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 classes of income and providing for exclusion of tips from taxable income.

PRINTER'S NO. 1549
THE GENERAL ASSEMBLY OF PENNSYLVANIA
SENATE BILL
No. 1255
Session of
2026
INTRODUCED BY GEBHARD, BARTOLOTTA, FONTANA, ROTHMAN, BROWN,
BAKER, PENNYCUICK, STEFANO, J. WARD, KANE, DUSH AND BROOKS,
MARCH 30, 2026
REFERRED TO FINANCE, MARCH 30, 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 personal income tax, further providing for
classes of income and providing for exclusion of tips from
taxable income.
The General Assembly of the Commonwealth of Pennsylvania
hereby enacts as follows:
Section 1. Section 303(a) 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 303. Classes of Income.--(a) The classes of income
referred to above are as follows:
* * *
(9) Tips excluded under section 303.1 shall not be included
in compensation for the purposes of calculating taxable income.
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* * *
Section 2. The act is amended by adding a section to read:
Section 303.1. Exclusion of Tips from Taxable Income.--(a)
For purposes of the tax imposed under this article, taxable
income shall not include any tip, gratuity or voluntary payment
received by an individual in the course of employment, whether
received in cash, electronically or by any other method.
(b) Nothing in this section shall be construed to permit the
reclassification of wages, service charges or employer-mandated
fees as tips for the purpose of avoiding taxation.
(c) As used in this section, the following words and phrases
shall have the meanings given to them in this subsection unless
the context clearly indicates otherwise:
"Tip." A voluntary payment made by a customer to an employe
or distributed to an employe through a tip-sharing arrangement.
The term does not include any payment that the employer is
mandated to pay as part of the employe's base wage.
Section 3. The Department of Revenue shall promulgate
regulations necessary to implement this act, including
procedures to prevent fraud, misclassification or improper
reporting of wages as tips.
Section 4. This act shall apply to the next fiscal year
following the effective date of this section.
Section 5. This act shall take effect in 60 days.
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