SB 527 — An Act amending the act of December 31, 1965 (P.L.1257, No.511), known as The Local Tax Enabling Act, further providing for title of act; providing for local taxes in cities of the first class, for prohibition of tax on certain individuals and for reimbursement of taxes; and making repeals.

PRINTER'S NO.   500

                     THE GENERAL ASSEMBLY OF PENNSYLVANIA



                        SENATE BILL
                        No. 527
                                               Session of
                                                 2025

     INTRODUCED BY FARRY, PENNYCUICK, ROTHMAN, LAUGHLIN AND MARTIN,
        MARCH 26, 2025

     REFERRED TO FINANCE, MARCH 26, 2025


                                    AN ACT
 1   Amending the act of December 31, 1965 (P.L.1257, No.511),
 2      entitled "An act empowering cities of the second class,
 3      cities of the second class A, cities of the third class,
 4      boroughs, towns, townships of the first class, townships of
 5      the second class, school districts of the second class,
 6      school districts of the third class and school districts of
 7      the fourth class including independent school districts, to
 8      levy, assess, collect or to provide for the levying,
 9      assessment and collection of certain taxes subject to maximum
10      limitations for general revenue purposes; authorizing the
11      establishment of bureaus and the appointment and compensation
12      of officers, agencies and employes to assess and collect such
13      taxes; providing for joint collection of certain taxes,
14      prescribing certain definitions and other provisions for
15      taxes levied and assessed upon earned income, providing for
16      annual audits and for collection of delinquent taxes, and
17      permitting and requiring penalties to be imposed and
18      enforced, including penalties for disclosure of confidential
19      information, providing an appeal from the ordinance or
20      resolution levying such taxes to the court of quarter
21      sessions and to the Supreme Court and Superior Court,"
22      further providing for title of act; providing for local taxes
23      in cities of the first class, for prohibition of tax on
24      certain individuals and for reimbursement of taxes; and
25      making repeals.
26      The General Assembly of the Commonwealth of Pennsylvania
27   hereby enacts as follows:
28      Section 1.    The title of the act of December 31, 1965
29   (P.L.1257, No.511), known as The Local Tax Enabling Act, is
 1   amended to read:
 2                                   AN ACT
 3   Empowering cities of the first class, second class, cities of
 4      the second class A, cities of the third class, boroughs,
 5      towns, townships of the first class, townships of the second
 6      class, school districts of the second class, school districts
 7      of the third class and school districts of the fourth class
 8      including independent school districts, to levy, assess,
 9      collect or to provide for the levying, assessment and
10      collection of certain taxes subject to maximum limitations
11      for general revenue purposes; authorizing the establishment
12      of bureaus and the appointment and compensation of officers,
13      agencies and employes to assess and collect such taxes;
14      providing for joint collection of certain taxes, prescribing
15      certain definitions and other provisions for taxes levied and
16      assessed upon earned income, providing for annual audits and
17      for collection of delinquent taxes, and permitting and
18      requiring penalties to be imposed and enforced, including
19      penalties for disclosure of confidential information,
20      providing an appeal from the ordinance or resolution levying
21      such taxes to the court of quarter sessions and to the
22      Supreme Court and Superior Court.
23      Section 2.    The act is amended by adding a chapter to read:
24                                 CHAPTER 6
25                  LOCAL TAXES IN CITIES OF THE FIRST CLASS
26   Section 601.    Authority to levy taxes.
27      (a)   Authorization.--
28            (1)   The council of a city of the first class shall have
29      the authority, by ordinance, for general revenue purposes, to
30      levy, assess and collect taxes or provide for the levying,

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 1      assessment and collection of taxes on persons, transactions,
 2      occupations, privileges, subjects and personal property
 3      within the limits of a city of the first class, as it shall
 4      determine, except that the council shall not have the
 5      authority to levy, assess and collect a tax or provide for
 6      the levying, assessment and collection of a tax on a
 7      privilege, transaction, subject or occupation, or on personal
 8      property, which is or may become subject to a State tax or
 9      license fee.
10            (2)   If, subsequent to the passage of an ordinance under
11      the authority of this chapter, the General Assembly enacts a
12      tax or license fee on a privilege, transaction, subject or
13      occupation, or on personal property taxed by a city of the
14      first class under this chapter, the act imposing the State
15      tax or license fee shall automatically vacate the city
16      ordinance passed under the authority of this chapter as to
17      all taxes accruing subsequent to the effective date of the
18      act imposing the State tax or license fee.
19            (3)   It is the intention of this section to confer upon
20      cities of the first class the power to levy, assess and
21      collect taxes upon any and all subjects of taxation which the
22      Commonwealth has power to tax but which it does not now tax
23      or license, subject only to this section, that any tax upon a
24      subject which the Commonwealth may tax or license shall
25      automatically terminate upon the effective date of the State
26      act imposing the new tax or license fee.
27      (b)   Prohibition of tax on salaries, wages, commissions or
28   other compensation on certain individuals.--
29            (1)   A city of the first class may not impose a tax on
30      salaries, wages, commissions or other compensation on a

