EARNED INCOME TAX

RULES AND REGULATIONS

PREFACE

IN ACCORDANCE WITH THE PENNSYLVANIA LOCAL TAX ENABLING ACT (“LTEA”), COMMONLY REFERRED TO AS “ACT 511,” THE FOLLOWING RULES AND REGULATIONS ARE PRESCRIBED AND ENFORCED TO MATTERS PERTAINING TO THE ADMINISTRATION OF THE EARNED INCOME TAX RESOLUTION AND/OR ORDINANCES. WHILE THE REGULATIONS DO NOT SPECIFY PARTICULAR TAXING JURISDICTIONS, THEY APPLY TO ALL THOSE DISTRICTS WHICH HAVE APPOINTED BERKHEIMER ASSOCIATES AS EARNED INCOME TAX ADMINISTRATOR. REVISIONS, ADDITIONS, OR DELETIONS, IF ANY, MADE IN BEHALF OF ANY DISTRICT, ARE CONTAINED IN THE ADDENDUM ATTACHED TO THESE RULES AND REGULATIONS.

 

ARTICLE I

DEFINITIONS

“Association” A partnership, limited partnership, or any other unincorporated group of two or more persons.

“Business” An enterprise, activity, profession or any other undertaking of any unincorporated nature conducted for profit or ordinarily conducted for profit whether by a person, partnership, association, or any other entity.

“Corporation” A corporation or joint stock association organized under the laws of the United States, the Commonwealth of Pennsylvania, or any other state, territory, foreign country, or dependency.

“Current Year” The calendar year for which the tax is levied.

“Domicile” The place where one lives and has his permanent home and to which he has the intention of returning whenever he is absent. Actual residence is not necessarily domicile, for domicile is the fixed place of abode which, in the intention of the taxpayer, is permanent rather than transitory. Domicile is the voluntarily fixed place of habitation of a person, not for a mere special or limited purpose, but with the present intention of making a permanent home, until some event occurs to induce him to adopt some other permanent home. In the case of businesses or associations, the domicile is that place considered as the center of business affairs and the place where its functions are discharged.

“Earned Income” Compensation as determined under section 303 of the act of March 4, 1971 (P.L. 6, No. 2), known as the “Tax Reform Code of 1971,” and regulations in 61 PA. Code Pt. I subpt. B. Art. V (relating to personal income tax). Employee business expenses are allowable deductions as determined under Article III of the “Tax Reform Code of 1971.” The amount of any housing allowance provided to a member of the clergy shall not be taxable as earned income.

“Earned Income Tax Administrator, Income Tax Officer or officer” Person, public employee or private agency designated by governing body to collect and administer the tax on earned income and net profits.

“Employee” Any person who renders services to another for a financial consideration or its equivalent, under an express or implied contract, and who is under the control and direction of the latter and shall include temporary, provisional, casual, or part-time employment.

“Employer” A person, partnership, association, corporation institution, governmental body, unit or agency, or any other entity employing one or more persons for a salary, wage, commission, or other compensation.

“Independent Contractor” A person who, while performing services, is not under the direction and control of another person, as to the result to be accomplished by the work and as to the details and means by which that result is accomplished, such as authors, professional men, seamstresses, laundresses, tailors and registered and practical nurses. Where the independent contractor is in the permanent or part-time employment of an employer, however, that contractor will be considered an employee of said employer for the purpose of withholding the tax due under the resolution.

“Net Profits” The net income from the operation of a business, profession, or other activity, except corporations, determined under section 303 of the act of March 4, 1971 (P.L. 6, No. 2), known as the “Tax Reform Code of 1971,” and regulations in 61 PA. Code Pt. I subpt. B. Art. V (relating to personal income tax). The term does not include income which is not paid for services provided and which is in the nature of earnings from an investment. For taxpayers engaged in the business, profession or activity of farming, the term shall not include:
(1) any interest earnings generated from any monetary accounts or investment instruments of the farming business;
(2) any gain on the sale of farm machinery;
(3) any gain on the sale of livestock held twelve months or more for draft, breeding or dairy purposes; and
(4) any gain on the sale of other capital assets of the farm.

“Non-resident” A person, partnership, association or other entity domiciled outside the taxing district.

“Person” Any individual, partnership, association or other entity.

“Preceding Year” The calendar year before the current year.

“Resident” A person, partnership, association or other entity domiciled in the taxing district.

“Resolution or Ordinance” As adopted by the respective Districts empowering the tax for a given year, or any part thereof.

“State” Encompasses government entities other than the Commonwealth of Pennsylvania located within the United States, but does not include foreign countries, for purposes of crediting provisions.

“Succeeding Year” The calendar year following the current year.

“Taxing District” or “District” The political subdivisions, including school districts, levying and assessing an earned income and net profits tax, which have appointed or commissioned Berkheimer Associates to collect and administer the tax on earned income and net profits.

“Taxpayer” A person, partnership, association, or other entity required hereunder to file a return of earned income or net profits, or to pay a tax thereon.

COMMENT: The definition of “state” comes from the case of O'Reilly v. Fox Chapel Area School District, 106 Pa.Cmwlth. 516, 527 A.2d 581, appeal granted 517 Pa. 619, 538 A.2d 501 (1989).

 

ARTICLE II

IMPOSITION AND RATE OF TAX

Section 2.01 Tax on Earnings and Net Profits of Residents and/or Non-Residents.

A. By virtue of the Resolutions and/or Ordinances adopted by the various taxing districts, a tax for general revenue purposes of any fraction of one percent (1%) has been imposed on the following:

1. The earned income, as defined herein, of residents and non-residents, where applicable, of the various taxing jurisdictions during the calendar year.

2. The net profits, as defined herein, of residents and/or non-residents of the various taxing districts during the calendar year.

B. The tax levied under (A)(1) above shall relate to and be imposed upon salaries, wages, commissions, and other compensation paid by an employer, or on his behalf, to a person who is employed by him.

The tax levied under (A)(2) above shall relate to and be imposed on the net profits of any business, profession or other activity carried on by a person or owner or proprietors, either individually or in association with some other person or persons.

C. The entire taxable earnings of resident employees and the total net profits of residents from businesses, professions and other activities are subject to this tax. The above item referring to residents would also apply to a taxing jurisdiction which levied these taxes on the non-residents as well as residents. Neither the source of the earnings or net profits, nor the place or places where the services were rendered exempt a resident from the tax.

Section 2.02 Exemption of Corporations.

Every corporation, including sub-chapter S corporations, shall be exempt from this tax.

COMMENT: “Pass-through” income received by a shareholder of an S corporation is not subject to local earned income tax under Scott v. Hempfield School District, Pa.Cmwlth. , 643 A.2d 1140 (1994). Only wages, salaries or other compensation paid by the S corporation to a shareholder for services rendered by the shareholder may be taxed.

Section 2.03 Exemption of Non-Profit Organizations.

A. The net profits of any institution or organization operated for public, religious, educational, or charitable purposes, organization of institutions not organized or private profit, and trusts or foundations established for any of these purposes shall be exempt from the tax on net profits.

B. This section shall not be construed to exempt any person who is an employer from the duty of withholding the tax at source from his employees and paying the amount withheld to the Income Tax Officer.

COMMENT: See, the definition of “Net Profits” pertaining to the imposition of a net profits tax.

Section 2.04 Registration of Taxpayers.

Every resident of a taxing jurisdiction who received, or anticipates that he will receive, taxable earned income in the form of earnings or net profits during the calendar year must register his name and residence address, his social security number, and the name and address of his place of employment or business with the Earned Income Tax Administrator. All residents will thereafter be responsible for reporting changes in their name, place of residence, or place of employment or business to the Earned Income Tax Administrator. In the districts which levy the non-resident factor, the above would also apply to these persons.

