Pennsylvania Corporate Taxes provides comprehensive discussions on a wide range of issues dealing with the taxation of corporations in Pennsylvania and considers important issues for all corporations doing business in the state. Written by a team of experts from the law firm of Wolf, Block, Schorr and Solis–Cohen LLP, including Dan A. Schulder, Esq., Alice W. Beck, Esq. and Kevin J. Moody, Esq., this Portfolio has been designed to assist accountants, attorneys, corporate tax managers, and other practitioners by answering questions regarding the various corporate taxes under Pennsylvania's Tax Reform Code of 1971, as amended, and corresponding interpretations under the Pennsylvania Code. This Portfolio is a practical guide on the operation of each corporate tax, referencing specific authority and relevant case law associated with the various promulgations and decisions interpreting the Tax Reform Code's corporate tax provisions. 

Pennsylvania Corporate Taxes provides a detailed discussion of the federal limitations imposed on Pennsylvania's corporate tax scheme, including a discussion of constitutional limitations, such as the due process clause and the commerce clause, and federal statutory limitations, such as Pub. L. No. 86–272. 

The authors offer insight concerning Pennsylvania's Corporate Net Income, domestic Capital Stock, and foreign franchise taxes. The discussion includes special issues affecting entities such as S corporations, regulated investment companies, holding companies, and limited liability companies. Additionally, the Portfolio addresses the taxation of banks and financial institutions. 

This Portfolio also explains apportionment and allocation issues as well as the unitary business doctrine. It concludes with an in-depth discussion of tax procedures and taxpayer remedies and provides insights on such issues as administrative challenges, appeals to the Commonwealth Court, and refund claims.

Pennsylvania Corporate Taxes allows you to benefit from: 

• Hundreds of hours of original research on specific tax planning topics from leading practitioners in this area.
• Invaluable practice documents including tables, charts and lists.
• Plain-English guidance from world-class experts.
• Real-world and in-depth analysis that lets you explore various options.
• Time-saving access to relevant sections of tax laws, regulations, court cases, IRS documents and more.
• Alternative approaches to both common and unique tax scenarios.

This Portfolio is part of the Premier State Tax Library, a comprehensive series, which covers major state tax transactions and issues with expert, in-depth analysis, and offers commentary on a wide range of multi-state and state-specific taxation topics, including Sales and Use, Corporate Income, Individual Income, Property, Gross Receipts, Limitations on States' Authorities to Tax, Credits and Incentives, Electronic Commerce, Mergers and Acquisitions, Procedure and Administration, Special Industries, and more.

Detailed Analysis

2300.01. INTRODUCTION

2300.02. FEDERAL LIMITATIONS ON STATE TAXATION

Introductory Material

A. Constitutional Limits

1. Due Process Clause

a. Nexus Analysis

b. Apportionment

2. Commerce Clause Restrictions on Taxing Income From Multistate Businesses

a. Historical Background

b. Complete Auto Transit Test

(1) Substantial Nexus

(2) Fair Apportionment

(3) Discrimination Against Interstate Commerce

c. Tax Must be Fairly Related to Benefits Provided by the State

3. Unitary Business Principles of Taxation

a. Pennsylvania Business Taxes

b. Multiformity

4. Allocation and Apportionment in Pennsylvania

a. Corporate Net Income Tax-Allocation and Apportionment

b. Income from Business Activity in Pennsylvania and Outside of Pennsylvania

c. Allocation of Nonbusiness Income

d. Three-factor Apportionment Formula

e. Allocation and Apportionment for Domestic Capital Stock Tax and Foreign Franchise Tax Purposes

5. Equal Protection Limitations

B. Statutory Limitations

1. Pub. L. No. 86-272

2. Doing Business-Nexus

2300.03. DOMESTIC AND FOREIGN ENTITIES SUBJECT TO CAPITAL STOCK TAX OR FRANCHISE TAX

A. In General

B. Entities Subject to Tax

1. Domestic Entities

2. Foreign Entities

3. Certain Entities

a. Entities Organized For and Engaged in Processing and Research and Development Activities.

