   third, sixth, ninth and twelfth months of the taxable year. The
16   remaining portion of the corporate net income tax due, if any,
17   shall be paid upon the date the corporation's annual report or
18   the unitary business's combined annual report is required to be
19   filed without reference to any extension of time for filing such
20   report.
21      * * *
22      Section 13.    Section 3003.3(d) of the act is amended and the
23   section is amended by adding a subsection to read:
24      Section 3003.3.     Underpayment of Estimated Tax.--* * *
25      (d)    Notwithstanding the provisions of [the preceding
26   subsections,] this section, other than as set forth in
27   subsection (d.1), interest with respect to any underpayment of
28   any installment of estimated tax shall not be imposed if the
29   total amount of all payments of estimated tax made on or before
30   the last date prescribed for the payment of such installment

20250HB1610PN1914                    - 24 -
 1   equals or exceeds the amount which would have been required to
 2   be paid on or before such date if the estimated tax were an
 3   amount equal to the tax computed at the rates applicable to the
 4   taxable year, including any minimum tax imposed, but otherwise
 5   on the basis of the facts shown on the report of the taxpayer
 6   for, and the law applicable to, the safe harbor base year,
 7   adjusted for any changes to sections 401, 601, 602 and 1101
 8   enacted for the taxable year, if a report showing a liability
 9   for tax was filed by the taxpayer for the safe harbor base year.
10   If the total amount of all payments of estimated tax made on or
11   before the last date prescribed for the payment of such
12   installment does not equal or exceed the amount required to be
13   paid per the preceding sentence, but such amount is paid after
14   the date the installment was required to be paid, then the
15   period of underpayment shall run from the date the installment
16   was required to be paid to the date the amount required to be
17   paid per the preceding sentence is paid. Provided, that if the
18   total tax for the safe harbor base year exceeds the tax shown on
19   such report by ten per cent or more, the total tax adjusted to
20   reflect the current tax rate shall be used for purposes of this
21   subsection. In the event that the total tax for the safe harbor
22   base year exceeds the tax shown on the report by ten per cent or
23   more, interest resulting from the utilization of such total tax
24   in the application of the provisions of this subsection shall
25   not be imposed if, within forty-five days of the mailing date of
26   each assessment, payments are made such that the total amount of
27   all payments of estimated tax equals or exceeds the amount which
28   would have been required to be paid on or before such date if
29   the estimated tax were an amount equal to the total tax adjusted
30   to reflect the current tax rate. In any case in which the

20250HB1610PN1914                 - 25 -
 1   taxable year for which an underpayment of estimated tax may
 2   exist is a short taxable year, in determining the tax shown on
 3   the report or the total tax for the safe harbor base year, the
 4   tax will be reduced by multiplying it by the ratio of the number
 5   of installment payments made in the short taxable year to the
 6   number of installment payments required to be made for the full
 7   taxable year.
 8      (d.1)   With respect to any underpayment of an installment of
 9   estimated corporate net income tax for any tax year that begins
10   in taxable year 2026 or 2027 by a corporation required to file a
11   combined annual report pursuant to section 403(a.1)(1), interest
12   shall not be imposed if the total amount of all payments of
13   estimated corporate net income tax made on or before the last
14   date prescribed for the payment of such installment equals or
15   exceeds the amount which would have been required to be paid on
16   or before such date if the estimated tax were an amount equal to
17   the combined tax shown on the reports of all the members of the
18   unitary business for the safe harbor base year computed at the
19   rate applicable to the taxable year.
20      Section 14.   Section 3003.11 of the act is amended to read:
21      Section 3003.11.   Restatement of Tax Liability Under
22   Treaties.--In the absence of an express exemption from State
23   income taxes, no treaty of the Federal Government shall be
24   construed to exempt a corporation or a member of a unitary
25   business from the taxes imposed under Articles IV and VI. For
26   purposes of determining "taxable income" under Article IV, any
27   corporation or member of a unitary business not subject to
28   Federal income taxation or Federal reporting requirements
29   pursuant to such a treaty shall be required to file a report or
30   file as part of a combined annual report with the department

20250HB1610PN1914                  - 26 -
 1   showing the taxable income which would have been reported to and
 2   ascertained by the Federal Government had it not been exempted
 3   by the treaty.
 4      Section 15.   The following provisions of the act shall apply
 5   to tax years beginning on and after January 1, 2026:
 6          The amendment or addition of section 401(3)1(a) and (b),
 7      (p.1) and (t)(5), 2(a)(1)(E.1), 2(a)(9)(A)(vi) and 2(a)(17)
 8      (E) and 4(h) and (i), (5), (12), (13), (14), (15), (16),
 9      (17), (18) and (19).
10          The addition of section 401.1(f).
11          The amendment or addition of sections 402(a) introductory
12      paragraph and (5)(iii), (b) and (d) and 403(a.1), (a.2),
13      (b.1), (c), (d), (e.1) and (f).
14          The amendment of sections 403.1 and 403.2(b) and (e).
15          The repeal of section 404.
16          The amendment of section 405.
17          The amendment or addition of section 406(e) and (f).
18          The amendment of sections 407.3(f), 407.6(a)(5), (6) and
19      (8) and 407.7(d)(3).
20          The addition of section 408(e).
21          The amendment of sections 409 and 410(c).
22          The addition of section 1710-A.1.
23          The amendment or addition of section 3003.2(a)(1.1), (b)
24      (2) and (4.3) and (c)(1).
25          The amendment or addition of section 3003.3(d) and (d.1).
26          The amendment of section 3003.11.
27      Section 16.   This act shall take effect January 1, 2026, or
28   immediately, whichever is later.




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