An Act amending the act of March 4, 1971 (P.L.6, No.2), known as the Tax Reform Code of 1971, in tax credit and tax benefit administration, further providing for definitions; and providing for Keystone Literacy Investment Tax Credit.

PRINTER'S NO. 3447
THE GENERAL ASSEMBLY OF PENNSYLVANIA
HOUSE BILL
No. 2541
Session of
2026
INTRODUCED BY ORTITAY, FLEMING, HANBIDGE, PASHINSKI AND NEILSON,
MAY 27, 2026
REFERRED TO COMMITTEE ON EDUCATION, MAY 27, 2026
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 tax credit and tax benefit administration,
further providing for definitions; and providing for Keystone
Literacy Investment Tax Credit.
The General Assembly of the Commonwealth of Pennsylvania
hereby enacts as follows:
Section 1. The definition of "tax credit" in section 1701-
A.1 of the act of March 4, 1971 (P.L.6, No.2), known as the Tax
Reform Code of 1971, is amended by adding a paragraph to read:
Section 1701-A.1. Definitions.
The following words and phrases when used in this article
shall have the meanings given to them in this section unless the
context clearly indicates otherwise:
* * *
"Tax credit." A tax credit authorized under any of the
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following:
* * *
(14.2) Article XVIII-I.
* * *
Section 2. The act is amended by adding an article to read:
ARTICLE XVIII-I
KEYSTONE LITERACY INVESTMENT TAX CREDIT
Section 1801-I. Scope of article.
This article relates to the Keystone Literacy Investment Tax
Credit.
Section 1802-I. Legislative intent.
It is the intent of this article to fund the evidence-based
reading instruction program under Article XV-N of the act of
March 10, 1949 (P.L.30, No.14), known as the Public School Code
of 1949 . Proficiency in reading is foundational to academic
achievement across all disciplines and essential to long-term
success in life and the workforce. By investing in evidence-
based structured literacy instruction, the Commonwealth ensures
that every student acquires the literacy skills necessary to
thrive, while also strengthening workforce productivity,
expanding economic opportunity and reducing long-term social
costs.
Section 1803-I. Definitions.
The following words and phrases when used in this article
shall have the meanings given to them in this section unless the
context clearly indicates otherwise:
"Allocation amount." The total amount of tax credits
purchased by a qualified taxpayer.
"Capital." The amount of money that a purchaser contributes
to the program.
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"Department." The Department of Community and Economic
Development of the Commonwealth.
"Fund." The Keystone Literacy Investment Fund.
"Insurance premiums tax liability." Any liability incurred
by an insurance company under Article IX.
"Program." The Keystone Literacy Investment Program.
"Qualified taxpayer." Any of the following that has
insurance premiums tax liability and contributes capital to
purchase premiums tax credits under this article:
(1) An insurance company authorized to do business in
this Commonwealth.
(2) A holding company that has at least one insurance
company subsidiary authorized to do business in this
Commonwealth.
"Tax credit." A credit against insurance premiums tax
liability offered to or held by a qualified taxpayer under this
article.
Section 1804-I. Tax credit.
A qualified taxpayer may purchase tax credits from the
department in accordance with this article and may apply the tax
credits against the qualified taxpayer's insurance premiums tax
liability in accordance with this article.
Section 1805-I. Duties.
(a) Sale of tax credits.--The department may sell up to
$150,000,000 in tax credits to qualified taxpayers. The sale of
the tax credits shall be in accordance with section 1808-I.
(b) Time of sale.--The sale authorized under subsection (a)
shall occur by January 31, 2027.
Section 1806-I. Use of tax credits by qualified taxpayers.
(a) Use against insurance premiums tax liability.--A
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qualified taxpayer that purchases tax credits under section
1805-I may claim the credits beginning in calendar year 2029
against insurance premiums tax liability incurred for a taxable
year that begins on or after January 1, 2028.
(b) Application to department.--A qualified taxpayer seeking
to use purchased tax credits may submit an application to the
department in a manner prescribed by the department.
