CT-1 PA CORPORATION TAX INSTRUCTIONS 2014

Transcription

1 BUREAU OF CORPORATION TAXES PO BOX HARRISBURG PA CT-1 PA CORPORATION TAX INSTRUCTIONS 2014 FOR CALENDAR YEAR 2014 AND FISCAL YEARS BEGINNING IN 2014 PLEASE CAREFULLY REVIEW HIGHLIGHTS BEFORE COMPLETING ANY TAX REPORTS OR SCHEDULES. HIGHLIGHTS 1. New: The penaty imposed for faiure to fie reports when due is now a minimum of $500, regardess of the determined tax iabiity, pus an additiona 1 percent of any determined tax iabiity over $25, IMPORTANT: Taxpayers granted an extension to fie the federa income tax return wi automaticay be granted an extension to fie the PA Corporate Tax Report, RCT-101. Corporate taxpayers granted a federa extension must indicate this on Page 1 of RCT-101 and incude a copy of the federa extension request with the report. 3. New: Act 52 of 2013 increased the imitation of the net oss deduction from the greater of 20 percent of PA taxabe income or $3 miion to the greater of 25 percent of PA taxabe income or $4 miion. 4. The PA Corporate Tax Report, RCT-101, is no onger year specific. This form must be used for a corporate tax reports fied on or after Jan. 1, 2012, regardess of tax year. 5. The Amended PA Corporate Tax Report, RCT-101X, has been discontinued. Beginning Jan. 1, 2012, taxpayers fiing amended reports must use RCT-101 and indicate the report is an amended report by checking the Amended Report box on Page 1. See Page 8 of the instructions for detais. 6. New: Loans tax has been repeaed for tax periods beginning on or after Jan. 1, Do not compete Section D. 7. Revenue ID: A corporation s Revenue ID is a new, unique, 10-digit number assigned by the department to a taxpayer, separate from any federay issued identification number(s) or Pennsyvania icense number(s). As the department continues to transition into an integrated tax system, a 10-digit Revenue ID wi be assigned and communicated to each taxpayer. A corporation s seven-digit PA Tax Account ID wi continue to be accepted by the department on tax forms and schedues, but upon assignment of a 10-digit Revenue ID to a taxpayer, the department wi begin using the 10-digit Revenue ID on outbound correspondence in ieu of referencing the seven-digit Tax Account ID. 8. Corporations participating in a consoidated federa tax fiing must provide consoidating income statements and baance sheets to the department, incuding separate company schedues and a eiminations. 9. Business income wi be apportioned to Pennsyvania by use of the saes factor ony. This does not affect the apportionment formua used for capita stock/foreign franchise tax. 10. The timeframe for reporting changes in federa taxabe income is increased from 30 days to six months. This appies to tax years beginning on or after Jan. 1, The eectronic funds transfer requirement was reduced from $10,000 to $1,000; a payments of $1,000 or more made after Dec. 31, 2013, must be made eectronicay 12. The PA corporate tax report and schedues are avaiabe on the PA Department of Revenue website at Schedues are indexed by form number. The form numbers for supporting schedues begin with REV. These numbers can be found on Page 3 of the instructions. IMPORTANT - Use the department s website to stay up-to-date on tax aw changes, tax rates and specia instructions regarding form changes. Estimated payments and requests for extension of time to fie shoud be made onine. Visit the e-services Center at A third party preparers who prepared 11 or more PA corporate tax reports in the prior caendar year are required to eectronicay fie a PA corporate tax reports in subsequent years. Once a third-party preparer is subject to this fiing mandate, the thirdparty preparer sha continue to be subject to the mandate regardess of how many PA corporate tax reports he prepares during a caendar year. Reports requiring a specia cacuation of tax iabiity cannot be eectronicay fied. These reports must be fied in paper form with a compete expanation of the fiing. See Page iii (Specia Handing) for the maiing address. Page 1 of RCT-101 contains a check box abeed E-Fie Opt Out. This box is used to indicate that the taxpayer has instructed the preparer to not fie the report eectronicay. A ist of software vendors approved for eectronic fiing of the PA corporate tax report can be found by visiting the e-services Center at For information on refunds and transfers of overpayment, see Page 10. Tax rates for years beginning in Capita Stock/Foreign Franchise Tax.67 mis.45 mis Corporate Net Income Tax 9.99 % 9.99 % REV-1200 CT (08-14)

2 What must be incuded with the PA Corporate Tax Report..1 Assemby of the Corporate Tax Report RCT Federa S Corporations Inactive Corporations Copy of Federa Form 1120 or 1120S Confirmation of Deposits on Account for a Non-Fied Year..5 Where to Fie/Pay Eectronic Payment Requirement Due Date of Report and Payment Fiing Requirements Out of Existence/Withdrawa LINE BY LINE INSTRUCTIONS FOR THE PA CORPORATE TAX REPORT RCT-101 RCT-101-PAGE 1 STEP A Tax Period STEP B Check Specia Fiing Status STEP C Name, Address, Business Activity Code & Revenue ID STEP D Tax Summary STEP E Payment Due/Overpayment STEP F Transfer/Refund Methods STEP G Signature RCT-101-PAGE 2 SECTION A: CAPITAL STOCK/FOREIGN FRANCHISE TAX Investment in LLC Hoding Company Famiy Farm Average Book Income Net Worth Capita Stock Vaue/Taxabe Vaue/Tax Cacuation.11 RCT-101-PAGE 3 SECTION B