[Ord. 1096, 3/3/2004, § 201]
A tax for general revenue purposes at the rate as approved by
the Council of the Borough of Quakertown is hereby imposed on:
A.
Earned income/compensation earned by residents of the Borough of
Quakertown.
B.
Earned income/compensation earned by nonresidents of the Borough
of Quakertown for work done or services performed or rendered in the
Borough.
C.
The net profits earned from the operation of businesses, professions
or other activities, except corporations, regardless of location by
residents of the Borough of Quakertown.
[Ord. 1096, 3/3/2004, § 202]
The following words and phrases used in the tax ordinances and
resolutions and in this Part have the following meanings, unless the
context clearly indicates a different meaning:
The determination by a local taxing authority of the amount
of underpayment by a taxpayer.
A partnership, limited partnership or any other unincorporated
group of two or more persons.
An enterprise, activity, profession or any other undertaking
of an unincorporated nature conducted for profit or ordinarily conducted
for profit whether by a person, partnership, association or any other
entity.
See "earned income."
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.
A type of nonactivity; when one party promises to compensate
another party to refrain from working in a certain business or profession
within a limited geographic region for a certain period of time. A
covenant not to compete is not comparable to income from the sale
of goodwill, nor can it be considered investment income, for the payments
are directly dependent upon the conduct of the person receiving the
payments.
The calendar year for which the tax is being levied.
The place where one lives and has his or her permanent home
and to which he or she has the intention of returning whenever he
or she 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 or her 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.
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, Part I, Subpart B, Article
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. See § 248
for referenced act and regulations.
A person employed by an employer on a salary, wage, commission
or other compensation basis; any person who renders services to another
for 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.
A person, partnership, association, corporation, institution,
governmental body or unit or agency, or any other entity employing
one or more persons for a salary, wage, commission or other compensation.
One of two or more persons who associate to carry on a business
as co-owners for profit and who are personally liable for all the
debts of the partnership.
Defined as doing nothing; generally weak and dissipating.
A person, public employee or private agency designated by
the governing body to collect and administer the tax on earned income/compensation
and net profits.
A person who, while performing services for another person,
is not subject to 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, seamstresses,
laundresses, tailors and registered or 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 ordinances and resolutions.
The Internal Revenue Code, as amended from time to time.
An association that is a limited liability company organized
and existing under Pa. Act 106 of 1994, known as the “Limited
Liability Company Act,” or organized and existing under a similar
act of another state or commonwealth.
A type of partnership comprised of one or more general partners
who manage the business and who are personally liable for partnership
debts, and one or more limited partners who take no part in running
the business and who incur no liability for partnership obligations
beyond the contribution they invested in the partnership.
A political subdivision levying an eligible tax. The term
shall include any officer, agent, agency, clerk, income tax officer,
employee or other person to whom the governing body has assigned responsibility
for the audit, assessment, determination or administration of an eligible
tax. The term shall not include a tax collector or collection agency
that has no authority to audit a taxpayer or determine the amount
of eligible tax or whose only responsibility is to collect an eligible
tax on behalf of the Borough Council.
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, Part 1, Subpart B, Article 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:
Any interest generated from monetary accounts or investment
instruments of the farming business.
Any gain on the sale of farming machinery.
Any gain on the sale of livestock held 12 months or more for
draft, breeding or dairy purposes.
Any gain on the sale of other capital assets of the farm.
The Pennsylvania Supreme Court has ruled that the tax is
levied on the total earned income/compensation and net profits as
two separate and distinct classes of income. Taxpayers may deduct
proper, permitted business losses from wage and salary income. However,
the Court let stand a prior Commonwealth Court decision that taxpayers
may not apply the net losses of one business against the net profits
of another business. Liability for earned income/compensation taxes
on net profits is to be calculated for each business separately. (Aronson
v City of Pittsburgh, 485 A2nd 890; Pa. Cmwlth Court, 1985).
Deliberately refraining from doing something; it is the positive
absence of activity as affirmative restraint. Each day throughout
a certain time period, the taxpayer is under a duty to refrain from
working in that profession or business. Performance under a "covenant
not to compete" is deliberate and purposeful nonactivity; and while
inactivity is generally weak and dissipating, nonactivity can be just
as powerful as activity.
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Example: A "covenant not to compete" is so important in our
society that courts may even enforce them by issuing injunctions —
a rare civil remedy — in addition to awarding monetary damages.
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A person, partnership, association or other entity domiciled
outside the taxing district.
An office established by the Borough of Quakertown to collect
and receive earned income/compensation and net profits taxes and administer
earned income/compensation and net profits tax ordinances or resolutions
of the Borough of Quakertown, and any political subdivisions, including
school districts, with which it may enter into collection agreements.
The Office performs the function of the Income Tax Officer.
As adopted by the taxing district levying and/or ordinance
assessing an earned income/compensation and net profits tax.
Any payment of tax which is determined in the manner provided
by law not to be due.
The taxable income in respect to a partnership is taxable
to its partners whether or not it is distributed. The character of
any item includable in each partner's share is determined as
if the item was realized directly by the individual partners from
the source from which it was realized by the partnership or incurred
as in the same manner as the partnership.
An activity in which the partner does not materially participate
in the management of the entity by having influence or effect on decisions
or actions or through physical presence or activity.
A natural person.
The calendar year before the current year.
Investment income, not earned income/compensation.
A person, partnership, association or other entity domiciled
in the taxing district.
As adopted by the taxing district levying and/or ordinance
assessing an earned income/compensation and net profits tax.
A corporation that is eligible to choose S corporation status
and whose shareholders have all consented to the corporation's
choice of S corporation status as per federal law.
The calendar year following the current year.
The earned income/compensation and/or net profits tax enacted
under Act 511, P.L. 1257, as amended, and known as "the Local Tax
Enabling Act 166 of 2002." "Tax" includes interest, penalties and
additions to tax, such as costs of collection, and further includes
the tax required to be withheld by an employer on the earned income/compensation
paid to employees, unless a more-limited meaning is disclosed by the
context.
The political subdivisions, including school districts, levying
and assessing an earned income/compensation and net profits tax, which
have appointed or commissioned the Borough of Quakertown to collect
and administer the tax on earned income/compensation and net profits.
A person, partnership, association, or any other entity required
hereunder to file a return of earned income/compensation or net profits
or to pay a tax thereon.
The sum of earned income/compensation plus net profits.
The amount or portion of any tax determined to be legally
due in the manner provided by law for which payment or remittance
has not been made.
The payment of an eligible tax made pursuant to the freewill
of the taxpayer. The term does not include a payment as a result of
distraint or levy or pursuant to a legal proceeding in which the local
taxing authority is seeking to collect its delinquent taxes or file
a claim therefor.
[Ord. 1096, 3/3/2004, § 203]
1.
All persons who are:
A.
Residents of the Borough of Quakertown who are employed or engaged
in the operation of a business, profession or other activity for income
or profit.
B.
Nonresidents of Borough of Quakertown who are employed in the Borough
of Quakertown or engaged in the operation of a business, profession
or other activity for income or profit in Borough of Quakertown are
subject to this tax.
2.
A resident is an individual who is domiciled in the Borough of Quakertown,
as evidenced, among other things, by one or more of the following:
A.
By customarily being physically present, sleeping and eating there.
B.
By holding him or herself out as residing there, i.e., giving that
address in registration for licenses, voting and payment of personal
or property taxes.
C.
By his or her spouse and minor children living there.
D.
By maintaining religious, civic and club affiliations there.
E.
By the center of his or her affairs appearing to be there.
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Normally it is not difficult to determine the domicile of a
person because most of the determining factors point to one conclusion.
Obviously, if a person has all of the foregoing factors occurring
in one district, he or she is a resident of that district. Of more
difficulty is the situation concerning persons for whom some of the
factors occur in one district and others take place elsewhere. In
such cases, the residence or domicile of an individual shall be determined
by the Officer based on all of the legally relevant factors which
affect the issue. Each case shall be determined solely on its own
facts.
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3.
Effective July 1, 2003, by virtue of the ordinances and resolutions
adopted by the Borough of Quakertown, the tax rate is 1 1/2%
unless or until the tax rate is amended in the respective ordinances
and resolutions or by any act passed or amended by the Pennsylvania
General Assembly.
[Ord. 1096, 3/3/2004, § 204]
1.
The tax is imposed on earned income/compensation and net profits,
as both are defined in § 202. These items are subject to
the tax whether a taxpayer received them directly or through an agent.
Where the taxpayer has received remuneration, a portion of which is
attributable to services rendered ("the earnings component") and another
portion of which is not attributable to services rendered, then only
"the earnings component" shall be subject to the tax.
2.
The earned income/compensation and net profits tax levied under Act 511, as amended, and enacted by the ordinances and resolutions of the Borough of Quakertown shall be applicable to earned income/compensation received and net profits earned in the period beginning January 1 and ending December 31 of each year, or in the fiscal year of taxpayers electing a fiscal year basis under § 221, Subsection 2. The tax shall continue in force on a calendar-year or taxpayer-fiscal-year basis, without annual reenactment, unless the rate of tax is subsequently changed. Changes in the rate shall become effective on the date specified in the ordinances or resolutions.
3.
Trusts or Estates. Every estate or trust must pay the tax:
[Ord. 1096, 3/3/2004, § 205]
The statutory definitions of earned income/compensation and
net profits can be found in § 202. The purpose of this section
is not to modify these definitions but to provide additional clarification
through various examples and explanations. The examples of earned
income/compensation listed below, without intending in any way to
limit the provisions of the ordinances or resolutions to these examples,
are:
A.
Gross salaries.
B.
Gross wages.
C.
Commissions.
D.
Bonuses.
E.
Drawing accounts reported on the current year's Form W-2. (If amounts
received as a drawing account exceed the salary 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.)
F.
Clergy pay.
G.
Incentive payments. Payments received from employers or on behalf
of employers, other than the usual compensation, for the purpose of
inducing the employee to make a decision — such as buying out
an agreement or contract or moving to another location or accepting
an early retirement or "golden parachute settlement" are incentive
payments. Such payments/settlements constitute taxable income. Incentive
payments are not to be considered "retirement" payments. Lump-sum
payments shall be taxed in the year received by the employee or former
employee. If the payment/settlement of such sums is to be made in
the future, such sums shall be taxed in the year they are received.
Incentive payments include stock appreciation rights (SAR) and/or
a phantom stock plan payment, where these payments are attributable
to remuneration for services rendered.
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Example: Employer offers to give Employee F an incentive payment
of $20,000 if Employee F agrees to depart or retire before his scheduled
date. The $20,000 is to be paid at the rate of $5,000 per year over
a four-year period after the retirement become effective. The $20,000
is taxable income. It will be taxed in the years it is received by
Employee F. That is to say that Employee F shall have to include as
earned income/compensation the extra $5,000 received for/in each of
the four years following his retirement.
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Example: The employee has been a product manager with an art
supply business for 12 years. He and his wife have purchased a home
in the suburbs of Houston for $80,000, $55,000 of which they financed
through a loan from their bank. The lending rate for the home mortgage
was 6% and their mortgage payments were $520 per month.
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Twelve years after purchasing the house, he was offered a transfer
to Bethlehem, Pennsylvania, to open a sales office and showroom in
Bethlehem, Pennsylvania. His employer agreed to reimburse him for
his moving expenses if he took the assignment. When he and his wife
traveled here to look for a new residence, they were told that a comparable
home in Bethlehem, Pennsylvania, would be $130,000 and that the mortgage
rate would be 8.5%. The mortgage on their new home would be $952.
His employer was willing to pay the $432 difference between his old
and new mortgage for two years. This form of reimbursement is wages
to the employee, subject to the earned income/compensation and payroll
tax withholding.
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Example: In an SAR plan, the employee-participant is allowed
to share in the appreciation in value of the company stock plan. The
employee shares in the appreciation in value of the company stock
plan over the period selected.
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In a phantom stock plan, the employee shares in the appreciation
and is also given the value of the stock at the starting point.
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In each of these plans, the employee is not the owner of any
shares. By agreement the employee participates in the growth of the
business' value through a formula that measures the growth in
value of the company's stock. The employee is credited on paper
with a percentage of the growth in value, which value is convertible
to cash at a future date. The employee will be taxed on the date in
the future that he or she receives the cash benefit.
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Example: An employer offers and pays an employee 15% on a house
purchased in another location in lieu of the employer acquiring the
employee's and becoming responsible for selling the house. This
type of circumstance shall be considered as an incentive for the employee
to move to another location. If the payment is restricted or imperfect
with a qualified right to enter (confined, temporary, modified, conditioned,
limited provisional, guarded, ambiguous, reserved, dependent, defined),
it shall not be taxable as earned income/compensation.
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The employee is responsible for providing proper documentation
to the Borough of Quakertown so as to establish whether this payment
is or is not restricted.
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Moving expenses which are permitted on Pennsylvania Schedule
UE will be deducted.
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Example: Auto manufacturers' incentive payments paid by or on
behalf of any automobile manufacturer, whether directly to individual
salespersons or through a dealership, are taxable for local earned
income/compensation tax purposes.
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H.
Tips and gratuities; honoraria; financial consulting services allowance;
travel allowance; moving allowance; mortgage differential; legal service
allowance; grossed up income; reimbursements received in cash, when
in excess of actual allowable business expenses. See § 211
for deductions against income.
I.
Fees include: administrator fee, director fee, executor fee, expert
witness fee, fiduciary fee, honoraria fee (if one's profession
is being a professional speaker), trustee fee, any fee received for
service performed by the taxpayer and fees received for decisions
made by the taxpayer. The fees referenced herein involve activity
and participation on the part of the taxpayer.
J.
Earnings component of stock option plans when the option is exercised.
The earnings component is considered to be the difference between
the stock option price and the fair market value of the stock at the
time the option is exercised.
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Example: There is basis under the Local Tax Enabling Act for
taxing the earnings component of stock option plans. Stock option
plans have an earnings component, namely the difference between the
option price and the fair market value of the stock when the option
is exercised. The difference (the earnings component) is to be reported
on the taxpayer's W-2 Form and is taxable for local earned income/compensation
tax purposes, upon the exercise of the stock option.
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The Pennsylvania Supreme Court, in its February 22, 2000, decision
in the Marchlen case, makes no distinction between qualified and nonqualified
stock option plans. The case site is: Louis Thomas Marchlen, Appellee
vs. the Township of Mt Lebanon, al, No. 7 W.D., Appeal Docket 1998
(707 A2nd 631, Pa. Cmwlth 1998).
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"At the time that the stock options in this case were granted
to Appellee, they could not be exercised. This does not imply that
the stock options have no value at the time they are granted. Stock
options are valuable inducements to attract and retain employees and
to compensate them for their services. The holder of a stock option
can reap the benefits of stock price increases without bearing the
risks of stock price declines. However, at the time the stock option
is granted, its "value" is purely speculative, for should the fair
market value of the stock drop below the purchase price of the option,
the exercise of the option on or after its maturity date would result
in a loss to the holder of the option — i.e., the option would
be worthless. In contrast, should the fair market value of the stock
rise above the purchase price of the option, the exercise of the option
on or after its maturity date would result in a gain to the holder
of the option. Further, the holder of the stock option may well choose
not to exercise the option. Thus, it is not that stock options have
no value at the time they are granted, rather, the value of the stock
option is speculative and not readily ascertainable until exercised.
It is precisely for this reason that the taxing authority must wait
until the exercise of the stock option to compute the associated tax
liability (emphasis added)."
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This says nothing about qualified vs. nonqualified plans. This
says that all stock options without differentiation are taxable when
exercised. It makes no difference whether the plans are qualified
or not.
