Section 513. Corporate net income tax.
(a) Credits.--For tax years that begin on or after January 1 of the tax years following the date an economic development district is designated, a corporation which is a qualified business may claim a credit against the tax imposed by Article IV of the Tax Reform Code of 1971 for tax liability attributable to business activity conducted within the economic development district in the taxable year. No credit may be claimed for activities conducted on the real property prior to designation of the real property as an economic development district. The business activity must be conducted directly by the corporation in the economic development district in order for the corporation to claim the tax credit.
(b) Tax liability determinations.--A corporation's tax liability which is attributable to business activity conducted within an economic development district shall be determined by multiplying the corporation's taxable income which is attributable to business activity conducted within the economic development district by the rate of tax imposed under Article IV of the Tax Reform Code of 1971 for the taxable year and shall be computed, construed, administered and enforced in conformity with Article IV of the Tax Reform Code of 1971 in accordance with all of the following:
(1) If the entire business of the corporation in this
Commonwealth is transacted wholly within the economic
development district, the taxable income attributable to
business activity within the economic development district
shall consist of the Pennsylvania taxable income as
determined under Article IV of the Tax Reform Code of 1971.
(2) If the entire business of the corporation in this
Commonwealth is not transacted wholly within the economic
development district, the taxable income of the corporation
within the economic development district shall be determined
upon the portion of the Pennsylvania taxable income of the
corporation attributable to business activity conducted
within the economic development district and apportioned in
accordance with subsection (c).
(c) Income apportionment.--The taxable income of a corporation which is a qualified business shall be apportioned to the economic development district by multiplying the Pennsylvania taxable income by a fraction, the numerator of which is the property factor plus the payroll factor plus the sales factor and the denominator of which is three, in accordance with all of the following:
(1) The property factor is a fraction, the numerator of
which is the average value of the corporation's real and
tangible personal property owned or rented and used within
the economic development district during the tax period and
the denominator of which is the average value of all the
corporation's real and tangible personal property owned or
rented and used in this Commonwealth during the tax period
but shall not include the security interest of the
corporation as seller or lessor in personal property sold or
leased under a conditional sale, bailment lease, chattel
mortgage or other contract providing for the retention of a
lien or title as security for the sales price of the
property.
(2) The payroll factor is a fraction, the numerator of
which is the total compensation paid by the corporation in
the economic development district during the tax period by
the corporation for compensation and the denominator of which
is the total compensation paid by the corporation in this
Commonwealth during the tax period. Compensation is paid in
the economic development district if:
(i) the employee's service is performed entirely
within the economic development district;
(ii) the employee's service is performed both within
and outside the economic development district, but the
service performed outside the economic development
district is incidental to the employee's service within
the economic development district; or
(iii) some of the employee's service is performed in
the economic development district; and the base of
operations, or, if there is no base of operations, the
place from which the employee's service is directed or
controlled, is located within the economic development
district or the base of operations or the place from
which the employee's service is directed or controlled is
not in any location in which some part of the service is
performed, but the employee's residence is in the
economic development district.
(3) The sales factor is a fraction, the numerator of
which is the total sales of the corporation in the economic
development district during the tax period and the
denominator of which is the total sales of the corporation in
this Commonwealth during the tax period. The following shall
apply:
(i) Sales of tangible personal property are in the
economic development district if the property is
delivered or shipped to a purchaser within the economic
development district regardless of the F.O.B. point or
other conditions of the sale.
(ii) Sales other than sales of tangible personal
property are in the economic development district if:
(A) the income-producing activity is performed
within the economic development district; or
(B) the income-producing activity is performed
both within and outside the economic development
district and a greater proportion of the income-
producing activity is performed within the economic
development district than in any other location,
based on costs of performance.
(d) Computation.--A corporation shall compute its Commonwealth taxable income in conformity with Article IV of the Tax Reform Code of 1971 with no adjustments or subtractions for economic development district taxable income.
(e) Limitation on amount of credit.--The credit allowed under subsection (a) shall not exceed the tax liability of the corporation under Article IV of the Tax Reform Code of 1971 for the tax year.
(f) Section not applicable to certain businesses.--Any portion of the corporation's taxable income which is attributable to the operation of a railroad, truck, bus or airline company, pipeline or natural gas company, water transportation company, a corporation which qualifies as a regulated investment company under Article IV of the Tax Reform Code of 1971 or as a holding company as defined in Article VI of the Tax Reform Code of 1971 shall not be used to calculate a credit under this section.