Schedue A Schedue A Schedue C Schedue X PA Schedues L, M-1 and M RCT Schedue C Schedue OA, Schedue OD PAGE Apportionment of Taxabe Income Specia Apportionment Fractions Rairoad, Truck, Bus or Airine Companies...19 Pipeine or Natura Gas Companies Water Transportation Companies Operating on High Seas Water Transportation Companies Operating on Inand Waters Apportionment of Capita Stock/ Foreign Franchise Tax Three-Factor Apportionment Property Factor TABLE OF CONTENTS GENERAL INSTRUCTIONS PAGE SPECIFIC INSTRUCTIONS PAGE SUPPLEMENTAL SCHEDULES PAGE i PAGE Reinstatement Recording Doar Amounts Fiing Period Extension of Time to Fie Penaties Interest Transfers/Refunds of Corporate Taxes Assignment of Tax Credit (Overpayment) Department Notices Amended Reports/Reports of Change Changes In Federa Taxabe Income PAGE SECTION C: CORPORATE NET INCOME TAX Business Trust Soicitation Ony LLC PA-S Taxabe Buit-in Gains Deductions from and Additions to Income Apportionment and Aocation Net Operating Loss Deduction Determination of Tax RCT-101-PAGE 4 SECTION D: LOANS TAX SCHEDULE A-1: APPORTIONMENT SCHEDULE FOR CAPITAL STOCK/FOREIGN FRANCHISE TAX SCHEDULE C-1: APPORTIONMENT SCHEDULE FOR CORPORATE NET INCOME TAX RCT-101-PAGES 5 and 6 SECTION E: CORPORATE STATUS CHANGES SECTION F: GENERAL INFORMATION QUESTIONNAIRE..14 Paid Preparer s Maiing Address APPORTIONMENT, EXEMPTIONS AND ALLOCATION PAGE Schedue DA, Schedue REV Instament Saes REV REV RCT-101D Schedue C Schedue C Schedue AR, REV PAGE Payro Factor Saes Factor Apportionment & Investments in Unincorporated Entities Caiming Exemptions to Capita Stock/ Foreign Franchise Tax Exemptions to Capita Stock Tax Constitutiona Exemptions Statutory Exemptions Hoding Companies Famiy Farm Nonbusiness Income MISCELLANEOUS PAGE PAGE Reguated Investment Companies Restricted Credits

3 CONTACT NUMBERS ESTIMATED PAYMENTS PATAXES ( ) GENERAL BUSINESS TAX QUESTIONS EXTENSION TO FILE ANNUAL REPORT TRANSFER/REFUND OF OVERPAYMENTS E-FILED REPORTS TAX CREDITS CONTACT NUMBERS KEYSTONE OPPORTUNITY ZONE CREDIT EDUCATIONAL IMPROVEMENT/OPPORTUNITY SCHOLARSHIP TAX CREDIT or NEIGHBORHOOD ASSISTANCE CREDIT or EMPLOYMENT INCENTIVE PAYMENT CREDIT JOBS CREATION TAX CREDIT or PENNSYLVANIA RESEARCH & DEVELOPMENT TAX CREDIT ORGAN AND BONE MARROW DONOR ACT FORMS ORDERING SERVICE To obtain tax bookets, singe copies of PA corporation tax forms, coupons or brochures, use one of these services: Internet: To-Free Phone Services PATAXES ( ) Touch-tone service is required for this automated 24-hour to-free ine. Ca to order forms or check the status of a corporate tax account. Automated 24-hour Forms Ordering Message Service Serves taxpayers without touch-tone phone service. Services for Taxpayers with Specia Hearing and/or Speaking Needs (TTY ony) Written Requests: PA DEPARTMENT OF REVENUE TAX FORMS SERVICE UNIT 711 GIBSON BLVD. HARRISBURG PA Onine Customer Service Center Find the answer to your question using the department s Onine Customer Service Center at Pennsyvania Tax Update Stay up-to-date on Department of Revenue news with the PA Tax Update, a free, bi-monthy e-newsetter. Visit to sign up for a PA Tax Update e-aert. ii

4 MAILING ADDRESSES RCT-101-PA CORPORATE TAX REPORT, RCT-101-I-INACTIVE PA CORPORATE TAX REPORT, RCT-101D-DECLARATION OF DE MINIMIS ACTIVITY, RCT-128C-REPORTS OF CHANGE IN CORPORATE NET INCOME TAX If you are incuding payment, pease use the foowing address: PA DEPT OF REVENUE PAYMENT ENCLOSED PO BOX HARRISBURG PA If you are requesting a refund or transfer of credit, pease use the foowing address: PA DEPT OF REVENUE REFUND REQUESTED PO BOX HARRISBURG PA If you are neither incuding payment nor requesting a refund or transfer of credit, pease use the foowing address: PA DEPT OF REVENUE NO PAYMENT, NO REFUND PO BOX HARRISBURG PA REV-857-ESTIMATED TAX PAYMENTS BUREAU OF CORPORATION TAXES PO BOX HARRISBURG PA SPECIAL HANDLING PA DEPT OF REVENUE BUREAU OF CORPORATION TAXES P O BOX HARRISBURG PA REV-854-EIN/FILING PERIOD/ADDRESS CHANGE BUREAU OF CORPORATION TAXES PO BOX HARRISBURG PA REV-976-ELECTION NOT TO BE TAXED AS A PENNSYLVANIA S CORPORATION BUREAU OF CORPORATION TAXES PA S UNIT PO BOX HARRISBURG PA PA-20S/PA-65, PA S CORPORATION/ PARTNERSHIP INFORMATION RETURN PA DEPARTMENT OF REVENUE BUREAU OF INDIVIDUAL TAXES PO BOX HARRISBURG PA REV-853-ANNUAL EXTENSION BUREAU OF CORPORATION TAXES PO BOX HARRISBURG PA REV-1605-SCHEDULE CO-NAME OF CORPORATE OFFICERS BUREAU OF CORPORATION TAXES PO BOX HARRISBURG PA OVERNIGHT MAILING PA DEPARTMENT OF REVENUE BUREAU OF IMAGING AND DOCUMENT MANAGEMENT 1854 BROOKWOOD ST HARRISBURG, PA ADDRESSES NOTICE OF ADJUSTMENT LETTER If you beieve the adjustments are in error, pease contact the department via emai at: [email protected] iii

