HB 1815 — An Act repealing the act of July 12, 1935 (P.L.970, No.314), known as the Individual Net Income Tax Act.

PRINTER'S NO.   2235

                     THE GENERAL ASSEMBLY OF PENNSYLVANIA



                         HOUSE BILL
                         No. 1815
                                               Session of
                                                 2025

     INTRODUCED BY ROWE, SCHEUREN, HAMM, GAYDOS AND BERNSTINE,
        AUGUST 21, 2025

     REFERRED TO COMMITTEE ON FINANCE, AUGUST 22, 2025


                                    AN ACT
 1   Repealing the act of July 12, 1935 (P.L.970, No.314), entitled
 2      "An act imposing a graduated income tax for school purposes
 3      on residents of Pennsylvania including fiduciaries and on
 4      income of nonresidents derived from property or business in
 5      Pennsylvania; defining taxable income and requiring filing of
 6      returns thereof; providing for the assessment, collection and
 7      lien of said tax and for the disposition of proceeds thereof;
 8      providing for administration and enforcement of the act by
 9      the Department of Revenue; conferring powers and imposing
10      duties on certain persons, partnerships, associations,
11      corporations, school districts, State officers, employes and
12      departments; imposing penalties; and appropriating the
13      revenues derived from said tax."
14      The General Assembly of the Commonwealth of Pennsylvania
15   hereby enacts as follows:
16      Section 1.    The act of July 12, 1935 (P.L.970, No.314), known
17   as the Individual Net Income Tax Act, is repealed:
18                                 [AN ACT
19   Imposing a graduated income tax for school purposes on residents
20      of Pennsylvania including fiduciaries and on income of
21      nonresidents derived from property or business in
22      Pennsylvania; defining taxable income and requiring filing of
23      returns thereof; providing for the assessment, collection and
 1      lien of said tax and for the disposition of proceeds thereof;
 2      providing for administration and enforcement of the act by
 3      the Department of Revenue; conferring powers and imposing
 4      duties on certain persons, partnerships, associations,
 5      corporations, school districts, State officers, employes and
 6      departments; imposing penalties; and appropriating the
 7      revenues derived from said tax.
 8                                ARTICLE I
 9                       SHORT TITLE AND DEFINITIONS
10      Section 1.    Short Title.--Be it enacted, &c., That this act
11   shall be known and may be cited as the "Individual Net Income
12   Tax Act."
13      Section 2.    Definitions.--The following words, terms and
14   phrases when used in this act shall have the meaning ascribed to
15   them in this section, except where the context clearly indicates
16   a different meaning.
17      "Association."    A partnership, limited partnership, or any
18   other form of unincorporated enterprise owned by two or more
19   persons.
20      "Corporation."    A corporation or joint stock association
21   organized under the laws of this Commonwealth, the United
22   States, or any other state, territory, or foreign country or
23   dependency.
24      "Department."    The Department of Revenue of this
25   Commonwealth.
26      "Dividend."    Any distribution made by a corporation or
27   association, subject, or not subject, to the payment of a tax on
28   capital stock under the laws of the Commonwealth, out of its net
29   earnings or profits, accumulated after December thirty-first,
30   one thousand nine hundred and thirty-four, to its stockholders

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 1   or members, whether in cash or in other property or in stock,
 2   other than stock dividends as hereinafter defined.
 3      "Fiduciary."    A guardian, committee, trustee, executor,
 4   administrator, receiver, conservator, or any person, whether
 5   individual or corporate, acting in any fiduciary capacity for
 6   any person, estate or trust.
 7      "Individual."     A natural person.
 8      "Paid."   For the purposes of the deductions under this act,
 9   means "paid or accrued" or "paid or incurred," and the words
10   "paid or accrued," "paid or incurred" and "incurred" shall be
11   construed according to the method of accounting upon the basis
12   of which the net income is computed under this act.
13      "Person."   Every natural person, fiduciary, association, or
14   corporation. Whenever used in any clause prescribing and
15   imposing a fine or imprisonment, or both, the term "person," as
16   applied to associations, shall mean the partners or members
17   thereof, and as applied to corporations, the officers thereof.
18      "Received."    For the purpose of the computation of the net
19   income under this act, means "received or accrued" and the words
20   "received or accrued" shall be construed according to the method
21   of accounting upon the basis of which the net income is computed
22   under this act.
23      "Resident."    As applied to an individual, means any person
24   domiciled in the Commonwealth of Pennsylvania and any person who
25   maintains a permanent place of abode within this Commonwealth.
26      "Stock dividends."    New stock for surplus or profits
27   capitalized, issued to stockholders in proportion to their
28   previous holdings.
29      "Tax year."    The calendar year upon the basis of which the
30   net income of a taxpayer is computed under this act.

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 1      "Taxpayer."    Any individual, trust or estate required to pay
 2   a tax under the provisions of this act.
 3      The singular shall include the plural, and the masculine
 4   shall include the feminine and neuter.
 5                                ARTICLE II
 6                            IMPOSITION OF TAX
 7      Section 201.   Residents and Nonresidents.--A.   A tax is
 8   hereby imposed upon every resident taxpayer of this
 9   Commonwealth, which tax shall be levied, collected and paid
10   annually, with respect to his entire net income as herein
11   defined, computed at the following rates, after deducting the
12   exemptions provided in this act:
13      (1)   Two per centum of the amount of net income not exceeding
14   five thousand dollars ($5,000.00);
15      (2)   Two and one-half per centum of the amount of the net
16   income in excess of five thousand dollars ($5,000.00), but not
17   in excess of ten thousand dollars ($10,000.00);
18      (3)   Three per centum of the amount of net income in excess
19   of ten thousand dollars ($10,000.00), but not in excess of
20   twenty-five thousand dollars ($25,000.00);
21      (4)   Four per centum of the amount of net income in excess of
22   twenty-five thousand dollars ($25,000.00), but not in excess of
23   fifty thousand dollars ($50,000.00);
24      (5)   Five per centum of the amount of net income in excess of
25   fifty thousand dollars ($50,000.00), but not in excess of
26   seventy-five thousand dollars ($75,000.00);
27      (6)   Six per centum of the amount of net income in excess of
28   seventy-five thousand dollars ($75,000.00), but not in excess of
29   one hundred thousand dollars ($100,000.00);
30      (7)   Eight per centum of the amount of net income in excess

