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§ 19-2601. Definitions.

In addition to the definitions provided in the Act of May 30, 1984, P.L. 345, No. 69, known as the First Class City Business Tax Reform Act, and Chapter 19-500 of this Title, the following definitions shall apply:

Affiliated Group. One or more chains of corporations connected through stock ownership with a common parent corporation if:

(1) Stock possessing at least eighty (80%) percent of the voting power of all classes of stock and at least eighty (80%) percent of each class of the nonvoting stock of each corporation, except the common parent corporation, is owned directly by one or more of the other corporations.

(2) The common parent corporation owns directly stock possessing at least eighty (80%) percent of the voting power of all classes of stock and at least eighty (80%) percent of each class of the nonvoting stock of at least one of the other corporations.

As used in this definition, "stock" does not include nonvoting stock which is limited and preferred as to dividends.

Business. Carrying on or exercising for gain or profit within a city of the first class, any trade, business, including financial business as hereinafter defined, profession, vocation or commercial activity, including the partial or complete liquidation or sale of business assets, or making sales to persons within such city of the first class. "Business" shall not include the following:

(1) Any business conducted by a nonprofit corporation or association organized for religious, charitable, or education purposes, other than commercial activity that does not directly serve and is not directly connected with the corporation or association's religious, charitable, or education purposes; the business of any political subdivision, or of any authority created and organized under and pursuant to law of this Commonwealth, and the business of any credit union chartered under the laws of this Commonwealth.

(2) The specific business conducted by any public utility operating under the laws, rules and regulations administered by the Pennsylvania Public Utility Commission or conducted by a business subject to the jurisdiction of the Interstate Commerce Commission of furnishing or supplying service or services at the rates specified in its tariffs.

(3) The business of any insurance company, association or exchange, or any fraternal, benefit or beneficial society of any other state under the laws of which insurance companies, associations or exchanges or fraternal, benefit or beneficial societies of this Commonwealth doing business in such other state are subjected, by reason of the tax imposed by this act, to additional or further taxes, fines, penalties or license fees by such other state.

(4) Any employment for a wage or salary.

(5) For the tax year 1986 and thereafter, the business of loading or discharging cargo to or from vessels conducted on piers, wharves or marine terminal facilities in the Port of Philadelphia and business activities related thereto such as furnishing dockage, wharfage, truck and/or railroad car loading and unloading and storage of cargo which is to be loaded or has been discharged from vessels at a pier, wharf or marine terminal facility in the Port of Philadelphia.

(6) Any hobby or other not-for-profit activity, as set forth at 26 C.F.R. § 1.183-2. The determination of whether an activity is engaged in for profit is made by reference to objective factors, taking into account all of the facts and circumstances of each case. The Department of Revenue shall promulgate regulations setting forth the factors to be considered in making this determination, which regulations shall be consistent with 26 C.F.R. § 1.183-2. The relevant, non-exclusive factors set forth in 26 C.F.R. § 1.183-2 are: (1) the manner in which the person carries on the activity; (2) the expertise of the person carrying on the activity or such person's advisors; (3) the time and effort expended by the person in carrying on the activity; (4) the expectation that assets used in the activity may appreciate in value; (5) the success of the person in carrying on other similar or dissimilar activities; (6) the person's history of income or losses with respect to the activity; (7) the amount of occasional profits, if any, which are earned from the activity; (8) the financial status of the person carrying on the activity; and (9) elements of personal pleasure or recreation in carrying on the activity.

(7) For tax year 2012 and thereafter, the activities of (i) an investment company (no matter how organized) as defined in subsection 3(a) of the Investment Company Act of 1940, without regard to the exceptions set forth at subsections 3(c)(1), 3(c)(3) with respect to common trusts or similar funds, 3(c)(5)(C), 3(c)(7), 3(c)(9), 3(c)(10), 3(c)(11), or 3(c)(14) of said Act; and (ii) an entity or natural person directly or indirectly owning a general partnership interest or a managing member interest in a limited liability company in an entity described in subsection (i) that is not publicly traded, to the extent that the activities consist of the exercise of management responsibilities of a general partner or of a managing member in a limited liability company and result in income, gross, net or otherwise, that is measured by or otherwise based on the financial performance of the entity. Except as otherwise provided by law, the activities of any such entity or natural person other than the activities described above shall not be excluded from the definition of "business." The Revenue Department may, by regulation, apply the provisions of subparagraphs (i) or (ii) to the activities of an entity or natural person that are substantially the same as those described in subparagraph (i) or (ii) whether or not the investee entity is publicly traded.