b. Regulated Investment Companies

c. Holding Companies

d. Limited Liability Companies

C. Exemptions

1. Exempt Organizations

2. Family Farm Corporations

D. Doing Business Requirement

E. Valuation of Capital Stock

1. Computation Formula

a. Valuation Methods

b. Definitions

(1) Average Net Income

(2) Net Worth

2. Alternate Computation Methods

a. Regulated Investment Companies

b. Holding Companies

F. Apportionment of Tax

1. In General

2. Election of Tests

a. Domestic Companies

b. Foreign Companies

3. Single-Factor Apportionment Formula

a. Average Book Value

b. Exempt Assets

c. Computation of Taxable Assets Fraction

4. Three-Factor Apportionment Formula

a. Exemptions

5. Special Apportionment Methods

a. Regulated Investment Companies (RICs)

b. Holding Companies

c. Special Industries

d. Section 338 Election

6. Multiformity and Unrelated Asset Principles

G. Property Not Subject to the Capital Stock Tax or Foreign Franchise Tax

1. Overview

2. Assets Exempt Due to Situs

a. Domestic Corporations

b. Foreign Corporations

3. Stock in Other Corporations

4. Government Obligations

5. Pollution Control Devices

6. Assets Invested in Manufacturing, Processing, or Research and Development

a. Domestic Corporations

b. Foreign Corporations

c. Defining "Manufacturing," "Processing," and "Research and Development"

d. Tangible Assets Subject to Exemption

e. Intangible Assets Subject to Exemption

f. Activity Classification

g. Invalidation of Manufacturing Exemption

h. Other Exemptions

2300.04. TAX CREDITS

Introductory Material

A. Neighborhood Assistance Tax Credits

1. Neighborhood Organization Contribution Credit

2. Enterprise Zone Investment Credit

B. Employment Incentive Payment Credits

C. Research and Development Credit

D. Keystone Opportunity Zones

1. Business Activities Credit

2. Job Creation Credit

E. Keystone Innovation Zones

F. First Class Cities Economic Development Districts

G. Strategic Development Areas

H. Resource Enhancement and Protection Program (REAP)

I. Financial Assistance Programs

1. Pollution Prevention Assistance Account

2. Economic Development Administration Loans

3. Economic Development Administration Grants

4. Tax–Exempt Bonds

J. Miscellaneous Credits

1. Coal Waste Removal and Ultraclean Fuels Tax Credit

2. Educational Improvement Tax Credit

3. Alternative Energy Production Credit

4. Film Production Credit

2300.05. CORPORATE NET INCOME TAX

A. Overview

B. Basic Rule

1. Tax Base and Rate

2. Nexus - Doing Business

C. Entities Subject to Tax

1. Corporation Defined

2. Partners in a Partnership Doing Business In Pennsylvania

3. Public Utilities

4. Regulated Investment Companies

5. DISCs and FSCs

6. Insurance Companies

7. Cooperative Agricultural Associations

D. Exempt Entities

1. In General

2. S Corporations

a. Small Corporations

b. Election

3. Effect of Election on Subsidiaries

4. Information Return

5. Revocation and Termination

6. General Tax Treatment

7. Calculation of Tax Items at the Corporate Level

8. Shareholders Taxed on a Pa. S Corp.'s Income

9. Shareholders' Basis in a Pa. S Corp.

10. Distributions to Shareholders

11. Limited Liability Companies (LLCs)

a. Taxation

b. Formation

c. Amendment of the Certificate of Organization

d. Restricted Professional Companies (RPCs)

(1) Taxation

(2) Qualification for RPC Status

(3) Certificate of Annual Registration

(4) Foreign LLCs and RPCs

12. Business Trusts

a. In General

b. Creation of a Business Trust

c. Amendment

d. Foreign Business Tusts

e. Tax Exempt Business Trusts

f. Real Estate Investment Trust

g. Regulated Investment Company

2300.06. COMPUTATION OF TAXABLE INCOME

A. Starting Point – Federal Taxable Income

B. Modifications for Pennsylvania Taxable Income – Additions

1. Income Taxes

2. Tax Preference Items

3. Employment Incentive Payment Credit Adjustment

C. Modifications to Federal Taxable Income – Subtractions

1. Dividends Received

2. Foreign Dividend Gross–Up

3. Interest on U.S. Obligations

4. Gains from the Sale of U.S. Securities

5. Federal Credits

6. Depreciation

D. Division of Income

E. Net Operating Loss Deduction

F. Allocation and Apportionment

1. In General

2. Corporations Subject to Apportionment and Allocation

a. Transacting Business in Another State

b. Interests in Partnerships

3. Unitary Business Principle and Pennsylvania's Multiformity/Unrelated Assets Principles

a. Unitary Business Principle

b. Pennsylvania's Multiformity/Unrelated Assets Principles

4. Uniform Division of Income for Tax Purposes Act (UDITPA)

G. Business Income/Nonbusiness Income

1. In General

2. Three–factor Apportionment Formula

a. Property Factor

(1) Mobile and Movable Property.