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 1   of one hundred thousand dollars ($100,000.00).
 2      B.    A like tax is hereby imposed, and shall be levied and
 3   collected and paid annually, at the rates specified in this
 4   section, upon and with respect to the entire net income as
 5   herein defined, from all property owned and from every business,
 6   trade, occupation or profession carried on in this Commonwealth
 7   by natural persons not residents of this Commonwealth.
 8      Section 202.    Estates and Trusts.--A.   The tax imposed by
 9   this act shall apply to estates and trusts which tax shall be
10   levied, collected and paid annually upon and with respect to the
11   income of estates or of any kind of property held in trust
12   including:
13      (1)    Income received by estates of deceased persons during
14   the period of administration or settlement of the estate;
15      (2)    Income accumulated in trust for the benefit of unborn or
16   unascertained persons or persons with contingent interests;
17      (3)    Income held for future distribution under the terms of
18   the will or trust;
19      (4)    Income which is to be distributed to the beneficiaries
20   periodically, whether or not at regular intervals, and the
21   income collected by a guardian of an infant to be held or
22   distributed as the court may direct; and
23      (5)    Income of an estate during the period of administration
24   or settlement permitted by subsection C of this section to be
25   deducted from the net income upon which the tax is to be paid by
26   the fiduciary.
27      B.    The fiduciary shall be responsible for making the return
28   of income for the estate or trust for which he acts whether such
29   income be taxable to the estate or trust or to the beneficiaries
30   thereof. The net income of an estate or trust shall be computed

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 1   in the same manner and on the same basis as provided for
 2   individual taxpayers, and in cases under paragraphs (four) and
 3   (five) of subsection A of this section the fiduciary shall
 4   include in the return a statement of each beneficiary's
 5   distributive share of such net income, whether or not
 6   distributed before the close of the tax year for which the
 7   return is made.
 8      C.   In cases under paragraphs (one), (two) and (three) of
 9   subsection A of this section, the tax shall be imposed upon the
10   estate or trust with respect to the net income of the estate or
11   trust and shall be paid by the fiduciary, except that in
12   determining the net income of the estate of any deceased person
13   during the period of administration or settlement there may be
14   deducted the amount of any income property paid or credited to
15   any legatee, heir or other beneficiary. In such cases the estate
16   or trust shall be allowed the same personal deductions as are
17   allowed to single persons under section three hundred and eight,
18   and in such cases an estate or trust created by a person not a
19   resident, and an estate of a person not a resident, shall be
20   subject to tax only to the extent to which individuals, other
21   than residents, are liable, by reason of the limitation as to
22   gross income provided in section three hundred and three,
23   subsection C.
24      D.   In cases under paragraphs (four) and (five) of subsection
25   A of this section, if the distribution of income is in the
26   discretion of the fiduciary, either as to the beneficiaries to
27   whom payable, or as to the amounts to which any beneficiary is
28   entitled, the tax shall be imposed upon the estate or trust in
29   the manner provided in subsection C of this section, but without
30   the deduction of any amounts of income paid or credited to any

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 1   such beneficiary. In all other cases under paragraphs (four) and
 2   (five) of subsection A of this section, the tax shall not be
 3   paid by the fiduciary but there shall be included, in computing
 4   the net income of each beneficiary, his distributive share,
 5   whether distributed or not, of the net income of the estate or
 6   trust for the tax year. In such cases the net income of a
 7   beneficiary not a resident derived through such estate or trust
 8   shall be subject to tax only to the extent to which individuals,
 9   other than residents are liable, by reason of the limitations as
10   to gross income provided in section three hundred and three,
11   subsection C.
12      E.   A trust created by an employer as a part of a stock bonus
13   pension or profit-sharing plan for the exclusive benefit of
14   some, or all, of his employes to which contributions are made by
15   such employer or employes, or both, for the purpose of
16   distributing to such employes the earnings and principal of the
17   fund accumulated by the trust in accordance with such plan,
18   shall not be taxable under this section but any amount actually
19   distributed, or made available to any distributee, shall be
20   taxable to him in the year in which so distributed or made
21   available to the extent that it exceeds the amounts paid in by
22   him.
23      F.   Where any part of the income of a trust, other than a
24   testamentary trust, is, or may be, applied to the payment of
25   premiums upon policies of insurance on the life of the grantor,
26   or to the payment of premiums upon policies of life insurance
27   under which the grantor is the beneficiary, such part of the
28   income of the trust shall be included in computing the net
29   income of the grantor.
30      Section 203.   Partnerships.--Individuals carrying on business

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 1   in partnerships shall be liable for income tax only in their
 2   individual capacity. There shall be included in computing the
 3   net income of each partner his distributive share, whether
 4   distributed or not, of the net income of the partnership for the
 5   tax year. Taxpayers who are members of partnerships may be
 6   required by the department to make a return stating the gross
 7   receipts and net gains or profits of the partnership for any tax
 8   year. The net income of the partnership shall be computed in the
 9   same manner and on the same basis as provided in computing the
10   net income of individuals and the personal deductions provided
11   for in section three hundred and eight shall be allowed only to
12   the individual partners.
13      Section 204.   Initial Tax Levy.--The tax imposed by this
14   article shall first be levied, collected and paid in the year
15   one thousand nine hundred thirty-six upon and with respect to
16   taxable net income for the calendar year one thousand nine
17   hundred thirty-five.
18                               ARTICLE III
19                          COMPUTATION OF THE TAX
20      Section 301.   Net Income.--The term "net income" means the
21   gross income of a taxpayer less the deductions allowed by this
22   article.
23      Section 302.   Manner of Computing Net Income.--The net income
24   shall be computed in accordance with the method of accounting
25   regularly employed in keeping the books of the taxpayer; but if
26   no such method of accounting has been so employed, or if the
27   method employed, does not clearly reflect the income, the
28   computation shall be made upon such basis, and in such manner,
29   as in the opinion of the department does clearly reflect the
30   income.