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The only limitation imposed by Marchlen is, ". . . that the
taxing authority must wait until the exercise of the stock option
to compute the associated tax liability."
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Employers have the obligation to withhold the local earned income/compensation
tax on the earnings component of the stock options at the time the
options are exercised. Employers should also report "the earnings
component" as part of the local wages total on the employee's
W-2 form.
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K.
Payments accruing from employment, including but not limited to salary
advances, annual leave, standby pay, overtime, vacation, holiday,
sickness, and severance or separation pay or benefits; excluding,
however, benefits referred to in § 207, Subsection 1A.
L.
Fair market value of noncash fringe benefits accruing by virtue of
employment recognized as taxable by the Pennsylvania Department of
Revenue are also to be included as taxable earned income/compensation,
unless they are specifically listed in § 207 as exclusions
from earned income/compensation.
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Examples: (taxable noncash fringe benefits):
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(1)
Stock options.
(2)
Group legal services plans.
(3)
Mortgage assistance in lieu of other compensation.
(4)
Noncash payment for services rendered.
(5)
Stock bonus plans.
(6)
Automobile allowance that exceeds actual expenses incurred.
(7)
Taxpayer A receives a salary of $70,000. In addition to this
salary, Taxpayer A has exercised a nonqualified stock option, as reported
on Form W-2, of $11,000 and was compensated for spouse's travel
expenses in the amount of taxable noncash fringe benefits of $3,100.
Therefore, Taxpayer A's total taxable compensation is $84,100.
(8)
Taxpayer B receives a salary of $55,000, of which $9,000 is
deferred to a 401(k) plan for retirement. Taxpayer B's local
taxable earned income/compensation is $55,000. Any plan which serves
to reduce gross taxable wages for federal income tax purposes is not
recognized as an exclusion for earned income/compensation tax purposes.
(9)
Taxpayer C is a minister, employed by a church, but he does
not live in a church-provided parsonage. Taxpayer C receives a salary
of $30,000, a housing allowance of $10,000, and a car/travel expense
allowance of $3,000. The total taxable compensation is $33,000. To
claim unreimbursed business expenses associated with the car/travel
allowance, Taxpayer C can file a Pennsylvania Department of Revenue
Schedule UE as a deduction from the taxable compensation. If necessary,
a copy of Federal Form 2106 may be required to substantiate the Pennsylvania
Schedule UE amounts.
(10)
Taxpayer D has recently moved into the Borough of Quakertown.
In addition to a salary of $43,000, Taxpayer D received $10,000 in
moving expense reimbursements from his/her employer. The total taxable
compensation for Taxpayer D is $53,000. Taxpayer D can file a Pennsylvania
Department of Revenue Schedule UE for moving expenses in excess of
the reimbursed amount. Federal Form 3903 must accompany the Schedule
UE.
M.
Taxes assumed by the employer for the employee. The payment of taxes
by an employer on behalf of an employee in consideration for services
rendered by the employee is a gain derived by the employee for his
or her labor and is therefore considered to be a part of his or her
earned income/compensation. The payment of taxes for an employee is
taxable in the year the taxes were paid and reported and must be reported
on the employee's W-2 or a similar form.
N.
Regular wages or other compensation received during a period of sickness
or disability.
O.
Employee contributions to deferred compensation plans and old age
or retirement benefit programs or cafeteria plans.
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NOTE ON CAFETERIA PLANS. Any plan which, through an employee's
contribution, serves to reduce gross taxable wages for federal income
tax purposes is not recognized as an exclusion for the tax and will
therefore be taxed accordingly.
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Example: An employee's contribution/deferment under § 403(b),
§ 457(b) or § 401(k) of the Internal Revenue Code
will not be recognized as a reduction of taxable wages for purposes
of this tax.
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P.
Value of meals and lodging furnished by employers to domestics or
other employees, unless provided for the convenience of the employer
on the employer's premises. When lodging is provided by the employer
to the employee, and the employee is not required:
(1)
To reside on his or her employer's premises by the employer,
or
(2)
By the employer to reside temporarily at a location other than
the employer's premises as a requirement of the employee's
position and/or employment: then the fair market value of the employer
supplied meals and lodging shall be included in the employee's
earned income/compensation as it shall be taxable.
Q.
Scholarships, stipends, grants and fellowships shall be taxed as
earned income/compensation, if services are rendered in connection
therewith. See Appendix, § 601, 61 Pa. Code § 101.6,
Compensation (b), for determining whether scholarships, stipends,
grants and fellowships are taxable.
R.
National Guard pay, Military Reserve pay and other such earned income/compensation
derived from the United States Government for active duty outside
the Commonwealth of Pennsylvania as a member of its armed forces,
as determined to be taxable compensation by the Pennsylvania Department
of Revenue.
S.
Premature profit distributions not rolled over into a qualified pension
plan, individual retirement account or an annuity plan.
T.
Premature withdrawal or early distribution from retirement or pension
plan, on the contributions not taxed when earned. This can include
employer contributions, interest earned and employee contributions
actually received by the taxpayer from a regular IRA or from a Roth
IRA, to the extent that such employer and/or employee contributed
portion of the principal being withdrawn was not previously taxed
for local earned income/compensation tax, unless the premature principal
withdrawal is rolled over without passing to the taxpayer. The taxpayer
should use the cost recovery method of accounting to determine the
taxable portion of only the previously not taxed principal which the
employer contributed.
U.
Cafeteria plan money, credits and cash reimbursements made by an
employer to an employee for dependent care, legal services or other
personal services. A cafeteria or flexible benefit plan is one in
which an employee may choose from a package of employer-provided fringe
benefits, some of which may be taxable and some of which may be nontaxable.
Employer contributions to a cafeteria plan or flexible benefit plan
are included in gross compensation only to the extent the employee
has elected taxable benefits. Generally, a plan that provides for
deferred compensation is not a cafeteria plan. However, certain profit
sharing or stock bonus plans, and certain life insurance plans can
be offered through a cafeteria plan even though they provide for deferred
compensation. Where an employee has elected to participate in a cafeteria
plan or flexible benefit plan that provides for deferred compensation,
the cafeteria plan or flexible benefit plan will be considered as
taxable compensation for earned income/compensation tax purposes.
V.
Deferred compensation plan distribution (preretirement), to the extent
that it exceeds employee contributions into the plan. Distributions
received prior to the taxpayer's actual date of retirement, including
but not limited to ESOP, PAYSOP, 401k, 403b, cafeteria plans, etc.,
shall be taxable on the interest and employer's contributed portion
if the distribution is not rolled into an individual retirement account,
annuity plan or another qualified retirement plan.
W.
That portion of salary or wages which an employee contributes under
a plan which provides for an employee's election to contribute
a portion of his or her salary or wages to receive a benefit in lieu
of receiving the cash is taxable. The actual amount the employee elects
not to receive in cash is the amount which is taxable and shall be
included as gross salary or wages when filing the final individual
tax return with the Borough of Quakertown, as the employee has constructive
control of the cash. The amount is to be included in the W-2 total
for local wages and the applicable earned income/compensation tax
is also to be withheld on this portion of the employees gross salary
or wages.
X.
Back pay awards when the payment represents salary, wages, commissions,
bonuses, incentive payments, fees, tips or other compensation to which
the employee is entitled for services rendered is taxable. However,
back pay and retroactive wage increases which have been proven to
constitute punitive damages are generally not taxable.
Y.
All other forms of earned income/compensation or remuneration for
an employee's services rendered, whether this compensation is
received directly or through an agent and whether it is paid in cash,
property, or services. This shall include prizes and awards when the
recipient has rendered substantial service as a condition to receive
the prize or award. The manner of employment, or the rate of payment,
or the kind of payment will not cause the person to be exempt from
the applicable tax. Compensation received in the form of property
shall be taxed at its fair market value at the time of receipt. Neither
the kind nor the rate of payment, nor the manner of employment exempts
an employee from the tax.
Z.
Covenants not to compete which arise "within an employment relationship,"
such as when an employee signs a covenant not to compete with his
or her employer if and when he or she is no longer employed. In such
a case, the consideration for the agreement is usually provided at
the time the agreement is executed; often consists of the employment
itself. To the extent that explicit compensation is provided to the
employee during his or her employment, such compensation shall be
taxable as earned income/compensation. See Rauch v Philadelphia, 708
A.2d 142 (Pa. Cmwlth 1998)
AA.
Termination or severance pay received by the taxpayer.
BB.
Golden parachute payments.
CC.
Taxpayer payments received in the form of "debt forgiveness" as payment
of compensable services provided by the taxpayer are taxable.
DD.
Deceased taxpayer's earned income/compensation and net profits
from self-employment.
EE.
Guaranteed payments received by individual partners of a partnership
are to be included on the individual taxpayer's Pennsylvania
RK-1 form.
[Ord. 1096, 3/3/2004, § 206]
1.
The statutory definitions of "net profits" can be found in § 202,
Definitions. The purpose of this section is not to modify this definition
but to provide additional clarification through various examples and
explanations. This list of examples and explanations is not exhaustive
and in no way limits what constitutes taxable profits.
2.
Net profits shall be determined on a cash or accrual basis in accordance
with accepted accounting principles and practices but without deduction
of taxes based on income.
3.
Persons, activities and property are subject to the tax on net profits.
Partnership income which is the net income from business, profession
or farming, including guaranteed payments is taxable.
4.
Persons are subject to the tax on net profits. Any individual engaged
in a business, trade, profession or other activity carried on for
a profit shall pay the tax on the net profits therefrom. The form
of business shall not be the determining factor.
5.
Examples of net profits (without intending in any way to limit the
provisions of the ordinances or resolutions to these examples) are:
A.
The net profits of a business, profession or farm conducted by a
sole proprietor.
B.
The net profits of a business, profession or farm conducted as a
partnership.
C.
Royalties and patent or copyright fees received by authors, composers,
inventors and other such individuals.
D.
The net profits of a limited liability company as reference in Act
106 of 1994, known as the “Limited Liability Company Act, § 8925.”
E.
Net profits from the operation of hotels, motels, trailer camps,
tourist homes, boarding houses, bed-and-breakfast establishments,
mobile home parks, child care, adult care, day care and other similar
businesses.
F.
Net profits from the business of renting personal property.
G.
Real estate rental net profits reported on Pennsylvania Schedule
C, received in the course of a trade or business, are taxable. Rental
income received from the operation of real estate is subject to this
tax when the owner actively manages and supervises the property himself
or herself or through agents or servants, by providing labor and service
in connection with it. The furnishing of labor and service signifies
activity and participation on the part of the owner and classifies
him or her as carrying on a business. When any property falls within
a taxable classification the manner of its acquisition, i.e., purchase,
gift, inheritance, fiduciary, or as a fiduciary mortgagor in possession,
etc., does not affect the taxability of the income derived therefrom,
unless specifically stated otherwise in this Part.
H.
All other net profits of business activities except any portion thereof
resulting from items not taxed under the provisions of the ordinances
or resolutions as set forth in § 207 hereof. In calculations
utilized to determine the correct net profits, the following items
are to be included, as they shall be considered to be a part or component
of business income:
(1)
Interest received on credit sales.
(2)
Interest received on working capital.
(3)
Interest earned on withheld employee taxes.
(4)
Discounts received from Pennsylvania Department of Revenue for
timely remittance of sales tax.
(5)
Damages, awards and or settlements received, except for personal
injury cases. Both punitive and compensatory damages, awards and/or
settlements received in personal injury cases are excluded when physical
injury or sickness has occurred. Punitive damages, awards and/or settlements
received in personal injury cases where no physical sickness or injury
has occurred, such as defamation of character actions, is taxable
income for determining net profits.
I.
In determining net profits subject to tax under the provisions of
the ordinances and resolutions, the net profit of each business activity
is to be determined separately with reference only to the gross income
and expenses of that business and without mixing the income of one
activity with the expenses of another. Persons engaged in more than
one business activity during the tax year may not offset a loss in
one activity against the gain in another. The tax is imposed on the
net profit of each business activity separately. A loss incurred from
a profession, business activity or venture, regardless of the nature,
may not be deducted from the net profit of any other business activity.
(See Aronson vs. City of Pittsburgh, 86 Pa. Cmwlth. 591, 485 A.2d
890 (1985).
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Example: A person who receives net profits from the operation
of a sole proprietorship may not offset against such profits the net
losses incurred as a partner in another business activity.
|
J.
Each resident partner or member of a nonresident partnership, association
or other entity must pay the tax on his or her share of the net profits,
whether or not it is actually distributed to him or her.
K.
The net profits received by a general partner of a limited partnership
entity (15 Pa. C.S.A § 8925).
L.
Guaranteed payments to partners/taxpayers as reported on Pennsylvania
Schedule RK-1.
M.
Covenants not to compete executed after December 31, 2001, which
involve taxpayers who are not employees. The promise not to compete
and the subsequent undertaking of that effort pursuant to a business
arrangement is sufficient to bring this item within the purview of
the net profits tax. The fact that this is a negative covenant or
rather, a promise not to do something does not remove it from the
realm of business activity which is undertaken as part and parcel
of a contract for a fee. The act of not competing is the consideration
contributed to this contract by the taxpayer. It is consideration
that has a business purpose, not a personal purpose.
N.
Bonus depreciation amounts are to be calculated for local income
tax purposes in the same manner as calculated for Pennsylvania personal
income purposes and not as according to federal income tax provisions.
[Ord. 1096, 3/3/2004, § 207]
1.
The following income sources are not considered to be earned income/compensation
and are not subject to the tax.
A.
Sickness, disability or retirement benefits paid, other than regular
wages as provided in § 205N.
B.
Benefits paid under any public assistance, unemployment or worker's
compensation legislation, including supplemental unemployment benefits
(SUB pay) or strike pay.
C.
Compensation or bonuses paid by a State or by the United States for
active military service in the armed forces, as determined by the
Pennsylvania Department of Revenue to be excluded from compensation
for personal income tax purposes.
D.
Death benefit payments to an employee's beneficiary or estate,
whether payable in a lump sum or otherwise.
E.
Proceeds of life insurance policies or annuities.
F.
Cash or property received as a gift, by will or by statutes of descent
and distribution.
G.
Personal interest and dividends. (Interest earned on working capital
must be included in the calculations of net profits and may not be
deducted.) All forms of interest, i.e., on obligations of the United
States or its possessions, the Commonwealth of Pennsylvania, or any
political subdivision thereof, or on any bank or postal savings accounts,
mortgages, or loans received by an individual, except those amounts
representing compensation by virtue of being remuneration for services
provided, such as those amounts reported as "wages, salaries, tips,
etc." on the appropriate lines of the taxpayer's W-2 form.
H.
All forms of dividends received by a person, except those amounts
representing earnings or compensation by virtue of being remuneration
for services provided, such as those amounts reported as "wages, salaries,
tips, etc." on the appropriate lines of the taxpayer's W-2 form.
I.
Rents derived from mere "passive" or "investment" ownership or subleasing
of real estate without the furnishing by the lessor of services to
the leased premises or to the lessee other than gas, electricity,
water, sewage and heat. Such rents are considered to be return solely
from invested capital and not profits from the operation of a business
activity taxed by the ordinances or resolutions.
J.
Value of meals and lodging furnished by the employer to domestics
or other employees for the convenience of the employer on the employer's
premises. However, when board or lodging is provided by the employer
and the employee is not required to reside on the employer's
premises by his or her employer, the fair market value of the board
or lodging shall be included in the employee's earnings as it
shall be considered to be taxable earned income/compensation.
K.
Capital gain income.
L.
Social Security benefits.
M.
Veterans Administration allotments for subsistence or disability.
N.
Income from pensions or old age and retirement benefit plans received
upon retirement.
