HB 1575 — 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 factory or mill building economic revitalization.

PRINTER'S NO.   1873

                     THE GENERAL ASSEMBLY OF PENNSYLVANIA



                         HOUSE BILL
                         No. 1575
                                                Session of
                                                  2025

     INTRODUCED BY FREEMAN, SAMUELSON, SCHLOSSBERG, NEILSON, PIELLI,
        KHAN, GALLAGHER, CEPEDA-FREYTIZ, PROBST, SHUSTERMAN, OTTEN,
        INGLIS, PASHINSKI AND MERSKI, JUNE 9, 2025

     REFERRED TO COMMITTEE ON FINANCE, JUNE 9, 2025


                                    AN ACT
 1   Amending the act of March 4, 1971 (P.L.6, No.2), entitled "An
 2      act relating to tax reform and State taxation by codifying
 3      and enumerating certain subjects of taxation and imposing
 4      taxes thereon; providing procedures for the payment,
 5      collection, administration and enforcement thereof; providing
 6      for tax credits in certain cases; conferring powers and
 7      imposing duties upon the Department of Revenue, certain
 8      employers, fiduciaries, individuals, persons, corporations
 9      and other entities; prescribing crimes, offenses and
10      penalties," in tax credit and tax benefit administration,
11      further providing for definitions; and providing for factory
12      or mill building economic revitalization.
13      The General Assembly of the Commonwealth of Pennsylvania
14   hereby enacts as follows:
15      Section 1.    The definition of "tax credit" in section 1701-
16   A.1 of the act of March 4, 1971 (P.L.6, No.2), known as the Tax
17   Reform Code of 1971, is amended to read:
18   Section 1701-A.1.    Definitions.
19      The following words and phrases when used in this article
20   shall have the meanings given to them in this section unless the
21   context clearly indicates otherwise:
22      * * *
 1      "Tax credit."      A tax credit authorized under any of the
 2   following:
 3             (1)    Article XVII-B.
 4             (2)    Article XVII-D.
 5             (3)    Article XVII-E.
 6             (4)    Article XVII-G.
 7             (5)    Article XVII-H.
 8             (6)    Article XVII-I.
 9             (7)    Article XVII-J.
10             (8)    Article XVII-K.
11             (8.1)    Article XVII-L.
12             (8.2)    Article XVII-M.
13             (9)    Article XVIII.
14             (10)    Article XVIII-B.
15             (11)    Article XVIII-D.
16             (12)    Article XVIII-E.
17             (13)    Article XVIII-F.
18             (14)    Article XVIII-G.
19             (14.1)   Article XVIII-H.
20             (15)    Article XIX-A.
21             (15.1)   Article XIX-C.
22             (16)    Article XIX-E.
23             (16.1)   Article XIX-F.
24             (17)    Section 2010.
25             (19)    Article XX-B of the act of March 10, 1949 (P.L.30,
26      No.14), known as the Public School Code of 1949.
27             (20)    The act of December 1, 2004 (P.L.1750, No.226),
28      known as the First Class Cities Economic Development District
29      Act.
30             (21)    12 Pa.C.S. Ch. 34 (relating to Infrastructure and

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 1      Facilities Improvement Program).
 2            (22)   Any other program established by a law of this
 3      Commonwealth in which a person applies for and receives a
 4      credit against a tax. This paragraph shall not apply to a
 5      credit against a tax liability as a result of an overpayment.
 6      * * *
 7      Section 2.     The act is amended by adding an article to read:
 8                                ARTICLE XVII-M
 9                           FACTORY OR MILL BUILDING
10                           ECONOMIC REVITALIZATION
11   Section 1701-M.     Definitions.
12      The following words and phrases when used in this article
13   shall have the meanings given to them in this section unless the
14   context clearly indicates otherwise:
15      "Building."     A factory or mill complex that:
16            (1)    was constructed prior to January 1, 1973;
17            (2)    has at least one floor, excluding a basement;
18            (3)    has been, is or will be used primarily for
19      manufacturing, processing, wholesale trade and other
20      commercial purposes and may be adaptively reused for
21      residential, commercial, cultural, institutional or
22      industrial uses or any combination thereof;
23            (4)    is proposed for substantial rehabilitation;
24            (5)    has been at a minimum 75% vacant for a minimum of 24
25      months at the time of submission of a request under section
26      1702-M by the municipality in which the factory or mill
27      complex is located;
28            (6)    is designated by the municipality for consideration
29      as a program-eligible building as provided in this article;
30      and