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 1      Section 303.    Gross Income.--A.   The term "gross income"
 2   includes gains, profits and income derived from salaries, wages
 3   or compensation for personal service, of whatever kind and in
 4   whatever form paid, or from professions, vocations, trades,
 5   businesses, commerce, or sales, or dealings in property, whether
 6   real or personal, growing out of the ownership, or use of, or
 7   interest in, such property, also from interest, rent, dividends,
 8   securities, or the transaction of any business, carried on for
 9   gain or profit, and all other income derived from any source
10   whatever, including income derived through estates or trusts by
11   the beneficiaries thereof, whether as distributed or as
12   distributable shares. The amount of all such items shall be
13   included in the gross income for the tax year in which received
14   by the taxpayer.
15      B.    The term "gross income" does not include the following
16   items:
17      (1)    Amounts received under a life insurance contract paid by
18   reason of the death of the insured, whether in a single sum or
19   in installments, but if such amounts are held by the insurer
20   under an agreement to pay interest thereon, the interest
21   payments shall be included in gross income;
22      (2)    The amount received by the insured as a return of
23   premium or premiums paid by him under life insurance, endowment
24   or annuity contract, either during the term, or at the maturity
25   of the term, mentioned in the contract, or upon surrender of the
26   contract;
27      (3)    The value of property acquired by gift, bequest, devise
28   or descent, but the income from such property shall be included
29   in gross income;
30      (4)    Interest upon the obligations of the United States, or

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 1   its possessions, or the obligations of the Commonwealth of
 2   Pennsylvania, or of any municipal corporation, or political
 3   subdivision thereof;
 4      (5)   Any amount received through accident or health
 5   insurance, or under workmen's compensation acts as compensation
 6   for personal injuries or sickness, plus the amount of any
 7   damages received, whether by suit or agreement, on account of
 8   such injuries or sickness, or through the war risk insurance
 9   act, or any law for the benefit or relief of injured or disabled
10   members of the military or naval forces of the United States;
11      (6)   Salaries, wages and other compensation received from the
12   United States by officials or employes thereof, including
13   persons in the military or naval forces of the United States;
14      (7)   Income received by any officer of a religious
15   denomination, or by any institution or trust for moral or mental
16   improvement, religious, bible, tract, charitable, benevolent,
17   fraternal, missionary, hospital, infirmary, educational,
18   scientific, literary, library, patriotic, historical or cemetery
19   purposes or for the enforcement of laws relating to children or
20   animals, or for two or more of such purposes, if such income be
21   used exclusively for carrying out one, or more, of such
22   purposes, but nothing herein shall be construed to exempt the
23   fees, stipends, personal earnings or other private income of
24   such officer or trustees;
25      (8)   Stock dividends when received by a shareholder, but if
26   before or after the distribution of any such dividend, the
27   corporation proceeds to cancel or redeem its stock, at such time
28   and in such manner as to make the distribution and cancellation
29   or redemption in whole or in part essentially equivalent to the
30   distribution of a taxable dividend, the amount so distributed in

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 1   redemption or cancellation of the stock shall be treated as a
 2   taxable dividend, and included in gross income: Provided, That
 3   any stock dividend shall be considered in computing gain, profit
 4   or income upon the sale, exchange or other disposition of the
 5   stock upon which a stock dividend has been declared, or of the
 6   stock included in such stock dividend;
 7      (9)     The principal and income paid by a building and loan
 8   association to a member thereof upon the maturity of his or her
 9   shares or upon the withdrawal of such member from the
10   association;
11      (10)     Any amount received by any person whatever under any
12   law of this Commonwealth, the United States, or any other state
13   providing for any pension, bonus or compensation whatsoever for,
14   or in respect to, services in the military or naval forces of
15   the United States in any war in which the United States has been
16   engaged.
17      C.    In the case of taxpayers, other than residents, gross
18   income includes only the gross income from sources within the
19   State, but shall not include annuities, interest on bank
20   deposits, interest on bonds, notes or other interest-bearing
21   obligations or dividends from corporations, except to the extent
22   to which the same shall be a part of income from any business,
23   trade, profession or occupation carried on in this State subject
24   to taxation under this act.
25      D.    In the case of taxpayers who regularly sell, or otherwise
26   dispose of, personal property on the installment plan, gross
27   income includes, in any tax year, only such portion of the total
28   profit realized, or to be realized when the payment is
29   completed, as the installment payments received in that year
30   bears to the total of all installment payments.

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 1      E.    In the case of a casual sale or other casual disposition
 2   of personal property, or of a sale or other disposition of real
 3   property, if in either case the payment in cash or property are
 4   not completed during the tax year when the sale or disposition
 5   was made, the income may be returned on the basis and in the
 6   manner above described in subsection D of this section for
 7   installment sales. Evidences of indebtedness of the purchaser,
 8   or amounts secured by the property sold or disposed of, shall
 9   not be construed to be payments, but in such cases the income
10   shall be returned on the above basis in the tax year when such
11   indebtedness, or the amounts secured or any part thereof, is
12   paid to the vendor.
13      Section 304.   Ascertainment of Gain and Loss.--A.   For the
14   purpose of ascertaining any gain included in gross income as
15   herein defined, derived, or any deductible loss sustained, for
16   the sale or other disposition of property, real, personal or
17   mixed, the basis shall be, in case of property acquired on or
18   after January first, one thousand nine hundred thirty-five, the
19   cost thereof or the inventory value, if the inventory is made in
20   accordance with this article.
21      B.    In case of property acquired prior to January first, one
22   thousand nine hundred thirty-five, and disposed of thereafter--
23      (1)    No profit shall be deemed to have been derived if either
24   the cost or the fair market price or value on January first, one
25   thousand nine hundred thirty-five, exceeds the value realized;
26      (2)    No loss shall be deemed to have been sustained if either
27   the cost or the fair market price or value on January first, one
28   thousand nine hundred thirty-five, is less than the value
29   realized;
30      (3)    Where both the cost and the fair market price or value

