An Act amending the act of March 4, 1971 (P.L.6, No.2), known as the Tax Reform Code of 1971, in personal income tax, further providing for definitions and for classes of income.

PRINTER'S NO. 4
THE GENERAL ASSEMBLY OF PENNSYLVANIA
HOUSE BILL
No. 22
Session of
2025
INTRODUCED BY WATRO, MARCELL, OLSOMMER, HAMM, LEADBETER, CIRESI,
KUTZ AND ROWE, JANUARY 8, 2025
REFERRED TO COMMITTEE ON FINANCE, JANUARY 8, 2025
AN ACT
Amending the act of March 4, 1971 (P.L.6, No.2), entitled "An
act relating to tax reform and State taxation by codifying
and enumerating certain subjects of taxation and imposing
taxes thereon; providing procedures for the payment,
collection, administration and enforcement thereof; providing
for tax credits in certain cases; conferring powers and
imposing duties upon the Department of Revenue, certain
employers, fiduciaries, individuals, persons, corporations
and other entities; prescribing crimes, offenses and
penalties," in personal income tax, further providing for
definitions and for classes of income.
The General Assembly of the Commonwealth of Pennsylvania
hereby enacts as follows:
Section 1. Sections 301(d) and 303(a)(1)(i) of the act of
March 4, 1971 (P.L.6, No.2), known as the Tax Reform Code of
1971, are amended to read:
Section 301. Definitions.--Any reference in this article to
the Internal Revenue Code of 1986 shall mean the Internal
Revenue Code of 1986 (Public Law 99-514, 26 U.S.C. § 1 et seq.),
as amended to January 1, 1997, unless the reference contains the
phrase "as amended" and refers to no other date, in which case
the reference shall be to the Internal Revenue Code of 1986 as
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it exists as of the time of application of this article. The
following words, terms and phrases when used in this article
shall have the meaning ascribed to them in this section except
where the context clearly indicates a different meaning:
* * *
(d) "Compensation" means and shall include 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. The term
"compensation" shall include any part of a distribution under a
plan described in section 409A(d)(1) of the Internal Revenue
Code of 1986 (Public Law 99-514, 26 U.S.C. § 409A(d)(1)), as
amended, attributable to an elective deferral of income or the
income on any elective deferral of income, whether paid or
payable during employment or to a retired person upon or after
retirement from service.
The term "compensation" shall not mean or include: (i)
periodic payments for sickness and disability other than regular
wages received during a period of sickness or disability; or
(ii) disability, retirement or other payments arising under
workmen's compensation acts, occupational disease acts and
similar legislation by any government; or (iii) payments
commonly recognized as old age or retirement benefits paid to
persons retired from service after reaching a specific age or
after a stated period of employment; or (iv) payments commonly
known as public assistance, or unemployment compensation
payments by any governmental agency; or (v) payments to
reimburse actual expenses; or (vi) payments made by employers or
labor unions, including payments made pursuant to a cafeteria
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plan qualifying under section 125 of the Internal Revenue Code
of 1986 (Public Law 99-514, 26 U.S.C. § 125), for employe
benefit programs covering hospitalization, sickness, disability
or death, supplemental unemployment benefits or strike benefits:
Provided, That the program does not discriminate in favor of
highly compensated individuals as to eligibility to participate,
payments or program benefits; or (vii) any compensation received
by United States servicemen serving in a combat zone; or (viii)
payments received by a foster parent for in-home care of foster
children from an agency of the Commonwealth or a political
subdivision thereof or an organization exempt from Federal tax
under section 501(c)(3) of the Internal Revenue Code of 1954
which is licensed by the Commonwealth or a political subdivision
thereof as a placement agency; or (ix) payments made by
employers or labor unions for employe benefit programs covering
social security or retirement; or (x) personal use of an
employer's owned or leased property or of employer-provided
services[.]; or (xi) any salary earned while a resident or
nonresident of this Commonwealth in service to the National
Guard, whether active duty or nonactive duty.
* * *
Section 303. Classes of Income.--(a) The classes of income
referred to above are as follows:
(1) Compensation.
(i) 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
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of its armed forces and income from the United States Government
or the Commonwealth of Pennsylvania for active State duty for
emergency within or outside the Commonwealth of Pennsylvania,
including duty ordered pursuant to 35 Pa.C.S. Ch. 76 (relating
to Emergency Management Assistance Compact)[.] or for any amount
of income earned as a resident or nonresident of this
Commonwealth while serving in the National Guard, whether active
duty or nonactive duty.
* * *
Section 2. This act shall take effect in 60 days.
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