O.
Lottery winnings.
P.
Individual retirement account (IRA) payments received upon retirement.
Q.
Profits applicable to limited partners within a limited partnership
entity.
R.
A net loss on a self-employment business schedule may be deducted
only from that individual's earned income/compensation for that
tax year. A Schedule E loss will not offset earned income/compensation
as a Schedule E net profit will not be taxed.
S.
S corporation net profits. This does not include compensation paid
to the officers of an S corporation, nor does this include any salaries,
wages, commissions, fees, or other compensation received by an officer,
director, stockholder or employee of an S corporation.
T.
Distributions from deferred compensation plans to the extent that
such distributions represent a return of the taxpayer's own contribution
upon which he originally paid the tax.
U.
Damages for personal injuries.
V.
Payments received for child support and alimony.
W.
Scholarships and fellowships awarded from detached generosity on
the basis of financial need or academic achievement for the sole purpose
of encouraging or allowing the recipient to further his or her educational
development and not as compensation for past, present or future services.
A scholarship or fellowship shall constitute earned income/compensation
if the recipient must apply his or her skills and training to advance
research, creative work or some other project or activity.
X.
Prizes and awards unless the recipient must render substantial service
as a condition to receiving the prize or award.
Y.
Profit from the casual exchange or sale of property.
Z.
Parsonage/housing/rent/utilities payments received by a member of
the clergy.
AA.
Jury duty pay.
2.
The items listed and described within this section are not to be
listed as deductions against income as they are a list of nontaxable
income sources.
[Ord. 1096, 3/3/2004, § 208]
The entire earned income/compensation and net profits received
and/or earned by a resident of Borough of Quakertown is subject to
this tax. Neither the source of the earned income/compensation or
net profits nor the place where it is received and/or earned exempts
a resident from the tax.
[Ord. 1096, 3/3/2004, § 209; as amended by Ord.
1111, 4/6/2005]
1.
The entire earned income/compensation and net profits received and/or
earned by a nonresident of the taxing district who is employed in
the taxing district or engaged in the operation of a business, profession
or other activity for income or profit in the taxing district, and
is not required to pay a similar tax elsewhere, is subject to this
tax; provided, however, that nonresidents are not subject to taxation
by school districts.
2.
Any person claiming nonresidency status must provide proof of nonresidency,
such as a passport with a valid student or exchange visitor's
visa, a driver's license, a local tax return from his or her
resident municipality, voter registration card, or other acceptable
documentation. Any person claiming nonresidency exemption status must
provide proof of payment of the local earned income/compensation and
net profits tax elsewhere for the concurrent time period.
3.
The earned income/compensation tax, as levied on nonresidents by
the ordinances and resolutions of the Borough of Quakertown shall
relate to and is imposed at the rate of 1% upon the salaries, wages,
commissions and other compensation paid by an employer or on his or
her behalf to a person who is employed by him or her. Therefore, if
an employer has its place of business within the Borough of Quakertown
and employs an individual and all salaries, wages, etc., are paid
to the employee from said employer, then all wages, salaries, etc.
are taxable at the rate of 1%. It makes no difference that the employee
spends a significant amount of time outside of the Borough of Quakertown
on business. The critical factor is whether the salaries, wages, etc.,
are paid to the employee from the employer or business located within
our taxing jurisdiction(s). If this is the case, then the tax is properly
levied, and no refunds should be issued.
[Ord. 1096, 3/3/2004, § 210]
1.
Credit for earned income/compensation and/or net profits tax paid
for the concurrent time period to another state or political subdivision
will be allowed as a deduction from the liability of taxpayers for
tax imposed under the provisions of the ordinances and resolutions
and as provided by Act 511. Such allowable credit will be available
up to the maximum effective rate of the tax levied by the taxing district
on the identical income and/or net profits taxed by the Borough of
Quakertown and other Commonwealth of Pennsylvania and/or another state's
political subdivisions; provided, however, that this same credit has
not already been applied towards the taxpayer's liability for
the Pennsylvania personal income tax for the same period. Evidence
of the amount of gross earnings and payments of the applicable tax
on earned income/compensation or net profits is required before this
credit is allowed.
2.
Examples.
A.
Taxpayer G, a resident within our taxing jurisdiction, is employed
or self-employed in Philadelphia and pays the Philadelphia income
tax. Taxpayer G is entitled to a credit of up to 1.5% (the current
tax rate for the Borough of Quakertown of the earning income/compensation
and/or net profits taxed by the City of Philadelphia, towards his
or her local earned income/compensation and or net profits tax due
to the Borough of Quakertown.
|
Since the City of Philadelphia is a "nonreciprocating" tax district
that derives its power to levy a local income tax by virtue of the
Sterling Act at a rate higher than that allowed by the Local Tax Enabling
Act, tax paid to Philadelphia cannot be applied as a credit to earned
income/compensation and/or net profits earned outside the City of
Philadelphia, not subject to the Philadelphia local income tax. The
Borough of Quakertown will not refund the Philadelphia local income
tax paid in excess of the tax due to Taxpayer G's resident municipality.
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B.
Taxpayer H, a resident within our taxing jurisdiction, is employed
or self-employed in City A in the State of Delaware, which exacts
a 1.3% on his or her earned income/compensation and/or net profits.
Taxpayer H is entitled to a credit of up to 1.5% (the current tax
rate for the Borough of Quakertown of the earning income/compensation
and/or net profits taxed by City A, Delaware).
C.
Taxpayer I, a resident within our taxing jurisdiction, is a partner
in a national CPA firm with offices in our taxing jurisdiction, plus
Chicago, New York and New Orleans. Taxpayer I pays taxes on income
earned in some of these cities. Taxpayer I may take credit towards
the tax using the following method:
(1)
Determine the income earned in each locality during the tax
year.
|
$50,000 in Bethlehem
| |
|
$5,000 in New York City
| |
|
$15,000 in Chicago
| |
|
$10,000 in New Orleans
| |
|
$80,000 gross income – all taxable locally
|
(2)
Determine the maximum credit that can be taken for taxes paid
to the other localities.
|
$5,000 x 1.5% = $75
| |
|
$15,000 x 1.5% = 225
| |
|
$10,000 x 1.5% = $150
| |
|
$450 maximum allowable credit that can be applied towards the
tax
|
(3)
List the amount of tax paid to each locality.
|
$200 to New York City
| |
|
$400 to Chicago
| |
|
$600 to New Orleans
| |
|
$1,200 total paid to other localities.
|
(4)
Subtract from the total the credit already taken on the Pennsylvania
state return PA-40.
|
$1,200 total paid to other localities.
| |
|
$735 credit taken on PA-40
| |
|
$465 credit remaining
|
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The maximum credit that can be applied towards the tax is $450
– see Step (2) above. This amount $450 can be entered on our
final individual earned income tax return as an out-of state/miscellaneous
credit. If the credit remaining after Step (4) had been less than
$450, then the lesser amount would be allowed as a credit against
the tax.
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3.
Residents who take credit for taxes paid in other jurisdictions shall
provide the Borough of Quakertown with an exact duplicate copy of
the tax return as filed with the other taxing jurisdictions, along
with an exact duplicate copy of their Commonwealth of Pennsylvania
individual income tax return (PA-40) and any additional documentation
or schedules requested by the Income Tax Officer.
4.
Residents who pay taxes to any foreign country shall not be eligible
for credits against the earned income/compensation and/or net profits
tax as a result of Pennsylvania Supreme Court decision per the March
16, 1989, opinion by Justice McDermott in the O'Reilly case,
in that it was the intention of the General Assembly to limit the
application of the credit to taxes paid to other states of these United
States; for absent clear words evincing a manifest intent we can not
presume that the General Assembly determines politics or their consequences
based on the laws of nations or states beyond the borders of the United
States.
[Ord. 1096, 3/3/2004, § 211]
1.
Deductions.
A.
Employee's Unreimbursed Business Expenses. Business expenses
for which an employee has not been reimbursed are allowed as a deduction
from earned income/compensation provided such expenses meet the four-part
test as established by the Pennsylvania Department of Revenue. That
is, the expense must be "ordinary, actual, reasonable, and necessary"
in order to be deducted from earned income/compensation. This means
that any expense claimed as a deduction from gross earnings must be:
(1)
Customary and accepted in the industry or occupation in which
the taxpayer works.
(2)
Directly related to the taxpayer's present occupation as
opposed to an occupation in which he plans to enter in the future.
(3)
Reasonable in amount and not lavish or excessive.
(4)
Necessary to enable the taxpayer to properly perform the duties
of his present employment.
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Those expenses not meeting the four-part test are not allowed
as a deduction from earned income/compensation. The taxpayer has the
burden of proving that any expense claimed is ordinary, actual, reasonable
and necessary and must maintain adequate and sufficient records to
substantiate any such deduction taken.
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B.
Examples of expenses which may not be deducted from earned income/compensation
include but are not limited to travel (commuting) to and from work;
meals and lodging unless the "away from home overnight test" is met;
capital expenditures; moving, educational and office-in-home expenses
except as allowed by the Pennsylvania Department of Revenue; and personal
expenses such as medical, dental, life insurance premiums, contributions,
interest, other taxes, gifts and entertainment, dues to professional
or fraternal societies, club memberships, subscriptions to publications,
alimony, babysitting, books, casualty or theft losses, license fees,
clothing suitable for everyday use, employee deferred compensation
plan contributions, Federal Form 1040 tax credits and other taxes,
individual retirement account (IRA) contributions, employee contributions
to simplified employee pension plans (SEP), federal, state or local
income taxes, gift estate or inheritance taxes and personal taxes,
penalties or interest paid on delinquent income taxes, tools for use
at home, Federal Form 1040 itemized deductions or the occupational
privilege tax.
C.
Employees engaged in income producing activities separate and apart
from their earned income/compensation may be permitted necessary,
ordinary, reasonable and actual expenses. However, employees whose
activities do not generate supplemental income shall not be permitted
deductions for associated expenses.
D.
Business expenses as documented on Pennsylvania Department of Revenue
Schedule UE are permitted. If employee business expenses are claimed
a copy of Pennsylvania Schedule UE, and all supporting forms, schedules
and/or worksheets must be provided. If moving expenses are claimed,
a copy of Pennsylvania Schedule UE must be provided along with the
Pennsylvania Tax Form 214.
E.
Should the taxpayer omit the required expense deduction form, as
well as supporting forms, schedules and worksheets, or if the expense
deduction form is not fully completed, the expense deduction will
be systematically disallowed and denied without notification to the
taxpayer.
2.
Losses.
A.
Taxpayers are allowed to offset a gain in one class of income against
a loss in another class of income. O'Reilly v. Fox Chapel Area
School District, 555 A.2d. 1288, 521 Pa. 471, 1989.
B.
If a net loss is incurred from the operation one or more business
activities, the amount of the net loss or losses must be listed separately
(not combined with the net profit of any other business or businesses).
Aronson v. City of Pittsburgh, 485 A.2d. 890, 86 Pa. Cmwlth. 591,
1985.
C.
Losses may only be applied in the year in which the loss was actually
incurred and may not be carried forward to subsequent years.
D.
One person's losses may not be deducted from his or her spouse's
earnings.
E.
S Corporation losses may not offset the earned income/compensation
or net profit of any taxpayer.
F.
Losses from items or activities which are excluded from the tax may
not be used to offset earned income/compensation or net profits.
[Ord. 1096, 3/3/2004, § 212; as amended by Ord.
1111, 4/6/2005]
1.
Generally. A nonresident working or self-employed within the Borough
of Quakertown, which levies a tax on nonresidents, is subject to a
1% tax on all earned income/compensation and/or net profits for work
done or services provided or originating in or directed from within
the Borough of Quakertown.
2.
Compensation Allocation. Apportionment of earned income/compensation
tax to a nonresident's earnings generated from full time employment
within the Borough of Quakertown, which taxes nonresidents:
A.
Where the Pennsylvania borough, township, city or school district
(except Philadelphia) of which the employee is a resident imposes
and collects a tax of 1% or more on earned income/compensation, the
earnings of such employee are required to be taxed by the employer
in the Borough of Quakertown. The Income Tax Officer will collect
the withheld tax and forward it to the employee's resident municipality
and/or school district of record.
B.
Where the Pennsylvania borough, township, city or school district
(except Philadelphia) of which the employee is a resident imposes
and collects a tax of less than 1% on earned income/compensation,
the earned income/compensation earned within the Borough of Quakertown
shall be taxed at 1% by the employer. The Income Tax Officer will
collect the withheld tax and forward the amount of tax imposed by
the employee's resident taxing jurisdiction. Any difference between
the tax actually imposed by the employee's resident taxing jurisdiction(s)
and the amount of tax withheld will be retained by the municipality
where the employer is located.
C.
Nonresidents working full-time in one or more of our taxing jurisdictions
which tax residents, by virtue of a contract of employment on a five
day per week basis (Monday through Friday) may not exclude from his
or her earned income/compensation, compensation for days which he
or she is compensated but not required to work (i.e., Saturdays, Sundays,
holidays, vacations, etc.).
3.
Nonresidents Working Part-Time in the Borough of Quakertown.
A.
Where a nonresident receives earned income/compensation for work
done or services provided or originating in or directed from within
the Borough of Quakertown and additionally receives earned income/compensation
for work done or services provided or originating in or directed from
areas outside the Borough of Quakertown, only that income attributable
to Quakertown shall be subject to the tax.
B.
The Borough of Quakertown does not allow non residents employed within
its taxing jurisdiction(s) to use the "days present" method of apportioning
income. Nonresidents are taxed on total earned income/compensation
from sources within the Borough of Quakertown.
4.
Allocation of Net Profits of Nonresidents.
A.
Where the Entire Business is Transacted Within the Borough of Quakertown.
A nonresident individual conducting any business, trade, profession,
or other activity is subject to the tax on the entire net profits
thereof if the entire business is conducted or carried on in the tax
jurisdiction(s).
B.
Where the Sole Store or Office is in the Borough of Quakertown. A
nonresident who maintains his or her sole store or office in the taxing
jurisdiction and transacts business both within and outside the taxing
jurisdiction is not entitled to an allocation of his or her net profits.
The business status, in such instances, is considered transacted as
flowing through the municipality/taxing jurisdiction's store
or office.
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Example: A nonresident surgeon who maintains an office within
the taxing jurisdiction and no other office outside the taxing jurisdiction
would not be permitted to allocate the tax as to fees received for
surgery actually performed outside the taxing jurisdiction. The same
example would apply to an attorney who maintains his or her sole office
within the municipality.
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C.
When a Nonresident is Entitled to an Allocation of Net Profits. A
nonresident who, in addition to having a place of business or office
within the taxing jurisdiction, also maintains a place of business
or office outside the taxing jurisdiction shall be entitled to an
allocation of his or her net profits. Such allocation is subject to
the approval of the Tax Administrator and shall only be considered
if sufficient proof is provided that the place of business or office
outside the taxing jurisdiction is an established, self-sustaining,
bona fide branch office or store.
5.
Methods of Allocation.
A.
Special Allocation Formula. Where it is impossible to allocate with
certainty the net profits subject to the tax by reason of the absence
of a place of business or office within the taxing jurisdiction, or
because the nonresident taxpayer's records do not disclose a
breakdown of the actual net profits earned within the taxing jurisdiction,
or for any other reason, the Tax Administrator, upon request, may
permit the use of a special allocation formula to effect a fair and
proper apportionment so that only that portion of the net profits
attributable to the taxing jurisdiction is included in the measure
of the tax. These factors are:
(1)
Real and Tangible Property Factor. The taxpayer computes a percentage
on the basis of a fraction using the total average book value of all
such property located within the taxing jurisdiction as the numerator,
and the total average book value of all property located within and
outside the taxing jurisdiction as the denominator.
