Section 9932-C - Personal income tax(a) General rule.--A person shall be allowed an exemption for: (1) Net income from the operation of a qualified business received by a resident or nonresident of a strategic development area attributable to business activity conducted within a strategic development area, determined in accordance with section 2935-C, except that any business that operates both within and outside this Commonwealth, before computing its strategic development area exemption, shall first determine its Pennsylvania activity over its activity everywhere by applying the three-factor apportionment formula as set forth in Department of Revenue personal income tax regulations applicable to income apportionment in connection with a business, trade or profession carried on both within and outside this Commonwealth.(2) All of the following:(i) Net gains or income, less net losses, derived by a resident or nonresident of a strategic development area from the sale, exchange or other disposition of real or tangible personal property located in a strategic development area as determined in accordance with accepted accounting principles and practices. The exemption provided in this subparagraph shall not apply to the sale, exchange or other disposition of any stock of goods, merchandise or inventory or any operational assets unless the transfer is in connection with the sale, exchange or other disposition of all of the assets in complete liquidation of a qualified business located in a strategic development area. This subparagraph shall apply to intangible personal property employed in a trade, profession or business in a strategic development area by a qualified business but only when transferred in connection with a sale, exchange or other disposition of all of the assets in complete liquidation of the qualified business in the strategic development area.(ii) Net gains, less net losses, realized by a resident of a strategic development area from the sale, exchange or disposition of intangible personal property or obligations issued on or after February 1, 1994, by the Commonwealth, a public authority, commission, board or other Commonwealth agency, political subdivision or authority created by a political subdivision or by the Federal Government as determined in accordance with accepted accounting principles and practices.(iii) The exemption from income for gain or loss provided for in subparagraphs (i) and (ii) shall be prorated based on the following:(A) In the case of gains, less net losses, in subparagraph (i), the percentage of time, based on calendar days, the property located in a strategic development area was held by a resident or nonresident of the strategic development area during the time period the strategic development area was in effect in relation to the total time the property was held.(B) In the case of gains, less net losses, in subparagraph (ii), the percentage of time, based on calendar days, the property was held by the taxpayer while a resident of a strategic development area in relation to the total time the property was held.(3) Net gains or income derived from or in the form of rents received by a person, whether a resident or nonresident of a strategic development area, to the extent that income or loss from the rental of real or tangible personal property is allocable to a strategic development area. For purposes of calculating this exemption: (i) Net rents derived from real or tangible personal property located in a strategic development area are allocable to a strategic development area.(ii) If the tangible personal property was used both within and without the strategic development area during the taxable year, only the net income attributable to use in the strategic development area is exempt. The net rental income shall be multiplied by a fraction, the numerator of which is the number of days the property was used in the strategic development area and the denominator of which is the total days of use.(4) Dividends received during the time the person was a resident of a strategic development area.(5) Interest received during the time period the person was a resident of a strategic development area.(6) The part of the income or gains received by an estate or trust for its taxable year ending within or with the resident-beneficiary's taxable year which, under the governing instrument and applicable State law, is required to be distributed currently or is in fact paid or credited to the resident-beneficiary and which would have been exempt under this article if received by a resident-beneficiary directly.(b) Pass-through entities.--The exemptions provided for in subsection (a)(1), (2)(i) and (3) shall apply to all of the following: (1) The income or gain of a partnership or association. The partner or member shall be entitled to the exemptions under this section for the partner's or member's share, whether or not distributed, of the income or gain received by the partnership or association for its taxable year.(2) The income or gain of a Pennsylvania S corporation. The shareholder shall be entitled to the exemptions under this section for the shareholder's pro rata share, whether or not distributed, of the income or gain received by the corporation for its taxable year ending within or with the shareholder's taxable year.(c) Limitation.-- A partnership, association, Subchapter S corporation, resident or nonresident may not apply an exemption from income under this article for any class of income against any other classes of income or gain. A partnership, association, Subchapter S corporation, resident or nonresident may not carry back or carry forward any exemption under this article from year to year. The credit allowed under this section shall not exceed the tax liability of the taxpayer under Article III for the tax year.(d) Section not applicable to certain entities.-- Any portion of net income or gain that is attributable to operation of a railroad, truck, bus or airline company, pipeline or natural gas company, water transportation company or entity which would qualify as a regulated investment company under Article IV or would qualify as a holding company under Article VI shall not be used to calculate an exemption under this section. This subsection shall not apply to the exemption from tax provided in subsection (a)(4).1971, March 4, P.L. 6, No. 2, art. XXIX-C, §2932-C, added 2006, Nov. 20, P.L. 1385, No. 151, § 2, imd. effective.