5 NEW FOR 2014 Act 52 of 2013 increased the imitation of the net oss deduction from the greater of 20 percent of PA taxabe income or $3 miion to the greater of 25 percent of PA taxabe income or $4 miion. The penaty imposed for faiure to fie reports when due is now a minimum of $500, regardess of the determined tax iabiity, pus an additiona 1 percent of any determined tax iabiity over $25,000. Act 52 of 2013 estabished the foowing criteria for determining if receipts from other than the sae of tangibe persona property are sourced to PA: Saes from the sae, ease, renta or other use of rea property, if the rea property is ocated in this state. If a singe parce of rea property is ocated both inside and outside this state, the sae is in this state based upon the percentage of origina cost of the rea property ocated in this state. Saes from the renta, ease or icensing of tangibe persona property, if the customer first obtained possession of the tangibe persona property in this state. If the tangibe persona property is subsequenty taken out of this state, the taxpayer may use a reasonaby determined estimate of usage in this state to determine the extent of sae in this state. Saes from the sae of service, if the service is deivered to a ocation in this state. If the service is deivered both to a ocation inside and outside this state, the sae is in this state based upon the percentage of tota vaue of the service deivered to a ocation in this state. If the state or states of assignment cannot be determined for a customer who is an individua who is not a soe proprietor, a service is deemed to be deivered at the customer's biing address. If the state or states of assignment cannot be determined for a customer who is a soe proprietor, a service is deemed to be deivered at the ocation from which the services were ordered in the customer's reguar course of operations. If the ocation from which the services were ordered in the customer's reguar course of operations cannot be determined, a service is deemed to be deivered at the customer's biing address. Act 52 of 2013 estabished a specia apportionment for sateite teevision services providers. Loans tax has been repeaed for tax periods beginning after Dec 31, The eectronic funds transfer requirement was reduced from $10,000 to $1,000 for a payments made after Dec. 31, Corporations fiing a report for any of the conditions isted beow must fie a paper form, RCT-101. To ensure timey processing of the report, pease mai to the address beow. Exampes of reports having specia handing status: NOTE: This ist may not be a incusive. Corporations requesting Extra Statutory Treatment Corporations with two distinct activities (Warehousing/Trucking & Distribution Trucking); (Persons/Transportation & Property/Transportation) Reguated Investment Companies (RIC) Corporations having Net Operating Loss (NOL) imitations under IRC Section 381 and IRC Section 382 Corporations fiing any tax report for a tax year beginning prior to 2001 Maiing Address: PA DEPARTMENT OF REVENUE BUREAU OF CORPORATION TAXES P O BOX HARRISBURG, PA REMINDER If an amended report must be fied, taxpayers must compete the most current non-year specific RCT-101, competing a sections of the report. This incudes those sections originay fied and those sections being amended. The amended report check box under Step B, Page 1 of RCT-101 must be checked and REV-1175 must be incuded with the report. Use ONLY the most current non-year specific RCT-101 form for fiing ALL tax years. NEW FOR TAX YEARS BEGINNING ON OR AFTER JAN 1, 2015 Act 52 of 2013 requires the add-back of intangibe expenses to income for interest, royaties, patents, trademarks, etc., between affiiated companies in certain instances.

6 ATTENTION PENNSYLVANIA BUSINESSES: YOU MAY OWE USE TAX If you purchase items or services subject to saes tax for which the seer does not charge and coect saes tax on the invoice or receipt, you are personay responsibe for remitting the use tax directy to the PA Department of Revenue. Use tax is often due when saes tax was underpaid or not paid on purchases made over the internet, through to-free numbers (800, 888, 866 and 877), from mai order cataogs and from out-of-state ocations. Use tax aso appies to purchases of taxabe items and services in Pennsyvania when saes tax was not paid. The use tax rate is the same as the saes tax rate: 6 percent state, with an additiona 1 percent oca tax for items purchased or used in Aegheny County. Two percent oca tax appies to items purchased or used in Phiadephia. Businesses currenty registered for saes tax shoud report and remit use tax iabiities when fiing saes and use tax returns. Use tax iabiities can be reported on a PA-1 Use Tax Return. Use tax is due on or before the 20th day of the month after the month in which the purchase was made. The department can identify businesses that report minima use tax, and underreporting of use tax can trigger an audit by the department. For detaied information on use tax reporting responsibiities and options, visit UNAUTHORIZED INSURANCE Any individua or business purchasing insurance for coverage within Pennsyvania from insurance companies or agents not icensed to do business in Pennsyvania must fie an Unauthorized Gross Premiums Tax Report (RCT-122) within 30 days of each purchase or renewa. Such purchases are subject to a 2 percent premiums tax for ife insurance (the rate is appied against the premium), and 3 percent premiums tax for a other types. Any questions on the reporting and payment of unauthorized insurance gross premiums tax can be directed to BANK SHARE TAX Institutions, as defined in 72 P.S , doing business in this commonweath and having PA gross receipts in excess of $100,000, must fie a compete Bank Shares Tax Report, RCT-132B, for tax years beginning on or after Jan. 1, Institutions which are corporations may aso be subject to capita stock/foreign franchise and corporate net income tax and have a corporate tax fiing requirement for tax years when their PA gross receipts are $100,000 or ess.