(2)
Wages and Salaries Factor. A percentage is computed on the basis
of a fraction using the total amount of wages and salaries paid to
employees who work in or from or are attached to places of business
located within the taxing jurisdiction as the numerator, and the total
wages and salaries paid to all employees within and outside the taxing
jurisdiction as the denominator.
(3)
Gross Receipts Factor. A percentage is computed on the basis
of a fraction using as the numerator gross receipts from sales or
services attributable to the taxing jurisdiction and as the denominator
all gross receipts from sales or services made within and outside
the taxing jurisdiction.
(4)
Averaging. The percentages obtained for the three factors described
herein above are to be added together and the total thereof divided
by three to obtain the average of the three percentages. If the numerator
and/or the denominator of any fraction are zero, the factor is deemed
to be nonexistent and shall be omitted in calculating the average
of the percentages.
|
Example:
| ||||
|
(a)
|
Average real and tangible personal property in the taxing jurisdiction
|
$25,000
| ||
|
Average real and tangible personal property within and outside
the taxing jurisdiction
|
$100,000
|
25%
| ||
|
(b)
|
Wages and salaries in taxing jurisdiction
|
$10,000
| ||
|
Wages and salaries within and outside the taxing jurisdiction
|
$50,000
|
20%
| ||
|
(c)
|
Gross receipts in taxing jurisdiction
|
$75,000
| ||
|
Gross receipts within and outside the taxing jurisdiction
|
$300,000
|
25%
| ||
|
25% + 20% + 25% = 70%, then 70% divided by 3 factors = 23 1/3%;
23 1/3% would be the allocation percentage for taxable net profits
| ||||
[Ord. 1096, 3/3/2004, § 213]
1.
Every employer having an office, factory, workshop, branch, warehouse
or other place of business located within the taxing district and
who employs one or more persons (other than domestic servants in a
private home) for a salary, wage, commission or other compensation
shall deduct the tax from the employee's wage at the time of
payment thereof.
2.
Fiduciary Status. Employers who withhold earned income/compensation
tax from employees, and the person responsible for the transmission
of earned income/compensation tax withheld by a corporate employer,
shall be a fiduciary charged with all the responsibilities of a fiduciary
with respect to taxes withheld and shall be subject to all duties
imposed by law on fiduciaries, including criminal penalties for breach
of duties.
3.
Withholding by Employers from Musicians, Entertainers, Sports Participants,
Clergy and Domestics:
A.
Musicians.
(1)
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 event or occasion.
(2)
Contractor. The term “contractor” means that individual
through whom the purchaser and the musician(s) negotiate the contract
of service and the performance thereof. The contractor may or may
not perform actual music service under a contract which he or she
has negotiated.
(3)
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. Where a contract for the purchase of music
has been executed between a purchaser and a contractor, then the musicians
shall be deemed to be the employee of the purchaser. The purchaser
shall be the person responsible for the withholding, and remittance
to the Income Tax Officer, of the tax from the wages paid to the musicians.
(4)
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 (i)
a fixed personnel or (ii) the individual member musician has contracted
for his or her services with the leader or owner of the band at a
fixed salary, by term or by individual engagement, and over whom the
purchaser of music 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, and remitting the withheld tax to the
Income Tax Officer.
B.
Entertainers Other Than Musicians.
(1)
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.
(2)
The owner of a club, cafe, taproom, 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, and remit to the Income Tax Officer, the tax withheld
from the earned income/compensation paid to the entertainer.
C.
Promoters of boxing exhibitions and other sporting events are required
to withhold the tax from the earned income/compensation paid to the
contestants engaged in the particular sporting event (where an employer/employee
relationship exists).
D.
Minister, Rabbis and Clergymen. Salaries paid by organized religious
bodies to ministers, rabbis, clergymen, evangelists or other religious
workers are taxable. The organized religious body shall withhold the
tax upon such salaries and make remittance to the Income Tax Officer.
E.
Domestics. The earned income/compensation received by domestics is
taxable. The employer may, with the consent of the domestic, withhold
the tax. Where the duties of domestics require them to live at their
place of employment, board and lodging shall not be considered as
wages or salary earned.
[Ord. 1096, 3/3/2004, § 214]
Any employer located outside the taxing district may voluntarily
withhold the tax from employees who are residents of taxing district
but are employed outside the taxing district. Such employers assume
the fiduciary responsibilities as outlined in § 213, Subsection
2.
[Ord. 1096, 3/3/2004, § 215]
1.
Each employer withholding or required to withhold tax pursuant to
§§ 213 and 214 shall register with the Borough of Quakertown
such employer's name and address and such other information as
the Officer may require within 15 days after becoming a withholding
employer.
2.
All employers who have a place of business located within the taxing
district shall maintain complete records of all employees for a period
of six years in such form as to enable the Officer to determine the
employers' liability to withhold for each employee, the amount
of taxable income for each employee, the actual amount of tax withheld,
the actual amount transmitted to the Officer and such other information
available to such employers as will enable the Officer to carry out
his or her responsibilities.
[Ord. 1096, 3/3/2004, § 216]
Failure or omission of any employer to withhold the tax shall
not relieve the employee from payment of the tax or from complying
with the requirements relating to the filing of declarations and returns.
[Ord. 1096, 3/3/2004, § 217]
Employers who willfully or negligently fail or omit to make
the required deductions of its employees earned income taxes shall
be directly liable for payment of the taxes which the employer was
required to withhold to the extent that such taxes have not been recovered
from the employee.
[Ord. 1096, 3/3/2004, § 218]
1.
On or before April 15 of each year, every person who was a resident
of the taxing district who was employed or engaged in the operation
of a business, profession or other activity for income or profit or
who was a nonresident of the taxing district who is subject to this
tax and who was employed in the taxing district or engaged in the
operation of a business, profession or other activity for income or
profit in the taxing district, for all or any part of the preceding
calendar year; shall file with the Borough of Quakertown an annual
tax return showing all earned income/compensation and net profits
received and/or earned for the previous year
2.
Persons residing in more than one taxing district as a result of
moving during the calendar year must file an annual tax return with
the Officer for each district in which they resided during the year.
Employees have the authority to request and receive or view a pay
stub or letter from the taxpayer's employer or employers for
the applicable period of time relevant to the tax-filing period. The
pay stub or letter from the employer should indicate the gross earnings
and earned income/compensation tax withheld for each period and taxing
authority. To facilitate tax return processing this information must
accompany each tax return when it is received. Alternatively, the
taxpayer's earned income/compensation and/or net profits for
the year may be divided by 12 months and multiplied by the number
of months appropriate for each taxing jurisdiction.
3.
If a person receives an annual tax return from the Borough of Quakertown
and has no earned income/compensation to report, the word "none" shall
be entered on the annual tax return, and the return shall be signed,
dated, and returned to the Borough of Quakertown with an explanation
(military service, retired, disability income only, unemployment compensation
only, S corporation only, housewife, unemployed student or deceased).
4.
If net profits are received, the type of business, profession or
activity shall be indicated on the annual tax return and the amount
of the profit shall be shown on the appropriate line of the return.
If a net loss is incurred in the operation of one business activity,
it may not be offset against the net profit of another business activities.
Losses shall be indicated as zero in all calculations involving net
profits, and zero shall be entered on the appropriate line of the
annual tax return. There shall also be attached to the annual tax
return a copy of the appropriate Pennsylvania Tax Form PA-40 and Pennsylvania
Schedules C, E, F, UE, Pennsylvania Schedule RK-1 or Pennsylvania
NRK-1 to substantiate profits and/or losses indicated. Schedule E
profits are not taxed. Schedule E losses cannot be used to offset
earned income/compensation or other profits.
5.
When a return is made for a fiscal year, the return shall be filed
within 105 days from the end of said fiscal year.
6.
The annual tax return shall also show the taxpayer's name, Social
Security number, address, place or places of employment or business,
the amount of tax due, the amount of credit claimed for tax withheld
by an employer (with a copy of the earnings and tax statement showing
the amount of tax withheld) and such other information as may be indicated
on the return form or as may be required by the Officer.
7.
Every person subject to the tax shall file such return regardless
of the fact that his or her wages may have been subject to withholding
of the tax by his or her employer and regardless of whether or not
any tax is due.
8.
At the time of filing the annual return, the taxpayer shall pay any
tax due. Total balances less than $1 need not be paid. Tax installment
contracts are available to taxpayers meeting the requirements set
forth in § 237 when approved by the Tax Administrator.
9.
The annual tax return must be signed and dated by the taxpayer in
the space provided.
10.
Joint filing of an annual return by husband and wife shall not be
allowed.
11.
Remittances shall be made payable to the Borough of Quakertown EIT.
12.
Third party checks in payment of the tax due may be refused by the
Borough of Quakertown.
13.
Bad Checks. A $25 charge will be levied each time a check is returned
from the bank unpaid. Checks issued in violation of the Pennsylvania
Crimes Code will be referred to appropriate authorities for possible
criminal prosecution.
[Ord. 1096, 3/3/2004, § 219]
1.
Net Profits.
A.
Every taxpayer anticipating net profit(s) in excess of $2,500 individually
in a given calendar year shall file a declaration of estimated income
tax form.
B.
Quarterly payments of 1/4 of the tax due thereon of net profit(s)
earned during the period beginning January 1 and ending December 31
of the current year, shall be made to the Borough of Quakertown at
the following times:
|
For Quarter Comprising the Months in Which Net Profits
are Received
|
Quarterly Payment (1/4 of Total Estimated Yearly Tax Owed)
| |
|---|---|---|
|
January, February, March
|
April 30
| |
|
April, May, June
|
July 31
| |
|
July, August, September
|
October 31
| |
|
October, November, December
|
January 15
|
C.
A penalty of $10 per failure to comply with the filing requirement
shall be imposed and collected, in addition to the fines and penalties
referenced in § 223.
D.
The additional $10 penalty shall apply to the following:
(1)
Failure to file the quarterly declaration of estimated tax form
for each period.
(2)
The deliberate misrepresentation of information or an improperly
filed declaration.
(3)
Failure to pay any of the estimated tax due for each period.
(4)
Failure to make timely estimated tax payments for each period.
E.
A husband and wife shall not file a joint declaration using one Social
Security number. If one payment is made for multiple persons, the
amount of tax to be applied to each person identified by their correct
Social Security number is required.
F.
Any taxpayer may, in lieu of paying the fourth quarterly installment
of his estimated tax, elect to make and file with the Income Tax Officer
on or before January 15 of the succeeding year the final return as
herein above required.
2.
Earned Income/Compensation Not Subject to Withholding.
A.
Every taxpayer anticipating earned income/compensation in excess
of $2,500 individually in a given calendar year, if the tax due thereon
is not fully withheld by employer(s) shall file a declaration of estimated
income tax form.
B.
Quarterly payments of 1/4 of the tax due thereon of earned income/compensation
earned during the period beginning January 1 and ending December 31
of the current year, shall be made to the Borough of Quakertown at
the following times:
|
For Quarter Comprising the Months in Which Net Profits
are Received
|
Quarterly Payment (1/4 of Total Estimated Yearly Tax Owed)
| |
|---|---|---|
|
January, February, March
|
April 30
| |
|
April, May, June
|
July 31
| |
|
July, August, September
|
October 31
| |
|
October, November, December
|
January 15
|
C.
A penalty of $10 per failure to comply with the filing requirement
shall be imposed and collected, in addition to the fines and penalties
referenced in § 223.
D.
The additional $10 penalty shall apply to the following:
(1)
Failure to file the quarterly declaration of estimated tax form
for each period.
(2)
The deliberate misrepresentation of information or an improperly
filed declaration.
(3)
Failure to pay any of the estimated tax due for each period.
(4)
Failure to make timely estimated tax payments for each period.
E.
A husband and wife shall not file a joint declaration using one Social
Security number. If one payment is made for multiple persons, the
amount of tax to be applied to each person identified by their correct
Social Security number is required.
F.
Any taxpayer may, in lieu of paying the fourth quarterly installment
of his estimated tax, elect to make and file with the Income Tax Officer
on or before January 15 of the succeeding year the final return as
hereinabove required.
G.
Every taxpayer is required to file an annual return, pursuant to
§ 218, whether or not a declaration and/or quarterly installments
have been filed and/or paid.
[Ord. 1096, 3/3/2004, § 220]
1.
Every employer required to withhold the tax shall file a quarterly
return (Form 511) on the proper form setting forth the name, Social
Security number, address, municipality of residence, gross earnings
and the amount of tax withheld for each employee, and shall remit
the total sum thereof to the Borough of Quakertown at the following
times:
|
For Quarter Comprising the Following Months in Which Wages
are Paid
|
Employer's Quarterly Return and Payment Due on or
Before
| |
|---|---|---|
|
January, February, March
|
April 30
| |
|
April, May, June
|
July 31
| |
|
July, August, September
|
October 31
| |
|
October, November, December
|
January 31
|
2.
Employers may utilize computer printouts or similar listings to transmit
quarterly and/or annual employee withholding data provided the required
information is furnished in a manner acceptable to the Borough of
Quakertown. By prior arrangement with the Administrator, employers
with fewer than 250 employees may furnish quarterly and/or annual
employee withholding data via magnetic media. In such cases an employer's
quarterly return "header" shall be completed and attached as a cover
sheet to transmit the data and withheld tax to the Borough of Quakertown
quarterly. The annual employee withholding Form W-2 data shall be
reported to the Borough of Quakertown during February of the succeeding
calendar year and shall be accompanied by the annual reconciliation
Form 512.
3.
Every employer with 250 or more employees shall be required to submit
employee quarterly and annual withholding data via acceptable magnetic
media. This reporting requirement shall become effective with the
tax year beginning January 1, 2000. Such employers shall complete
an employer's quarterly return "header" and attach it as a cover
sheet to transmit the data and withheld tax to the Borough of Quakertown
quarterly. The annual employee withholding Form W-2 data shall be
reported to the Borough of Quakertown during February of the succeeding
calendar year and shall be accompanied by the annual reconciliation
Form 512.
4.
The local earned income/compensation taxes withheld from an employee's
wages by an employer or business entity or a corporation shall be
held in trust for the taxing jurisdiction and the Tax Administrator,
even in the event of bankruptcy. These withheld tax funds shall not
be considered to be part of the "property of the bankrupt estate."
These withheld taxes shall not be commingled in the employer's
general cash or other operating accounts.
A.
Trustee ex Maleficio. One who collects the earned income/compensation
tax as an agent for the taxing jurisdiction or the taxing jurisdiction's
tax administrator and fails to pay over such withheld taxes to the
appointed collector for the taxing jurisdiction is a trustee ex maleficio.
|
Example: An officer of a company that fails to remit the earned
income/compensation tax withheld from the company's employees
may be held personally liable for the tax withheld as a trustee ex
maleficio, where the officer has been active and/or in control over
the collection and remittance of taxes.
|
B.
Businesses and corporations must act through individuals and where
such individuals are the acting and controlling officers and agents
of the corporation or business and they fail to administer the trust
responsibilities, liabilities are imposed upon the individuals who
are responsible for the performance of the trust duty.
|
Example: A corporation which files an employer's quarterly
return of tax withheld from employees, or the Forms W-2 documenting
collections from employees, but does not remit the tax withheld in
full to this office shall be liable for the withheld taxes as a trustee
through wrongdoing. The controlling corporate officer is also liable
for the tax as a trustee through wrongdoing, to the extent that this
officer has failed, permitted and/or directed the corporation not
to remit the withheld tax.
| |
|
Example: An officer and/or director of a corporation or business
who has knowledge that the corporation has failed to remit withheld
earned income/compensation tax shall be personally liable for such
tax withheld because that person did not try to prevent the corporation
or business from spending its funds without first remitting the withheld
tax to the Income Tax Office.
|
C.