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 1   on January first, one thousand nine hundred thirty-five, are
 2   less than the value realized, the basis for computing profit
 3   shall be the cost or the fair market price or value on January
 4   first, one thousand nine hundred thirty-five, whichever is
 5   higher;
 6      (4)    Where both the cost and the fair market price or value
 7   on January first, one thousand nine hundred thirty-five, are in
 8   excess of the value realized, the basis for computing loss shall
 9   be the cost or the fair market price or value on January first,
10   one thousand nine hundred thirty-five, whichever is lower.
11      Section 305.   Exchange of Property.--Upon the sale or
12   exchange of property in transactions, the gain or profit from
13   which is included in gross income as herein defined, the entire
14   amount of the gain or loss determined under section three
15   hundred four of this act shall be recognized, except as
16   hereinafter provided in this section.
17      (A)    No gain or loss shall be recognized if property held for
18   productive use in trade or business or for investment (not
19   including stock in trade or other property held primarily for
20   sale, nor stocks, bonds, notes, choses in action, certificates
21   of trust or beneficial interest, or other securities or
22   evidences of indebtedness or interest) is exchanged solely for
23   property of a like kind to be held either for productive use in
24   trade or business, or for investment, or if common stock in a
25   corporation is exchanged solely for common stock in the same
26   corporation, or if preferred stock in a corporation is exchanged
27   solely for preferred stock in the same corporation.
28      (B)    No gain or loss shall be recognized if stock or
29   securities in a corporation, a party to a reorganization, are in
30   pursuance of the plan or reorganization exchanged solely for

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 1   stock or securities in such corporation or in another
 2   corporation a party to the reorganization.
 3      (C)   No gain or loss shall be recognized if property is
 4   transferred to a corporation by one or more persons solely in
 5   exchange for stock or securities in such corporation, and
 6   immediately after the exchange such person or persons are in
 7   control of the corporations, but, in the case of an exchange by
 8   two or more persons; this subsection shall apply only if the
 9   amount of the stock and securities received by each is
10   substantially in proportion to his interest in the property
11   prior to the exchange.
12      (D)   If property (as a result of its destruction in whole or
13   in part, theft, or seizure, or an exercise of the power of
14   requisition or condemnation, or the threat or imminence thereof)
15   is compulsorily or involuntarily converted into property,
16   similar or related in service or use, to the property so
17   converted, or into money which is forthwith in good faith, under
18   regulations prescribed by the department, expended in the
19   acquisition of other property similar or related in service or
20   use to the property so converted, or in the acquisition of
21   control of a corporation owning such other property, or in the
22   establishment of a replacement fund, no gain or loss shall be
23   recognized. If any part of the money is not so expended, the
24   gain, if any, shall be so recognized, but in an amount not in
25   excess of the money which is not so expended.
26      (E)   If there is distributed, in pursuance of a plan or
27   reorganization, to a shareholder in a corporation, a party to
28   the reorganization, stock or securities in such corporation, or
29   in another corporation, a party to the reorganization, without
30   the surrender by such shareholder of stock or securities in such

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 1   a corporation, no gain to the distributee from the receipt of
 2   such stock or securities shall be recognized.
 3      (F)   If an exchange would be within the provisions of
 4   subsections A, B or C of this section, if it were not for the
 5   fact that the property received in exchange consists not only of
 6   property permitted by such subsection to be received without the
 7   recognition of gain but also of other property or money, then
 8   the gain, if any, to the recipient shall be recognized, but in
 9   an amount not in excess of the sum of such money and the fair
10   market value of such other property.
11      (G)   If an exchange would be within the provisions of
12   subsections A, B or C of this section, if it were not for the
13   fact that the property received in exchange consists not only of
14   property permitted by such subsection to be received without the
15   recognition of gain or loss but also of other property or money,
16   then no loss from the exchange shall be recognized.
17      (H)   As used in this section the term "reorganization"
18   means--(1) a merger or consolidation (including the acquisition
19   by one corporation of at least a majority of the total number of
20   shares of all other classes of stock of another corporation or
21   substantially all the properties of another corporation), or (2)
22   a transfer by a corporation of all or a part of its assets to
23   another corporation if, immediately after the transfer, the
24   transferor or its stockholders, or both, are in control of the
25   corporation to which the assets are transferred, or (3)
26   recapitalization, or (4) a mere change in identity, form or
27   place of organization, however effected.
28      The term "a party to a reorganization" includes a corporation
29   resulting from a reorganization and includes both corporations
30   in the case of an acquisition by one corporation of at least a

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 1   majority of the voting stock and at least a majority of the
 2   total number of shares of all other classes of stock of another
 3   corporation.
 4      As used in this section, "control" means the ownership of at
 5   least eighty per centum of the voting stock and at least eighty
 6   per centum of the total number of shares of all other classes of
 7   stock of the corporation.
 8      Section 306.   Inventory.--Whenever, in the opinion of the
 9   department, the use of inventories is necessary in order clearly
10   to determine the income of any taxpayer, inventories shall be
11   taken by such taxpayer upon such basis as the department may
12   prescribe, conforming as nearly as may be to the best accounting
13   practice in trade or business of such taxpayer.
14      Section 307.   General Deductions.--In computing net income
15   there shall be allowed as deductions--
16      A.   All the ordinary and necessary expenses paid or incurred
17   during the tax year in carrying on any trade or business, or in
18   the production of income required to be included in gross income
19   under this article, including a reasonable allowance for
20   salaries or other compensation for personal service actually
21   rendered, and including rentals or other payments required to be
22   made as a condition to the continued use or possession for
23   purposes of the trade or business of property to which the
24   taxpayer has not taken, or is not taking title, or in which he
25   has no equity.
26      B.   All interest paid or accrued during the taxable year on
27   indebtedness.
28      C.   Taxes paid or accrued within the tax year imposed by--(1)
29   the authority of the United States or of any of its possessions,
30   (2) by the Commonwealth of Pennsylvania (except the net income