7 When fiing a PA Corporate Tax Report, RCT-101, a corporate taxpayers are required to attach forms and schedues to support the cacuation of the tax iabiity. The type of information required depends on how the entity reports income to the IRS. The foowing chart ists the forms and schedues the taxpayer must incude with the RCT-101 each year. This ist is not meant to be a-incusive. Expanation of forms appears on Pages IMPORTANT: Taxpayers fiing amended PA corporate tax reports must incude Schedue AR, REV-1175, in addition to the isted items. Corporation Business Trust WHAT MUST BE INCLUDED WITH THE PA CORPORATE TAX REPORT IF TAXPAYER IS ORGANIZED AS Limited Liabiity Company or Any other entity eecting to fie as a corporation under federa Check the Box rues TAXPAYER FILES WITH THE IRS Federa Form 1120, Federa Form 1120C, Federa Form 1120S, (Taxpayer eected to not be taxed as a Pennsyvania S Corporation) Federa Form 1120F, or Any other Corporate Income Tax Return TAXPAYER MUST PROVIDE THE FOLLOWING WITH RCT Compete copy of federa income tax return, on separate company basis, with a supporting schedues. Corporations participating in a consoidated federa income tax fiing must provide consoidating income statements and baance sheets to the department, incuding separate company schedues and a eiminations. 2. Competed federa Schedues L, M-1 & M-2 regardess of federa requirements.* 3. Consoidated baance sheet (Corporation owns more than 50 percent of another corporation). See Page 11 of these instructions. 4. RCT-103 to support net operating oss carry-forward, if appicabe. 5. Schedue C-5 Schedue of Taxes. 6. Schedue OA, Other Additions, and Schedue OD, Other Deductions, if appicabe. 7. RCT-106 to support apportionment factors, if appicabe. 8. RCT-102 or RCT-105 to support the manufacturing exemption, if appicabe. 9. Schedue C-2 to support the dividend deduction, if appicabe. 10. Schedues C-3 and C-4 to support adjustments for bonus depreciation, if appicabe. 11. Schedue X, if appicabe. 12. Other supporting statements if necessary, with references to supporting statements on the appicabe form. 13. Schedue A-2 Reconciiation of Retained Earnings of a Federa Subchapter S Corporation, if appicabe. 14. Schedue A-3 Adjustment to Net Income per Books, if appicabe. 15. REV-934 Schedue of Non-Business Income, if appicabe. 16. REV-986 Schedue to Support Caim of Exemption From Corporate Net Income Tax Under P.L , if appicabe. Corporation Business Trust Limited Liabiity Company or Any other entity eecting to fie as a corporation under federa Check the Box rues Business Trust or Limited Liabiity Company Business Trust or Limited Liabiity Company (Singe-Member) Federa Form 1120S Federa Form 1065 Disregarded Entity: Income reported on Persona Income Tax Return of the Singe Member 1. Compete copy of federa income tax return, on separate company basis, with a supporting schedues. Corporations participating in a consoidated federa income tax fiing must provide consoidating income statements and baance sheets to the department, incuding separate company schedues and a eiminations. 2. Competed federa Schedues L, M-1 & M-2, regardess of federa requirements.* 3. RCT-102 or RCT-105 to support the manufacturing exemption, if appicabe. 4. RCT-106 to support apportionment factors, if appicabe. 5. Schedue X, if appicabe. 6. Other supporting statements if necessary, with references to supporting statements on the appicabe form. 7. Must separatey fie the PA-20S/PA-65 with the Pass-Through Business Office at the address noted in the instructions. 8. Schedue A-2 Reconciiation of Retained Earnings of a Federa Subchapter S Corporation, if appicabe. 9. Schedue A-3 Adjustment to Net Income per Books, if appicabe. 1. Compete copy of federa Form 1065 on a separate company basis with a supporting schedues. 2. Competed federa Schedues L, M-1 & M-2 regardess of federa requirements.* 3. RCT-106 to support apportionment factors, if appicabe. 4. RCT-102 or RCT-105 to support the manufacturing exemption, if appicabe. 5. Schedue X, if appicabe. 6. Other supporting statements if necessary, with references to supporting statements on the appicabe form. 7. Must separatey fie the PA-20S/PA-65 with the Pass Through Business Office at the address noted in the instructions. 8. Schedue A-3 Adjustment to Net Income per Books, if appicabe. 1. PA Schedue L Baance Sheets for the Beginning and End of the Tax Period. 2. PA Schedue M-1, Reconciiation of Income (Loss) per Books to Income (Loss) per Return. 3. PA Schedue M-2, Reconciiation of Member s Capita Account. 4. Federa Schedue C, E or F of federa Form Schedue X. 6. RCT-106 to support apportionment factors, if appicabe. 7. RCT-102 or RCT-105 to support the manufacturing exemption, if appicabe. 8. Schedue A-3 Adjustments to Net Income per Books, if appicabe. 9. Other supporting statements if necessary, with references to supporting statements on the appicabe form. *Taxpayers required to fie federa Schedue M-3 may submit such in ieu of federa Schedue M-1. Page 1

