Section 8502 - Imposition; report and payment of tax; exemptions(a) Every institution shall annually, by April 15 of each year beginning in the year 1984, make a report to the Department of Revenue, setting forth the entire amount of taxable net income received or accrued by said institution from all sources during the preceding year, and such other information as the department may require, and upon such taxable net income the said institution shall pay into the State Treasury, through the Department of Revenue, for the use of the Commonwealth, a State excise tax at the rate of eleven and one-half per cent for the calendar years 1983, 1984, 1985 and 1986 and fiscal years beginning in 1983, 1984, 1985 and 1986, at the rate of twenty per cent for calendar years 1987, 1988, 1989 and 1990 and fiscal years beginning in 1987,1988, 1989 and 1990 and at the rate of twelve and one-half per cent for calendar year 1991 and fiscal years beginning in 1991 and at the rate of eleven and one-half per cent for calendar year 1992 and each calendar year thereafter and fiscal years beginning in 1992 and each fiscal year thereafter upon such annual taxable net income, for the privilege of doing business in the Commonwealth. Every institution shall be required to make payment of estimated tax pursuant to the provisions of sections 3003.2, 3003.3 and 3003.4 of Article XXX for taxable years beginning after December 31, 1991. For taxable years beginning before January 1, 1992, every institution shall be required to make payment of tentative tax pursuant to the provisions of Article XXX. The remaining portion of the tax due shall be paid at the time the report prescribed herein is required to be made.(b) If, however, any such institution closes its fiscal year, not upon December 31 but upon some other date, the tax shall be imposed upon such taxable net income received or accrued during its fiscal year beginning in the year 1983 and during each fiscal year thereafter, and the annual report of taxable net income received or accrued during each fiscal year shall be made, and the remaining tax due thereon shall be paid within one hundred five days after the close of such fiscal year. Each such institution shall be required to make payment of estimated tax pursuant to the provisions of sections 3003.2, 3003.3 and 3003.4 of Article XXX for taxable years beginning after December 31, 1991. For taxable years beginning before January 1, 1992, every institution shall be required to make payment of tentative tax pursuant to the provision of Article XXX.(c) Net income or net loss shall be determined in accordance with generally accepted accounting principles, except that:(1) Net income or net loss shall be determined on a separate company unconsolidated basis, using cost in lieu of equity accounting for investments in a subsidiary.(2) The accounting method may be on a cash, combined cash and accrual, or accrual basis, depending on the method of bookkeeping employed by the institution.(3) In the case of a business combination entered into after December 31, 1986, which is treated as a reorganization for purposes of section 368 of the Internal Revenue Code of 1986 , or a similar successor provision, and accounted for under the purchase accounting method, net income or net loss shall be determined as though the acquisition had been accounted for under the pooling of interest method.(4) Net income or net loss shall exclude amounts credited or paid as interest to holders of accounts or depositors or as dividends to shareholders, except that no deduction shall be permitted for dividends paid by an institution having capital stock to its stockholders with regard to their stock.(5) Net income or net loss shall exclude income or loss derived from obligations of the United States which, by Federal law, are exempt from local and state taxation and from obligations of the Commonwealth which, by Pennsylvania law, are exempt from taxation by the Commonwealth. For purposes of this article, United States obligations shall be obligations coming within the scope of 31 U.S.C. § 3124, and Commonwealth obligations shall be obligations of the Commonwealth, any public authority, commission, board or other agency created by the Commonwealth, any political subdivision of the Commonwealth or any public authority created by such political subdivision which, by Pennsylvania law, are exempt from taxation by the Commonwealth.(6) No deduction shall be allowed for that portion of the institution's interest expense which is allocable to tax-exempt income derived from United States obligations and Commonwealth obligations. An institution's interest expense shall include amounts credited or paid as interest to holders of accounts or depositors or as dividends to shareholders except dividends paid by an institution having capital stock to its shareholders with regard to their stock. For purposes of this clause, the portion of the institution's interest expense which is allocable to tax-exempt income derived from United States obligations and Commonwealth obligations is an amount which bears the same ratio to such interest expense as the institution's interest income from United States obligations and Commonwealth obligations bears to the total interest income of the institution.(d)(1) In determining taxable net income, there shall be allowed a net loss carryover deduction as provided by this subsection.(2) The net loss carryover deduction for a taxable year shall be that amount which is the sum of any net losses for the preceding three taxable years, beginning with the earliest year, to the extent that any such net loss has not previously been allowed as a deduction in a prior taxable year, except that the deduction shall not exceed the amount of the net income for the current year determined after apportionment.(3) A net loss for a preceding taxable year shall be an amount determined as a negative amount for the year in accordance with subsection (c), after any apportionment applicable to the preceding year, except that, for taxable years beginning before 1987, any net loss shall be determined without regard to clause (6) of subsection (c).(e) Institutions subject to the provisions of this article shall be exempt from all other corporate taxes imposed by the Commonwealth for State purposes. Such institutions, any shares of stock in such institutions and the property of such institutions shall be exempt from all local taxation imposed by political subdivisions of this Commonwealth under the authority of the laws of this Commonwealth, except taxes on real estate or transfers thereof.(e.1) In the case of a change in ownership by purchase, liquidation, acquisition of stock or reorganization of an institution in the manner described in section 381 or 382 of the Internal Revenue Code of 1954, as amended, certain limitations provided in the Internal Revenue Code with respect to net operating losses shall apply for the purpose of computing the portion of a net loss carryover recognized pursuant to this article. The applicable limitations shall include all those limitations imposed solely on account of a change in ownership, including, but not limited to, sections 269, 318 (insofar as it defines the scope of section 382), 381 and 382. The carryover of tax losses shall not be limited by the Federal consolidated return regulations or section 338, providing for the deemed termination of corporate existence upon the making of certain elections for Federal income tax purposes. When any acquiring institution or a transferor institution participated in the filing of consolidated returns to the Federal Government, the entitlement of the acquiring institution to the Pennsylvania net loss carryover of the acquiring institution or the transferor institution will be determined as if separate returns to the Federal Government had been filed prior to the change in ownership by purchase, liquidation, acquisition of stock or reorganization.(f) If any institution shall neglect or refuse to make any report required by this article, such institution shall be liable to a penalty of five thousand dollars ($5,000), which shall be assessed in the same manner as the tax imposed by this article is assessed.1971, March 4, P.L. 6, No. 2, art. XV, § 1502, added 1983, Dec. 1, P.L. 228, No. 66, § 7, imd. effective. Amended 1983, Dec. 23, P.L. 360, No. 89, § 4, imd. effective; 1985, July 1, P.L. 78, No. 29, § 11, imd. effective; 1987, July 13, P.L. 325, No. 59, § 4, imd. effective; 1988, Oct. 14, P.L. 737, No. 106, § 3, imd. effective; 1989, July 1, P.L. 95, No. 21, § 9, imd. effective; 2006, Oct. 18, P.L. 1149, No. 119, § 26, imd. effective.