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 1   tax imposed by this act and taxes on liquid fuels), (3) by any
 2   city, borough, town, township, school district or poor district
 3   of this Commonwealth (except those assessed as local benefits
 4   tending to increase the value of the property assessed), or (4)
 5   by the authority of any other state, country or territory.
 6      D.   Losses sustained during the tax year and not compensated
 7   for by insurance, or otherwise, if incurred in trade or
 8   business.
 9      E.   Losses sustained during the tax year and not compensated
10   for by insurance or otherwise, if incurred in any transaction
11   entered into for profit, though not connected with the trade or
12   business. No deduction shall be allowed under this clause for
13   any loss claimed to have been sustained in any sale or other
14   disposition of shares been sustained in any sale or other
15   disposition of shares of stock or security where it appears
16   that, within thirty days before or after the date of such sale
17   or other disposition, the taxpayer has acquired (otherwise than
18   by bequest or inheritance), or has entered into a contract or
19   option to acquire, substantially identical property, and the
20   property so acquired is held by the taxpayer for any period
21   after such sale or disposition. If such acquisition or the
22   contract or option to acquire is to the extent of part only of
23   substantially identical property, then only a proportionate part
24   of the loss shall be disallowed.
25      F.   Losses sustained during the tax year of property not
26   connected with the trade or business (but in case of a taxpayer
27   other than a resident only of real property or tangible personal
28   property having an actual situs within the State) if arising
29   from fires, storms, shipwrecks or other casualty, or from theft,
30   and not compensated for by insurance or otherwise.

20250HB1815PN2235                  - 17 -
 1      G.   Debts ascertained to be worthless and charged off within
 2   the tax year, and, when satisfied that a debt is recoverable
 3   only in part, the department may allow such debt to be charged
 4   off in part. In the case of a debt existing on January first,
 5   one thousand nine hundred thirty-five, no more than its fair
 6   market value on that date shall be deducted. A worthless debt
 7   arising since January first, one thousand nine hundred thirty-
 8   five from unpaid wages, salary, rent or any similar item of
 9   taxable income is not an allowable deduction, unless the income
10   which such item represents has been included as income by the
11   taxpayer in a return rendered under this act.
12      H.   A reasonable allowance for the exhaustion, wear and tear
13   of property, the income from which is required to be included in
14   gross income under this article, used in the trade or business,
15   including a reasonable allowance for obsolescence. In case of
16   property held by one person for life with remainder to another
17   person, the deduction shall be computed as if the life tenant
18   were the absolute owner of the property, and shall be allowed to
19   the life tenant. In the case of property held in trust, the
20   allowable deduction shall be apportioned between the income
21   beneficiaries and the trustee in accordance with the pertinent
22   provisions of the instrument creating the trust, or in the
23   absence of such provisions, on the basis of the trust income
24   allocable to each.
25      I.   In the case of mines, oil and gas wells, other natural
26   deposits and timber, a reasonable allowance for depletion and
27   for depreciation or improvement, according to the peculiar
28   conditions in each case, such reasonable allowance in all cases
29   to be made under rules and regulations to be made by the
30   department. The department may apportion such deductions

20250HB1815PN2235                  - 18 -
 1   equitably between the lessor and lessee.
 2      J.   In the case of a taxpayer other than a resident of the
 3   State, the deduction allowed in this section shall be allowed
 4   only if and to the extent that they are connected with income
 5   arising from sources within the State and taxable under this act
 6   to a nonresident taxpayer, and the proper apportionment and
 7   allocation of the deductions with respect to sources of income
 8   within and without the State shall be determined under rules and
 9   regulations to be prescribed by the department.
10      Section 308.   Deductions for Living Expenses.--The following
11   fixed sums, and no others, shall also be allowed to all
12   taxpayers in computing net income as personal deductions on
13   account of living expenses:
14      A.   In the case of a single person, a personal exemption of
15   one thousand dollars ($1,000.00), or in the case of the head of
16   a family, or a married person living with husband or wife, a
17   personal deduction of one thousand five hundred dollars
18   ($1,500.00). A husband and wife living together shall receive
19   but one personal deduction. If such husband and wife make
20   separate returns, the personal deduction may be taken by either
21   or divided between them.
22      B.   Four hundred dollars ($400.00) for each person (other
23   than husband or wife) dependent upon and receiving his chief
24   support from the taxpayer, if such dependant person is under
25   eighteen years of age or is incapable of self-support because
26   mentally or physically defective.
27      C.   If the status of the taxpayer, in so far as it affects
28   the deductions allowed by this section, changes during his tax
29   year, such deduction shall be apportioned under rules and
30   regulations prescribed by the department in accordance with the

20250HB1815PN2235                  - 19 -
 1   number of months before and after such change. For the purposes
 2   of this subsection, a fractional part of a month shall be
 3   disregarded unless it amounts to more than half a month, in
 4   which case it shall be considered as a month.
 5      Section 309.   Items Not Deductible.--In computing net income
 6   no deduction shall in any case be allowed in respect of--
 7      A.   Personal living or family expenses, except as otherwise
 8   herein expressly provided.
 9      B.   Any amount paid out for new buildings or for permanent
10   improvements or betterments made to increase the value of any
11   property or estate.
12      C.   Any amount expended in restoring property or in making
13   good the exhaustion thereof for which an allowance is or has
14   been made, or
15      D.   Premiums paid on any life insurance policy covering the
16   life of any officer or employe or of any person financially
17   interested in any trade or business carried on by the taxpayer
18   when the taxpayer is directly or indirectly a beneficiary under
19   such policy.
20      Section 310.   Credit for Taxes in Case of Taxpayers, Other
21   than Residents of the Commonwealth.--Whenever a taxpayer, other
22   than a resident of the Commonwealth, has become liable to income
23   tax to the state, county or city where he resides, upon his net
24   income for the tax year, derived from sources within this
25   Commonwealth and subject to taxation under this act, the
26   department shall credit the amount of income tax payable by him
27   under this act with such proportion of the tax so payable by him
28   to the state, county or city where he resides as the income
29   subject to taxation under this act bears to his entire income
30   upon which the tax so payable to such other state, county or