8 IF TAXPAYER IS ORGANIZED AS TAXPAYER FILES WITH THE IRS TAXPAYER MUST PROVIDE THE FOLLOWING WITH RCT-101 Business Trust or Limited Liabiity Company (Singe-Member) Disregarded Entity: Income reported on federa return of another business entity 1. Proforma federa tax return.* 2. Competed federa Schedues L, M-1 & M-2 regardess of federa requirements. 3. RCT-106 to support apportionment factors, if appicabe. 4. RCT-102 or RCT-105 to support the manufacturing exemption, if appicabe. 5. Schedue of Net Income per Books if different than Line 1 of federa Schedue M-1, if appicabe. 6. Schedue X, if appicabe. 7. Other supporting statements if necessary, with references to supporting statements on the appicabe form. 8. Schedue A-2 Reconciiation of Retained Earnings of a Federa Subchapter S Corporation, if appicabe. 9. Schedue A-3 Adjustment to Net Income per Books, if appicabe. *If the singe member of the LLC or business trust is a corporation for federa income tax purposes, the LLC or business trust sha attach a pro forma separate company federa Form 1120 or 1120S. If the singe member of the LLC is a partnership for federa income tax purposes, the LLC sha attach a pro forma separate company federa Form In certain situations corporate taxpayers are aso required to provide additiona information when fiing RCT-101. Exampes of these are as foows. IF THE CORPORATE TAXPAYER IS A non-pa Corporation, with activity outside of PA in prior years, fiing a PA Corporate Tax Report for the first time. Caiming a Manufacturing, Processing or Research and Deveopment Exemption. Apportioning income for the first time. Fiing the fina PA Corporate Tax Report. Apportioning income or Capita Stock Vaue, or caiming a Manufacturing, Processing, or Research and Deveopment Exemption, and has an investment in passthrough entities. See Pages 19, 20 and 21 for detais. Caiming the Keystone Opportunity Zone/Keystone Opportunity Expansion Zone or Strategic Deveopment Area Credit. Caiming an Empoyment Incentive Payment Credit. TAXPAYER MUST ALSO PROVIDE A five-year history of earnings. (If the corporation has not been in existence for five years, a schedue of the Net Income per Books for a tax periods since incorporation must be provided). 1. A detaied description of activity from raw materias to finished product (i.e., company or product brochures in first year). 2. A schedue reporting the end-of-month baance of interest generating accounts (singe-factor manufacturing exemption ony). A copy of a tax return from another state. A compete Schedue DA - Disposition of Assets Schedue (REV-861). A compete copy of federa Form 1065 for the investee partnership. If the investee partnership provided the corporate taxpayer with Schedue H-Corp of the PA 20S/PA-65, the corporate taxpayer shoud submit a copy of this schedue, aong with federa Schedue-K, in ieu of the federa Form 1065 for the investee partnership. 1. A competed RCT-101 KOZ, showing the cacuation of the credit. 2. A copy of the Keystone Opportunity Zone approva etter issued by the Department of Community and Economic Deveopment for the current year. Schedue W Certifications for New Empoyees. Page 2

9 WHEN IS A FORM OR SCHEDULE REQUIRED? FORM USED FOR REQUIRED WHEN CORPORATE TAXPAYER RCT-106, Page 1 RCT-106, Page 2 RCT-102 RCT-105 RCT-103 Schedue C-2 REV-798 Schedue C-3 REV-799 Schedue C-4 REV-799 Schedue C-5 REV-860 Schedue OA REV-860 Schedue OD REV-860 REV-860 PA Schedue L PA Schedue M-1 PA Schedue M-2 Schedue X REV-798 Schedue A-2 REV-961 Schedue A-3 REV-961 REV-934 REV-986 Schedue AR REV-1175 Cacuating Proportion of Taxabe Assets Support of Three-Factor Apportionment or Specia Apportionment Support of Singe-Factor Manufacturing Exemption Support of Three-Factor Manufacturing Exemption Support of Net Operating Loss Deduction Support of Dividend Deduction Bonus Depreciation Adjustment Adjustment for Sae of Sec. 168(k) Property Schedue of Tax Expense Other Additions Other Deductions Beginning and Ending Baance Sheets Reconciiation of Income (Loss) per Books to Income (Loss) per Return Reconciiation of Member's Capita Account Parent and Subsidiary Corporations Reconciiation of Beginning and Ending Retained Earnings reported on Schedue L of federa Form 1120S Adjustments to Net Income per Books Schedue of Non-Business Income Schedue to Support Caim of Exemption From Corporate Net Income Tax Under P.L Schedue to Provide Reason for Fiing an Amended Report and Summary of Change in Tax Liabiity for Amended Report Is caiming exemption for the foowing assets when cacuating capita stock foreign/franchise tax: 1. Rea and tangibe persona property ocated outside PA 2. Stock of corporations incorporated under the aws of PA 3. Net worth of corporation of which the taxpayer owns more than 50 percent interest 4. U.S. Government Securities 5. PA Municipa Securities 6. Investment in the stock of a Nationa Bank or Student Loan Assets Has taxabe activity in at east one other state and is apportioning income to the other state based on property, payro and saes. RCT-106 is aso required by taxpayers who are required to utiize specia apportionment methods (revenue mies, etc.). Quaifies for the manufacturing exemption and either eects to use the singe-factor manufacturing exemption or does not quaify for the three-factor manufacturing exemption. Ony appies to capita stock/foreign franchise tax. Has taxabe activity in at east one other state and quaifies for the manufacturing exemption. Ony appies to capita stock/foreign franchise tax. Is deducting a net operating oss carry-forward in the cacuation of corporate net income tax. Is caiming a Dividend Received Deduction in the cacuation of corporate net income tax. Is caiming a deduction to recover disaowed federa bonus depreciation in the cacuation of corporate net income tax. Is caiming a deduction to recover remaining federa bonus depreciation in the cacuation of corporate net income tax in the year an asset is sod. Is subject to corporate net income tax and reports taxes paid as an expense on the federa income tax return. Is reporting an "Other Addition" on RCT-101, Section C, Line 3E. Is reporting an "Other Deduction" on RCT-101, Section C, Line 2D. Is a singe-member imited iabiity company. Income reported on persona income tax return of member. Has more than 50 percent of its stock owned by another corporation, individua or other business entity or owns more than 50 percent of another corporation. Is fiing federa Form 1120S and the change in the retained earnings pus distributions of a federa subchapter S corporation is different than the net income per books of the corporation. Is adjusting the net income per books reported on federa Schedue M-1 or federa Schedue M-3, to arrive at the net income per books reported on RCT-101. Is caiming non-business income. Is a non-pa corporation caiming to be exempt from corporate net income tax under P.L Is amending a PA Corporate Tax Report. Page 3