COMMENT: This section merely requires a taxpayer to register himself as such with the tax collector for administration purposes. Where a taxpayer believes that he will not receive taxable earned income for any given year, he must apply to and receive from the local taxing body a written exoneration from registering and filing subsequent returns.

 

ARTICLE III

DECLARATION AND PAYMENT OF TAX

NET PROFITS

Section 3.01 Annual Tax Returns.

A. On or before April 15 every person who has taxable net profits shall file with the Earned Income Tax Administrator, on a form prescribed by him, an annual final return, as required by the local Resolution and/or Ordinance, showing all taxable income from January 1 of the current year to December 31 of the current year, the total amount of tax due, the amount of tax withheld or paid, and the balance due. A return is required from every person subject to the tax regardless of whether or not any tax is due. All appropriate tax schedules, worksheets, and Federal form 1099s must be attached to the return and signed by the taxpayer. Payment of any tax due should be remitted along with the return. A return will not be considered complete and valid if the appropriate tax schedules, worksheets, and/or Federal form 1099s are not attached; or if the return is not signed; or if payment of any tax due is not remitted with the return.

B. When the return is made for a fiscal year different from the Administrator's calendar year, the return shall be filed within one hundred and five (105) days from the end of said fiscal year.

C. At the time of filing the final return, the taxpayer shall pay the balance of the tax due or shall make demand for refund in the case of overpayment.

D. Every taxpayer who discontinues business prior to the end of the calendar year shall within thirty (30) days after the discontinuance of business, file his final return as hereinabove required and pay the tax due, or demand refund in the case of overpayment. Where discontinuance of business is due to the absence of a personal representative, his heirs as designated by the Pennsylvania Intestate Act of 1947, as amended, or as hereafter amended or supplemented, shall file his return within sixty (60) days after the taxpayer's death and pay the tax due or demand refund in the case of overpayment.

E. If the amount of the net profits as returned by any taxpayer under this Resolution and/or Ordinance is finally changed or corrected by the Federal Commissioner of Internal Revenue, or by any other agency or court of the United States, such taxpayer, within thirty (30) days after receipt of notice of such final change or correction shall make a report of same to the Income Tax Officer.

F. Every person when requested to do so must file a final return, even though he expects to have no net profits, stating on the final return why he expects to have no net profits.

COMMENT: Section F, which requires a taxpayer to file a final return even where he or she expects no income, is based upon the decision in Commonwealth v. Case, 8 D. & C. 3d 611 (1978).

Section 3.02 Quarterly Estimated Tax Returns

A. Where required by local Ordinance and/or Resolution, on or before June 15 of the current year, September 15 of the current year, and January 15 of the succeeding year, every person who receives net profits shall make and file with the Collector, on a form prescribed by him, a return or declaration showing his estimated net profits for the period commencing January 1 and ending December 31 of the current tax year. A return is required from every person subject to the tax regardless of whether or not any tax is due.

B. The declaration or return shall show the amount of tax imposed by this Ordinance on such estimated net profits received by the taxpayer and the balance due. The taxpayer making the declaration or return shall, at the time of filing thereof, pay to the Tax Collector the amount of tax shown as due thereon.

C. On or before April 15 of the succeeding year, every taxpayer shall make and file with the Collector, on a form prescribed by him, a final return or declaration showing the amount of net profits received during the period commencing January 1 of the current and ending on December 31 of the current year, the total amount of tax due thereon and the total amount of tax paid thereon. At the time of filing the final return, the taxpayer shall pay to the officer the balance of tax due or shall make demand for refund or credit in the case of overpayment.

D. Any taxpayer may, in lieu of paying the fourth quarterly installment of his estimated tax, elect to make and file with the officer on or before January 31 of the succeeding year the final return as hereinabove required.

Section 3.03 Computation of Net Profits.

A. The net profits of a business, trade, profession, or other activity shall be computed by subtracting from gross receipts the cost of goods sold and all ordinary and necessary expenses of doing business. These net profits shall be determined either on a cash or accrual basis, in accordance with accepted accounting principles and practices. Net profits do not include income which is not paid for services provided and which is in the nature of earnings from an investment. Ordinarily no business deduction which is not permitted by the Pennsylvania State Government, for income tax purposes will be allowed.

B. To constitute net profits, all of the following must apply:

(1)The gross profits shall be derived from either, the marketing of a product or service to customers on a commercial basis, or from securities employed as working capital in the business operations or, from accounts and notes receivable from sales of products or services sold in the ordinary course of the business operations, or, from assets which serve an operational function in the ordinary course of business operations.

(2)The marketing activity shall be conducted with the manifest objective of achieving profitable operations.

(3) The marketing activity shall be conducted with regularity and continuity and may not be limited or exclusive.

C. Offset of losses from one business against profits from another. Taxpayers who generate profits from one business and business losses from another may offset same in calculating their overall net profits.

 

Section 3.04 Taxable Entities.

Persons subject to a tax on net profits shall be the following:

A. Individuals. Any individual engaged in a business, trade, profession, or other activity carried on for profit shall pay a tax on the net profits therefrom.

B. Partnerships, Associations and other Entities. A partnership, association, or other entity engaged in carrying on a business, trade, profession, or other activity wholly or partly within a taxing jurisdiction shall be required to provide each partner or member with the appropriate information and/or schedule(s), (i.e. Schedule K-1), sufficient to inform the individual of his/her percentage of net profits, whether or not the net profits are actually distributed to the individual. The individual shall include the percentage of the net profits as income when determining his/her tax liability.

Each resident partner or member of a non-resident partnership, association, or other entity must pay the tax on his share of the net profits whether or not it is actually distributed to him.

“Pass-through” income from an S corporation to an individual shareholder is not taxable, Scott v. Hempfield Township Area School District, 643 A.2d 1140 (Pa. Cmwlth. 1994). Compensation paid by an S corporation to an individual for services rendered to the corporation is taxable.

“Partnership” income, received by a Limited Liability Company member, where a Limited Liability Company has elected to be taxed as a “partnership” at the state level, is taxable for purposes of net profits. This is deemed to be ordinary income, received by an LLC member. Also the income received as an “individual,” in a single member LLC, is taxable for purposes of net profits.

C. Trusts or Estates. Every estate or trust must pay the tax on:

1. Net profits resulting from its engagement in any business, trade, or other activity which would require the filing of a return by an individual or partnership, and

2. Income which would be subject to the tax if received by an individual or partnership.

COMMENT: Section 3.04(A) flows from the definition of “Net profits” set forth in Article I of these Rules and Regulations. Section 3.04(B), which deals with partnerships and other non-individual entities also is derived from this definition.

Section 3.05 Deductions from Gross Profits.

A. All ordinary and necessary expenses of doing business, including reasonable compensation paid employees, shall be allowed. No deduction may be claimed for “salary” or withdrawals of a sole proprietor or of the partners or members of an unincorporated business or enterprise.

B. A taxpayer who is a wage earner and runs a separate and distinct business may not deduct a business loss against a salary, wage, commission or other earned compensation. However, a person who runs more than one business may deduct a loss from one business against the net profits of another business.

C. Rentals or other payments required to be made as a condition of the continued use or possession, for purposes of the trade or business, of property to which the taxpayer has not taken or is not taking title or in which he has no equity, shall be allowed as deductions.

