Section 155.28. Capital stock value methods—fixed formula

(a) Prior methods inapplicable. The capital stock value arrived at by application of the formula set forth in section 601(a) of the TRC (72 P. S. § 7601(a)) may not be affected by the valuation factors or methods set forth in § § 155.21—155.24 (relating to general; definitions; determinations of valuation factors; and valuation methods). This includes methods formerly applied to valuing first year companies (§ 155.24(c)(2)), last year companies (§ 155.24(c)(3)), companies with liquidations in progress (§ 155.24(c)(4)), valuations relating to cash sales of assets or outstanding shares (§ 155.24(c)(5)), valuations based on the sale of an asset (§ 155.24(c)(7)) or valuations based on a stock for stock exchange transaction (§ 155.24(c)(8)).

(b) Short taxable year. Tax due for a short taxable year shall be prorated as follows:

(1) First year companies. Tax due for a short taxable year resulting from the commencement of business activities within this Commonwealth during the taxable year shall be prorated either on the basis of proration of tax, or proration of the property factor, as required in this section. The payroll of sales factors may not be prorated.

(i) In the case of a corporation which has done business outside this Commonwealth for more than 1 year but has been subject to Commonwealth taxation for less than 1 year, the numerator of the property factor shall be prorated to reflect the portion of the year for which business was done in this Commonwealth. The tax due shall be prorated only where all three factors are 100% Commonwealth.

Example 1. A foreign corporation has operated outside of this Commonwealth for more than 1 year, but was only subject to Pennsylvania taxation for the last 90 days of the taxable year. The average value of real and tangible personal property in this Commonwealth is $80,000, and the average value of the property everywhere is $150,000. The numerator of the property factor would be $19,726 ($80,000 x 90/365 days.) The tax would not otherwise be prorated.

Example 2. If, in Example 1, all three apportionment factors were 100% Commonwealth, the property factor would not be prorated, but the tax would be prorated by multiplying the tax by a fraction, which is 90/365 days.

(ii) In the case of a corporation which has been doing business outside of this Commonwealth for the same period for which it has been subject to Commonwealth taxation, which is less than 1 year, the property factor is not prorated, but the tax due is prorated based on the portion of the year during which the corporation did business in and out of this Commonwealth.

(iii) In the case of a corporation which has done business outside of this Commonwealth for a period of less than 1 year and has been subject to Commonwealth taxation for a shorter period than it has done business outside of this Commonwealth, the property factor shall be prorated unless it reports 100% Commonwealth factors—in which case the property factor would not be prorated—and the tax would be prorated for the period of operation everywhere.

Example 1. A corporation did business outside of this Commonwealth commencing July 15, but did not become subject to Commonwealth taxation until October 1, and files on a calendar year basis. The numerator of the property factor would be prorated by multiplying it by a fraction, which is 92/170 days. The tax due would be prorated by multiplying the tax by a fraction, which is 170/365 days.

Example 2. If, in Example 1, the corporation was incorporated July 15 but did not transact business anywhere until October 1, the numerator of the property factor would not be prorated, but the tax would be prorated for the Commonwealth period only, by multiplying the tax by a fraction, which is 92/365 days.

Example 3. If the corporation in examples 1 and 2 reported 100% Commonwealth factors, the property factor would not be prorated but the tax would be prorated for the Commonwealth period only, by multiplying the tax by a fraction, which is 92/365 days.

(2) Last year companies.

(i) In the case of a corporation ceasing business activities everywhere, tax due shall be prorated on a per day basis.

Example. The taxpayer, a domestic corporation which files on a calendar year basis, is not entitled to apportionment and has no exempt assets. Its capital stock value for the calendar year 1985 was $20,000. Taxpayer made its final distribution on August 31, 1985. Its tax, at the rate of 10 mills, would be $133.15, computed as follows:

$20,000 at 10 mills = $200

$200 x 243/365 days = $133.15

(ii) In the case of a corporation withdrawing from this Commonwealth but continuing to do business elsewhere, the numerator of the property factor shall be prorated.

(c) Minimum Capital Stock and Foreign Franchise Tax. The minimum tax due is $75 which will be prorated if the corporation does not have a full tax year in this Commonwealth. See section 7602 of the TRC (72 P. S. § 7602). This subsection applies to corporations which file reports with the Department, with the exception of family farm corporations. See § 155.29 (relating to minimum tax).

The provisions of this § 155.28 adopted January 16, 1987, effective January 17, 1987, 17 Pa.B. 273.

Notation

Authority

The provisions of this § 155.28 issued under section 408 of the Tax Reform Code of 1971 (72 P. S. § 7408).

Cross References

This section cited in 61 Pa. Code § 155.21 (relating to general).