10 ASSEMBLY OF THE COMPLETED PA CORPORATE TAX REPORT RCT-101 PACKAGE Assembe the competed PA Corporate Tax Report in the foowing order. Faiure to submit a propery competed and signed report may resut in the imposition of ate fiing penaties and/or estimated assessments. 1. RCT-101 PA Corporate Tax Report Pages 1 through 6 competed and assembed in order. 2. RCT-103, Net Operating Loss Schedue, if appicabe. 3. Federa Form 7004, if appicabe 4. Pennsyvania Extension Approva Letter, if appicabe 5. Pennsyvania schedues and forms, as required and in the foowing order: Schedue AR (REV-1175) - If fiing an amended PA Corporate Tax Report. Schedue C-2, PA Dividend Deduction Schedue (REV-798) Schedue X, (REV-798) Schedue C-3, Adjustment for Bonus Depreciation (REV-799) Schedue C-4, Adjustment for Disposition of Section 168(k) Property & Recapture of Depreciation on Listed Property (REV-799) Schedue A-2, (REV-961) Schedue A-3, Adjustments to Net Income per Books (REV -961) PA Schedue L, Baance Sheets for Singe-Member Limited Liabiity Companies when the Income is Reporting of the Persona Income Tax Return of the Member; PA Schedue M-1, Reconciiation of Income (Loss) per Books to Income (Loss) per Return; PA Schedue M-2, Reconciiation of Member s Capita Account (REV-860) Schedue C-5 - Schedue of Taxes; Schedue OA - Other Additions; Schedue OD - Other Deductions (REV-860) RCT-106, Insert Sheet RCT-102, Singe-Factor Manufacturing Exemption RCT-105, Three-Factor Manufacturing Exemption Schedue of Nonbusiness Income (REV-934) Schedue to Support Caim of Exemption From Corporate Net Income Tax (REV-986) 6. A other documentation to support the RCT-101 PA Corporate Tax Report 7. Compete federa tax return and supporting schedues, as required: Federa Form 1120 Federa Form 1120S Federa Form 1120C Federa Form 1120F Federa Form 1065 Schedue C, E or F of federa Form Consoidating schedues, when appicabe Page 4

11 PENNSYLVANIA CORPORATE TAX REPORT INSTRUCTIONS FOR FORM RCT-101 GENERAL INSTRUCTIONS FEDERAL S CORPORATIONS Effective with tax years beginning on or after Jan. 1, 2006, any corporation with a vaid federa subchapter S corporation eection is considered a Pennsyvania S corporation. Any federa subchapter S corporation that does not desire to be a Pennsyvania S corporation must fie the Eection Not to be Taxed as a Pennsyvania S Corporation (REV-976) on or before the due date or extended due date of the report for the first year in which the eection is to be in effect. This eection must be signed by a of the sharehoders and once made cannot be revoked for five years. The competed REV-976 shoud be maied to the foowing address: BUREAU OF CORPORATION TAXES PA S UNIT PO BOX HARRISBURG PA To revoke an eection, the corporation must send a etter signed by sharehoders hoding more than one-haf of the shares of stock of the corporation on the day on which the revocation is made. This etter must contain the name of the corporation, federa EIN, Revenue ID number and the effective date of the revocation. If no effective date is provided, the revocation wi be effective for the first tax period for which the revocation was timey submitted. In the case of a corporation with quaified subchapter S subsidiaries, the etter must aso incude the names and Revenue ID numbers of a quaified subchapter S subsidiaries doing business in Pennsyvania. Quaified subchapter S subsidiaries may not be Pennsyvania S corporations, or eect not to be Pennsyvania S corporations, separate from the parent corporation. Federa subchapter S corporations doing business in Pennsyvania that do not make this eection are required to fie both RCT-101 and PA-20S/PA-65, and the sharehoders of these corporations must report the income from these corporations on their PA persona income tax returns. IMPORTANT: This eection must be fied by a federa subchapter S corporations that do not want to be taxed as Pennsyvania S corporations, regardess of any prior actions taken by a corporation on this issue. If a corporation has eected to be taxed as an S corporation for federa tax purposes, but has eected not to be taxed as a PA S corporation, it must: (1) compete Section C of RCT-101, (2) attach a copy of federa Form 1120S to the PA Corporate Tax Report, and (3) attach a schedue refecting adjustments to Line 21 of federa Form 1120S for the pass-through items on Schedue K (Sharehoders Share of Income, Credits, Deductions, etc.). These adjustments shoud produce taxabe income simiar to that for a C corporation and must be reported in Section C, Line (1) of the RCT-101. INACTIVE CORPORATIONS Inactive corporations must compete and fie form RCT-101-I. Ony skeeton corporations - those performing no business activity and owning no assets anywhere - may use the RCT-101-I. Corporations that have business activity outside Pennsyvania must compete and fie the PA Corporate Tax Report, RCT-101. A copy of federa Form 1120 must be attached and apportionment fractions must be reported. IMPORTANT: Prior period forms are not acceptabe. Do not use forms for other years when fiing a PA Corporate Tax Report, RCT-101, or an Inactive PA Corporate Tax Report, RCT-101I. COPY OF FEDERAL FORM 1120 OR 1120S IMPORTANT: A copy of the federa income tax return - Form 1120, 1120C, 1120S, 1065, 990 or other appicabe federa form must be attached to the PA Corporate Tax Report. This is in addition to any requirement to suppy a copy of the federa tax return with any other fiing. An LLC that is a disregarded entity must attach a pro forma federa return. If the singe member of the LLC is a corporation for federa income tax purposes, the LLC sha attach a pro forma separate company federa Form If the singe member of the LLC is a partnership for federa income tax purposes, the LLC sha attach a pro forma separate company federa Form If the singe member of the LLC is an individua the LLC sha attach a copy of Schedue C, E or F of federa Form 1040 aong with PA Schedues L, M-1 and M-2 (REV-860) and Schedue X (REV-798). Pennsyvania does not aow consoidated fiing of corporate tax reports. A corporation fiing a consoidated return to the federa government must incude the foowing: 1. Separate company income statement refecting taxabe income that woud have been returned to and ascertained by the federa government, if a separate return had been made to the federa government. 