This article shall be known as the "Earned Income
Tax Ordinance."
As used in this article, the following terms
shall have the meanings indicated:
ASSOCIATION
A partnership, limited partnership or any other unincorporated
group of two or more persons.
BUSINESS
Any 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.
CORPORATION
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.
DOMICILE
The place where one lives and has his/her permanent home
and to which he/she has the intention of returning whenever he 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/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.
EARNED INCOME
Compensation, including salaries, wages, commissions, bonuses
and incentive payments whether based on profits or otherwise, fees,
tips and similar remuneration for services rendered, whether in cash
or in property, such as:
A.
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, signing bonuses, amounts
received under employee benefit plans and deferred compensation arrangements.
B.
Scholarships, stipends, grants and fellowships,
if services are rendered in connection therewith. When used in this
subsection, the following words have the following meanings, unless
the context indicates otherwise:
(2)
GRANT-IN-AIDFinancial support given by a public agency or private institution to an individual to further the individual's education.
C.
Other forms of remuneration characterized as
taxable compensation by the Tax Reform Code of 1971, as amended, and
its implementing regulations, as amended, and any future amendments
to said Code and/or its implementing regulations.
D.
Compensation does not include (i) periodic payments
for sickness and disability other than the regular wages received
during a period of sickness or disability; or (ii) disability, retirement
or other payments arising under workmen's compensation acts, occupation
diseases acts and similar legislation by any government; or (iii)
payments commonly recognized as old age or retirement benefits paid
to persons retired 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 for employee benefit programs covering
hospitalization, sickness, disability or death, supplemental employment
benefits or strike benefits, subject to certain conditions identified
in the Tax Reform Code of 1971, as amended, and its implementing regulations;
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 any agency of the Commonwealth
or a political subdivision thereof, or an organization tax 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 employee benefit programs covering Social Security
or retirement; or (x) personal use of an employer's owned or leased
property or of employer-provided services.
EMPLOYER
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.
INCOME TAX OFFICER OR OFFICER
Person, public employee or private agency designated by governing
body to collect and administer the tax on earned income and net profits.
NET PROFITS
A.
The net income from the operation of a business,
profession or other activity, except corporations, after provision
for all costs and expenses incurred in the conduct thereof, be determined
either on a cash or accrual basis in accordance with generally accepted
accounting principles and practices, as defined in the Tax Reform
Code of 1971, as amended, its implementing regulations, and any subsequent
amendments to said Code and/or regulations. Net profits do not include
income which is not paid for services provided and which is in the
nature of earnings from an investment.
B.
To constitute net profits, all of the following
must apply:
(1)
The gross profits shall be derived from one
of the following:
(a)
The marketing of a product or service to customers
on a commercial basis or from securities employed as working capital
in the business operations.
(b)
Accounts and notes receivable from sales of
products or services in the ordinary course of the business operations.
(c)
Assets which serve an operational function in
the ordinary course of business operations.
(2)
The marketing activity shall be conducted with
the manifest objective of achieving profitable operations.
(3)
The marking objective shall be conducted with
regularity and continuity and may not be limited or exclusive.
C.
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:
(1)
The ownership or disposition of assets that
are held for investment purposes or otherwise serve an investment
function.
(2)
The trading in securities for personal purposes
and not for the accounts of customers.
(3)
The sale, discontinuation or abandonment of
a business or segment thereof.
(4)
Any tax imposed on, or measured by, gross or
net earned or unearned income.
(5)
An isolated or nonrecurring transaction which
is not a normal or routine business activity.
D.
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.
E.
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:
(1)
Those who maintain or provide a market place
or facilities for bringing together purchases and sellers of these
financial investment products.
(2)
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 portion they buy or sell.
(3)
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.
(4)
Licensed dealers, including financial investment
product specialists and market makers, if the conditions in the following
subparagraphs are met:
(a)
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.
(b)
The dealer makes market by quoting the bid and
ask prices at which he is willing to buy and sell the financial investment
products and by buying directly from or selling directly to customers.
(c)
The dealer's profits is determined in whole
or in part by a markup based on cost.
(d)
The dealer elects to inventory securities held
for resale to customers or uses the mark-to-market system of accounting.
(5)
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.
F.
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. For taxpayers
engaged in the business, profession or activity of farming, the term
shall not include:
(1)
Any interest earnings generated from any monetary
accounts or investment instruments of the farming business.
(2)
Any gain on the sale of farm machinery.
(3)
Any gain on the sale of livestock held 12 months
or more for draft, breeding or dairy purposes.
(4)
Any gain on the sale of other capital assets
of the farm.
NONRESIDENT
A person, partnership, association or other entity domiciled
outside the taxing district.
RESIDENT
A person, partnership, association or other entity domiciled
in the taxing district.
TAXPAYER
A person, partnership, association or any other entity required
hereunder to file a return of earned income or net profits, or to
pay a tax thereon.
A tax for general revenue purposes is hereby
reimposed in the amount of 1% on earned income received and to net
profits earned by residents and nonresidents of the Borough, beginning
on the first day of January, 2004, and continuing for each taxable
year thereafter. Except as otherwise provided in Section 14 of the
Local Tax Enabling Act (53 P.S. § 6914), as amended, allowing
for crediting or deductions for duplication of taxes, in the event
the school district in which the Borough is situate shall impose,
or continue to impose, an earned income tax under the authority of
the Act on residents or businesses domiciled within the Borough during
the same year or part of year, then the tax herein imposed shall be
subject to the sharing provision from the day such duplication becomes
effective.
This article is adopted pursuant to the authority
conferred by the Act of December 31, 1965, P.L. 1257 (53 P.S. § 6901
et seq.), as amended.
It is hereby declared to be the intent of Borough
Council that this article shall replace in its entirety all prior
ordinances enacted, resolutions adopted, motions approved, or other
actions taken by Borough Council levying an earned income tax, and/or
in any manner affecting the specific terms or provisions of said earned
income tax as levied, the provisions of which shall remain in full
force and effect for each year thereafter, without annual reenactment
unless the rate of tax is subsequently changed.
This article shall become effective on the first
day of January 2004, and the tax shall continue in force on a calendar
year or a taxpayer fiscal year basis, without annual reenactment,
unless the rate of the tax is subsequently changed. Changes in rate
become effective on the date specified in the amending ordinance.