Liabilities of Corporations and Officers. Where a corporation does
not remit the earned income/compensation tax withheld from its employees
and is subsequently is dissolved in bankruptcy, the corporate officers
shall be held personally liable, jointly or severally, for the payment
of the tax withheld.
|
Example: The officers are the sole owners of the shares of stock
and/or are the "guiding force" of the corporation. The officers are
trustees of the earned income/compensation tax collected since they
are responsible for the corporation's failure to remit the withheld
taxes and the resulting misappropriation of the tax funds. The doctrine
of separate entity of the corporation shall not defeat this office's
claims for tax withheld.
|
5.
The employer or the business or the corporation shall not characterize
the tax withheld from employees as simply creating a debtor-creditor
relationship between the employer or business or corporation and this
office as collector for the tax district or taxing jurisdiction; therefore,
the employer is the conduit for the employees' tax payments.
Consequently, these taxes withheld are held in "express trust" or
in "constructive trust" for the taxing authority and its collector
of these taxes.
6.
Lowest Intermediate Balance Test (LIBT). This is a judicial test
which the Collector will apply to ease the burden of the beneficiary
(the tax collector, in this case the Borough of Quakertown) to trace
the funds if or when a trustee commingles trust funds due this office
with other monies in a single account. The LIBT allows trust beneficiaries
to assume that trust funds are withheld last from a commingled account.
Therefore the lowest intermediate balance in a commingled account
represents trust funds that have never been dissipated and which are
reasonably identifiable. The Borough of Quakertown will take the position
that the court will keep in mind a broad policy against allowing a
party to unilaterally make a trust unenforceable by commingling assets.
Also, in the event of bankruptcy, filing the LIBT is intended to provide
a method for this to demonstrate that amounts of withheld taxes were/are
still in the possession of the debtor at the commencement of the case.
See: 300-227 City of Farrell vs. Sharon Steel Corp.; United States
Office; Mueller Industries, Inc.; Citibank, N.A. United States Court
of Appeals, third Circuit, No. 94-3130, November 14, 1994 case.
7.
Interlocking Business Entities. A company that maintains separate
payrolls for its employees on a separate checking account or general
ledger system and reported to this office that it has withheld payroll
taxes from its employees shall be liable for the earned income/compensation
tax, plus interest, plus penalties, plus all costs of collection when
the tax has not been remitted to this office.
|
Example: The fact that a company is closely tied to a corporation
and that together the company and the corporation provide a single
overall set of services does not excuse the corporation from liability
for unremitted earned income/compensation tax withheld where the entities
have been kept separate for bookkeeping and operational purposes.
|
8.
Responsible Party.
A.
An officer or employee of a business entity, including a corporation,
who is responsible or has the duty to collect or withhold the earned
income/compensation tax and/or possesses actual or implied control
over funds and tax accounts will be personally assessed for collected
or withheld earned income/compensation tax that is not remitted to
this office. Generally, the Borough of Quakertown will issue an assessment,
or file a legal action, against the chief operating or financial officer
and/or officers of any entity, including corporations, if the facts
of the particular case disclose that these individuals are involved
in the day to day operation of the business entity and retain decision
making authority over financial matters. A responsible person need
not be an officer of the entity. Managers whose duties include authority
and control over financial decisions may likewise be held responsible.
B.
This office's process of determining the responsible person
begins with the "employer questionnaire" and/or the tax return itself.
Borough regulations do not restrict who may sign a tax return form.
However, it is important for the person signing the Form 511 understands
that act, along with other factors, may subject him or her to personal
liability. Because signing the employer's tax return (Form 511)
evidences control over the funds of the entity and an active involvement
in the entity, this presumes the person signing the tax return to
be the person responsible for the payment of the withheld tax unless
the facts of each particular case do not support that inference. Therefore,
if the signatory is an officer of the entity, it is likely that an
assessment will be made.
9.
Any employer who for two of the preceding four quarterly periods
has failed to deduct the proper tax, or any part thereof, or has failed
to pay over the proper amount of tax to the Borough of Quakertown,
may be required by the Officer to file the 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.
10.
On or before February 28 of the succeeding year, every employer shall
file with the Officer:
A.
An annual return (Form 512) showing the employer's name, address
and identification number, the total number of withholding statements
transmitted with the annual return, the total income tax withheld
from wages during the year as shown by withholding tax statements
and the total income tax withheld as reported on the quarterly returns.
Any differences between the total income tax withheld from wages as
shown on the withholding statements and the total income tax withheld
as reported on the quarterly returns must be fully explained in an
attached note.
B.
A withholding tax statement (Form 525 or W-2) for each employee employed
during all or any part of the period beginning January 1 of the current
year and ending December 31 of the current year setting forth the
employee's name, address and Social Security number, the amount
of earned income/compensation paid to the employee during said period,
the amount of tax deducted, the political subdivision imposing the
tax upon such employee, and the amount of tax paid to the Officer.
Every employer shall furnish two copies of Form 525 or at least four
copies of Form W-2 to each employee for whom it is filed.
11.
Every employer who discontinues business prior to the completion
of taxable year, shall, within 30 days after the discontinuance of
business, file and furnish the returns required by this section covering
the periods between the last such return and the discontinuance of
business, and remit to the Officer all remaining tax due. Every employer
engaged in a business activity within the approving political subdivision
shall withhold from resident and nonresident employees who work for
such employer within the approving political subdivision even though
the payroll records and place of payment are not located in the approving
political subdivision.
12.
The failure or omission of any employer to make the deductions required
by this section shall not relieve any employee from the payment of
the tax or from complying with the requirements of the ordinances
or resolutions relating to the filing of declarations and returns.
13.
Bad Checks. A charge of $25 will be levied each time a check is returned
from the bank unpaid. Checks issued in violation of the Pennsylvania
Crimes Code will be referred to the appropriate authorities for possible
criminal prosecution.
[Ord. 1096, 3/3/2004, § 221]
1.
Normally taxpayers shall use the calendar-year method for reporting
and paying the tax.
2.
A business taxpayer, by filing with the Officer his written election
to do so, may make and file returns and pay tax on the same fiscal
year basis used for Pennsylvania personal income tax purposes. (See
§ 218, Subsection 5.)
[Ord. 1096, 3/3/2004, § 222]
1.
A taxpayer may calculate income on the cash or accrual basis as those
terms are used for Pennsylvania personal income tax purposes. The
basis used by the taxpayer shall be the same as used by the taxpayer
for the Pennsylvania personal income tax.
2.
Illustrations of Computations of Net Profits. As amplification of the definition contained in Subsection 1, but not a limitation thereof, the following information and requirements for the determination of net business profits are furnished:
A.
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 or she deducts all disbursements
made during the year in cash or its equivalent, provided deduction
for such expenditures is authorized by law.
B.
The use of the cash basis is mandatory where no books or records
of account are maintained.
C.
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.
|
Example: A taxpayer on the cash basis received shares of stock
in payment of services. Assuming that the stock has a fair market
value, the taxpayer has received the equivalent of cash to the extent
of its value and that amount must be included as income.
|
D.
If a return is made on the cash basis, gross profit 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, chooses-in-action and services.
E.
Accrual Basis. 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: (i) the right
to receive an item of income (as distinguished from actual receipt)
determines its inclusion in gross income under the accrual basis;
and (ii) a deduction cannot be accrued until an actual liability is
incurred.
|
Example: In September of last year a contractor performed work
for a customer. Payment for this work was not received until this
year. If the taxpayer reports on the accrual basis, the income will
be included in last year's return (when earned). If the taxpayer
reports on the cash basis, the payment will be included in this year's
return (when received).
|
3.
A taxpayer engaged in more than one business activity may, in computing
taxable income, use a different method for each trade or business
activity.
4.
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 the cash basis, unusual cases
way arise in which a payment made during the year is not deductible.
|
Example: Commissions, fees and costs paid in one year by a taxpayer
in securing a loan for 10 or 15 years covered by a mortgage on property
to be leased are not deductible in full in the year of payment but
should be spread over the period of the loan, even though the taxpayer's
accounts are kept and the return made on the cash basis.
|
5.
Income or net profits shall be taxable in the year when they are
actually or constructively received by the taxpayer. Income or net
profits, although not actually reduced to a taxpayer's possession,
will be deemed to be constructively received by the taxpayer in the
tax year during which it is credited to the taxpayer's account,
set apart for the taxpayer, or otherwise made available so that the
taxpayer may draw upon it at any time. However, income will not be
deemed to be constructively received if the taxpayer's control
of its receipt is subject to substantial limitations or restrictions,
such as those relating to age, death, disability, retirement or other
similar factors.
[Ord. 1096, 3/3/2004, § 223]
1.
If for any reason the tax is not paid when due, interest at the rate
of 6% per annum on the amount of said tax, and an additional penalty
of 1 1/2% 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 shall be brought for recovery of any such tax, the person
liable therefore shall, in addition, be liable for the cost of collection
and the interest and penalty herein imposed.
2.
Abatement of certain interest and penalty will be considered under
the following conditions:
A.
Errors and Delays. In the case of any underpayment, the Income Tax
Office may abate all or any part of interest for any period for the
following:
(1)
Any underpayment of tax finally determined to be due attributable
in whole or in part to any error or delay by the office in the performance
of a ministerial act. For the purposes of this subsection, an error
or delay shall be taken into account only if no significant aspect
of the error or delay can be attributed to the taxpayer and after
the Income Tax Officer has contacted the taxpayer in writing with
respect to the underpayment of tax finally determined to be due or
payable.
(2)
Any payment of a tax to the extent that any error or delay in
the payment is attributable to an officer, employee or agent of the
Income Tax Office being erroneous or dilatory in the performance of
a ministerial act. The Collector shall determine what constitutes
timely performance of ministerial acts performed under this subsection.
(3)
The timely performance of ministerial acts shall mean that the
Income Tax Officer shall contact the taxpayer or employer within 60
days of receiving a properly filed tax return. If the Officer fails
to notify the taxpayer or employer of an underpayment of tax within
60 days of the receipt of a properly filed return, that taxpayer or
employer shall be given 30 days to satisfy the underpayment without
the accrual of penalty and interest. If that taxpayer or employer
fails to satisfy the underpayment within 30 days penalty and interest
shall be applied from the date the tax was originally due.
(4)
A "properly filed return" shall be defined as a return that
has been prepared in accordance with this Part and contains all supporting
documents, forms, schedules, etc.
B.
Abatement due to erroneous written advice by the:
(1)
The Income Tax Officer shall abate any portion of any penalty
or excess interest attributable to erroneous advice furnished to the
taxpayer in writing by and officer, employee or agent of the acting
in the officer's, employee's or agent's official capacity
if:
(2)
This subsection shall not be construed to require the Income
Tax Office to provide written advice to the taxpayer.
[Ord. 1096, 3/3/2004, § 224]
1.
A taxpayer who requires an extension of time in which to file his
or her annual tax return shall make written application to the Borough
of Quakertown no later than 105 days from the end of the calendar
or fiscal year for which the return will be filed. A taxpayer who
is granted an extension of time for filing his or her federal or Pennsylvania
income tax return shall not automatically be entitled to a similar
extension of time for filing his or her local income tax return. A
copy of the taxpayer's federal or Pennsylvania tax extension
form must be received by the Borough of Quakertown on or before April
15, of the succeeding year, for the extension to be approved. Such
approved extension shall be valid through August 15 of the succeeding
year.
2.
Any taxpayer who, after receiving an approved extension to August
15 of the succeeding year, finds that he or she needs additional time
for proper completion of the annual tax return, shall make written
application to the Borough of Quakertown on or before August 15 of
the succeeding year, requesting an additional extension of time to
file. Such approved second extension shall be valid through October
15 of the succeeding year and will only be approved if a first extension
was filed and approved on or before April 15 of the succeeding year.
Under no circumstances will extensions be approved after October 15
of the succeeding year.
3.
Interest and penalty, as outlined in § 406, will be added
and collected on tax not received by its due date, even though an
extension of time for filing has been granted.
[Ord. 1096, 3/3/2004, § 225]
If the amount of a taxpayer's earned income/compensation
or net profits reported on his or her annual federal or Pennsylvania
income tax return is changed or corrected either by action of the
Internal Revenue Service or Pennsylvania Department of Revenue or
by the individual's filing of an amended annual federal or Pennsylvania
return, the taxpayer shall report to the Borough of Quakertown such
change or correction within 30 days after the date when the change
or correction was determined, by filing an amended tax return indicating
the applicable tax year on the return.
[Ord. 1096, 3/3/2004, § 226]
1.
The Officer is charged with the administration and enforcement of
the ordinances and resolutions and this Part and is authorized to
act on behalf of the Borough of Quakertown taxing district in such
administrative and enforcement matters.
2.
The Borough of Quakertown shall keep a record showing the amount
received by it from each person paying the tax and, if paid by such
person in respect of another person, the name of such other person,
and the date of receipt for seven years.
3.
The Borough of Quakertown has prepared a disclosure statement which
sets forth the following in simple and nontechnical terms:
A.
The rights of a taxpayer and the obligation of the local taxing authority
during an audit or administrative review of the taxpayer's books
and records.
B.
The administrative and judicial procedures by which a taxpayer may
appeal or seek review of any adverse decision of the local taxing
authority.
C.
The procedure for filing and processing refund claims and taxpayer
complaints.
D.
The enforcement procedures.
[Ord. 1096, 3/3/2004, § 227]
1.
The Borough of Quakertown encourages any taxpayer or employer desiring
a specific ruling concerning the ordinances, resolutions or this Part
to submit all pertinent facts in writing to the Tax Administrator,
who shall issue a written ruling.
2.
The Borough of Quakertown has established an administrative process
to receive and make determinations on petitions from taxpayers relating
to the assessment, determination and refund of eligible taxes as required
by Act 50 of 1998. The hearing officer shall rule on all petitions
submitted based on the regulations set forth governing the practice
and procedures of the administrative appeal process.
3.
Any taxpayer who is aggrieved by an assessment or determination or
delinquency of any of the eligible taxes would have 90 days from the
date of the assessment or determination notice to file a petition
for reassessment or redetermination with the hearing officer.
4.
The petition shall be double spaced, typed or legibly handwritten
on plain paper. The petition should contain a brief summary of the
action and the "legal basis" that precipitated the filing for reassessment
or redetermination, along with any pertinent information (copies of
tax returns, supporting information, tax schedules, expense records,
etc.)
5.
The petition shall be mailed via first class mail, or delivered in
person to the hearing officer c/o the Borough of Quakertown. Hand-delivered
petitions will be receipted by the Income Tax Officer and will be
considered filed as of the date receipted. Petitions received by mail
will be considered filed as of the United States Postal Service postmark
stamped on the envelope.
6.
Petitions will be photocopied by the Income Tax Officer and immediately
forwarded to the hearing officer. Within 10 days of the petition's
filing date, the Officer will submit its position and all relevant
facts pertaining to the action that precipitated the petition to the
hearing officer.
7.
Within 60 days of the petition's filing date, a final decision
must be issued by the hearing officer. Failure to issue a final decision
within 60 days will result in the petition being deemed approved.
8.
Any person aggrieved by a decision of the hearing officer who has
a direct interest in the decision shall have the right to appeal to
the court vested with the jurisdiction of local tax appeals by or
pursuant to 42 Pa.C.S.A.
9.
Decisions under this § 227 may be made according to the
principles of law and equity.