20250HB1815PN2235                  - 20 -
 1   city was imposed: Provided, That such credit shall be allowed
 2   only if the laws of said state, county or city--(1) grant a
 3   substantially similar credit to residents of this Commonwealth
 4   subject to income tax under such laws, or (2) impose a tax upon
 5   the personal incomes of its residents derived from sources in
 6   this Commonwealth and exempt from taxation the personal income
 7   of residents of this Commonwealth. No credit shall be allowed
 8   against the amount of the tax on any income taxable under this
 9   act, which is exempt from taxation under the laws of such other
10   state, county or city.
11      Section 311.   Certain Gifts not Taxable.--In case any
12   taxpayer in any tax year, shall give or contribute, and has
13   given or contributed in each of the ten preceding calendar
14   years, ninety per centum or more of his net income in each year
15   to any corporation, or trust, or community chest, fund or
16   foundation, organized and operated exclusively for religious,
17   charitable, scientific, literary, or educational purposes, or
18   for the prevention of cruelty to children or animals, no part of
19   the net earnings of which inures to the benefit of any private
20   shareholder or individual, and no substantial part of the
21   activities of which is carrying on propaganda, or otherwise
22   attempting, to influence legislation, such net income so given
23   or contributed shall not be subject to any tax under the
24   provisions of this act.
25                                ARTICLE IV
26                            RETURNS AND PAYMENT
27      Section 401.   Taxpayers' Returns; Time and Place of Filing;
28   Payment.--A.   Every taxpayer, having a net income for the tax
29   year of one thousand dollars ($1,000.00) or over, if single, or,
30   if married, and not living with husband or wife, or of one

20250HB1815PN2235                   - 21 -
 1   thousand five hundred dollars ($1,500.00) or over, if married
 2   and living with husband or wife, or a gross income for the tax
 3   year of five thousand dollars or over, regardless of the amount
 4   of his net income, shall make, under oath or affirmation, a
 5   return as hereinafter provided, stating specifically the items
 6   of his gross income and the deductions and credits allowed by
 7   this act. For the purposes of this section, any taxpayer, other
 8   than a married person, shall be deemed to be a single person. If
 9   a husband and wife living together have an aggregate net income
10   of one thousand five hundred dollars ($1,500.00) or over, or an
11   aggregate gross income for such year of five thousand dollars
12   ($5,000.00) or over, each shall make such a return, or the
13   income of each shall be included in a single joint return, in
14   which case the tax shall be computed on the aggregate income. If
15   the taxpayer is unable to make his own return, the rturn shall
16   be made by a duly authorized agent or by the guardian or other
17   person charged with the care of the person or property of such
18   taxpayer. A taxpayer other than a resident shall not be entitled
19   to the deductions authorized by section three hundred and seven
20   unless he shall make, under oath or affirmation, a complete
21   return of his gross income both within and without the State.
22      B.   Returns shall be in such form, and shall contain such
23   information, as the department may from time to time prescribe,
24   and shall be filed with the department, at its main office, or
25   at any branch office which it may establish, on or before the
26   fifteenth day of May in the year one thousand nine hundred
27   thirty-six, and in each and every year thereafter for the
28   preceding calendar year. The department is authorized to prepare
29   and furnish such return forms, but the failure of any taxpayer
30   to receive or procure a return form shall not excuse him from

20250HB1815PN2235                  - 22 -
 1   making a return.
 2      C.     The department may, upon application made to it, in such
 3   form as it may prescribe, on or prior to the last day for filing
 4   any report, and upon proper cause shown, grant a reasonable
 5   extension of time for the filing of any return, within which
 6   time such return may be filed without penalty except as herein
 7   provided, and shall keep a record of every such extension and
 8   the reason therefor. Except in the case of taxpayers who are
 9   abroad, no such extension shall be granted for more than six
10   months.
11      D.     Any agent duly authorized by the department is hereby
12   authorized to administer the oath or affirmation to any person
13   or officer making any return or report required by this act for
14   the taking of which oath or affirmation no charge shall be made.
15   Any such agent who shall make any charge for administering such
16   oath or affirmation shall be deemed guilty of a misdemeanor,
17   and, upon conviction thereof, shall be sentenced to pay a fine
18   not exceeding five hundred dollars ($500.00), or to undergo
19   imprisonment not exceeding one (1) year, either, or both, in the
20   discretion of the court.
21      E.     Each taxpayer shall, or in cases where an agent,
22   guardian, committee, fiduciary or other person makes the return
23   for the taxpayer, then such agent, guardian, fiduciary,
24   committee or person shall, at the time of filing the return, pay
25   to the department the amount of tax payable under this act as
26   the same shall appear from a calculation made on the face of the
27   return. If the time for filing the return shall have been
28   extended by the department, the taxpayer shall pay, in addition,
29   interest thereon at the rate of six per centum per annum from
30   the time when the return was originally required to be filed to

20250HB1815PN2235                    - 23 -
 1   the time of payment.
 2      Section 402.   Returns in Cases of Changed Residence.--If a
 3   taxpayer, during the tax year, changes his status from that of
 4   resident to that of nonresident, or from that of nonresident to
 5   that of resident, he shall file two returns: One as a resident
 6   covering the fraction of the year during which he was a
 7   resident, and one as a taxpayer other than a resident covering
 8   the fraction of the year during which he was a nonresident. In
 9   case two returns for one year are filed as aforesaid, the taxes
10   due thereon shall not be less than would be payable if the total
11   net income shown by the two returns were included in a single
12   return. If the aggregate of the taxpayer's net income from all
13   sources during the fraction of the year in which he was a
14   resident, and his net income from sources within the State
15   during the fraction of the year in which he was a nonresident,
16   shall be less than one thousand dollars ($1,000.00) in the case
17   of a taxpayer who is single or married and not living with
18   husband or wife, or under one thousand five hundred dollars
19   ($1,500.00) in the case of a taxpayer who is married and living
20   with husband or wife, no return shall be required under this
21   section unless the aggregate of the taxpayer's gross income from
22   all sources during the fraction of the year in which he was a
23   resident, plus the aggregate of his gross income from sources
24   within the State during the fraction of the year in which he aws
25   a nonresident, is five thousand dollars ($5,000.00) or over, in
26   which event returns shall be required.
27      Section 403.   Partnership Returns.--Every partnership shall
28   make a return for each tax year, stating specifically the items
29   of its gross income and the deductions allowed by this act, and
30   shall include in the return the names and addresses of the

