SB 396An 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, providing for elective tax imposed at pass-through entity level and further providing for taxability of partners and for income of a Pennsylvania S corporation.

Latest change summary

+1330 / −2515 words · LargeConfidence: high

This version removes Section 302.3 in its entirety, eliminating Pennsylvania's elective pass-through entity (PTE) level tax regime. The deleted provisions had allowed partnerships and S corporations to elect annual entity-level taxation at the Section 302(b) rate instead of taxing owners individually, with owners receiving refundable credits for their share of entity-paid tax. The removal eliminates all associated mechanics: the election procedures and irrevocability rules, mandatory reporting of owner information and income shares, the prohibition on most tax credits for electing entities, exemptions from withholding on nonresident owners, and protections preventing double assessment against both the entity and its owners. The changes also delete the framework for tiered pass-through structures, guaranteed payment treatment for partners, and the limitation tying elections to years when the federal $10,000 SALT deduction cap applies. Additional conforming deletions include removal of the Internal Revenue Code reference date definition in Section 301 and technical bracketing corrections to the 'Taxpayer' definition.