[Ord. 1096, 3/3/2004, § 228]
1.
The Officer and agents or staff members of the Borough of Quakertown
designated in writing by him are authorized to examine the books,
papers and records of any taxpayer or supposed taxpayer 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, if any. Every
taxpayer or supposed taxpayer and every employer or supposed employer
is required to give the Officer or any agent or staff member so designated
by him, the means, facilities and opportunity for such examination
and investigations as are authorized. In addition to all other powers,
the Officer and agents or staff members of the Borough of Quakertown
shall have the power, on behalf of the taxing jurisdiction to examine
any person under oath concerning salaries, wages, commissions, and
other compensation listed on the annual tax return, or which should
have been listed on the annual tax return 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. Pursuant to the foregoing, the Officer and agents or staff members
of the Borough of Quakertown are authorized to require the production
of federal and/or state tax returns for purposes of determining the
accuracy of a taxpayer's local tax return and/or of assessing
the earned income/compensation and net profits tax. [See Borough of
Brookhaven v. Century 21, 57 Pa. Cmwlth. 211 (1981)].
2.
Income Tax Officer Requests.
A.
Minimum time period for taxpayer response to requests for information
shall be 30 days from the mailing of the audit notice. The Income
Tax Officer shall grant reasonable extensions upon application for
good cause and shall notify the taxpayer of the procedure to obtain
an extension in its initial request for information.
B.
An initial inquiry by the Income Tax Officer regarding a taxpayer's
compliance with any eligible tax may include taxes required to be
paid or tax returns required to be filed no more than three years
prior to the mailing date of the notice.
C.
The Income Tax Officer may make a subsequent request for a tax return
or supporting information if, after the initial request, the Borough
determines that the taxpayer has failed to file a tax return, under
reported income or failed to pay a tax for one or more of the tax
periods covered by the initial request. Note that this requirement
shall not apply if the Borough has sufficient information to indicate
that the taxpayer failed to file a required return or pay an eligible
tax which was due more than three years prior to the date of the notice.
3.
Any information gained by the Office as a result of any audit, return,
report, investigation, hearing or verification shall be confidential
tax information. It shall be unlawful, except for official purposes
or as provided by law, for the Office to:
A.
Divulge or make known in any manner confidential information gained
in any return investigation, hearing or verification to any person.
B.
Permit confidential tax information or any book containing any abstract
or particulars thereof to be seen or examined by any person.
C.
Print, publish or make known in any manner any confidential tax information.
[Ord. 1096, 3/3/2004, § 229]
Taxpayers and employers subject to the ordinances or resolutions
are required to keep such records as will enable the filing of true
and accurate returns, whether taxes are withheld at the source of
earned income/compensation or of taxes payable upon earned income/compensation
or net profits, or both; and such records shall be preserved for a
period of not less than six years in order to enable the Borough of
Quakertown to verify the correctness and accuracy of the returns filed.
[Ord. 1096, 3/3/2004, § 230]
A valid annual tax return must be filed before a request for
a refund or credit can be considered. Depending on the nature of the
refund or credit, additional documentation to substantiate the request
may be required by the Borough of Quakertown. Refund and credit requests
will not be processed until the necessary documentation is provided.
Requests for refunds and credits will be considered based upon the
relevant facts and circumstances pertinent to each case. Unsupported
or unexplained expense amounts will be denied and removed from the
tax calculations. Amounts less than $1 will not be refunded. Credits
of less than $1 will not be extended.
A.
A taxpayer who has paid an eligible tax to the Income Tax Office
may file a written request with the Borough for a refund or credit
of the eligible tax. A request for refund shall be made within three
years of the due date for filing the report as extended or one year
after the actual payment of the tax, whichever is later. If no report
is required, the request shall be made within three years after the
due date for the eligible tax or within one year after actual overpayment
of the eligible tax, whichever is later.
(1)
For purposes of this section, a tax return filed by the taxpayer
with the Office showing an overpayment of tax shall be deemed to be
a written request for a cash refund unless otherwise indicated on
the return.
(2)
A request for refund under this subsection shall not be considered
a petition under § 227 of this Part and shall not preclude
a taxpayer from submitting a petition under § 227 of this
Part.
(3)
For amounts paid as a result of a notice asserting or informing
a taxpayer of an underpayment, a written request for refund shall
be filed with the Income Tax Office within one year of the payment.
B.
All overpayments of tax due a local taxing authority shall bear simple
interest from the date of overpayment until the date of resolution.
Interest on overpayments shall be allowed and paid at the same rate
the Commonwealth is required to pay pursuant to 72 P.S. § 806.1,
known as the “Fiscal Code.” Exceptions are as follows:
(1)
No interest shall be allowed if an overpayment is refunded or
applied against any other tax, interest or penalty due within 75 days
after the last date prescribed for filing the report of tax liability
or within 75 days after the date the tax return is filed or the report
of liability is filed, whichever is later.
(2)
Overpayments of interest and penalty shall not bear any interest.
C.
The taxpayer's acceptance of the Borough's check shall
not prejudice any right of the taxpayer to claim any additional overpayment
and interest thereon. Tender of a refund check by the taxpayer shall
be deemed to be acceptance of the check by the taxpayer for the purposes
of this section.
D.
As used in this § 230 of this Part, the following words
and phrases shall have the meanings given to them in this subsection.
E.
Date of Overpayment. The later of the date paid or the date tax is
deemed to be overpaid as follows:
(1)
Any tax actually deducted and withheld at the source shall be
deemed to have been overpaid on the last day for filing the report
for the tax period, determined without regard to any extension of
time for filing.
(2)
Any amount overpaid as estimated tax for the tax period shall
be deemed to have been overpaid on the last day for filing the final
report for the tax period, determined without regard to any extension
of time for filing.
(3)
An overpayment made before the last day prescribed for payment
shall be deemed to have been paid on the last day.
(4)
Any amount claimed to be overpaid with respect to which lawful
administrative review or appellate procedure is initiated shall be
deemed to have been overpaid 60 days following the initiation of the
review or procedure.
(5)
Any amount shown not to be due on an amended income for earned
income/compensation and net profits tax return shall be deemed to
have been overpaid 60 days following the date of the filing of the
amended income tax return.
F.
Date of Resolution. The date the overpayment is refunded or credited
as follows:
(1)
For a cash refund, a date preceding the date of the taxpayer's
refund check by not more than 30 days.
(2)
For a credit for an overpayment:
(a)
The date of the Office's notice to the taxpayer of the
determination of the credit; or
(b)
The due date for payment of the tax against which the credit
is applied, whichever first occurs. For a cash refund of a previously
determined credit, interest shall be paid on the amount of the credit
from a date 90 days after the filing of a request to convert the credit
to a cash refund to a date preceding the date of the refund check
by not more than 30 days whether or not the refund check is accepted
by the taxpayer after tender.
[Ord. 1096, 3/3/2004, § 231]
Any person who violates any provision of the ordinances or resolutions
shall upon conviction, be sentenced to pay a fine of not more than
$500 for each offense plus costs, and in default of payment thereof,
to be imprisoned in the county prison for a period not exceeding 30
days. Some of the violations which may result in such conviction are:
A.
Failure, neglect or refusal on the part of any person, to make and
file any declaration or return required by the ordinances or resolutions.
B.
Failure, neglect or refusal of any employer, required to withhold
the tax under this Part, to register with the Borough of Quakertown.
C.
Failure, neglect or refusal of any employer to deduct or withhold
the tax from his or her employees.
D.
Failure, neglect or refusal to maintain or to reveal to the Borough
of Quakertown or its authorized representative, by any person, any
partner of a partnership, or any officer of a corporation or association,
books, records, papers (including federal or state tax forms) relevant
to the tax imposed hereunder.
E.
Knowingly making any incomplete, false or fraudulent report or return
or attempting to do any other thing to avoid full disclosure of net
profits or earned income/compensation in order to avoid the payment
of the whole or any part of the tax imposed by the ordinances or resolutions.
F.
All taxes, fines and penalties imposed by these resolutions and ordinances
shall be paid to the Borough of Quakertown Earned Income Tax Office.
[Ord. 1096, 3/3/2004, § 232]
Imposition of any fine or imprisonment shall not bar either
civil liability for tax, penalty or interest or criminal prosecution
for embezzlement, fraudulent conversion, theft or other offense under
the Pennsylvania Crimes Code, or criminal prosecution for failure
to file a properly prepared tax return under Act 511.
[Ord. 1096, 3/3/2004, § 233]
Failure of a taxpayer or employer to receive forms or returns
required by the ordinances or resolutions does not excuse any failure
to file any reports or returns required or to pay any tax due, including
penalty and interest.
[Ord. 1096, 3/3/2004, § 234]
1.
Each taxpayer shall account for all 12 months of the calendar year
as to their place of domicile and, in the case of more than one place
of domicile, the months in each place of domicile and also provide
the name of each borough, township or city in which they were domiciled
during the year.
2.
Figures are not to be rounded off. Actual figures are to be used.
3.
All appropriate schedules (state tax forms and schedules, as well
as taxpayer prepared worksheets referenced on state tax forms and
schedules and federal tax forms and schedules when referenced by the
Pennsylvania state form and/or schedule), W-2 forms, and 1099 forms
shall be filed with the annual tax return. Annual tax returns received
without the appropriate schedules, W-2 forms or 1099 forms shall be
considered incomplete and is not a valid filing of the annual return.
4.
Taxpayers with earnings in another state who have paid tax on those
earnings to the other state, and are applying for credit for tax paid
to the other state, must provide a copy of the state tax return for
that state, plus their Pennsylvania personal income tax return. If
the aforementioned state tax returns are not provided with the annual
tax return, it will be considered as being incomplete and not a valid
filing of the annual tax return.
5.
Estimates of income and or expenses by the taxpayer are not acceptable
unless approved by the Borough of Quakertown.
6.
Should the taxpayer omit the required expense deduction forms or
if the expense deduction forms are not fully completed, the expense
deductions shall be disallowed and systematically denied without notification
to the taxpayer. In the case where the omission of the required expense
deduction forms and the subsequent denial of the expense deduction
results in a balance of tax due, the taxpayer will be notified of
the balance due.
7.
Taxpayers may not file federal forms and schedules in lieu of Pennsylvania
Schedules C, E, F, G, I, UE, RK-1 and NRK-1 with the annual tax return.
8.
Taxpayers may not submit Schedule E in lieu of submitting their applicable
K-1 form. Failure to submit the completed K-1 form shall result in
the rejection and return of the taxpayer's forms as an incomplete
or fraudulent filing.
9.
Annual tax returns received by the Borough of Quakertown that are
not signed and dated by the taxpayer filing the annual tax return
will be considered as an incomplete and invalid filing of the annual
tax return.
10.
In the case where a taxpayer remits a payment towards the tax due
as calculated on the annual tax return and that annual tax return
is found to be incomplete or not a valid filing of the annual tax
return, as outlined above, the payment will be deposited towards the
taxpayer's liability as an estimated tax payment to be reconciled
upon the receipt of a complete and valid filing of the annual tax
return by the aforementioned taxpayer.
12.
The Borough of Quakertown may acquire Pennsylvania Department of
Revenue individual income tax information regarding earned income/compensation
and net profits for audit and compliance purposes.
13.
The Income Tax Officer shall notify the taxpayer in writing of the
basis for any underpayment that the Borough has determined to exist.
The notification shall include:
A.
The tax period or periods for which the underpayment is asserted.
B.
The amount of underpayment detailed by tax period.
C.
The legal basis upon which the Officer has relied to determine that
an underpayment exists.
D.
An itemization of the revisions made by the Officer to a return or
report filed by the taxpayer that results in the determination that
an underpayment exists.
[Ord. 1096, 3/3/2004, § 235]
1.
Every person who was a resident of Borough of Quakertown who was
employed or engaged in the operation of a business, profession or
other activity for income or profit and every sole proprietor liable
for tax in his home district shall file with the Borough of Quakertown
an annual tax return showing all earned income/compensation and net
profits received and/or earned for the previous year.
2.
Partial year residents are required to file an annual tax return
for the applicable portion of the calendar year they resided in Borough
of Quakertown.
3.
Taxpayers must file an annual tax return even though they may have
had earned income/compensation tax withheld by an employer.
4.
Taxpayers who are on active military duty must file an annual tax
return for the year in which they first entered the military on active
duty and inform the Borough of Quakertown of their active duty military
status. Upon completion of active duty military status, taxpayers
shall resume filing annual tax returns.
5.
Taxpayers who are retired or permanently disabled and have no taxable
earned income/compensation or net profits may be coded on the Borough
of Quakertown's files so as not to receive an annual tax form.
The taxpayer must notify the Borough of Quakertown in writing and
must also provide the effective date of retirement or permanent disability.
[Ord. 1096, 3/3/2004, § 236]
Every taxpayer who receives, or anticipates that he or she will
receive, taxable earned income/compensation or net profits during
the calendar year must register his or her name and resident address,
his or her Social Security number and the name and address of his
or her place of employment or business with the Borough of Quakertown
Earned Income Tax Office. All taxpayers will thereafter be responsible
for reporting changes in their name, place of residence or place of
employment or business with the Borough of Quakertown.
[Ord. 1096, 3/3/2004, § 237]
The Income Tax Officer may enter into written agreements with
any taxpayer under which the taxpayer is allowed to satisfy liability
for any eligible tax in installment payments if the Officer determines
that the agreement will facilitate collection. The following terms
and conditions shall apply to installment plans:
A.
The taxpayer must file an annual tax return for the current tax year
and any delinquent tax years to be covered under the installment plan.
These annual tax returns must include a copy of the taxpayer's
federal tax return and/or a Pennsylvania personal income tax return
and all supporting documentation as verification that all taxable
income has been reported. In cases where a federal or state tax return
cannot be produced, the taxpayer must complete a Federal Form 4506
"Request for Copies of Tax Return," naming the Borough of Quakertown
as recipient of the requested copy. The costs to procure the federal
or state tax return and related information are the sole responsibility
of the taxpayer.
B.
Installment plans will not be approved for tax amounts less than
$100.
C.
Installment plans will not be approved for more than four months.
Payment amounts will be calculated by dividing the total tax liability
by four and adding the applicable penalty, interest, fines and costs
to each payment.
D.
Taxpayers will be required to verify that their current year's
tax liability has been satisfied to date either by proof of employer
withholding or by direct payment from the taxpayer.
E.
Installment plans will be granted only one time to any taxpayer.
F.
Installment plans will be revoked and immediate civil action or garnishment
of wages for collection of the tax due will be initiated if any of
the aforementioned terms and conditions are not met.
H.
If the Income Tax Officer finds that the financial condition of the
taxpayer has significantly changed, the Officer may alter, modify
or terminate the agreement, but only if:
I.
The Income Tax Officer may alter, modify or terminate an installment
plan agreement if the taxpayer fails to do any of the following:
J.
Nothing in this subsection shall prevent a taxpayer from prepaying
in whole or in part any eligible tax under any installment agreement
with the Income Tax Officer.
[Ord. 1096, 3/3/2004, § 238]
1.
The Officer may sue in the name of the Borough of Quakertown taxing
district for the recovery of taxes, penalties, interest, and late
filing fees due and unpaid under the ordinances or resolutions.
2.
Any suit brought to recover the tax, penalty, interest and late filing
fees imposed by the ordinances or resolutions shall be begun within
three years after such tax is due, or within three years after the
declaration or 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:
A.
Where no declaration or return was filed by any person although a
declaration or return was required to be filed by him or her under
provisions of the ordinances or resolutions, there shall be no limitation.
B.
Where an examination of the declaration or return filed by any person
or of any other evidence relating to such declaration or return in
the possession of the Officer reveals a fraudulent evasion of taxes,
there shall be no limitation.