D. Interest on indebtedness incurred by the business, including mortgage interest (where proprietor also owns the building) and interest payments on loans made for use in the business, shall be allowed as deductions.

E. Taxes directly connected with the operation of the business and on business property shall be allowed. However, the following taxes are not to be deducted:

1. The tax under the Earned Income Tax Resolution or Ordinance.

2. Any federal, state, or local taxes based upon income.

3. Any gift, estate, or inheritance taxes.

4. Taxes or assessments for local benefits or improvements to property which tend to appreciate the value thereof.

F. Casualty losses sustained during the taxable period and not fully compensated for by insurance or otherwise shall be allowed, if incurred in conducting the trade or business subject to the tax. Where such a loss is claimed, there must be attached to the return a schedule showing in detail the nature of the loss and of the property damaged, destroyed, or stolen, its cost or other valuation, the depreciation sustained prior to the time of the damage, destruction, or theft, the measure of loss, and any recovery through insurance or otherwise. In any event, the amount of the loss to be recognized shall not exceed that permitted for the purpose of the Federal Income Tax.

G. Bad debts, in a reasonable amount, may be allowed in the year ascertained worthless and charged off; or, at the discretion of the Income Tax Officer (if the reserve method is used), a reasonable addition to the reserve may be claimed; but in no event shall the amount allowed exceed the amount recognized as a deduction for the purpose of the Federal Income Tax.

H. Depreciation may be claimed and allowed in a reasonable amount for the exhaustion, wear and tear (including a reasonable allowance for obsolescence) of property used in the trade or business. The amount so allowed, however, may not exceed that recognized for the purpose of the Federal Income Tax. The Accelerated Recovery Systems (ACRS) is an acceptable method of depreciation.

I. A deduction for an office maintained in the taxpayer's home may be taken where the following requirements are met:

1. The office is used exclusively and regularly as the taxpayer's “regular place of business”; and

2. The office is used exclusively and regularly as a place where clients/customers come to meet the taxpayer during the course of their business.

COMMENT: Section 3.05 permits the deductions of expenses incurred in the operation of a business, as recognized on the federal level, from gross profits of same.

Section 3.06 Items Not Deductible.

In computing net profits, no deduction shall in any case be allowed in respect to the following:

A. Gifts of any kind, regardless of character or purposes of recipient or donor.

B. Personal taxes, including taxes on real estate occupied as taxpayer's residence, personal property taxes, and per capita, occupation, and poll taxes.

C. Premiums paid on any life insurance policy covering the life of any employee or of any person financially interested in any trade or business carried on by the taxpayer, when the taxpayer is directly or indirectly a beneficiary under such policy.

D. Any amount otherwise allowable as a deduction which is allowable to one or more classes of income wholly exempt from the tax imposed herein.

E. Any amount otherwise allowable as an ordinary and necessary expense of doing business which is allowable to interest wholly exempt from the tax imposed herein.

F. Any loss resulting from an activity which in the case of a profit would not be considered earned income or a net profit taxable hereunder.

G. Contributions by an individual to an Individual Retirement Account, a Keogh/Hr10Plan, a tax deferred annuity, a 401(K) plan, or a Simplified Employee Pension Plan (SEP).

H. The ownership or disposition of assets that are held for investment purposes or otherwise serve an investment function.

I. The trading in securities for personal purposes and not for the accounts of customers.

J. The sale, discontinuation or abandonment of a business or segment thereof.

K. Any tax imposed on, or measured by, gross or net earned or unearned income.

L. An isolated or nonrecurring transaction, not a normal or routine business activity.

Section 3.07 Net Losses / Carry-Over.

A net loss in any year may not be carried over to any other year.

Section 3.08 Sale of Real Estate / Rentals of Tangible Property

A. The income received from the sale of real estate by licensed Realtors in the Commonwealth of Pennsylvania shall be subject to the tax imposed herein.

B. The income received from the rental of any tangible property, is generally not subject to the

tax imposed herein,

C. However, the leasing of tangible property would constitute operating a business and be

subject to the tax imposed, only if: the taxpayer offers the use of his or her property on a

commercial basis to others in a marketplace and at least one of the following applies:

1. The average period of customer use is 30 days or less; or
2.The property is customarily made available for use only during defined business hours;

or
3. In addition to renting the property, the taxpayer also provides "significant services as

defined below.

4. The taxpayer incurs significant operating expenses in making the property available for

lease; or
5. The leasing activity is incidental to a real estate sales business; and

- the taxpayer offers the use of his or her property with the intention of realizing a

profit; and

- the leasing of the property is characterized by regularity and continuity of activities.

COMMENT:

Examples of services that DO NOT Constitute Significant Services include, providing heat, lighting, electric service, elevators, cleaning public access and exit areas, collecting trash and maintenance of the property in a usable rentable condition are not usually significant services.

Examples of Services That DO constitute significant services are: Services that are provided with rooms in hotels, boarding houses, apartment houses furnishing hotel services, tourist homes, motor courts, or motels and assisted living facilities. Additionally, providing maid service, room service, valet parking, decorating assistance, delivery services, transportation services, and concierge services are significant. Providing food and nursing care are also significant.

 

Also, payments for parking cars usually are not rents. Payments for warehousing of goods or the use of personal property are not rents if significant services are provided in connection with the payments.

 

EARNED INCOME

Section 3.09 Annual Tax Returns.

A. On or before April 15of the succeeding year, every person who has taxable earned income shall file with the Earned Income Tax Administrator, on a form prescribed by him, an annual final return, as required by the local Resolution and/or Ordinance, showing all taxable income from January 1 to December 31, the total amount of tax due, the amount of tax withheld or paid, and the balance due. A return is required from every person subject to the tax regardless of the fact that his wages may have been subject to withholding of the tax by his employer, or regardless of whether nor not any tax is due. All appropriate tax schedules, worksheets, and Federal form W-2s and 1099s must be attached to the return and signed by the taxpayer. Payment of any tax due should be remitted along with the return. A return will not be considered complete and valid if the appropriate tax schedules, worksheets, and/or Federal form W-2s and 1099s are not attached; or if the return is not signed; or if payment of any tax due is not remitted with the return.

B. When the return is made for a fiscal year different from the Administrator's calendar year, the return shall be filed within one hundred and five (105) days from the end of said fiscal year.

C. At the time of filing the final return, the taxpayer shall pay the balance of the tax due or shall make demand for refund in the case of overpayment.

D. If the amount of the net earned income as returned by any taxpayer under this Resolution and/or Ordinance is finally changed or corrected by the Federal Commissioner of Internal Revenue, or by any other agency or court of the United States, such taxpayer, within thirty (30) days after receipt of notice of such final change or correction shall make a report of same to the Income Tax Officer.

E. Every person when requested to do so must file a final return, even though he expects to have no earned income; stating on the final return why he expects to have no earnings, i.e., retired, unemployed, housewife, etc.

COMMENT: This section is based upon the LTEA pertaining to the filing of returns and payment of tax. Section E, which requires a taxpayer to file a final return even where he or she expects no income, is based upon the decision in Commonwealth v. Case, 8 D. & C. 3d 611 (1978).

Section 3.10 Quarterly Estimated Tax Returns

A. Where required by local Ordinance and/or Resolution, on or before June 15 of the current year, September 15 of the current year, and January 15 of the succeeding year, every person who receives earned income shall make and file with the Collector, on a form prescribed by him, a return or declaration showing his estimated net profits for the period commencing January 1 and ending December 31 of the current tax year. A quarterly return is required from every person subject to the tax regardless of the fact that his wages may have been subject to withholding of the tax by his employer, or regardless of whether or not any tax is due.