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 1    nonresident individual who is employed by an employer whose
 2    place of business is located in a city of the first class and
 3    performs all employment duties or services outside of the
 4    city of the first class.
 5          (2)   If a nonresident individual performs a portion of
 6    the individual's employment duties or services outside of the
 7    city of the first class, the city of the first class may only
 8    impose a tax on salaries, wages, commissions or other
 9    compensation on that portion of salaries, wages, commissions
10    or other compensation attributable to duties performed by the
11    individual within the city of the first class.
12          (3)   For purposes of this subsection, an employment duty
13    or service is deemed to be performed where the employee is
14    physically located, notwithstanding any electronic device,
15    computer network or other technology that connects the
16    employee to a person or premises located in a city of the
17    first class.
18    (c)   Duties.--
19          (1)   The State Treasurer or other appropriate State
20    official shall, at the time of payment of the salary, wage or
21    other compensation to an officer or employee of the
22    Commonwealth, with the exception of elected officials,
23    domiciled or rendering services within a city of the first
24    class, deduct any tax imposed by the city on the salary, wage
25    or other compensation paid by the Commonwealth to the officer
26    or employee.
27          (2)   The State Treasurer or other appropriate State
28    official shall, on or before the last day of April, July,
29    October and January of each year, make a return on a form
30    furnished by or obtainable from the revenue commissioner of

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 1      the city and remit to the revenue commissioner the amount of
 2      tax so deducted for the three-month period ending on the last
 3      day of the month preceding.
 4   Section 602.     Creation of offices necessary for the collection
 5                  of taxes.
 6      A city of the first class is authorized to provide, by
 7   ordinance, for the creation of bureaus or the appointment and
 8   compensation of officers, clerks, collectors and other
 9   assistants and employees, either under existing departments or
10   otherwise, as may be deemed necessary for the assessment and
11   collection of taxes imposed under the authority of this chapter.
12   Section 603.     Penalties and enforcement of nonpayment of taxes.
13      The council of a city of the first class shall have the power
14   to prescribe and enforce penalties for the nonpayment, within
15   the time fixed for their payment, of taxes imposed under the
16   authority of this chapter and for the violation of the
17   provisions of ordinances passed under the authority of this
18   chapter.
19   Section 604.     Reimbursement.
20      (a)     Applicability.--Notwithstanding any other provision of
21   law or this act, this section shall only apply to a taxpayer who
22   is a resident of this Commonwealth and not a resident of a city
23   of the first class but who is subject to the tax on salaries,
24   wages, commissions or other compensation imposed by a city of
25   the first class under this chapter.
26      (b)     Employer duty.--Each employer of a taxpayer shall report
27   on or before the last day of April, July, October and January of
28   each year to a city of the first class all of the following:
29            (1)   The amount of tax on salaries, wages, commissions or
30      other compensation under subsection (a) imposed by the school

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 1    district in which the taxpayer resides.
 2          (2)   The amount of tax on salaries, wages, commissions or
 3    other compensation under subsection (a) imposed by the
 4    municipality in which the taxpayer resides.
 5    (c)   School districts.--
 6          (1)   Notwithstanding any other provision of law or this
 7    act, for tax years beginning after December 31, 2025, payment
 8    of a tax on salaries, wages, commissions or other
 9    compensation to a city of the first class shall be credited
10    by the school district of the taxpayer's residence at an
11    amount no greater than the tax on salaries, wages,
12    commissions or other compensation imposed by the school
13    district in which the taxpayer resides.
14          (2)   In order to facilitate the prompt implementation of
15    this section, the Department of Education shall, in
16    consultation with the Department of Community and Economic
17    Development, promulgate temporary regulations to calculate
18    the amount equal to the aggregate amount of the tax credited
19    under paragraph (1) which is due to each school district
20    qualifying under this subsection. The temporary regulations
21    shall expire no later than two years following the
22    publication of the temporary regulations. The temporary
23    regulations shall not be subject to:
24                (i)    Section 612 of the act of April 9, 1929
25          (P.L.177, No.175), known as The Administrative Code of
26          1929.
27                (ii)    Sections 201, 202, 203, 204 and 205 of the act
28          of July 31, 1968 (P.L.769, No.240), referred to as the
29          Commonwealth Documents Law.
30                (iii)    Sections 204(b) and 301(10) of the act of