C.
In the case of substantial understatement of tax liability of 25%
or more and no fraud, suit shall be begun within six years.
D.
Where any person has deducted taxes under the provisions of the ordinances
or resolutions and has failed to pay the amounts so deducted to the
Officer, or where any person has willfully failed or omitted to make
the deductions required by the ordinances or resolutions, there shall
be no limitation.
E.
This section shall not be construed to limit the Borough of Quakertown
from recovering delinquent taxes by any other means provided by Act
511.
3.
The Officer may sue for recovery of an erroneous refund or credit
provided such suit is begun two years after making such refund or
credit, except that such suit may be brought within five years if
it appears that any part of the refund or credit was induced by fraud
or misrepresentation of material fact.
[Ord. 1096, 3/3/2004, § 239]
1.
The Borough of Quakertown shall demand, receive and collect from
all corporations, political subdivisions, associations, companies,
firms or individuals employing persons owing delinquent earned income/compensation
taxes or having in possession unpaid commissions or earnings belonging
to any person or persons owing delinquent earned income/compensation
taxes, upon the presentation of a written notice and demand certifying
that the information contained therein is true and correct and containing
the name of the taxable and the amount of tax due. Upon presentation
of such written notice and demand, it shall be the duty of any such
corporation, political subdivision, association, company, firm or
individual to deduct from the wages, commissions, or earnings of such
individual employees, then owing or that shall within 60 days thereafter
become due or from any unpaid commissions or earnings of any such
taxable in its or his or her possession or that shall within 60 days
thereafter come into its or his or her possession, a sum sufficient
to pay the respective amount of the delinquent earned income/compensation
taxes, penalties, interest and costs, shown upon written notice or
demand and to pay the same to the Borough of Quakertown 60 days after
such notice shall have been given. No more than 10% of the wages,
commissions or earnings of the delinquent taxpayer may be deducted
at any one time for delinquent earned income/compensation taxes, penalties,
interest and costs. 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 2% of the amount of money
so collected and paid over to the Borough of Quakertown. Upon the
failure of any such corporation, political subdivision, association,
company, firm or individual to deduct the amount of such taxes, penalties,
interest, and costs or to pay the same over to the tax collector,
less the cost of bookkeeping involved in such transaction, as herein
provided, within the time required, such corporation, political subdivision,
association, company, firm or individual shall forfeit and pay the
amount of such tax, penalty, interest and costs for each such taxable
whose taxes, penalties, interest and costs are not withheld and paid
over, or that are withheld and not paid over together with a penalty
of 10% added thereto, to be recovered by an action of assumpsit in
a suit to be instituted by the Borough of Quakertown Earned Income
Tax Collector 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.
2.
Upon presentation of a written notice and demand under oath or 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 60 days thereafter become due to any employee,
a sum sufficient to pay the respective amount of the delinquent earned
income/compensation tax, penalty, interest and costs shown on the
written notice. The same shall be paid to the Borough of Quakertown,
which said delinquent tax, penalty and interest was levied within
60 days after such notice shall have been given.
3.
The Borough of Quakertown shall, at least 15 days prior to the presentation
of a written notice and demand to the State Treasurer or other fiscal
officer of the State, or to any corporation, political subdivision,
association, company or individual, notify the taxpayer owing the
delinquent tax, penalty, interest and costs by registered or certified
mail that a written notice and demand shall be presented to his or
her employer unless such tax, penalty, interest and costs are paid.
The return receipt card for certified or registered mail shall be
marked delivered to addressee only, and the cost of notification by
certified or registered mail shall be added to the costs for collecting
taxes, penalties, and interest.
[Ord. 1096, 3/3/2004, § 240]
When any person shall give or cause to be given to this Borough
a check in payment of any obligation, whether due to the Borough or
others, including but not limited to any tax, which is dishonored
or unpaid by the bank upon which it is drawn, the sum of $25 shall
be added to the obligation and interest and penalty provided by law
or otherwise, to cover the additional cost to the Borough, plus the
issuer/maker may have a criminal complaint court action filed against
him or her.
[Ord. 1096, 3/3/2004, § 241]
Should the Pennsylvania General Assembly amend Act 511 language,
the amended language shall be incorporated into this Part.
[Ord. 1096, 3/3/2004, § 242]
1.
If, as a result of research or investigation conducted by or on behalf
of the Tax Administrator of the Borough, a declaration or return is
found or is reasonably believed to be incorrect, the Tax Administrator
is authorized to assess and collect any under payments of taxes withheld
at the source or any under payments of taxes withheld at the source
or any under payments of tax owed by any taxpayer with respect to
earnings or net profits or both. If no declaration or return has been
filed and a tax is found or determined to be due, the tax actually
due may be assessed and collected with or without the formality of
obtaining a delinquent declaration or return from the taxpayer.
2.
Taxpayer Appeals. Any person aggrieved by an assessment made by the
Tax Administrator may, within 90 days after receipt of notice of the
assessment, appeal the assessment by following the appeal procedures
as outlined in § 227, Administrative Appeals.
[Ord. 1096, 3/3/2004, § 243]
A check endorsement shall not qualify as a refund claim. The
words "paid under protest" handwritten, typed or otherwise placed
on a taxpayer's check or money order, or the check or money order
of an employer, shall not qualify as a refund claim as the words are
not sufficient to appraise the Borough's personnel of the taxpayer's
intent to seek a refund or of the substance of their claim or of facts
sufficient to permit the Borough to undertake an investigation of
the person's claim.
[Ord. 1096, 3/3/2004, § 244]
1.
The first letter will be mailed by first class postage at the prevailing
postage rate.
2.
The second letter, if required, will be mailed by certified mail,
with return receipt at the prevailing postage rate. The second letter
will also contain a "postage expense" amount which is to be included
in the total amount due indicated on the second letter to the taxpayer.
3.
The postage amount will change if the postal rate fee for these services
is changed.
4.
If a wage attachment is subsequently prepared, the postage expense
will become a part of and shall be included in the $40 wage attachment
amount when the wage attachment is prepared and mailed to the employer.
[Ord. 1096, 3/3/2004, § 245]
1.
In bankruptcy cases, the priority claim due to or held by this Borough
shall survive the confirmation of any bankruptcy claim and shall not
be subject to discharge of debt to the extent that such claims are
not paid by the bankruptcy plan of the debtor.
2.
Amounts owing or which shall be determined to be due this Borough
shall be the amount of the priority claim due to this Borough when
a bankruptcy plan is filed with the Bankruptcy Court.
[Ord. 1096, 3/3/2004, § 246]
In cases where a question arises as to the taxation of earned
income/compensation or net profits not specified in these rules and
regulations, then the regulations promulgated by the Pennsylvania
Department of Revenue for the personal income tax shall apply, so
long as they are not contrary to the provisions of the Local Tax Enabling
Act of 1965, as amended by Act 166 of December, 2002.
[Ord. 1096, 3/3/2004, § 247]
1.
Apportioning the income is required by a nonresident who receives
earned income/compensation/compensation for services rendered within
the geographic boundary of a member taxing authority which levies
a nonresident tax, as a member of a professional athletic team, or
as an individual professional athlete. This rule shall not apply to
athletes domiciled within any states which have reciprocity agreements
with the Commonwealth of Pennsylvania.
2.
Generally, a nonresident professional athlete's income will
be apportioned to this Borough's applicable member taxing authority
on the basis of a fraction, the numerator of which is the number of
duty days spent within the member taxing authority rendering services
to the team, or as an individual, and the denominator of which is
the total number of duty days spent both within and outside the member
taxing authority during the tax year. An alternative method may be
prescribed by this Borough or proposed by the athlete if the above
method does not fairly and equitably apportion the compensation.
3.
Duty Days Defined. Duty days generally mean all days during the tax
year.
A.
From the beginning of official preseason training through the last
scheduled or actually played game or event.
B.
Other days, not in the period, during which the athlete renders a
service for the team. Rendering a service includes conducting training
and rehabilitation activities at the team's facilities.
C.
Duty days include:
(1)
Game days.
(2)
Practice days.
(3)
Days spent at team meetings, promotional caravans and preseason
training camps.
(4)
Days spent participating in instructional leagues and at special
games such as all-star games.
(5)
Days served with the team through all post-season games in which
the team competes or is scheduled to compete.
D.
Duty days do not include days for which an athlete is suspended without
pay or prohibited from performing services for the team. For athletes
who switch teams during the tax year, a separate duty day calculation,
representing the number of duty days spent with each team, must be
made. Duty days are included in the apportionment formula for the
tax year in which they occur.
E.
Disability and Travel Days. Days that an athlete is on a disabled
list and does not engage in rehabilitation at the team's facility
or is not otherwise rendering services for the team within a member
taxing authority are not considered duty days spent within the taxing
authority, but they are included in the total duty days spent within
and outside the taxing authority, i.e., they are included in the denominator,
but not in the numerator of the apportionment formula.
F.
Travel days not including a game, practice, team meeting, promotional
caravan or other similar team event shall not be considered duty days
spent within the taxing authority, but they shall be included in the
total duty days spent both within and outside the taxing authority.
G.
Bonuses. Performance bonuses earned as a result of play during the
season, such as a bonus received for championship, playoff or all-star
games are included in the apportionment formula. Bonuses paid for
signing a contract are included in the apportionment formula unless:
[Ord. 1096, 3/3/2004, § 248]
[§ 303 of the Act of March 4, 1971 (P.L 6, No. 2)
72 P.S. § 7303]
1.
Compensation. All salaries, wages, commissions, bonuses and incentive
payments whether based on profits or otherwise, fees, tips and similar
remuneration received for services rendered whether directly or through
an agent and whether in cash or in property except income derived
from the United States Government for active duty outside the Commonwealth
of Pennsylvania as a member of its armed force.
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61 Pa. Code, Part I, Subpart B, Article V
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61 Pa. Code § 103.11, Compensation.
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Reference should be made to § 101.6 (relating to compensation).
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61 Pa. Code, Part I, Subpart B, Article V
| |
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61 Pa. Code § 101.6, Compensation.
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2.
Compensation includes items of remuneration received, directly or
through an agent, in cash or in property, based on payroll periods
or piecework, for services rendered as an employee or casual employee,
agent or officer of an individual, partnership, business or nonprofit
corporation, or government agency. These items include salaries, wages,
commissions, bonuses, stock options, incentive payments, fees, tips,
dismissal, termination or severance payments, early retirement incentive
payments and other additional compensation contingent upon retirement,
including payments in excess of the scheduled or customary salaries
provided for those who are not terminating service, rewards, vacation
and holiday pay, paid leaves of absence, payments for unused vacation
or sick leave, tax assumed by the employer or casual employer signing
bonuses, amounts received under employee benefit plans and deferred
compensation arrangements, and other remuneration received for services
rendered.
3.
Scholarships, stipends, grants and fellowships shall be taxable as
compensation, if services are rendered in connection therewith.
A.
For taxable compensation, the following words have the following
meanings, unless the context clearly indicated otherwise:
(1)
FELLOWSHIP STIPEND or FELLOWSHIP AWARD – A fixed sum of
money paid periodically for services or to defray expenses to a graduate
student who is enrolled in a graduate degree program at a university.
(2)
GRANT-IN-AID – Financial support given by a public agency
or private institution to an individual to further the individual's
education.
(3)
POSTDOCTORAL RESEARCH FELLOWSHIP STIPEND or POSTDOCTORAL RESEARCH
FELLOWSHIP AWARD – A fixed sum of money paid periodically for
services or to defray expenses of an individual who has obtained a
doctoral degree at a university and is conducting research at a research
facility.
(4)
SCHOLARSHIP – A grant-in-aid to a student.
B.
Scholarships, grants, awards and other types of student aid which
require no past, present or future services in return for receipt
of the funds are not taxable.
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Examples:
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(1)
John has a high school diploma and is currently employed. John's
employer promises to pay for John's college tuition, room and
board for four years, and John agrees to return to his employer after
obtaining his degree and to work for the employer for four consecutive
years. John's grant-in-aid is taxable compensation and is subject
to employer withholding and reporting.
(2)
Peter is employed by ABC Company. Peter and ABC Company agree
that he will work for them for one year without receiving any salary.
In return, after that year Peter will attend XYZ College and ABC Company
will pay his tuition, room and board for the entire year. ABC's
payment of Peter's tuition, room and board is taxable compensation
and is subject to employer withholding and reporting.
(3)
John is employed by XYZ Corporation. XYZ Corporation has established
a scholarship program for the children of its employees. The program
does not qualify as an employer scholarship program for federal income
tax purposes. John's child, Erin, received a scholarship from
the plan to attend college. The fair market value of the federally
nonqualified scholarship is taxable compensation to John and is subject
to employer withholding.
C.
Fellowship awards or fellowship stipends made to graduate students
enrolled in a graduate degree program at a university chartered by
a state or foreign country on the basis of need or academic achievement
for the purpose of encouraging or allowing the recipient to further
their educational development are not taxable. When the fellowship
awards or fellowship stipends are made as compensation for past or
present employment or in expectation of future employment services
they are taxable.
|
Example: Jane is enrolled in a graduate degree program in biochemistry
at a university. Jane is in the first year of a three year graduate
degree program. A pharmaceutical company enters into an agreement
to pay the remaining tuition, room and board expenses necessary for
Jane to obtain her graduate degree. In return, Jane promises to work
for the pharmaceutical company for four years after graduation. Jane's
receipt of these payments from her future employer constitute taxable
compensation.
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D.
Fellowship awards and fellowship stipends are taxable compensation
for services if the recipient is required to apply his or her skill
and training to advance research, creative work or some other project
or activity, unless the recipient can show that the recipient is a
candidate for a degree and the same activities are required of all
candidates for that degree as a condition to receive that degree.
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Example: Steven is enrolled in a graduate degree program in
education at ABC University. Degree candidates are required to teach
an undergraduate education course for five hours a week to obtain
their degree. Steven and two of the other 15 candidates in the degree
program are receiving federal stipends. If Steven does not perform
additional services for ABC University, his teaching will not make
his stipend taxable compensation.
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E.
For a payment received by a postdoctoral research fellow for conducting
research to be excludable from the definition of compensation, the
payment shall meet the following conditions. If the payment fails
to meet one or more of these 15 conditions, the payment is taxable
compensation:
(1)
The source of funding for the payment is a governmental agency,
a private foundation as described in § 509 of the Internal
Revenue Code (26 U.S.C.A. § 509), a federally exempt organization
as described in §§ 501(c)(3) or (5) of the Internal
Revenue Code [26 U.S.C.A. § 501(c)(3) and (5)], or a public
or private university chartered by a state.
(2)
The organization which is permitting the fellow to use its facilities
and which is sponsoring the fellow's research (sponsoring organization)
is a governmental agency, a federally exempt organization as described
in § 501(c)(3) of the Internal Revenue Code or a public
or private university chartered by a state.
(3)
Prior to enrollment in the sponsoring organization's postdoctoral
research fellowship program, the fellow has obtained a doctoral degree
in a field of study which is related to the field of study being research
by the fellow.
(4)
The amount of the fellow's stipend or grant is based on
the scale established by the source of funding.
(5)
Each fellow formulates his or her own research project or advances
his or her own research project throughout the stipend or grant period.
(6)
The sponsoring agency serves only in an advisory capacity in
the selection of research projects and cannot establish or control
the fellow's hours or methods of research except as control relates
to legal or regulatory matters.
(7)
The fellow is not required to perform administrative work, teaching
assignments or other duties for the sponsoring organization or another
entity as a condition for receiving a payment and will not be penalized
for not performing these duties.