Collector. The receiver of taxes in cities of the first class.

Community-Based Organization. Any group affiliated with, or organized for the benefit of, one or more communities or neighborhoods; or any group organized to benefit the quality of life in a residential area.

Cost of Goods. In the case of a retailer or wholesaler, the cost of goods, wares, commodities, and merchandise purchased by the retailer or wholesaler and resold by him, such cost to include all freight-in charges.

Cost of Labor. In the case of a retailer or wholesaler, the cost of the labor of his employees used in receiving, storing, shipping, and delivering the goods, wares, commodities, or merchandise purchased for resale and the cost of the salaries or commissions paid to his employees for making the actual sales of the goods, commodities or merchandise.

Dividends. Any distribution made by a corporation to its shareholders in respect of its stock, whether ordinary, extraordinary or in liquidation.

Drug Paraphernalia. Drug paraphernalia as defined in the Act of December 4, 1980, P.L. 1093, No. 186, § 1, 35 P.S. § 780-102.

Financial Business. Other than the business of any regulated industry, the services and transactions of private banks and bankers; building and loan associations; savings and loan associations; credit unions; savings banks; banks; bank and trust companies; trust companies; investment companies registered as such with the Federal Securities and Exchange Commission; holding companies; persons registered under the act of December 5, 1972 (P.L. 1280), known as the Pennsylvania Securities Act of 1972, including traders, dealers and brokers in money, credits, commercial paper, bonds, notes, securities and stocks, and monetary metals; factors and commission merchants.

Illegal Drugs. All drug products the sale of which is prohibited in the Commonwealth, as identified, or as named, in The Act of April 14, 1972, P.L. 233, No. 64, §§ 3 and 4; as amended; 35 P.S. §§ 780-103, 104, as amended.

Information Technology Company. A person whose business is categorized as electronic data processing services (NAIC 5142 and 51421), computer systems design and related services (NAIC 5415, 54151, and 541512), custom computer programming services (NAIC 541511), computer facilities management services (NAIC 541513), and on-line information services (NAIC 514191), as set forth in the North American Industry Classification System, 1997 ("NAIC") codes established by the Office of Management and Budget, Executive Office of the President.

Manufacturer. A person whose business is the sale of goods, commodities, wares or merchandise of its own manufacture, growth or production.

Net Income.

(a) "Net income" shall, at the option of the taxpayer, which option shall not be revokable by the taxpayer after it has been exercised as provided for by the collector, be either:

(1) The net gain from the operation of a business, after provision for all allowable costs and expenses actually incurred in the conduct thereof, either paid or accrued in accordance with the accounting system used, without deduction of taxes based on income, subject to a deduction for the pro rata portion of net income attributable to receipts that are excluded under paragraph (14) of the definition of "receipts" of this Section; or

(2) The taxable income from any business activity as returned to and ascertained by the Federal Government prior to giving effect to the exclusion for dividends received and net operating loss, subject to the following adjustments:

(i) A deduction for dividends, interest and royalty income and other receipts excluded from the definition of receipts under paragraphs (5) and (7) of that definition, but only to the extent that such dividends, interest, royalty and other receipts are included in taxable income as returned to and ascertained by the Federal Government as heretofore defined.

(ii) A deduction for net income attributable to receipts that are excluded under paragraph (6) or (9) of the definition of "receipts" of this Section.

(iii) A deduction for income received from all obligations of the United States, including stocks, bonds and Treasury notes and other obligations of the United States.

(iv) An increase for interest expense attributable to these stocks, bonds and Treasury notes and other obligations of the United States or any of its political subdivisions which is exempt from taxation of income under the laws of the United States or of the Commonwealth. The increase shall not exceed the deduction claimed in subparagraph (iii).

