This article shall be known as the "Earned Income Tax Ordinance."
The provisions hereof shall become effective on the first day of January
2011 A.D., 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.
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.
BOARD
The Borough Council of the Borough of Folcroft.
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 permanent home and
to which he 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 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.
(1)
When used in this subsection, the following words have the following
meanings, unless the context clearly indicates otherwise:
(a)
Fellowship stipend or fellowship award. A fixed sum of money
paid periodically for services or to defray expenses to a graduate
student who is enrolled in a graduate degree program at a university.
(b)
Grant-in-aid financial support given by a public agency or private
institution to an individual to further the individual's education.
(c)
Postdoctoral research fellowship stipend or postdoctoral research
fellowship award. A fixed sum of money paid periodically for service
or to defray expenses of an individual who has obtained a doctoral
degree at a university and in conducting research at a research facility.
(d)
Scholarship. A grant-in-aid to a student.
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:
(1)
Periodic payments for sickness and disability other than the
regular wages received during a period of sickness or disability;
(2)
Disability, retirement or other payments arising under workmen's
compensation acts, occupational disease acts and similar legislation
by any government;
(3)
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;
(4)
Payments commonly known as public assistance, or unemployment
compensation payments by any governmental agency;
(5)
Payments to reimburse actual expenses;
(6)
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;
(7)
Any compensation received by United States servicemen serving
in a combat zone;
(8)
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 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;
(9)
Payments made by employers or labor unions for employee benefit
programs covering social security or retirement; or
(10)
Personal use of an employer's owned or leased property
or of employer-provided services.
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.
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.
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 marketing 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 purchasers 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 Subsection
E(4)(a) through
(d) 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 profit 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; and
(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.
This article is adopted pursuant to the authority conferred
by the Act of December 31, 1965, P.L. 1257; 53 P.S. § 6924.101
et seq., as amended by Act 32 of 2008.