(8)
The fellow is not required to enter a contractual commitment
for future employment with a specified entity as a condition for obtaining
or continuing to obtain the payments.
(9)
Payments to the fellow for conducting research are limited to
no more than 36 months.
(10)
Research results or writings made by the fellow during the program
do not become the property of the sponsoring organization or another
entity other than the fellow. Patent or copyright royalties or other
income derived directly or indirectly from the fellow's research
results or writings may become the property of the sponsoring organization.
Income or gain derived from patent or copyright royalties by the postdoctoral
research fellow is taxable income to the fellow.
(11)
The fellow is not required to assist employees of the sponsoring
organization in conducting research being performed by employees of
the sponsoring organization.
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Example: John is a postdoctoral research fellow at ABC Cancer
Research Institute. His research is being funded by the National Institute
of Health. The sponsoring organization, ABC Cancer Research Institute,
requires John to spend half of his time assisting its own employees
on their own research project as a condition for sponsoring his research.
John's postdoctoral research fellowship stipend is taxable compensation.
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(12)
The fellow does not receive fringe benefits to which an, employee
of the sponsoring organization is entitled, except to the extent that
the benefits are at no additional cost to the sponsoring organization.
For purposes of the subparagraph "fringe benefits" means payer provided
health, life, disability income or group legal services insurance
plans, payer provided automobile and payer provided dependent care
assistance, educational assistance plans or retirement benefits.
(13)
Pennsylvania unemployment compensation premiums are not required
to be paid by the sponsoring organization or another entity on behalf
of the fellow.
(14)
Federal Social Security employment tax is not required to be
paid by the sponsoring organization or another entity or the fellow
with respect to the fellowship.
(15)
The fellow is not under the coverage of the sponsoring organization's
workers' compensation insurance plan or policy.
F.
Fellowship stipends paid to medical interns and residents under an
internship or residency program which conforms or substantially conforms
to standards set by the American Medical Association are taxable compensation.
If the program does not conform to the referenced standards, the amount
received will be taxable as wages.
4.
Compensation does not mean or include any of the following:
A.
Periodic payments for periods of sickness or disability paid by or
on behalf of an employer under a program or plan unless the payments
are regular wages. Additionally, no amount of damages received (whether
by suit or agreement and whether as lump sums or as periodic payments)
if pain and suffering, emotional distress or other like noneconomic
element was or would have been a significant evidentiary factor in
determining the amount of the taxpayer's damage. No payments
made by third-party insurers for periods of sickness or disability
would be considered payments of regular wages. A program or plan where
any of the following occur would not be considered payment of regular
wages.
(1)
The periodic payments have no direct relationship to the employee's
usual rate of compensation.
(2)
The periodic payments are computed with reference to the nature
of the sickness or disability and without regard to the employee's
job classification.
(3)
Periodic payments would be reduced by payments arising under
Workmen's Compensation Acts, Occupational Disease Acts, Social
Security Disability or similar legislation by any government.
(4)
The periodic payments exceed the employee's usual compensation
for the period.
B.
Disability, retirement or other payments arising under workers' compensation
acts, occupational disease acts or similar legislation by any government.
C.
Federal old age insurance benefits payable under 42 U.S.C.A. § 401,
Railroad Retirement Act benefits payable under 45 U.S.C.A. § 228
or § 231, or any retired or retainer pay of a member or
former member of a uniformed service computed under 10 U.S.C.A. § 1401.
D.
Payments commonly known as public assistance or unemployment compensation
by a government agency.
E.
Payments made by employers to employees to reimburse actual expenses
allowable as an ordinary, reasonable and necessary business expense.
F.
Payments made by an employer or labor union or elective contributions
deemed to be made by an employer under a cafeteria plan for a nondiscriminatory
health, accident or death plan.
|
Example: P is a partnership that is engaged in providing accounting
services. On a nondiscriminatory basis, it offers the following fringe
benefits to both employees and partners of the firm:
| |
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Blue Shield medical coverage.
| |
|
Dental and eyeglass coverage with a deductible.
| |
|
Group term life insurance with coverage up to the equivalent
of the employee's annual salary.
| |
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P pays the premiums on behalf of all employees and partners
for all medical dental, eyeglass and insurance coverage directly to
the insurance carrier or benefit provider. P does not add the premium
costs for the benefits to any employee's gross wages and it accounts
for the benefit costs as nonsalary fringe benefit expenses. In other
words, the value of the benefits are not shown as an addition to any
employee's wages on the pay stubs furnished to employees.
| |
|
The plan is not a federally qualifying cafeteria plan.
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Conclusion: For the employees of P the employer-provided hospitalization
(Blue Shield), eyeglass, dental coverage and group life insurance
benefits are excludable from compensation and are therefore not subject
to withholding. The premiums paid on behalf of the partners, however,
are not deductible or excludable from the income of the partnership
or the partners.
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G.
The value of meals and lodging furnished for the convenience of an
employer or casual employer does not constitute compensation.
H.
Old Age or Retirement Benefit Plans.
(1)
Scope. For the purpose of this section, the term plan includes
individual retirement plans (IRA), simplified employee pension plans
(SEP), Keogh plans, federally qualified employee pension plans and
similar old age or retirement benefit plans.
(2)
Contributions.
(a)
Contributions to a plan made by employers or labor unions on
behalf of an employee are excludable from the employee's income,
except as otherwise provided in this Part.
(b)
Contributions to a plan made by an employee or other individual
directly or indirectly, whether through payroll deduction, a salary
reduction agreement or otherwise, are not excludable from his or her
income. Contributions by, on behalf of or attributable to a self-employed
person are not excludable from either compensation or net profits
from a business, profession or other activity.
(3)
Distributions.
(a)
Amounts distributed to
an individual from a plan shall be included in income to the extent
that contributions were not previously included in this income except
for either of the following:
(b)
To determine the portion of a distribution to be included in
income, an individual shall use the cost recovery method.
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Example 1: John contributed $1,000 to his IRA. He pays tax on
the $1,000 contribution. Three years later the account has earned
$750 in income. The total balance of the account at that time is $1,000
+ $750 = $1,750. John receives a distribution of $750 from his IRA.
Since the amount of the distribution does not exceed $1,000, the distribution
is not includable in income.
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Example 2: Same facts as Example 1, except that John receives
a distribution of $1,500. Since the amount of the distribution exceeds
$1,000, the excess of the distribution, $500, is includable in his
income, as compensation.
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(4)
Income on plan assets. Income on assets held in a plan is not
includable in income.
I.
Payments made by an employer or labor union for a nondiscriminatory
supplemental unemployment benefit or strike benefit plan.
J.
Federally excludable benefits provided for the convenience of the
employer.
K.
Fringe benefits described in "Taxable Compensation" section (relating
to fringe benefits in the form of personal use of property or services).
L.
Program benefits payable on condition of hospitalization, sickness,
disability or death under a health, accident or death plan.
M.
Guaranteed payments to a partner for services rendered to the partnership.
N.
Benefits payable by an employer or labor union under a supplemental
unemployment benefit plan, whether payable on a periodic basis or
in the form of cash, services or property.
5.
The Department and this Borough may require the submission of a statement
from an employer or casual employer with respect to its employees
or casual employees regarding the verification or substantiation of
unreimbursed and reimbursed business expenses. The statement of the
employer or casual employer should verify that the expenses were required
by the employer or casual employer. The statement shall set forth
the types of expenses such as travel, meals, hotel and so forth that
the employer or casual employer specifically requires the employee
or casual employee to incur and to what extent, if any, the expenses
are reimbursed. If the employer or casual employer requires the employee
or casual employee to maintain an office, or office-in-home, a statement
by the employer or casual employer to this effect should also be included.
The Department will not require the employer or casual employer to
specifically list the amount expended or to verify each expense incurred
by the employee or casual employee.
6.
Compensation paid in a medium other than cash shall be valued at
its current market value. Compensation paid in the form of employer-provided
coverage under an employee welfare benefit plan shall be valued at
cost. The cost shall be the total amount of payment made during the
year by the employer on account of the plan and plan participant,
except in the following situations:
A.
In the case of self-insured insurance plans, the cost shall be the
annual cost for financial accounting purposes.
B.
The amount of compensation paid in the form of federally taxable
noncash fringe benefits shall be determined in the same manner as
is prescribed by the Internal Revenue Service under federal statutes
and regulations.
C.
In the case of cafeteria plans, amounts specified in the plan document
as being available to the participant for the purpose of selecting
or purchasing benefits when so used shall be included in the total
amount of payment made during the year by the employer on account
of the plan and plan participant.
7.
Compensation in the form of incentive, qualified, restricted or nonqualified
stock options shall be considered to be received:
A.
When the option is exercised if the stock subject to the option is
free from any restrictions having a significant effect on its market
value.
B.
When the restrictions lapse if the stock subject to the option is
subject to restrictions having a significant effect on its market
value.
C.
When exchanged, sold or otherwise converted into cash or other property.
8.
The following rules apply if, under a cafeteria plan, plan participants
may choose between benefits consisting of cash, additional paid vacation
days and other benefits; or if, outside a cafeteria plan, plan participants
can purchase additional paid vacation days:
9.
Employer payments to reimburse employees for uninsured medical or
dental expenses are not taxable if the amounts available for covered
reimbursement cannot be cashed out or used for any other purpose during
the taxable year or be carried over to any other taxable year, normal
cash compensation that is forgone by an employee under a spending
account or otherwise and credited to a self-insured medical reimbursement
account and drawn upon to reimburse the employee for uninsured medical
or dental expenses to which § 105(b) of the IRC [26 U.S.C.A.
§ 105(b)] applies is excludable from tax.
10.
After December 31, 1996.
A.
Payments made for employee welfare benefit plans under a cafeteria
plan will be deemed to be an "employer contribution" for Act 166 of
2002 income tax purposes if the following apply:
(1)
The payments were not actually or constructively received, after
taking § 125 of the IRC (26 U.S.C.A. § 125) into
account.
(3)
The benefits selected or purchased are nontaxable under the
IRC when offered under a cafeteria plan.
(4)
The payments made for the plan would be nontaxable under the
Act 166 of 2002 income tax if made by the employer outside a cafeteria
plan.
B.
If the requirements of Subsection 10A are satisfied, cafeteria plan contributions are taxed under such rules as they apply to employer payments for employee welfare benefit plans. However, if the benefits are taxable for federal income tax purposes when offered under a cafeteria plan, the payments will also constitute compensation for Pennsylvania personal income tax purposes. Payments will also constitute compensation if they would be taxable under the Pennsylvania personal income tax if made by the employer outside a cafeteria plan. For example, although not taxable under the IRC, coverage under a dependent care plan providing for the reimbursement of expenses for household or dependent care services would constitute compensation under the Pennsylvania personal income tax because it would be taxable if made by an employer outside a cafeteria plan.
11.
Compensation includes the entire cost of employer-provided coverage
provided to a highly compensated participant under any discriminatory
employee welfare benefit plan.
12.
Contributions made by an employer for IRC 401(k) plans under a cafeteria
plan under which the employee unilaterally may elect to have the employer
either make the payments as contributions to a 401(k) plan or other
plan on behalf of the employee or to the employee directly in cash
are includable in the employee's compensation.
13.
Compensation is taxable regardless of the form of the payment. Examples
of taxable forms of payment include:
A.
Cash.
B.
Foreign currency.
C.
A check or other negotiable instrument.
D.
Freely transferable, readily marketable obligations or other cash
equivalent.
F.
A monetary payment in reimbursement of a personal expenditure or
to eliminate personal expenditure.
G.
Below market rate loans.
H.
A cancellation of indebtedness constituting a quid pro quo or incentive
that would be taxable had the amount by which the debt had been forgiven
or discharged instead been paid to the debtor in cash or property.
14.
For purposes of this section:
A.
A person who separated from service before satisfying superannuation
requirements shall be deemed to be retired from service upon reaching
retirement age, regardless of whether he has permanently and wholly
withdrawn from active working life or not.
B.
The voluntary discontinuance of a plan within three years after it
has taken effect, for any reason other than business necessity, will
be evidence that the plan was temporary and limited.
[Ord. 1096, 3/3/2004, § 249]
[§ 303 of the Act of March 4, 1971 (P.L. 6, No. 2)
72 P.S. § 7303]
1.
Net Profits. The net income from the operation of a business, profession
or other activity, after provision for all costs and expenses incurred
in the conduct thereof, determined either on a cash or accrual basis
in accordance with accepted accounting principles and practices but
without deduction of taxes based on income.
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61 Pa. Code, Part I, Subpart B, Article V (relating to personal
income tax), 61 Pa. Code § 103.12
|
2.
Net profits shall be the net income from the operation of a business,
profession or other activity after provision for all costs and expenses
incurred in the conduct thereof. They shall be determined either on
a cash or accrual basis in accordance with accepted accounting principles
and practices.
3.
To constitute net profits, all of the following must apply:
A.
The gross profits shall be derived from one of the following:
(1)
The marketing of a product or service to customers on a commercial
basis or from securities employed as working capital in the business
operations.
(2)
Accounts and notes receivable from sales of products or services
sold in the ordinary course of the business operations.
(3)
Assets which serve an operational function in the ordinary course
of business operations.
B.
The marketing activity shall be conducted with the manifest objective
of achieving profitable operations.
C.
The marketing activity shall be conducted with regularity and continuity
and may not be limited or exclusive.
4.
In computing net profits, a deduction will not be allowed for any
item of cost, expense or liability derived or incurred in connection
with, or attributable to any of the following:
A.
The ownership or disposition of assets that are held for investment
purposes or otherwise serve an investment function.
B.
The trading in securities for personal purposes and not for the accounts
of customers.
C.
The sale, discontinuation or abandonment of a business or segment
thereof.
D.
Any tax imposed on, or measured by, gross or net earned or unearned
income, mercantile or business privilege taxes.
E.
An isolated or nonrecurring transaction which is not a normal or
routine business activity.
5.
Choosing to form a partnership or other entity or to associate with
others, receiving and reporting income or gain as the income of the
partnership, entity or associates or dividing the same among its partners,
beneficial owners or associates or the trading in securities for the
benefit of shareholders, partners, members or associates does not
of itself make the income of the partnership, entity or associates
net profits.
6.
For purposes of this section, only the following participants in
the stock, securities, options, derivatives, futures or commodities
market are engaged in marketing of a product or service to customers.
A.
Those who maintain or provide a market place or facilities for bringing
together purchasers and sellers of these financial investment products.
B.
Those who are licensed to act as their customer's agents and
charge a negotiated commission for executing transactions and do not
take title to the particular positions they buy or sell.
C.
Those who devote managerial attention to the financial investment
products holdings of others, or who employ other persons to assist
them in that management in the capacity of a licensed investment advisor.
D.
Licensed dealers, including financial investment product specialists and market makers, if the conditions in Subsection 6D(1) to (4) are met:
(1)
The dealer maintains an inventory of financial investment products
with the objective of reselling his inventories at a profit to customers
or operates as a specialist or market maker.
(2)
The dealer makes market by quoting the bid and asked prices
at which he is willing to buy and sell the financial investment products
and by buying directly from or selling directly to customers.
(3)
The dealer's profit is determined in whole or in part by
a markup based on cost.
(4)
The dealer elects to inventory securities held for resale to
customers or uses the mark-to-market system of accounting.
E.
Underwriters who facilitate initial sales of financial investment
products by acting either as licensed dealers in a principal capacity
or as brokers in an agency capacity.
7.
When a person operates as an investor or trader with respect to a
portion of that person's activities and as a market establishment,
broker, investment counselor or dealer with respect to the rest, this
section applies only to the operations as a market establishment,
broker, investment counselor or dealer.