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 1          (7)   meets any other requirement established by the
 2      department.
 3      "Building owner."   An individual, partnership, corporation,
 4   limited liability company or other entity which is the owner of
 5   record of a program-eligible building and may include one or
 6   more successors in title to the owner of the building at the
 7   time the building received written notice of final designation
 8   as a program-eligible building in accordance with section 1703-
 9   M. The term includes the owner of a leasehold interest with a
10   minimum term of 30 years, with respect to which a memorandum of
11   lease has been recorded in the office of the recorder of deeds
12   of the county.
13      "Department."   The Department of Community and Economic
14   Development of the Commonwealth.
15      "Factory or mill complex."    One or more factory or mill
16   buildings, located on the same or contiguous parcels of land,
17   each of which, at one time, had the same owner or owners.
18      "Program-eligible building."     A building with respect to
19   which the department has issued a written notice of final
20   designation as a program-eligible building in accordance with
21   section 1703-M.
22      "Qualified tax liability."    Tax liability imposed on a
23   taxpayer under Article III, IV, VII, VIII, IX, XI or XV,
24   excluding any tax withheld by an employer under Article III.
25      "Rehabilitation and reconstruction costs."     As follows:
26          (1)   Amounts incurred and paid by a building owner, after
27      issuance of the notice of final designation of the building
28      as a program-eligible building, which are solely and
29      exclusively for the rehabilitation of the program-eligible
30      building. The term includes amounts incurred and paid to

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 1      acquire tangible personal property and structural components
 2      of the program-eligible building which:
 3                (i)    are depreciated under 26 U.S.C. § 167 (relating
 4          to depreciation);
 5                (ii)    have a useful life of at least three years as
 6          evidenced by the tax depreciation method taken and shown
 7          on the Federal tax return of the building owner; and
 8                (iii)    are acquired by purchase as defined in 26
 9          U.S.C. § 179(d) (relating to election to expense certain
10          depreciable business assets).
11          (2)   The term does not include amounts incurred or paid
12      with respect to tangible personal property and structural
13      components of a program-eligible building which the building
14      owner leases from any other person or corporation. For
15      purposes of this paragraph, a contract or agreement to lease
16      or rent or for a license to use property shall be considered
17      a lease unless the contract or agreement is treated for
18      Federal income tax purposes of the building owner as an
19      installment purchase rather than a lease.
20      "Secretary."      The Secretary of Community and Economic
21   Development of the Commonwealth.
22      "Substantial rehabilitation."         Rehabilitation and
23   reconstruction costs of a program-eligible building that are:
24          (1)   incurred during the time period for project
25      completion specified by the building owner on the building
26      owner's application for a tax credit certificate and approved
27      by the department under section 1704-M; and
28          (2)   in a dollar amount that equals or exceeds 20% of the
29      appraised market value of the program-eligible building prior
30      to reconstruction or rehabilitation, which are determined by

