HB 22 — 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 classes of income.

PRINTER'S NO.   4

                     THE GENERAL ASSEMBLY OF PENNSYLVANIA



                         HOUSE BILL
                         No. 22
                                               Session of
                                                 2025

     INTRODUCED BY WATRO, MARCELL, OLSOMMER, HAMM, LEADBETER, CIRESI,
        KUTZ AND ROWE, JANUARY 8, 2025

     REFERRED TO COMMITTEE ON FINANCE, JANUARY 8, 2025


                                    AN ACT
 1   Amending the act of March 4, 1971 (P.L.6, No.2), entitled "An
 2      act relating to tax reform and State taxation by codifying
 3      and enumerating certain subjects of taxation and imposing
 4      taxes thereon; providing procedures for the payment,
 5      collection, administration and enforcement thereof; providing
 6      for tax credits in certain cases; conferring powers and
 7      imposing duties upon the Department of Revenue, certain
 8      employers, fiduciaries, individuals, persons, corporations
 9      and other entities; prescribing crimes, offenses and
10      penalties," in personal income tax, further providing for
11      definitions and for classes of income.
12      The General Assembly of the Commonwealth of Pennsylvania
13   hereby enacts as follows:
14      Section 1.    Sections 301(d) and 303(a)(1)(i) of the act of
15   March 4, 1971 (P.L.6, No.2), known as the Tax Reform Code of
16   1971, are amended to read:
17      Section 301.    Definitions.--Any reference in this article to
18   the Internal Revenue Code of 1986 shall mean the Internal
19   Revenue Code of 1986 (Public Law 99-514, 26 U.S.C. § 1 et seq.),
20   as amended to January 1, 1997, unless the reference contains the
21   phrase "as amended" and refers to no other date, in which case
22   the reference shall be to the Internal Revenue Code of 1986 as
 1   it exists as of the time of application of this article. The
 2   following words, terms and phrases when used in this article
 3   shall have the meaning ascribed to them in this section except
 4   where the context clearly indicates a different meaning:
 5      * * *
 6      (d)   "Compensation" means and shall include salaries, wages,
 7   commissions, bonuses and incentive payments whether based on
 8   profits or otherwise, fees, tips and similar remuneration
 9   received for services rendered, whether directly or through an
10   agent, and whether in cash or in property. The term
11   "compensation" shall include any part of a distribution under a
12   plan described in section 409A(d)(1) of the Internal Revenue
13   Code of 1986 (Public Law 99-514, 26 U.S.C. § 409A(d)(1)), as
14   amended, attributable to an elective deferral of income or the
15   income on any elective deferral of income, whether paid or
16   payable during employment or to a retired person upon or after
17   retirement from service.
18      The term "compensation" shall not mean or include: (i)
19   periodic payments for sickness and disability other than regular
20   wages received during a period of sickness or disability; or
21   (ii) disability, retirement or other payments arising under
22   workmen's compensation acts, occupational disease acts and
23   similar legislation by any government; or (iii) payments
24   commonly recognized as old age or retirement benefits paid to
25   persons retired from service after reaching a specific age or
26   after a stated period of employment; or (iv) payments commonly
27   known as public assistance, or unemployment compensation
28   payments by any governmental agency; or (v) payments to
29   reimburse actual expenses; or (vi) payments made by employers or
30   labor unions, including payments made pursuant to a cafeteria

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 1   plan qualifying under section 125 of the Internal Revenue Code
 2   of 1986 (Public Law 99-514, 26 U.S.C. § 125), for employe
 3   benefit programs covering hospitalization, sickness, disability
 4   or death, supplemental unemployment benefits or strike benefits:
 5   Provided, That the program does not discriminate in favor of
 6   highly compensated individuals as to eligibility to participate,
 7   payments or program benefits; or (vii) any compensation received
 8   by United States servicemen serving in a combat zone; or (viii)
 9   payments received by a foster parent for in-home care of foster
10   children from an agency of the Commonwealth or a political
11   subdivision thereof or an organization exempt from Federal tax
12   under section 501(c)(3) of the Internal Revenue Code of 1954
13   which is licensed by the Commonwealth or a political subdivision
14   thereof as a placement agency; or (ix) payments made by
15   employers or labor unions for employe benefit programs covering
16   social security or retirement; or (x) personal use of an
17   employer's owned or leased property or of employer-provided
18   services[.]; or (xi) any salary earned while a resident or
19   nonresident of this Commonwealth in service to the National
20   Guard, whether active duty or nonactive duty.
21      * * *
22      Section 303.   Classes of Income.--(a)   The classes of income
23   referred to above are as follows:
24      (1)   Compensation.
25      (i)   All salaries, wages, commissions, bonuses and incentive
26   payments whether based on profits or otherwise, fees, tips and
27   similar remuneration received for services rendered whether
28   directly or through an agent and whether in cash or in property
29   except income derived from the United States Government for
30   active duty outside the Commonwealth of Pennsylvania as a member

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 1   of its armed forces and income from the United States Government
 2   or the Commonwealth of Pennsylvania for active State duty for
 3   emergency within or outside the Commonwealth of Pennsylvania,
 4   including duty ordered pursuant to 35 Pa.C.S. Ch. 76 (relating
 5   to Emergency Management Assistance Compact)[.] or for any amount
 6   of income earned as a resident or nonresident of this
 7   Commonwealth while serving in the National Guard, whether active
 8   duty or nonactive duty.
 9      * * *
10      Section 2.   This act shall take effect in 60 days.




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