B. The declaration or return shall show the amount of tax imposed by this Ordinance on such estimated earned income received by the taxpayer and the balance due. The taxpayer making the declaration or return shall, at the time of filing thereof, pay to the Tax Collector the amount of tax shown as due thereon.

C. On or before April 15 of the succeeding year, every taxpayer shall make and file with the Collector, on a form prescribed by him, a final return or declaration showing the amount of net profits received during the period commencing January 1 of the current and ending on December 31 of the current year, the total amount of tax due thereon and the total amount of tax paid thereon. At the time of filing the final return, the taxpayer shall pay to the officer the balance of tax due or shall make demand for refund or credit in the case of overpayment.

D. Any taxpayer may, in lieu of paying the fourth quarterly installment of his estimated tax, elect to make and file with the officer on or before January 31 of the succeeding year the final return as hereinabove required.

Section 3.11 Exclusions and Deductions from Earnings.

The following payments or benefits received by an individual shall not be subject to the tax:

A. “Social Security Benefits, Retirement Pay and Pensions.”

B. “Sick or Disability Benefits.” Periodical payments received by an individual under a sickness or disability insurance plan are not taxable. Where, however, an employee received a regular salary from his employer during a period of sickness or disability by virtue of his contract of employment, such compensation shall be fully taxed.

C. “Benefits Arising Under Workmen's Compensation Acts, Occupational Disease Acts, and Similar Legislation.” Compensation received by employees under the provisions of workmen's compensation acts, occupational disease acts, or similar legislation together with any amount received as damages by suit or agreement on account of any injury or disease is not taxable.

D. “Public Assistance or Unemployment Compensation Payments.” Payments made under any public assistance or unemployment compensation legislation are not taxable.

E. “Active Military Service Pay.” Compensation paid by the United States to any person for active service in the armed forces of the United States is not taxable. This includes compensation paid to Reserve or National Guard for active duty service.

F. “Bonuses Paid by United States, Pennsylvania, or any other State, for Active Military Service.” Any bonus or additional compensation paid to a person by the United States, by the Commonwealth of Pennsylvania, or by any other state, for active service in the armed forces of the United States is not taxable.

G. “Death Benefits.” Where an employer makes death benefit payments to the beneficiary of an employee or to his estate, whether payable in a lump sum or otherwise, such payments are not taxable.

H. “Proceeds of Life Insurance Policies.” Proceeds of life insurance policies payable by reason of the death of an insured to his estate or to a beneficiary are not taxable.

I. “Gifts and Bequests.” Cash or property received as a gift or under a will or under statutes of descent and distribution is not taxable.

J. “Interest Received.” All forms of interest, e.g., on obligations of the United States or its possessions, the Commonwealth of Pennsylvania, or any political subdivision thereof, or on bank or postal savings accounts, mortgages, or loans received by an individual, are not taxable. However, where a person, other than a Corporation, is engaged in the business of lending money at interest, e.g., loan or finance companies or private bankers, the net profits of such business are taxable.

K. “Board and Lodging to Employees for Convenience of Employer.” The value of meals and lodging furnished to domestics or other employees by the employer for the employer's convenience is not considered earned income and is not taxable.

L. Income from stocks, trusts, and rental of dwellings, or the mere passive ownership and residing in a dwelling, is not taxable. Gain or loss from rental of real estate and from personal property leased with real estate is not taxable.

M. “Contributions to an Employee's Trust or Annuity Plan and Compensation under a Deferred Payment Plan.” Contributions paid by an employer to or under a stock bonus, pension profit-sharing or annuity plan and compensation paid or accrued on account of any employee under a plan deferring the receipt of such compensation shall not be included in gross taxable earnings. Payments to reimburse expenses or payments made by employers or labor unions for wage and salary supplemental programs, including, but not limited to programs covering hospitalization, sickness, disability or death, strike benefits, social security and retirement are not taxable.

N. “Employees' Deductions for Expenses Directly Connected with employment.” Employees who incur and pay expenses directly connected with the performance of their duties or services, may deduct such expenses in computing the amount subject to the tax provided:

1. No reimbursement is made by the employer;

2. They are reasonable and actual;

3. They are recognized as deductions by Federal authorities for Federal income tax purposes.

4. Allowable employee business expenses include:

a. Travel while away from home overnight including:

i. Air, rail and bus fares.

ii Operation and maintenance of an automobile.

iii. Taxi fares or other transportation, such as trips between airport or station and hotel; from one place of business to another; or from where you eat and sleep to temporary work assignment.

iv. Meals and lodging when away from home on business.

v. Tips that are incidental to any of the above.

b. The costs of traveling from one place to another if directly attributable to the conduct of employment and incurred while the employee is not in a travel status. Commuting to and from work are not allowable transportation costs.

c. Allowable education expenses which meet the express requirements of the employer or laws or regulations for keeping a job or position. Tuition, books, supplies, laboratory fees and similar items and certain related travel and transportation costs may be deducted from income. Reimbursements for graduate courses are allowable provided that the courses aid in job skills and do not qualify the employee for a new career.

5. Other allowable expenses include but are not limited to:

a. Union dues and initiation fees.

b. Professional dues and subscriptions to professional journals.

c. Small tools and supplies.

d. Uniforms, not suitable for everyday, and protective clothing required by an employer

e. Home Computers. The cost of a home computer which substantially aides the taxpayer in the performance of his employment duties may be depreciated; a letter from the taxpayer's employer must be attached verifying that it is a requirement and/or condition of the job.

f. Cellular Telephones. Costs of cellular telephones may be deducted/depreciated where the taxpayer uses same predominantly for his trade or business (i.e. over 50% of said use is for business), and can prove said use with adequate documentation. Employees may deduct the costs of leasing or purchasing of cellular telephones where it is a condition of their employment and used for the employer's convenience.

g. Malpractice insurance. Costs/premiums paid for malpractice insurance for attorneys and doctors are deductible business expenses.

6. An exclusion for an office maintained in the employee’s home for the convenience of the employer may be taken if the following requirements are met:

a. A suitable work space is not provided by the employer.

b. The activity of work is such that it requires a work area for its performance or for the storage of goods and wares on the premises other than that of the employer.

c. A letter is submitted on employer's letterhead stating in detail that office is necessary in order for the employee to work for the employer. Said letter must be signed by an appropriate representative of the company.

7. Expenses which are not allowable include, but are not limited to, child care and moving costs in connection with a change in jobs.

O. Payments made pursuant to a cafeteria plan qualifying under section 125 of the internal revenue code of 1986” are excluded from compensation and are not taxable.

P. “Employees’ personal use of employer-owned or leased property” and /or services, at no cost or at a reduced cost. Including company automobile, airplane, or other employer-owned or leased property, are not taxable fringe benefits.

COMMENT: The list of excluded income set forth in Section 3.11 flows from the definition of “Earned income” set forth in Act 511 and Article I of these Rules and Regulations.

Section 3.12 Taxable Earnings of Employees.

The items of compensation listed below are taxable. They are subject to the tax whether an employee received them directly or through an agent. Moreover, neither kind of rate of payment nor the manner of employment exempts an employee from the tax.

1. Salaries

2. Wages

3. Commissions

4. Bonuses

5. Drawing Accounts. If amounts received as a drawing account exceed the salaries or

commissions earned, the tax is payable on the amounts received. If the employee

subsequently repays to the employer any amounts not in fact earned, the tax shall be

adjusted accordingly.

6. Incentive payments for services rendered

7. Tips received

8. Fees, such as those received by a director or officer of a Corporation.

9. Benefits accruing from employment, including but not limited to annual leave, vacation,

holiday and/or severance pay, and welfare benefit programs.