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 1          October 15, 1980 (P.L.950, No.164), known as the
 2          Commonwealth Attorneys Act.
 3                (iv)   The act of June 25, 1982 (P.L.633, No.181),
 4          known as the Regulatory Review Act.
 5          (3)   The Department of Education shall certify the amount
 6    calculated pursuant to the regulations under paragraph (2) to
 7    the city of the first class. The amount certified shall,
 8    within 30 days of receipt of the certification, be paid by
 9    the city of the first class to the school district of
10    residence of each taxpayer.
11    (d)   Municipalities.--
12          (1)   Notwithstanding any other provision of law or this
13    act, for tax years beginning after December 31, 2025, payment
14    of a tax on salaries, wages, commissions or other
15    compensation to a city of the first class shall be credited
16    by the municipality of the taxpayer's residence at an amount
17    no greater than the tax on salaries, wages, commissions or
18    other compensation imposed by the municipality in which the
19    taxpayer resides.
20          (2)   In order to facilitate the prompt implementation of
21    this section, the Department of Community and Economic
22    Development shall, in consultation with the Department of
23    Education, promulgate temporary regulations to calculate the
24    amount equal to the aggregate amount of the tax credited
25    under paragraph (1) which is due to each municipality
26    qualifying under this subsection. The temporary regulations
27    shall expire no later than two years following the
28    publication of the temporary regulations. The temporary
29    regulations shall not be subject to:
30                (i)    Section 612 of The Administrative Code of 1929.

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 1                (ii)    Sections 201, 202, 203, 204 and 205 of the
 2          Commonwealth Documents Law.
 3                (iii)    Sections 204(b) and 301(10) of the
 4          Commonwealth Attorneys Act.
 5                (iv)    The Regulatory Review Act.
 6          (3)   The Department of Community and Economic Development
 7      shall certify the amount calculated pursuant to the
 8      regulations under paragraph (2) to the city of the first
 9      class. The amount certified shall, within 30 days of receipt
10      of the certification, be paid by the city of the first class
11      to the municipality of residence of each taxpayer.
12      Section 3.   Repeals are as follows:
13          (1)   The General Assembly declares that the repeal under
14      paragraph (2) is necessary to effectuate the addition of
15      Chapter 6 of the act.
16          (2)   The act of August 5, 1932 (Sp.Sess., P.L.45, No.45),
17      referred to as the Sterling Act, is repealed.
18          (3)   The General Assembly declares that the repeal under
19      paragraph (4) is necessary to effectuate the addition of
20      Chapter 6 of the act.
21          (4)   Section 324 of the act of June 27, 2006 (1st
22      Sp.Sess., P.L.1873, No.1), known as the Taxpayer Relief Act,
23      is repealed.
24      Section 4.   The addition of Chapter 6 of the act is a
25   continuation of the act of August 5, 1932 (Sp.Sess., P.L.45,
26   No.45), referred to as the Sterling Act. The following apply:
27          (1)   Except as otherwise provided in Chapter 6 of the
28      act, all activities initiated under the Sterling Act shall
29      continue and remain in full force and effect and may be
30      completed under Chapter 6 of the act. Orders, regulations,

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 1      rules and decisions which were made under the Sterling Act
 2      and which are in effect on the effective date of section 3(2)
 3      of this act shall remain in full force and effect until
 4      revoked, vacated or modified under Chapter 6 of the act.
 5      Contracts, obligations and collective bargaining agreements
 6      entered into under the Sterling Act are not affected nor
 7      impaired by the repeal of the Sterling Act.
 8          (2)   Except as provided in paragraph (3), any difference
 9      in language between Chapter 6 of the act and the Sterling Act
10      is intended only to conform to the style of the act and is
11      not intended to change or affect the legislative intent,
12      judicial construction or administration and implementation of
13      the Sterling Act.
14          (3)   Paragraph (2) does not apply to the addition of
15      section 601(b) or 604 of the act.
16      Section 5.   A reference in statute or regulation to the act
17   of August 5, 1932 (Sp.Sess., P.L.45, No.45), referred to as the
18   Sterling Act, shall be deemed a reference to Chapter 6 of the
19   act.
20      Section 6.   This act shall take effect as follows:
21          (1)   This section shall take effect immediately.
22          (2)   The remainder of this act shall take effect in 180
23      days or January 1, 2026, whichever is later.




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