(v) A deduction for net income of persons registered under the Pennsylvania Securities Act of 1972 other than the net income attributable to commissions and similar charges on account of transactions effected for persons residing or having their principal place of business within a city of the first class; or

(3) The taxable income from any business activity as returned to and ascertained by the Federal Government prior to giving effect to the exclusion for dividends received and net operating loss, subject to the following adjustments:

(i) A deduction for dividends, interest and royalty income and other receipts excluded from the definition of receipts under paragraphs (5) and (7) of that definition, but only to the extent that such dividends, interest, royalty and other receipts are included in taxable income as returned to and ascertained by the Federal Government as heretofore defined.

(ii) A deduction for net income attributable to receipts that are excluded under paragraph (6) or (9) of the definition of "receipts" of this Section.

(iii) A deduction for income received from all obligations of the United States, including stocks, bonds and Treasury notes and other obligations of the United States.

(iv) An increase for interest expense attributable to these stocks, bonds and Treasury notes and other obligations of the United States or any of its political subdivisions which is exempt from taxation of income under the laws of the United States or of the Commonwealth. The increase shall not exceed the deduction claimed in subparagraph (iii).

(v) A deduction for net income of persons registered under the Pennsylvania Securities Act of 1972 other than the net income attributable to commissions and similar charges on account of transactions effected for persons residing or having their principal place of business within a city of the first class.

(vi) A deduction for the pro rata portion of net income attributable to receipts that are excluded under paragraph (14) of the definition of "receipts" of this Section.

(b) In the case of a corporation participating in the filing of a consolidated corporate return to the Federal Government, net income shall mean the income from any business activity which would have been returned to and ascertained by the Federal Government, subject, however to any correction thereof for fraud, evasion or error as finally ascertained by the Federal Government. Notwithstanding any other provision of this act, no taxpayer shall be required or permitted to participate in the filing of a consolidated or combined tax return under this act.

(c) The collector shall establish rules and regulations and methods of apportionment and allocation and evaluation so that only that part of such net income or net operating loss which is properly attributable and allocable to the doing of business in the city of the first class levying the tax shall be taxed hereunder. The collector may make an apportionment and allocation with due regard to the nature of the business concerned on the basis of mileage, the ratio of the taxable receipts of the taxpayer from within the city to the total receipts of the taxpayer, the ratio of the value of the tangible personal and real property owned or leased and situated in the city levying the tax to the total tangible personal and real property of the taxpayer wherever owned and situated, the ratio of the wages, salaries, commissions and other compensation paid by the taxpayer within the city levying the tax to the total wages, salaries, commissions and other compensation paid by the taxpayer, and any other method or methods of apportionment and allocation other than the foregoing, calculated to effect a fair and proper apportionment and allocation. The net income of a person which is described as being subject to a tax pursuant to Article VII, VIII, IX or XV of the act of March 4, 1971 (P.L. 6, No. 2), known as the Tax Reform Code of 1971, shall be allocated, and apportioned to a city of the first class in accordance with a fraction of which the numerator shall be "receipts" as defined and limited in this Section, and the denominator shall be receipts regardless of whether received in or apportionable to the city of the first class.

(d) After apportioning and allocating net income, apportioned and allocated net operating losses carried forward shall be deducted.

Net Operating Loss.

(1) In the case of a person conducting its entire business within a city of the first class, any net losses incurred from the operation of its business as returned to and ascertained by the Federal Government prior to giving effect to the exclusion for dividends received and net operating loss subject to the same adjustments made applicable to net income in this Section. In the case of a person conducting its business both within and without a city of the first class, any net operating loss incurred which is carried forward to another tax year shall be allocated and apportioned in the same manner as net income prior to its being deducted from apportioned and allocated net income in the subsequent tax year. Apportionment and allocation of net operating loss shall be based upon allocation and apportionment factors applicable to the year in which the net operating loss was incurred.

(2) Net operating losses incurred in another tax period may be carried over for three (3) tax years following the year in which it was incurred. The earliest net loss shall be carried over to the earliest taxable year to which it may be carried.

Occupier. Any person, group or business occupying private property under any form of agreement with the owner or manager whether written or unwritten or without an agreement, or at sufferance.