(c) Construction.--
(1) A qualified taxpayer may not be required to reduce
the amount of insurance premiums tax included by the taxpayer
in connection with ratemaking for any insurance contract
written in this Commonwealth because of a reduction of the
taxpayer's insurance premiums tax liability derived from the
tax credit purchased under this article.
(2) If, under the insurance laws of this Commonwealth,
the assets of the qualified taxpayer are examined or
considered, the taxpayer's balance of tax credits shall be
treated as an admitted asset subject to the same financial
rating as held by the Commonwealth.
(d) Limitations.--
(1) The total amount of tax credits applied against
insurance premiums tax liability by all qualified taxpayers
in a fiscal year may not exceed $50,000,000 per year
beginning in calendar year 2029.
(2) The credit to be applied in any one year may not
exceed the insurance premiums tax liability of the qualified
taxpayer for that taxable year.
Section 1807-I. Sale, carryover and carryback.
(a) Carryover.--If the qualified taxpayer cannot use the
entire amount of the tax credit for the taxable year in which
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the taxpayer is eligible for the credit, the excess may be
carried over to succeeding taxable years and used as a credit
against the qualified tax liability of the taxpayer for those
taxable years, provided that the credit may not be carried over
to any taxable year that begins after December 31, 2034.
(b) Sale.--No sooner than 30 days after providing the
Insurance Department and the department written notice of the
intent to transfer tax credits, a qualified taxpayer may
transfer tax credits held without restriction to any entity that
is a qualified taxpayer in good standing with the Insurance
Department and agrees to assume all of the transferor's
obligations with respect to the tax credit.
(c) Carryback.--A qualified taxpayer may not carry back a
tax credit.
Section 1808-I. Sale of tax credits to qualified taxpayers.
(a) Conduct of sale.--The sale of tax credits authorized
under section 1805-I(a) shall be conducted in accordance with
this section.
(b) Process.--The department may sell the tax credits
authorized under this article or may contract with an
independent third party to conduct a bidding process among
qualified taxpayers to purchase the credits. In raising capital
for the program, the department shall have the discretion to
distribute credits using a market-driven approach or any
approach that maximizes the yield to the Commonwealth.
(c) Application.--A qualified taxpayer seeking to purchase
tax credits may apply to the department in the manner prescribed
by the department.
(d) Bidding process.--Using procedures adopted by the
department or, if applicable, by an independent third party,
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each qualified taxpayer that submits an application shall make a
timely and irrevocable offer, subject only to the department's
issuance to the taxpayer of tax credit certificates, to make
specified contributions of capital to the department on dates
specified by the department.
(e) Contents of offer.--The offer under subsection (d) must
include all of the following:
(1) The requested amount of tax credits, which may not
be less than $500,000.
(2) The qualified taxpayer's capital contribution for
each tax credit dollar requested, which may not be less than
the greater of:
(i) 75% of the requested dollar amount of tax
credits; or
(ii) the percentage of the requested dollar amount
of tax credits that the department and, if applicable,
the independent third party determines to be consistent
with market conditions as of the offer date.
(3) Any other information the department or, if
applicable, independent third party requires.
(f) Notice of approval.--A qualified taxpayer that submits
an application under this section shall receive a written notice
from the department indicating whether or not the qualified
taxpayer has been approved as a purchaser of tax credits and, if
so, the amount of tax credits allocated.
(g) Limitation.--No tax credits may be sold if the bidding
process, upon completion, has failed to yield at least
$20,000,000 in revenue.
Section 1809-I. Payment for tax credits purchased and
certificates.
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(a) Payment of capital.--
(1) Capital committed by a qualified taxpayer shall be
paid to the department for deposit into the fund.
(2) Nothing in this section shall be construed to
prohibit the department from establishing an installment
payment schedule for capital payments to be made by the
qualified taxpayer.
(b) Issuance of tax credit certificates.--On receipt of
payment of capital, the department shall issue to each qualified
taxpayer a tax credit certificate representing a fully vested
credit against insurance premiums tax liability.