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 1      a Commonwealth licensed and certified appraiser who is
 2      independent of the building owner or owners and their
 3      affiliated corporations and any tenants of the program-
 4      eligible building and their affiliated corporations. For
 5      purposes of determining whether a program-eligible building
 6      has been substantially rehabilitated, the market value of the
 7      program-eligible building shall be determined at the
 8      beginning of the day on which the department issued notice of
 9      final designation of the program-eligible building.
10      "Tax credit."     A tax credit issued under this article.
11      "Taxpayer."     A person subject to tax under Article III, IV,
12   VII, VIII, IX, XI or XV. The term includes a pass-through
13   entity.
14   Section 1702-M.     Building designation process.
15      (a)    Request by municipality.--Beginning 18 months after the
16   effective date of this section, a municipality may submit to the
17   department a list of buildings located within the municipality
18   that the municipality requests the department to consider for
19   designation as program-eligible buildings. The request must
20   include a statement by the municipality attesting that, within
21   six months of preliminary designation of one or more of the
22   listed buildings as program-eligible buildings, the municipality
23   agrees to:
24             (1)   expedite the building permit review process required
25      in the municipality for the rehabilitation of the program-
26      eligible buildings;
27             (2)   provide design standards in the municipality which
28      encourage historic preservation of the program-eligible
29      buildings and that conform to rehabilitation design standards
30      developed and recommended by the Pennsylvania Historical and

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 1      Museum Commission and the United States Secretary of the
 2      Interior's Standards for the Treatment of Historic
 3      Properties; and
 4            (3)   require the review and approval by the Pennsylvania
 5      Historical and Museum Commission be obtained for the
 6      rehabilitation of any program-eligible building in the
 7      municipality.
 8      (b)   Preliminary designation.--Within 60 days of receipt of a
 9   request from a municipality under subsection (a), the department
10   shall notify the municipality in writing as to which buildings
11   have been approved for preliminary designation as program-
12   eligible buildings.
13      (c)   Treatment as separate building.--A portion of a building
14   may be treated as a separate building for purposes of this
15   article if:
16            (1)   it consists of a clearly identifiable part of a
17      building, including, without limitation, one or more wings,
18      stories or other separable portions of the building;
19            (2)   it is held by a single owner in fee or as a
20      condominium, cooperative or leasehold interest; and
21            (3)   at least one business reasonably could be operated
22      within the confines of the portion of the building.
23   Section 1703-M.     Notice of final designation of program-eligible
24                  building.
25      Upon compliance with section 1702-M(a), the department shall
26   provide to the municipality and to the building owner a written
27   notice of final designation as a program-eligible building for
28   each building that received preliminary designation under
29   section 1702-M(b). The notice of final designation shall include
30   a statement that an independent appraisal is required in order

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 1   to document substantial rehabilitation.
 2   Section 1704-M.       Tax credit for substantial rehabilitation.
 3      (a)   General rule.--A taxpayer that is a building owner may
 4   apply to the department for a tax credit certificate against the
 5   taxpayer's qualified tax liability.
 6      (b)   Eligible costs.--
 7            (1)   Upon approval of the taxpayer's application by the
 8      department, the taxpayer may claim a tax credit for the
 9      rehabilitation and reconstruction costs of a program-eligible
10      building which has been substantially rehabilitated.
11            (2)   Once substantial rehabilitation is established by
12      the taxpayer, the taxpayer may claim a tax credit for all
13      rehabilitation and reconstruction costs incurred with respect
14      to the program-eligible building within five years from the
15      date of final designation of the program-eligible building
16      under section 1703-M.
17      (c)   Amount.--
18            (1)   A taxpayer may receive a tax credit of up to 25% of
19      the rehabilitation and reconstruction costs of the program-
20      eligible building up to a maximum of $1,500,000.
21            (2)   The tax credit shall be allowable in the year the
22      substantially rehabilitated program-eligible building is
23      first placed into service, which is the earlier of:
24                  (i)    the year in which, under the taxpayer's
25            depreciation practice, depreciation begins with respect
26            to the property; or
27                  (ii)    the year in which the property is placed in a
28            condition or state of readiness and availability for its
29            specifically assigned function.
30      (d)   Carry forward.--Amounts of unused tax credit may be