Owner. A legal owner of property, no matter what the form or length of such ownership.

Person. Any individual, partnership, limited partnership, association, corporation, estate or trust. Whenever used in any provision prescribing or imposing a penalty, the term "person", as applied to associations, shall mean the partners or members thereof, and as applied to corporations, the officers thereof.

Port of Philadelphia. Piers, wharves and marine terminal facilities entering into or abutting either the Delaware or Schuylkill Rivers which are within the confines of the City of Philadelphia.

Private Nuisance. Any unreasonable interference with another's right to use and enjoy private property. A public nuisance which affects private rights is also actionable as a private nuisance.

Public Nuisance. Any unreasonable interference with a public right of more than three (3) people caused by any activity or condition which violates The Philadelphia Code, an ordinance, or any statute.

Receipts. Cash, credits, property of any kind or nature, received from conducting any business or by reason of any sale made, including resales of goods, wares or merchandise taken by a dealer as a trade-in or as part payment for other goods, wares or merchandise or services rendered or commercial or business transactions, without deduction therefrom on account of the cost of property sold, materials used, labor, service or other cost, interest or discount paid or any other expense. For the purpose of determining receipts from the business of insurance, such receipts shall mean those from premiums received from risks within the city of the first class, whether by mutual or stock companies, domestic or foreign, without any deductions therefrom for any cost or expenses whatsoever; except, premiums shall not include return premiums, dividends paid or credited to policyholders, if such dividends are in the nature of an adjustment of the premiums charged, and premiums received for reinsurance. Receipts from a person engaged in the business of insurance shall also include receipts from rental real estate situated in cities of the first class, but shall not include interest, dividend and capital gain receipts. Nothing in this definition shall preclude the taxation of other nonpremium business receipts of persons engaged in the business of insurance. For purposes of determining the source of receipts of a Software Company the Market Based Sourcing Rule shall apply in accordance with Section 408(8) of the Department of Revenue Business Privilege Tax Regulations so that the source of receipts from the sale of products and services shall be deemed to be the location where the recipient receives the benefit of the products and services. Receipts of any business shall exclude:

(1) The amount of any allowance made for goods, wares or merchandise taken by a dealer as a trade-in or as part payment for other goods, wares and merchandise in the usual and ordinary course of his business.

(2) In the case of a financial business or a person which is described as being subject to a tax imposed pursuant to Article VII, VIII or XV of the Tax Reform Code of 1971, the cost of securities and other property sold, exchanged, paid at maturity, or redeemed; moneys or credits received in repayment of the principal amount of deposits, advances, credits, loans and other obligations; interest received on account of deposits, advances, credits, loans and other obligations made to persons resident or having their principal place of business outside such city; interest received on account of other deposits, advances, credits, loans and other obligations but only to the extent of interest expense attributable to such deposits, advances, credits, loans and other obligations and shall also exclude payments received on account of shares purchased by shareholders.

(3) In the case of a broker, any commissions paid by him to another broker on account of a purchase or sales contract initiated, executed or cleared in conjunction with such other broker, except where either is an employee of the other.

(4) Receipts by dealers from sales to other dealers in the same line, where the dealer transfers title or possession at the same price for which he acquired the goods, wares or merchandise.

(5) Dividends, interest and royalties received by one corporation from:

(i) a corporation of the same affiliated group; or

(ii) a corporation of which the receiving corporation owns at least twenty (20%) percent of the voting power of all classes of stock and at least twenty (20%) percent of each class of nonvoting stock.

(6) Receipts from the specific business conducted by any public utility operating under the laws, rules and regulations administered by the Pennsylvania Public Utility Commission or conducted by a business subject to the jurisdiction of the Interstate Commerce Commission of furnishing or supplying service or services at the rates specified in its tariffs.

(7) Receipts by a corporation which is a member of an affiliated group from other members of the same affiliated group.

(8) Commissions and similar charges received by persons registered under the Pennsylvania Securities Act of 1972, on account of transactions effected for persons resident and having their principal place of business outside the city of the first class.