(c) Certificate issued in accordance with bidding process.--
The department shall issue tax credit certificates to qualified
taxpayers in accordance with the bidding process selected by the
department or the independent third party.
(d) Contents.--The tax credit certificate shall state:
(1) The total amount of premiums tax credits that the
qualified taxpayer may claim.
(2) The amount of capital that the qualified taxpayer
has contributed or agreed to contribute in return for the
issuance of the tax credit certificate.
(3) The dates on which the tax credits will be available
for use by the qualified taxpayer.
(4) Any penalties or other remedies for noncompliance.
(5) The procedures to be used for transferring the tax
credits.
(6) Any other requirements the department considers
necessary.
Section 1810-I. Failure to make contribution of capital and
reallocation.
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(a) Prohibition.--A tax credit certificate under section
1809-I may not be issued to a qualified taxpayer that fails to
make a contribution of capital within the time the department
specifies.
(b) Penalty.--A qualified taxpayer that fails to make a
contribution of capital within the time the department specifies
shall be subject to a penalty equal to 10% of the amount of
capital that remains unpaid. The penalty shall be paid to the
department not later than 30 days after demand.
(c) Reallocation.--The department may offer to reallocate
the defaulted capital among other qualified taxpayers so that
the result after reallocation is the same as if the initial
allocation had been performed without considering the tax credit
allocation to the defaulting qualified taxpayer.
(d) Contribution.--If the reallocation of capital under
subsection (c) results in the contribution by another qualified
taxpayer of the amount of capital not contributed by the
defaulting qualified taxpayer, the department may waive the
penalty provided under subsection (b).
(e) Transfer.--
(1) A qualified taxpayer that fails to make a
contribution of capital within the time specified may avoid
the imposition of the penalty by transferring the allocation
of tax credits to a new or existing qualified taxpayer not
later than 30 days after the due date of the defaulted
installment.
(2) A transferee of an allocation of tax credits of a
defaulting qualified taxpayer under this subsection shall
make the required contribution of capital not later than 30
days after the date of the transfer.
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Section 1811-I. The Keystone Literacy Investment Program.
(a) Establishment.--The Keystone Literacy Investment Program
is established within the department.
(b) Fund.--The Keystone Literacy Investment Fund is
established in the State Treasury.
(c) Distribution.--The department shall deposit the net
proceeds received by the department as a result of the sale of
tax credits under section 1805-I(a) into the fund.
(d) Deposit of money.--No administrative action shall
prevent the deposit of money into the fund in the fiscal year in
which the money is received.
(e) Continuing appropriation.--The money in the fund is
appropriated to the Department of Education on a continuing
basis to award grants to school entities under Article XV-N of
the act of March 10, 1949 (P.L.30, No.14), known as the Public
School Code of 1949.
Section 1812-I. Guidelines.
The department, in consultation with the Department of
Education, shall publish guidelines implementing this article.
Section 1813-I. Report.
(a) Duties.--On or before January 31, 2029, and January 31
of each subsequent year through 2035, the department, in
consultation with the Department of Education, shall:
(1) Submit a report on the implementation of the program
to all of the following:
(i) The Governor.
(ii) The chairperson and minority chairperson of the
Appropriations Committee of the Senate.
(iii) The chairperson and minority chairperson of
the Appropriations Committee of the House of
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Representatives.
(2) Publish the report under paragraph (1) on the
department's publicly accessible Internet website.
(b) Contents.--The report under subsection (a) shall include
the following:
(1) The name of the purchaser of premiums tax credits.
(2) The amount of premiums tax credits allocated to the
purchaser.
(3) The amount of capital the purchaser contributed for
the issuance of the tax credit certificate.
(4) The amount of any tax credits that have been
transferred under section 1810-I(e).
(5) The amount of funds received by the recipients
during the previous year.
(6) The cumulative amount of capital received by the
department in connection with the sale of the tax credits.
(7) The names and locations of school entities receiving
grants under section 1507-N of the act of March 10, 1949
(P.L.30, No.14), known as the Public School Code of 1949.
Section 3. This act shall take effect in 60 days.
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