10. Taxes assumed by the employer.

11. Fellowships. The portion, if any, of payment to a graduate student in a college or university as a fellowship or scholarship grant which represents compensation for services required to be performed by him, is taxable.

12. Compensation received in the form of property shall be taxed at its fair market value at

the time of receipt. Stock options shall be considered to be received when the option is

exercised, exchanged, sold or otherwise disposed

 

 

ARTICLE IV

COLLECTION AT SOURCE

Section 4.01 Registration of Employers.

A. Every person within a taxing jurisdiction who employs one or more persons, other than domestic servants, on a salary, wage, commission or other compensation basis shall, within fifteen (15) days after becoming an employer, register with the Earned Income Tax Administrator his name and address and such other information as the Administrator may require.

B. Employers required to register and withhold include all employers who are residents of a taxing jurisdiction, and all other employers who maintain a place of business therein. In the districts which tax both residents and non-residents, every employer must register, as in Section (A) above, which refers to residents only.

COMMENT: Section 4.01(A) flows from 53 P.S. Section 6913(IV)(a).

Section 4.02 Employers Required to Withhold.

A. Every person within a taxing jurisdiction who employs one or more persons, other than domestic servants, on a salary, wage, commission or other compensation basis shall deduct at the time of payment thereof, that tax imposed by the Resolution or Ordinance upon residents of a taxing jurisdiction regardless of where their services where rendered.

B. An employer who is engaged in a business activity within and outside of a taxing jurisdiction shall withhold the tax from resident employees who work for such employers, irrespective of the location of such business activity, even though the payroll records and place of payment are not in a taxing jurisdiction.

C. An employer who employs one or more non-resident employees in a taxing jurisdiction which levies a tax on non-residents, other than domestics, on a salary, wage, commission or other compensation basis, the tax imposed upon non-residents shall be withheld by the employer at time of payment thereof. Said non-resident employee shall be said to be employed within a taxing jurisdiction which levies an earned income tax on non-residents if he reports to and/or receives work assignments from an employer's office located within said jurisdiction.

COMMENT: Section 4.02(A) mandates that an employer within a taxing jurisdiction imposing an earned income tax, withhold said tax from any resident employees. Section (B) requires an employer located within two taxing jurisdictions, one which imposes an earned income tax, and one which does not, to withhold from an employee who is a resident in the jurisdiction which does impose said tax. Section (C) requires an employer located in a municipality which does impose a resident/nonresident earned income tax to withhold said tax from nonresident employees and requires the tax collector to look to whether said nonresident employee reports to an employer's location within such a taxing jurisdiction.

Section 4.03. Withholding by Non-Resident Employers.

Non-resident employers engaged in a business, trade, profession or other activity located outside a taxing jurisdiction are not required to withhold the tax. Any such employer may, however, voluntarily agree with his employee to withhold the tax and transmit it and the appropriate forms to the Earned Income Tax Administrator.

Section 4.04. Drawing Accounts and Allowances for Expenses.

A. If the amount received by an employee as a drawing account exceeds the salaries or commissions earned, the tax shall be withheld on the amount received. If the employee subsequently repays any amount not in fact earned, the tax shall be adjusted accordingly.

B. An employer required to withhold the tax on compensation paid to an employee may, in determining the amount on which the tax is to be withheld:

1. Ignore any amount allowed and paid by the employer to the employee for expenses necessarily and actually incurred by the employee in the actual performance of his service, or;

2. Deduct any amount necessarily incurred and expended by the employee in the actual performance of his services, for which expense he is not to be or has not been reimbursed by the employer; provided, that in either case, such expense must be recognized by the Federal and State authorities for payroll tax purposes and the Federal authorities for income tax purposes, and the employee shall furnish the employer, before said deduction is made, an itemized statement of the expenses claimed.

COMMENT: Sections (A) and (B) make the distinction, for employer withholding purposes, between actual earned income and expenses which are incurred by the employee and reimbursement by the employer. See Section 3.11(N) above for list of allowed deductions/expenditures incurred by employees.

Section 4.05 Withholding by Employers of Nurses, Musicians, Entertainers, Clergymen

and Domestics.

A. Hospital Nurses -- Nurses in the permanent or part-time employ of hospitals, clinics, schools and institutions shall have their earned income tax withheld by their employers.

 

B. Musicians

1. For purposes of this provision, the following terms and phrases shall be defined as

follows:

a. Contractor -- The term “Contractor” means that individual musician through whom the purchaser of music and the musician negotiate the contract of service and the performance thereof. The contractor may or may not perform actual musical service under a contract which he has negotiated.

b. Purchaser of Music -- The person, partnership, organization or association for whom or which the musical services are to be performed or furnished, and who exercises an employer's control over the conduct of the musicians.

2. When a contract for the purchase of music has been executed between a purchaser and a contractor, then the musician shall be deemed to be the employee of the purchaser. The purchaser shall be the person responsible for withholding the tax from the wages paid to musicians.

3. Name Bands and Orchestras -- A name band or orchestra is one which is identified or known by a name and which holds itself out to the public as a permanent organization, and in addition has either (a) a fixed personnel, or (b) the individual member musician has contracted for his services with the leader or owner of the band at fixed salary, by term or by individual engagement, and over whom the purchaser has no direct control. The leader or owner of the band shall be responsible for withholding the tax from the wages paid to members of such name bands.

C. Entertainers Other than Musicians.

1. The owner of a club, cafe, bar, theater or of any place which furnishes entertainment to the public or to its patrons, shall be deemed the person liable as an employer of entertainers. Such employer must deduct the tax from the compensation paid to the entertainer.

2. Promoters of boxing exhibitions and other sporting events are required to withhold the tax from the compensation paid to the contestants engaged in the particular sporting event.

D. Lecturers and Speakers. The fees received by resident lecturers and speakers are subject to the earned income tax; the responsibility for the payment of the tax lies with the lecturer or speaker.

E. Clergymen. The compensation received by ministers, rabbis and clergymen is taxable. This includes offerings and fees received for performing marriages, baptisms, funerals and other religious ceremonies; it DOES NOT include offerings made to the religious institution.

A housing allowance paid to clergy is not taxable income

Rental value of parsonage owned by the congregation and required to be occupied by the cleric is not taxable income to the clergy. A housing allowance used by the clergyman to purchase a home is excluded from taxable income to the extent it is applied to the down payment, mortgage payment, and/or interest, taxes, utilities, costs of repair for the home.

F. Domestics. The compensation received by domestics is taxable income; HOWEVER, it is not subject to collection at source requirements. The individual employed or working as a domestic is responsible for the payment of the tax.

COMMENT: In the field of professional music there has arisen the practice of engaging musicians exclusively through a so-called “Contractor.” The practice, which arose by prescription of the American Federation of Musicians and of local union regulations, enables the purchaser of music to deal with only one of the number of musicians required for a particular occasion. An entertainer other than a musician is usually engaged by a purchaser through a booking agent. The booking agent, once the contract of employment has been executed, does not exercise an employer's control over the entertainer.

Under Section 4.02(A) of these Rules and Regulations and the LTEA, domestic servants are not subject to collection at source provisions.

Section 4.06 Liability of Employer.

A. When an employer required to withhold tax does so withhold, the amount withheld shall constitute in the hands of such employer a trust fund held for the account of the taxing jurisdiction as beneficial owner thereof and the employee from whose compensation such tax was withheld shall be deemed to have paid such tax. The provisions of this paragraph are not applicable in the case of an employer who is not required to withhold tax.