20250HB1815PN2235                  - 24 -
 1   persons who would be entitled to share in the net income if
 2   distributed and the amount of the distributive share of each
 3   person. The return shall be sworn to or affirmed by any one of
 4   the partners.
 5      Section 404.   Fiduciary Returns.--Every fiduciary (except
 6   receivers appointed by authority of law in possession of part
 7   only of the property of a taxpayer) shall make, under oath or
 8   affirmation, a return for the individual, estate, or trust for
 9   whom he acts as follows:
10      A.   If he acts for an individual whose entire income, from
11   whatever source derived, is in his charge and the net income of
12   such individual is one thousand dollars ($1,000.00) or over, if
13   single, or, if married and not living with husband or wife, or
14   one thousand five hundred dollars ($1,500.00) or over if married
15   and living with husband or wife, or whose gross income for the
16   tax year is five thousand dollars ($5,000.00) or over,
17   regardless of the amount of his net income.
18      B.   If he acts--(a) for an estate of a deceased person during
19   the period of administration or settlement whether or not the
20   income of such estate during such period of administration or
21   settlement is properly paid or credited to any legatee, heir or
22   other beneficiary, (b) for an estate or trust the income of
23   which is accumulated in trust for the benefit of unborn or
24   unascertained persons, or persons with contingent interests, or
25   (c) for an estate or trust the income of which is held for
26   future distribution, or is distributable, in the discretion of
27   the fiduciary, under the terms of the will or trust, and the net
28   income of such estate or trust is one thousand dollars
29   ($1,000.00) or over, or the gross income for the tax year is
30   five thousand dollars ($5,000.00) or over, regardless of the

20250HB1815PN2235                  - 25 -
 1   amount of the net income.
 2      C.   If he acts--(a) for an estate or trust the income of
 3   which is to be distributed to the beneficiaries periodically, or
 4   (b) as the guardian of an infant whose income is to be held or
 5   distributed as the court may direct, and any beneficiary of such
 6   estate or trust, or such infant, receives, or is entitled to a
 7   distributive share of the income of one thousand dollars
 8   ($1,000.00) or more. The return made by a fiduciary shall state
 9   specifically the items of the gross income and the deductions,
10   exemptions and credits allowed by this act. Under such
11   regulations as the department may prescribe, a return made by
12   one of two or more joint fiduciaries shall be sufficient
13   compliance with the above requirement.
14      D.   The fiduciary shall make oath or affirmation that he has
15   sufficient knowledge of the affairs of the individual, estate or
16   trust for whom, or which, he acts to enable him to make the
17   return, and that the same is, to the best of his knowledge and
18   belief, true and correct. Fiduciaries required to make returns
19   under this act shall be subject to all the provisions of this
20   act which apply to taxpayers.
21                               ARTICLE V
22                               PROCEDURE
23      Section 501.   Department of Revenue to Administer.--The
24   Department of Revenue shall administer and enforce the tax
25   herein imposed for which purpose it may divide the State into
26   districts, in each of which a branch office of the department
27   may be maintained.
28      Section 502.   Examination of Returns; Assessment of Tax
29   Refunds.--A.   As soon as practicable after the return is filed,
30   the department shall examine it and assess the tax.

20250HB1815PN2235                    - 26 -
 1      B.   If the amount of tax, as assessed, shall be greater than
 2   the amount theretofore paid, the additional assessment shall be
 3   paid by the taxpayer to the department within ten days after a
 4   notice of the amount of such additional tax, as assessed, shall
 5   be mailed to the taxpayer by the department. In such case, if
 6   the return is made in good faith, and the understatement of the
 7   amount in the return is made in good faith, there shall be no
 8   interest or penalty because of such understatement, provided the
 9   deficiency be paid, or notice of an intention to file a petition
10   for a reassessment, or to appear and be heard as herein
11   provided, shall be given within ten days after notice of the
12   amount is mailed to the taxpayer. If payment is not made within
13   ten days, and if no notice of an intention to file a petition
14   for a reassessment, or to appear and be heard is given to the
15   department within ten days as herein provided, there shall be
16   added to the amount of the deficiency five per centum thereof,
17   and, in addition, interest at the rate of one per centum per
18   month for each month or fraction thereof, from the date of such
19   notice to the date of payment. If the understatement is false or
20   fraudulent with intent to evade the tax, the tax, on the
21   additional income, discovered to be taxable and assessed by the
22   department shall be double, and an additional one per centum
23   shall be added to the amount so due for each month or fraction
24   of a month from the date the tax was originally due to the date
25   of payment.
26      C.   If the amount of tax as assessed by the department shall
27   be less than the amount paid by the taxpayer, the excess shall
28   be refunded upon written application, by the department, with
29   the approval of the Board of Finance and Revenue, out of the
30   moneys in the State School Fund to the credit of the school