(9) For the tax year 1986 and thereafter, receipts from the business of loading or discharging cargo to or from vessels conducted on piers, wharves or marine terminal facilities in the Port of Philadelphia and from business activities related thereto such as furnishing dockage, wharfage, truck and/or railroad car loading and unloading and storage of cargo which is to be loaded or has been discharged from vessels at a pier, wharf or marine terminal facility in the Port of Philadelphia.

(10) Beginning with the tax year 1996 and thereafter, receipts, or portion of receipts, attributable to the bona fide delivery of fiber, yarn, fabric or materials that have been dyed by a chemical mechanical process to a location regularly maintained by the other party to the transaction outside the limits of the city of the first class, and not for the purpose of evading or avoiding payment of the tax, or any portion thereof, imposed under this act.

(11) For the tax year 2001 through and including the tax year 2006, any receipts, or a portion of a receipt, from the specific business conducted by an information technology company.

(12) Beginning with the tax year 2006 and thereafter, receipts, or portion of receipts, attributable to the bona fide delivery of goods, wares or merchandise by persons engaged in bookbinding, which shall mean any business categorized as tradebinding (NAIC 323121) under the North American Industry Classification System, 2002 ("NAIC") codes established by the Office of Management and Budget, Executive Office of the President, to a location regularly maintained by the other party to the transaction outside the limits of the city of the first class, and not for the purpose of evading or avoiding payment of the tax, or any portion thereof, imposed under this Chapter.

(13) For the tax year 2011 and thereafter, any interest or fees received on loans made under the federal New Market Tax Credit program, section 45D of the Internal Revenue Code, 26 U.S.C. § 45D.

(14) For tax year 2014, the first $50,000 in taxable receipts received by any person or business subject to the business privilege tax under this Chapter; for tax year 2015, the first $75,000 in taxable receipts received by any person or business subject to the business privilege tax under this Chapter; for tax year 2016 and thereafter, the first $100,000 in taxable receipts received by any person or business subject to the business privilege tax under this Chapter.

Regulated Industry. A person subject to a tax pursuant to Articles VII, VIII, IX or XV of the Tax Reform Code of 1971 or any public utility operating under the laws, rules and regulations administered by the Pennsylvania Public Utility Commission, all or a portion of the activities of which is to furnish or supply service or services at the rates specified in its tariffs.

Retailer. A person whose business is the sale of goods, commodities, wares or merchandise to persons who are not dealers or vendors of those goods, commodities, wares or merchandise.

Sale. Transfer of title to goods, wares, commodities or merchandise, regardless of where accomplished, the delivery of which is made by the seller within a city of the first class. "Sale" shall not include any intra-company transfer.

Software Company. A persons whose business is categorized as computer systems design and related services (NAICS 5415, 54151, 541512), computer software publishing (NAICS 51121), internet publishing and broadcasting (NAICS 51611), internet web service provider (NAICS 51811), data processing, hosting and related services (NAICS 518210), and financial transaction processing and clearing (NAICS 52232).

Taxable Receipts.

(1) Receipts, as defined and limited in this Section, within the limits of the city of the first class.

(2) Taxable receipts shall exclude the following:

(i) receipts or portion of receipts attributable to any sale involving the bona fide delivery of goods, commodities, wares or merchandise to a location regularly maintained by the other party to the transaction outside the limits of a city of the first class, and not for the purpose of evading or avoiding payment of the tax, or any portion thereof, imposed under this act;

(ii) receipts or portion of receipts received for any services actually performed outside the limits of a city of the first class and not for the purpose of evading or avoiding payment of the tax, or any portion of it imposed, under this act.

(3) Taxable receipts of persons making sales or rendering services both inside and outside a city of the first class, or both, are to be segregated.

(4) In the event, and only in the event, taxable receipts as defined in this paragraph are incapable of segregation, the collector shall establish rules and regulations and methods of allocation and apportionment and evaluation so that only that part of such taxable receipts which is properly attributable to the doing of business within a city of the first class levying this tax shall be taxed hereunder.

Tax Measurement Year. The fiscal or calendar year by which the person engaging in business keeps its books and records for federal tax purposes.

Tax Year. A 12-month period from January 1 to December 31.

Wholesaler. A person whose business is the sale of goods, commodities, wares or merchandise to dealers or vendors of those goods, commodities, wares or merchandise.

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