B. The failure of any employer to withhold the tax shall not relieve the employee from payment of such tax or from complying with the requirements relating to the filing of a final return.

C. Every employer who willfully or negligently fails or omits to make the deductions required by Section 4.02 above shall be liable for payment of the taxes which he was required to withhold to the extent that such taxes have not been recovered from the employee.

D. Any employer who for two of the preceding four quarterly periods has failed to deduct the proper tax, or any part thereof, of has failed to pay over the proper amount of tax to the taxing authority, may be required by the officer to file his return and pay the tax monthly. In such cases, payments of tax shall be made to the officer on or before the last day of the month succeeding the month for which the tax was withheld.

COMMENT: Section 4.06(A) merely reiterates the fiduciary relationship between employer and employee to the extent that the employer has withheld the tax due and owing by his employee, creating a trust fund in the hands of the employer until such tax money is turned over to the tax collector. Where an employer has negligently or willfully neglected to withhold tax monies from his employee, said employee may be held liable for the payment of said tax. However, the employer may also be liable for any portion or all of the tax money not withheld on behalf of an employee, to the extent that same cannot be collected from the employee directly.

Section 4.07 Returns of Employers and Payment of Withheld Tax.

A. Every employer required to withhold tax shall on or before April 30 of the current year, July 31 of the current year, October 31 of the current year and January 31 of the succeeding year, file a return on a form prescribed by the Earned Income Tax Administrator setting forth the taxes withheld, and pay to the Earned Income Tax Administrator the amount of tax withheld for the preceding quarterly periods ending March 31, June 30, September 30 and December 31 of the current year.

B. On or before February 28 following the close of the calendar year, every such employer shall file with the Earned Income Tax Administrator an annual return in respect of each employee who earned any taxable salary, wages, commissions or other compensation, setting forth the employee's name, address, political sub-division, and social security number, the amount of such taxable compensation, the amount of tax deducted and paid to Earned Income Tax Administrator therefrom, and such other information as the Tax Bureau may require.

C. On or before February 28 following the close of each succeeding calendar year, every employer shall furnish two copies of the individual return provided for by paragraph B above to the employee with respect to whom it is filed. These copies must also be furnished by employer to employee at end of employment listing the district in which the individual was a resident.

D. Every employer who discontinues business prior to the completion of the fiscal year shall, within thirty (30) days after discontinuance of business, file the returns required by this section and transmit to the Earned Income Tax Administrator any tax remaining due. Where discontinuance of business is due to the death of the employer, his personal representative or, in the absence of a personal representative, his heirs as designated by the Pennsylvania Interstate Act of 1947, as amended or as hereafter amended or supplemented, shall within sixty (60) days after the death of the employer file his final return and pay the tax due.

 

ARTICLE V

POWERS AND DUTIES OF OFFICER

Section 5.01 Tax Collector.

A. All taxes, fines, and penalties imposed by these Resolutions and Ordinances shall be paid to the Earned Income Tax Administrator.

B. The Earned Income Tax Administrator shall keep a record showing the amount received by it from each person or employer/business paying the tax and, if paid by such person in respect of another person, the name of such other person, and the date of such receipt.

Section 5.02 Administration and Enforcement, and Rules and Regulations.

A. The Income Tax Officer is charged with the administration and enforcement of the Resolutions or Ordinances approved by the various Districts. The Income Tax Officer is empowered subject to the approval of the Board of Directors of the Earned Income Tax Administrator to prescribe, adopt, promulgate and enforce rules and regulations relating to any matter pertaining to the administration and enforcement of the provisions of the Resolution or Ordinance of each District. This includes provision for re-examination and correction of returns and of payments alleged or found to be incorrect or as to which an overpayment is claimed or found to have occurred; and to prescribe forms necessary for the administration of the Resolutions or Ordinances. Under the powers given him, these regulations are issued. Additional regulations and rulings will be issued from time to time as circumstances warrant. No such rule or regulation of any kind shall be enforceable unless approved by resolution of the taxing district.

B. Any taxpayer or employer desiring a specific ruling should submit all of the pertinent facts in writing to the Income Tax Officer of the Earned Income Tax Administrator and request a determination of his liability for the tax.

COMMENT: The LTEA empowers the tax collector to promulgate any and all rules and regulations pertaining to the enforcement and administration of earned income taxes.

Section 5.03 Examination of Books and Records of Taxpayers and Employers.

A. The Income Tax Officer and agents designated by him are authorized to examine the books, papers, and records of any taxpayer or supposed taxpayer or of any employer or supposed employer in order to verify the accuracy of any return; or, if no return was filed, to ascertain the tax due. Every taxpayer or supposed taxpayer and every employer or supposed employer is required to give to the Income Tax Officer or to any agent so designated by him, the means, facilities, and opportunity for such examination and investigations as are authorized. In addition to all other powers, the Income Tax Officer shall have the power, on behalf of the taxing jurisdiction to examine any person under oath concerning salaries, wages, commissions, and other compensation returned, or which should have been returned for taxation hereunder; to compel the production of books, papers, and records, and the attendance of persons (whether as parties, principals, agents or witnesses) before him.

B. The information obtained by the Income Tax Officer, his agent or any other official or agent of a taxing jurisdiction, as a result of any returns, investigation, hearings or verifications required or authorized, is confidential and shall not be disclosed to any person except for official use in connection with the administration or enforcement of the Resolution or Ordinance, or as otherwise provided by law.

C. Any person aggrieved by any action of the Income Tax Officer shall have the right of appeal as provided by law.

COMMENT: The LTEA and the Local Taxpayers Bill of Rights mandate that any information gained by the Income Tax Officer shall be held confidential, except for official purposes. Where a taxing body desires to review tax information pertinent to its jurisdiction, upon written request, this information must be turned over to the client.

In cases where a taxpayer refuses to turn over documentation or information requested by the Income Tax Officer, the taxpayer may be subject to fine; see, Section 8.02 below.

Section 5.04 Refunds.

A. Where a taxpayer as defined herein has erroneously paid any amount of the tax, the taxpayer may file a claim for refund with the Tax Collector. The Tax Collector will pay claims for refund in proper cases. A written claim for refund must be filed by the taxpayer or the employer within three (3) years from the date of filing the final return for the taxpayer's calendar year in which the overpayment was made, except that if the return was filed before the due date, the three-year refund period shall begin on the last day prescribed for filing the return.

B. The written claim for refund referred to in subsection (A) of this Section shall be deemed a request for a cash refund unless the taxpayer otherwise specified that it is to be credited against a future tax liability.

C. The Earned Income Tax Administrator is authorized to accept payment of the amount of tax claimed by a taxing jurisdiction in any case where any person disputes the validity or the amount of the tax claim. If it is thereafter judicially determined by a court of competent jurisdiction that there has been an overpayment to the Earned Income Tax Administrator, the amount of the overpayment will be refunded to the person who paid under protest, upon the filing of a claim for refund.

COMMENT: The Local Tax Collection Act, 72 P.S. Section 5566b, requires that a taxpayer file a written and verified claim for refund within three (3) years of the payment of said tax.

 

ARTICLE VI

ACCOUNTING RECORDS, ACCOUNTING PERIODS AND ACCOUNTING METHODS

Section 6.01. Accounting Records.

Taxpayers, employers, and others required to file returns under the provisions of the earned income tax Resolution and/or Ordinance shall keep such records as will permit the filing of true and accurate returns, and such records shall be preserved for a period of not less than six years.

Section 6.02. Accounting Periods.