20250HB1815PN2235                  - 27 -
 1   district income tax account.
 2      As much of the moneys, from time to time, standing to the
 3   credit of the school district income tax account of the State
 4   School Fund, as may be necessary, is hereby appropriated to the
 5   department for the purpose of making refunds as herein
 6   authorized. Estimates of the amounts to be expended from this
 7   account for refunds, form time to time, by the department shall
 8   be submitted to the Governor for his approval or disapproval as
 9   in the case of other appropriations to administrative
10   departments, boards, and commissions; and it shall be unlawful
11   for the Auditor General to honor any requisition of the
12   department for the expenditure of moneys hereunder in excess of
13   the estimates approved by the Governor.
14      Section 503.   Estimated Assessments.--A.   If any individual
15   or fiduciary believed by the department to be liable for a tax
16   under the provisions of this act shall have failed to file a
17   return in accordance with, and within the time prescribed by,
18   the provisions of this act, or any extension thereof granted by
19   the department, if the department should deem it more conducive
20   to the public interest because of the supposed smallness of the
21   tax, or for any other reason, not to proceed to compel the
22   exhibition of such individual's or fiduciary's accounts, it may
23   make an estimated assessment of the probable amount of the tax
24   owing by such individual or fiduciary; but, in every such case,
25   it shall add to every such estimated assessment a penalty of
26   fifty per centum, to include any losses which might otherwise
27   accrue to the Commonwealth from such neglect or refusal to file
28   a return or statement, and the department shall proceed to
29   recover money so due the Commonwealth as in other cases, if not
30   paid when due, as hereinafter provided.

20250HB1815PN2235                   - 28 -
 1      B.   The amount thus determined, together with penalties and
 2   interest at the rate of one per centum per month or fractional
 3   part thereof, shall be due and payable ten days after notice of
 4   such settlement shall be mailed by the department.
 5      Section 504.   Assessments Made at any Time Within Five
 6   Year.--An additional assessment or estimated assessment as
 7   heretofore provided shall be made by the department at any time
 8   within five (5) years after any net income of any taxpayer
 9   should have been returned by him for taxation, any such
10   additional assessment or estimated assessment may be made at any
11   time during said period, notwithstanding he shall have paid a
12   tax assessed on the basis of returns previously made or filed,
13   and notwithstanding the department shall have made previous
14   additional or estimated assessments against such taxpayer. In
15   any such case no credit shall be given for any penalty formerly
16   assessed and paid.
17      Section 505.   Petition for Reassessment; Appeal.--A.   Any
18   taxpayer against whom any estimated or additional assessment is
19   made may petition the department for a reassessment. Notice of
20   an intention to file such a petition, or to appear and be hear,
21   shall be given to the department prior to the time the amount
22   becomes due and payable, to wit, within ten (10) days after
23   notice of such estimated of additional assessment is given, or
24   sent by the department, to the taxpayer as provided in this act.
25   The department shall hold such hearings in each county as may be
26   necessary to hear and determine petitions for reassessment, at
27   such places, and at such times, as may be determined by rules
28   and regulations of the department; and each petitioner who has
29   duly notified the department of an intention to file a petition
30   for reassessment, or to appear and be heard, shall be notified

20250HB1815PN2235                  - 29 -
 1   by the department of the time when, and the place where, such
 2   hearings shall be held. All such petitions shall set forth
 3   specifically and in detail the grounds upon which it is claimed
 4   the estimated or additional assessment is erroneous or unlawful
 5   and shall be accompanied by an affidavit under oath or
 6   affirmation certifying to the correctness of the facts stated
 7   therein. If no petition for reassessment is filed with the
 8   department, the petitioner may, in lieu thereof, appear at the
 9   hearing and present his petition orally in which event all
10   testimony or statements of facts shall be made under oath or
11   affirmation.
12      B.   If such petitioner is dissatisfied with the action of the
13   department on his petition for reassessment, he shall have the
14   right to appeal to the court of common pleas of the proper
15   county at any time within thirty (30) days after notice of such
16   action or refusal is given to him by the department. If any
17   resident shall fail to give due notice of an intention to
18   petition for a reassessment, and to file a petition for
19   reassessment, or to appear and be heard after due notice of his
20   intention to do so, or to appeal to the court of common pleas
21   within the time and in the manner herein set forth, the right to
22   do so shall be forever barred, and any such resident so failing
23   shall not thereafter be permitted in a suit for the recovery of
24   such tax to set up any ground of defense which might have been
25   determined either by the department or the court of common pleas
26   as aforesaid. In all cases of petitions for reassessment and
27   appeals, the burden of proof shall be on the petitioner or
28   appellant, as the case may be, and every appeal to the court of
29   common pleas under this section shall specify all the objections
30   to the assessment, and any objection not specified in the appeal

20250HB1815PN2235                  - 30 -
 1   shall not be considered by the court.
 2      Section 506.   Enforcement, Rules and Regulations;
 3   Inquisitorial Powers of the Department.--A.   The department is
 4   hereby charged with the enforcement of the provisions of this
 5   act and is hereby authorized and empowered to prescribe, adopt,
 6   promulgate, and enforce rules and regulations relating to any
 7   matter or thing pertaining to the administration and enforcement
 8   of the provisions of this act and the collection of taxes,
 9   penalties and interest imposed by this act.
10      B.   The department, or any agent authorized in writing by it,
11   is hereby authorized to examine the books, papers, and records
12   of any taxpayer or supposed taxpayer in order to verify the
13   accuracy of any return made, or if no return was made, to
14   ascertain and assess the tax imposed by this act. Every such
15   taxpayer or supposed taxpayer is hereby directed and required to
16   give to the department, or its duly authorized agent, the means,
17   facilities, and opportunity for such examination and
18   investigations as are hereby provided and authorized. The
19   department is hereby authorized to examine any person under oath
20   concerning any property which was, or should have been, returned
21   for taxation, and to this end may compel the production of
22   books, papers, and records, and the attendance of all persons,
23   whether as parties or witnesses, whom it believes have knowledge
24   of such property. The procedure for such hearing or examination
25   shall be the same as that provided by The Fiscal Code relating
26   to inquisitorial powers of fiscal officers.
27      C.   Any information gained by the department as a result of
28   any returns, investigations, hearings or verifications, required
29   or authorized by this act, shall be confidential except for
30   official purposes and except in accordance with proper judicial

20250HB1815PN2235                  - 31 -
 1   order or as otherwise provided by law, and any person or agent
 2   divulging such information shall be deemed guilt

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