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 1   carried over and offset against the taxpayer's qualified tax
 2   liability for a period not to exceed the following seven taxable
 3   years.
 4   Section 1705-M.    (Reserved).
 5   Section 1706-M.    (Reserved).
 6   Section 1707-M.    Revocation of eligibility.
 7      The department may revoke the designation of a building as a
 8   program-eligible building under section 1703-M for noncompliance
 9   with this article.
10   Section 1708-M.    Tax credit certificates.
11      (a)   Application.--
12            (1)   A taxpayer may apply to the department for a tax
13      credit certificate under section 1704-M. The application
14      shall be on a form established by the department.
15            (2)   The application shall specify a time period during
16      which the rehabilitation and reconstruction occurred with
17      respect to the program-eligible building.
18      (b)   Issuance of certificate.--
19            (1)   The department shall review an application received
20      under section 1704-M and shall determine whether the
21      application meets the requirements established under this
22      article and any related guidelines or regulations.
23            (2)   If the department determines that an application
24      meets the requirements, the department shall issue a tax
25      credit certificate in the amount specified under section
26      1704-M.
27            (3)   Tax credit certificate applications shall be
28      approved on a first-come, first-served basis.
29      (c)   Carry back, refund, sale and assignment of tax credit.--
30   A taxpayer may not carry back, obtain a refund of, sell or

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 1   assign an unused tax credit granted under this article.
 2      (d)    Limitation.--
 3             (1)   The total aggregate amount of tax credits approved
 4      under this article shall not exceed $15,000,000 in a fiscal
 5      year.
 6             (2)   In granting tax credit certificates under this
 7      article, the department may not grant more than $15,000,000
 8      in tax credit certificates in any fiscal year exclusive of
 9      any tax credit certificates not awarded or returned from
10      previous fiscal years.
11   Section 1709-M.     Claiming the tax credit.
12      Upon presentation by a taxpayer of a tax credit certificate
13   to the Department of Revenue, the taxpayer may claim a credit
14   against the qualified tax liability of the taxpayer.
15   Section 1710-M.     Penalties.
16      (a)    Failure to maintain operations.--A building owner that
17   receives a tax credit and fails to substantially maintain
18   existing operations in the program-eligible building for which
19   the tax credit is claimed for a period of five years from the
20   date the tax credit is first allowable shall refund to the
21   Commonwealth the total amount of tax credit granted.
22      (b)    Waiver.--The department may waive the penalty in
23   subsection (a) if the department determines that the failure to
24   substantially maintain existing operations in the program-
25   eligible building occurred because of circumstances beyond the
26   building owner's control, including a natural disaster,
27   unforeseen industry trend or a loss of a major supplier or
28   market.
29   Section 1711-M.     Program administration.
30      The department shall establish guidelines as may be necessary

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 1   to administer this article, and shall post the guidelines on the
 2   department's publicly accessible Internet website. The
 3   guidelines shall include parameters for what constitutes
 4   substantially maintaining existing operations of a program-
 5   eligible building.
 6   Section 1712-M.        Report to General Assembly.
 7      (a)     Report.--
 8            (1)   No later than June 30, 2026, and September 1 of each
 9      year thereafter, the secretary shall submit a report to the
10      General Assembly containing the following:
11                  (i)    A summary of the effectiveness of the tax credit
12            provided by this article.
13                  (ii)    The names of all taxpayers utilizing the tax
14            credit under this article as of the date of the report.
15                  (iii)    The amount of tax credit approved for and
16            utilized by each taxpayer.
17                  (iv)    Any recommendation for changes in the
18            calculation or administration of the tax credit.
19            (2)   The report shall be submitted to the chairperson and
20      minority chairperson of the Appropriations Committee of the
21      Senate, the chairperson and minority chairperson of the
22      Appropriations Committee of the House of Representatives, the
23      chairperson and minority chairperson of the Finance Committee
24      of the Senate and the chairperson and minority chairperson of
25      the Finance Committee of the House of Representatives.
26      (b)     Public information.--Notwithstanding any law providing
27   for the confidentiality of tax records, the information in the
28   report shall be public information, and all report information
29   shall be posted on the department's publicly accessible internet
30   website.

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1      Section 3.   The addition of Article XVII-M of the act shall
2   apply to tax years beginning after December 31, 2025.
3      Section 4.   This act shall take effect immediately.




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