Net profits shall be computed on the basis of either the calendar year or fiscal year, or at the option of the taxpayer, upon the basis of that portion or portions of his annual accounting period or periods corresponding with the method on which he files his Federal Income Tax return. The percentage of the total net profits of any fiscal year of a taxpayer beginning or ending within the period beginning July 1, and ending June 30, to which the tax imposed by this Resolution and/or Ordinance shall be applicable or shall be equal to the percentage of the number of days within the taxpayer's fiscal year.

Section 6.03. Accounting Methods.

A. No uniform method of accounting is prescribed. However, the method of accounting used must be consistent with the method of accounting used in the filing of Federal Income Tax returns. Each taxpayer shall adopt such forms and methods of accounting as in his judgment are best suited for his purposes. The two principal methods of accounting are: (1) the cash receipts and disbursements methods, generally called the “cash basis” method; and (2) the “accrual basis” method.

1. “Cash Basis” method. A taxpayer employing the cash basis of accounting includes in gross income all income subject to tax received during the year in cash or its equivalent. He deducts all disbursements made during the year in cash or its equivalent, provided deduction for such expenditures is authorized by law.

a. The use of the cash basis is mandatory where no book or records of account are maintained.

b. Items of income and expenditure which, as gross income and deduction, are elements in computing taxable income need not necessarily be in the form of cash. It is sufficient that such items, if otherwise properly included in the computation, can be valued in terms of money.

c. If the return is made on a “cash basis,” gross profits shall include receipts from commissions, fees and interest, as well as the gross profit or loss from sales of merchandise, chattels, goods, wares, securities, notes, choses-in-action and services.

2. “Accrual Basis” method. If income is taken into consideration when earned, even though not received in cash, and expenses are considered as soon as incurred, whether paid or not, the system of accounting is said to be on the “accrual basis.” These are the basic rules:

a. The right to receive an item of income (as distinguished from actual receipt) determines its inclusion in gross income under the accrual method; and

b. A deduction cannot be accrued until an actual liability is incurred.

B. A combination of accounting methods is permitted, provided it clearly reflects income. A taxpayer engaged in more than one business may, in computing taxable income, use a different method for each trade or business.

C. Methods of accounting must clearly reflect income. No method of accounting is allowed unless it clearly reflects income. Thus, even if the taxpayer's accounts are kept and the return made on a cash basis, unusual cases may arise in which a payment made during the year is not deductible. Where necessary to properly reflect income, inventories must be used. The basis of pricing used for the purpose of the Federal Income Tax must be used in each instance.

COMMENT: Generally speaking, under the cash basis method, income is taken into account when actually received, and expenses are deducted when amounts are actually paid out. Under the accrual method, income is taken into account when it is earned and expenses deducted as soon as incurred.

Section 6.04. Fractional Parts of a Cent.

In deducting and withholding the tax at source and in the payment of any tax of a cent shall be disregarded unless it amounts to one-half cent or more, in which case it shall be increased to one cent.

 

ARTICLE VII

ENFORCEMENT PROCEEDINGS

Section 7.01. Suit for Collection of Tax.

A. The Earned Income Tax Administrator may sue in the name of the taxing district for the recovery of taxes due and unpaid under the applicable taxing district resolution or ordinance.

B. Any suit brought to recover the tax imposed by the ordinance or resolution shall be begun within three (3) years after such tax is due or within three (3) years after the return has been filed, whichever date is later; provided, however, that this limitation shall not prevent the institution of a suit for the collection of any tax due or determined to be due in the following cases:

1. Where no return was filed by any person, although a return was required to be filed by him under provisions of the ordinance of resolution, there shall be no limitation.

2. Where an examination of the return filed by any person, or of other evidence relating to such return in the possession of the Income Tax Officer, reveals a fraudulent evasion of taxes, there shall be no limitation.

3. In the case of substantial understatement of tax liability of twenty-five percent (25%) or more, and no fraud, suit shall be begun within six (6) years.

4. Where any person has deducted taxes under the provisions of the Ordinance or Resolution, and has failed to pay the amounts so deducted to the Earned Income Tax Administrator, or where any person has willfully failed or omitted to make the deductions required by this section, there shall be no limitation.

5. This section shall not be construed to limit the governing body from recovering delinquent taxes by other means provided by this act.

C. The Earned Income Tax Administrator may sue for recovery of an erroneous refund provided such suit is begun two (2) years after making such refund, except that the suit may be brought within five (5) years if it appears that any part of the refund was induced by fraud or misrepresentative of material fact.

D. Where suit is brought for the recovery of any unpaid and/or delinquent earned income tax, the person liable therefor shall, in addition, be liable for the costs of collection and interest and penalties imposed.

COMMENT: The statute of limitations, and exceptions thereto, set forth in Section 7.01(B) of these Rules and Regulations, comes from the LTEA directly. Note that these limitations and exceptions thereto apply only to the prosecution of earned income tax cases, and do not apply to the other Act 511 taxes. Note that Section 7.01(D) permits the recovery of costs of collection and penalties and interest in the prosecution of earned income tax cases; this is permissible under Act 511.

Section 7.02. Wage Attachments.

A. The Earned Income Tax Administrator shall demand, receive and collect from all corporations, political subdivisions, associations, companies, firms or individuals employing persons owing delinquent earned income taxes, or whose spouse owes delinquent earned income taxes, or having in possession unpaid commissions or earnings belonging to any person or persons owing delinquent earned income taxes, or whose spouse owes delinquent earned income taxes, upon the presentation of a written notice and demand under oath or affirmation, containing the name of the taxable or the spouse thereof, and the amount of tax due. Upon the presentation of such written notice and demand, it shall be the duty of any such corporation, political subdivision, association, company, form or individual to deduct from the wages, commissions, or earnings of such individual employees, then owing or that shall within sixty (60) days thereafter become due, or from any unpaid commissions, or earnings of any such taxable in its or his/her possession, or that shall within sixty (60) days thereafter come into its or his/her possession, a sum sufficient to pay the respective amount of the delinquent earned income taxes, and costs shown upon the written notice or demand, and to pay the same to the Earned Income Tax Administrator within sixty (60) days after such notice shall have been given. Such corporation, political subdivision, association, firm or individual shall be entitled to deduct from the moneys collected from each employee the costs incurred from the extra bookkeeping necessary to record such transactions, not exceeding two percent (2%) of the amount of money so collected and paid over to the Earned Income Tax Administrator. No more than ten (10%) percent of the wages, commissions or earnings of the delinquent taxpayer or spouse may be deducted at any one time for delinquent Earned Income Taxes and costs. The Earned Income Tax Administrator shall not proceed against a spouse or his/her employer until he had pursued collection remedies against the delinquent taxpayer and his employer under this section. Upon the failure of any such corporation, political subdivision, association, company, firm or individual to deduct the amount of such taxes or to pay the same over to the Earned Income Tax Administrator, less the cost of bookkeeping involved in such transaction, or herein provided, within the time hereby required, such corporation, political subdivision, association, company, firm or individual shall forfeit and pay the amount of such tax for each such taxable whose taxes were not withheld and paid over, or that are withheld and not paid over together with a penalty of ten percent (10%) added thereto, to be recovered by an action of assumpsit in a suit to be instituted by the Earned Income Tax Administrator or by the proper authorities of the taxing district, as debts of like amount are now by law recoverable, except that such person shall not have the benefit of any stay of execution or exemption law.