(2) Construction in Progress

(3) Mineral Leasehold Interests and Extracted Minerals

(4) Interests in Partnerships

b. Payroll Factor

c. Sales Factor and Triple Weighting

3. Special Rules Governing Factors for Certain Industries

a. In General

b. Airline, Railroad, Truck and Bus Companies

c. Pipeline and Natural Gas Companies

d. Water Transportation Companies

e. RICs

4. Apportionment for Safe Harbor Leases

H. Tax Credits

2300.07. CORPORATE REORGANIZATIONS

A. Overview

B. Non–Recognition of Gain or Loss

1. In General

2. Treatment of Shareholders

3. Section 338 Elections

C. Carryover of Tax Attributes

2300.08. BANKS AND FINANCIAL INSTITUTIONS

A. In General

B. Corporations Subject to Tax

1. Bank and Trust Company Shares Tax

2. Title Insurance Company Shares Tax

3. Mutual Thrift Tax

4. Private Bankers Tax

C. Constitutional Issues

D. Nexus Issues

1. Bank Shares Tax

2. Mutual Thrift Tax

E. Tax Base

1. Bank Shares Tax

a. Payroll Factor

b. Receipts Factor

c. Deposits Factor

2. Mutual Thrifts Tax

a. Payroll Factor

b. Receipts Factor

c. Deposits Factor

3. Private Bankers Tax

F. Rate of Taxation

1. Bank Shares Tax

2. Mutual Thrifts Tax

3. Private Banks Tax

G. Returns and Payment of Taxes

1. Bank Shares Tax

2. Mutual Thrifts Tax

3. Private Bankers Tax

H. Exemptions/Credits

1. Bank Shares Tax

2. Mutual Thrifts Tax

3. Private Bankers Tax

4. Credits

2300.09. CORPORATE LOANS TAX

A. In General

B. Administration

1. Duties of Corporate Treasurer

2. Procedure upon Payment of Back Interest

3. Notice of Assumption of Debt

4. Commission and Penalties

5. Review and Appeal

C. Basis and Rate

D. Obligations Subject to Tax

E. Exemptions

1. Exempt Indebtedness

2. Exempt Withholding Organizations

3. Exempt Holders

2300.10. TAX PROCEDURES

A. Filing Reports

1. Corporate Net Income Tax

a. Reports

b. Manner and Payment

c. Estimated Tax

2. Capital Stock and Franchise Tax

a. Reports

b. Manner and Payment

c. Estimated Tax

3. Corporate Loans Tax

a. Reports

b. Manner and Payment

4. Banks and Financial Institutions

a. Reports

b. Manner and Payment

B. Records

C. Corporate Tax Return Review Process

1. Overview

2. Bureau of Audits

3. Settlements

a. Settlement Review Responsibility

b. Settlement Approval and Corrections Process

c. Time Frame to Settle

d. Estimated Settlements

4. Resettlements Made by the Department of Revenue

5. Resettlements Requested by the Taxpayer

a. Filing and Process

b. Amended Corporate Tax Reports

c. Board of Appeals Petition Contents

d. Board of Appeals Procedures

e. Board of Appeals Hearing

f. Board of Appeals Decisions and Orders

6. Board of Finance and Revenue

a. Filing and Process

b. Board of Finance and Revenue Proceeding

7. Appeals to the Commonwealth Court

D. Refunds

E. Penalties and Additions

1. Overview

2. Late Filing or Failure to File

3. Penalty Appeals

4. Other Penalties

a. Report of Change/Bad Checks

b. Failure to Make Payments by Electronic Transfer

F. Interest

1. Overview

2. Interest Due By Taxpayers

3. Interest Due To Taxpayers

Working Papers

Item Description Sheet

Worksheet 1 Exempt Activities Under the Manufacturing, Processing and Research Development Exemption

Worksheet 2 BNA 2003 Survey of State Tax Departments: Pennsylvania Questionnaire

Bibliography

Bibliography