B. Upon presentation of a written notice and demand under oath or an affirmation, to the State Treasurer or any other fiscal officer of the State, or its boards, authorities, agencies or commissions, it shall be the duty of the treasurer or officer to deduct from the wages then owing, or that shall within sixty (60) days thereafter become due to any employee, a sum sufficient to pay the respective amount of the delinquent earned income tax and costs shown on the notice; the same shall be paid to the Income Tax Officer within sixty (60) days after such notice is given.

C. The Income Tax Officer shall, at least fifteen days prior to the presentation of written notice and demand in Section 7.02(A) or (B), notify the delinquent taxpayer by registered or certified mail that said written notice and demand shall be presented to his employer unless said tax is paid. The return receipt card for said mailing shall be marked to the addressee only and the costs for said notification shall be added to the costs of collection.

Section 7.03 Distress Sales.

A. The tax collector shall have power, in case of the neglect or refusal of any person, co-partnerships, association, or corporation, to make payment of the amount of any tax due by him, after two months from the date of the tax notice, to levy the amount of such tax, any penalty due thereon, and costs, not exceeding costs and charges allowed constables for similar services by distress and sale of the goods and chattels of such delinquent, wherever situate or found, upon giving at least ten days public notice of such sale, by posting ten written or printed notices, and by one advertisement in a newspaper of general circulation published in the county.

B. No failure to demand or collect any taxes by distress and sale of goods and chattels shall invalidate any return made, or lien filed for non-payment of taxes, or any tax sale for the collection of taxes.

C. A taxpayer subject to distraint for delinquent taxes has the right, within ten (10) days after the date of the levy, to appear at the office of the district magistrate in the district in which the goods and chattels are located and demand a hearing on the merits of the claim.

 

ARTICLE VIII

FINES AND PENALTIES FOR VIOLATION OF ORDINANCE

Section 8.01 Interest.

If for any reason the tax is not paid when due, interest at the rate of six percent (6%) per annum on the amount of said tax, and an additional penalty of one-half of one percent of the amount of the unpaid tax for each month or fraction thereof during which the tax remains unpaid, shall be added and collected. Where suit is brought for the recovery of any such tax, the person liable therefore shall, in addition, be liable for the costs of collection and the interest and penalties herein imposed.

Section 8.02. Bad Checks.

If any check received in payment of taxes, fines or penalties is returned unpaid by the bank, there shall be added to the amount due, a minimum of twenty dollars ($20.00) plus additional costs.

Section 8.03. Fines and Penalties for Violation of Ordinances or Resolutions.

A. Any person who fails, neglects, or refuses to make a return as required by the Ordinance or Resolution, any employer who fails, neglects or refuses to register or to pay the tax deducted from his employees, or fails, neglects or refuses to deduct or withhold the tax from his employees, any person who refuses to permit the Earned Income Tax Administrator or any agent designated by them to examine his books, records, and papers, and any person who knowingly makes any incomplete, false or fraudulent return, or attempts to do anything whatsoever to avoid the full disclosure of the amount of his net profits or earned income in order to avoid the payment of the whole or any part of the tax imposed by the Ordinance or Resolution, shall upon conviction thereof before any justice of the peace, alderman or magistrate, or court of competent jurisdiction in the county or counties in which the political subdivision imposing the tax is located, be sentenced to pay a fine of not more than five hundred dollars ($500.00) for each offense, and costs, and, in default of payment of said fine and costs to be imprisoned for a period not exceeding thirty (30) days.

B. Any person who divulges any information which is confidential under the provisions of the Ordinance or Resolution, shall, upon conviction thereof before any justice of the peace, alderman or magistrate, or court of competent jurisdiction, be sentenced to pay a fine of not more than five hundred dollars ($500.00) for each offense, and costs, and, in default of payment of said fines and costs to be imprisoned for a period not exceeding thirty (30) days.

C. Each day that a corporation, political subdivision, association, company, firm, person or other entity violates the Ordinance or Resolution may be considered as a separate offense and is punishable as aforementioned in (A) above, for each such offense.

D. The Penalties imposed under this section shall be in addition to any other penalty imposed by any other section of the Ordinance or Resolution.

E. The failure of any person to receive or procure forms required for making a return as required by the Ordinance or Resolution shall not excuse him from making such return.

 

ARTICLE IX

PAYMENT OF TAX TO OTHER POLITICAL SUBDIVISIONS OR STATES

AS CREDIT OR DEDUCTION: WITHHOLDING TAX

Section 9.01. Generally.

Payment of any tax to any political subdivision pursuant to an ordinance or resolution passes or adopted prior to the effective date of the Local Tax Enabling Act shall be credited to and allowed as a deduction from the liability of taxpayers for any like tax respectively on salaries, wages, commissions, other compensation or on net profits of business, professions or other activities and for any income tax imposed by any other political subdivision of this Commonwealth under the authority of this act.

Section 9.02. Credits for Tax Paid to Place of Residence.

Payment of any tax on salaries, wages, commissions, other compensation or net profits of business, professions or other activities to a political subdivision by residents thereof pursuant to an ordinance or resolution passed or adopted under the authority of the Local Tax Enabling Act shall be credited to and allowed as a deduction from the liability of such persons for any other like tax respectively on salaries, wages, commissions, other compensation or on net profits of business, professions or other activities imposed by any other political subdivision of this Commonwealth of Pennsylvania under the authority of the Local Tax Enabling Act.

Section 9.03. Credits for Tax Paid to Other States by Non-Residents of Pennsylvania.

Payment of any tax on income to any state or to any political subdivision thereof by residents thereof, pursuant to any State or local law, may, at the discretion of the Pennsylvania political subdivision imposing such tax, to the extent that such income includes salaries, wages, commissions, or other compensation or net profits of businesses, professions or other activities but in such proportions as hereinafter set forth, be credited to and allowed as a deduction from the liability of such person for any other tax on salaries, wages, commissions, other compensation or net profits of businesses, professions or other activities imposed by any political subdivision of this Commonwealth under the authority of this act, if residents of the political subdivision of Pennsylvania receive credits and deductions of a similar kind to a like degree from the tax on income imposed by the other state or political subdivision thereof.

Section 9.04. Credits for Tax Paid to Other States by Residents of Pennsylvania.

A. Payment of any tax on income to any State other than Pennsylvania or to any political subdivision located outside the boundaries of this Commonwealth, by residents of a political subdivision located in Pennsylvania shall, to the extent that such income includes salaries, wages, commissions, or other compensation or net profits of businesses, professions or other activities but in such proportions as hereinafter set forth, be credited to and allowed as a deduction from the liability of such person for any other tax on salaries, wages, commissions, other compensation or net profits of businesses, professions or other activities imposed by any political subdivision of this Commonwealth under the authority of this act.

B. No credit or deduction shall be allowed against any tax on earned income imposed under authority of Act 511 for payment of any tax on salaries, wages, commissions, other compensation or net profits of business, professions or other activities to a foreign country, state or political subdivision located outside the geographic and political boundaries of the United States, by residents thereof, pursuant to foreign law.

Section 9.05. Calculation of Credits.

A. Where a credit or a deduction is allowable in any of the several cases hereinabove provided, it shall be allowed in proportion to the concurrent periods for which taxes are imposed by the other state or respective political subdivisions, but not in excess of the amount previously paid for a concurrent period.

B. No credit or deduction shall be allowed against any tax on earned income imposed under authority of this act to the extent of the amount of credit or deduction taken for the same period by the taxpayer against any income tax imposed by the Commonwealth of Pennsylvania under section 314 of the act of March 4, 1971 (P.L. 6) known as the Tax Reform Code of 1971, on account of taxes imposed on income by other states or by their political subdivisions. (As amended 1967 P.L. 171, No. 47 and 1972 P.L. 1043, No. 261).