2. Separate company baance sheet refecting financia position of the taxpayer at the beginning and end of the taxabe period, if separate return had been made to the federa government. A corporation with subsidiaries aso must incude a consoidated baance sheet. 3. Schedues refected on the federa Form 1120 or 1120S on a separate company basis, incuding a schedue of taxes expensed. 4. Corporations participating in a consoidated federa income tax fiing must provide consoidating income statements and baance sheets to the department, incuding separate company schedues and a eiminations. IMPORTANT: Faiure to submit a propery competed and signed report may resut in the imposition of ate fiing penaties and/or estimated assessments. CONFIRMATION OF DEPOSITS ON ACCOUNT FOR A NON-FILED TAX YEAR. Prior to fiing a corporation tax report, taxpayers can confirm the tota amount of deposits on account by caing PATAXES ( ). You wi be asked to enter your Revenue ID number and a specific tax year. Once confirmed, the system wi provide: 1. Tota deposits by tax type for a specific tax year; or 2. A detaied response for each cash deposit and credit by tax type for a specific tax year. (Note: restricted credits are NOT uniquey identified by name of program) The system wi provide detais on up to 20 transactions. WHERE TO FILE/PAY Submit PA Corporate Tax Reports (RCT-101, RCT-101I, RCT-101D, RCT- 128C) and payments using one of the foowing addresses. If you are incuding payment, pease use the foowing address: PA DEPT OF REVENUE PAYMENT ENCLOSED PO BOX HARRISBURG PA Page 5

12 If you are requesting a refund or transfer of credit, pease use the foowing address: PA DEPT OF REVENUE REFUND REQUESTED PO BOX HARRISBURG PA If you are neither incuding payment nor requesting a refund, pease use the foowing address: PA DEPT OF REVENUE NO PAYMENT, NO REFUND PO BOX HARRISBURG PA If the tota taxes owed are ess than $1,000, you may send a check, made payabe to the PA Dept. of Revenue, to the above address. If the tota taxes owed are $1,000 or more, you must pay eectronicay. ELECTRONIC PAYMENT REQUIREMENT The PA Departments of Treasury and Revenue have impemented programs that enabe taxpayers to pay certain taxes eectronicay. A payments of $1,000 or more made after Dec. 31, 2013 must be remitted eectronicay. Faiure to make a payment by an approved method may resut in the imposition of a 3 percent penaty of the tax due, up to $500. For information on eectronic fiing options, visit the e-services Center at DUE DATE OF REPORT AND PAYMENT The PA Corporate Tax Report (RCT-101) is due annuay on Apri 15 of the year foowing the year for which the report is submitted for a caendar year reporting corporation, or 30 days after the federa due date for corporations reporting to the federa government on a fisca year basis. Domestic Internationa Saes Companies (DISC) must fie on or before the 15th day of the 10th month foowing the cose of the fisca year. If the due date fas on a Saturday, Sunday or hoiday, the report is due the next business day. FILING REQUIREMENTS First reports of domestic corporations must begin with the date of incorporation. A domestic corporations are required to fie annua reports even if no business activity was conducted during the taxabe period. First reports of foreign corporations must begin with the beginning date of the fisca period in which the Certificate of Authority was issued or the date Pennsyvania activity began, whichever date is earier. IMPORTANT: A corporations are required to fie annua reports even if no business activity was conducted within the commonweath during the tax period. In genera, PA Corporate Tax Reports are due 30 days after the origina due date of the federa tax return. OUT-OF-EXISTENCE/WITHDRAWAL A PA corporation that has ceased doing business and competey or totay divested itsef of ALL assets, or a foreign corporation that has ceased to do business in Pennsyvania and iquidated ALL PA assets may be reieved of the responsibiity of fiing corporate tax reports by indicating Fina Report in Section E, Corporate Status Change, found on Page 5 of RCT-101. NOTE: Entities formed under the aws of the Commonweath of Pennsyvania must answer the questions under PA Corporations in this section. Entities formed under the aws of another jurisdiction are required to answer the questions under Foreign Corporations. By competing this section of RCT-101, a corporate taxpayer wishing to be removed from the active records of the PA Department of Revenue wi no onger be required to fie the Out of Existence/Withdrawa Affidavit. However, taxpayers desiring to dissove or formay withdraw with the Department of State are sti required to fie an Appication for Corporate Cearance (REV-181). To quaify for out-of-existence or withdrawn status, the corporation must: 1. Fie a corporate tax reports and pay a taxes due the commonweath up to and incuding the date of cessation of activities and divestiture of assets. Where capita assets have been sod prior to iquidation, compete in detai a schedue refecting the gain or oss reaized as a resut of the sae. 2. Incude with the corporate tax reports a Disposition of Assets, Schedue DA (REV-861) which must refect the date or dates of divestiture of a assets. Where a distribution of assets is made directy by the corporation to its sharehoders in return for their stock, attach to the Distribution of Assets a copy of federa Form 1099-DIV. IMPORTANT: Faiure to submit the Distribution of Assets coud deay the acceptance of the return as a fina report resuting in continued corporate tax reporting requirements. Corporate taxpayers reporting the disposition of PA rea estate must provide evidence that the transfer of tite has been fied with the Recorder of Deeds of the respective county. This information must be provided in order to be removed from the active records of the Bureau of Corporation Taxes. PA corporations that never transacted business or hed tite to assets, or foreign corporations that never transacted business in Pennsyvania, are required to fie annua tax reports unti they fie fina returns and quaify for out-of-existence or withdrawn status. Such inactive corporations shoud mai the executed Out-of- Existence/Withdrawa Affidavit (REV-238) directy to: PA DEPARTMENT OF REVENUE BUREAU OF COMPLIANCE PO BOX HARRISBURG PA REINSTATEMENT A corporation considered out-of-existence through the acceptance of an affidavit may reinstate with the PA Department of Revenue by confirming with the PA Department of State, that the corporation name is avaiabe for use by caing A corporation considered out-of-existence/withdrawn, must be reinstated on Department of Revenue records before its corporate franchise can again be utiized. This can be effected by fiing corporate tax reports from the date of out-of-existence status through the end of the ast caendar or fisca period of no activity. The minimum tax is waived for the years covered by these reports. Taxpayer s fiing RCT-101-I for this purpose must check the reinstatement box found in Step J, Corporate Status Changes, and enter the beginning date of the first tax period in which business resumed (effective date). IMPORTANT: Foreign corporations that conducted business outside of Pennsyvania whie out-of-existence with the PA Department of Revenue must provide a five-year history of earnings when competing the PA Corporate Tax Report for the first period the taxpayer resumed PA activity. RECORDING DOLLAR AMOUNTS A tax cacuations must be shown in whoe doar amounts. Any amount ess than 50 cents is eiminated, and any amount 50 cents or more is rounded up to the next doar. Negative amounts shoud be written as foows: -3,456. Page 6

13 FILING PERIOD Reports must be fied on the same fiing basis as reported to the federa government. Where a change in fiing period has occurred, the taxpayer must provide the new month, day and year by eectronicay fiing REV-854 using the e-services Center at Indicate a permanent change in fiing period on the RCT-101 (Page 1, Step B). EXTENSION OF TIME TO FILE A request for an extension of time to fie must be submitted on or before the due date of the PA Corporate Tax Report. Taxpayers granted an extension to fie the federa income tax return wi automaticay be granted an extension to fie PA Corporate Tax Report, RCT-101. Corporate taxpayers granted a federa extension must indicate this on Page 1 of RCT-101 and incude a copy of the federa extension request with the report. Corporations that do not request an extension to fie the federa income tax return may sti request a 60-day extension to fie the PA corporate tax report. To appy for an annua extension, compete the Annua Extension Request, REV-853, eectronicay using the e-services Center at After review by the PA Department of Revenue, you wi receive written notification as to whether your extension was approved or denied. You may aso use REV-853 to make an annua tax payment with the extension request. If the taxes tota more than $1,000, you must make the required payment by an eectronic payment method. (Refer to Page 6, Eectronic Payment Requirement.) PENALTIES IMPOSED FOR FAILURE TO FILE REPORTS WHEN DUE If a report is fied ate, the taxpayer shoud wait unti bied by the department to remit the penaty amount. Interest does not accrue on penaties. Do not incude penaty with tax amounts reported on form RCT-101. The penaty imposed for faiure to fie reports when due is now a minimum of $500, regardess of the determined tax iabiity, pus an additiona 1 percent of any determined tax iabiity over $25,000. INTEREST Interest is charged on ate payments received after the due date of a tax report. Taxpayers shoud not precacuate interest or incude interest with the tax amount reported on the RCT-101 (Step D, coumn A). The department wi forecast interest on unpaid tax baances and provide a notice to the taxpayer. Taxpayers may request a payoff of unpaid baances (that incudes interest on unpaid tax and coection agency fees, if appicabe) by contacting the Bureau of Corporation Taxes Accounting Division at TRANSFERS/REFUNDS OF CORPORATE TAXES After competing Step D on Page 1 of the RCT-101 Annua Report, if an overpayment exists taxpayers must instruct the department to either transfer any avaiabe credit to the next tax year or consider any avaiabe credit for refund. Taxpayers provide this instruction by seecting one of the options under Step F. If no option is seected, the department wi automaticay transfer any overpayment to the next tax year for estimated tax purposes after offsetting current period iabiities and other unpaid iabiities or commonweath obigations within the account. A tax period overpayment summary wi be maied to the taxpayer confirming the disposition of the credit. ASSIGNMENT OF TAX CREDIT (OVERPAYMENT) Department reguation (61 Pa. Code ) provides authorization for taxpayers to assign a credit to another taxpayer. To accompish the assignment, the Department of Revenue requires both assignor and assignee to compete REV-774, Assignment of Tax Credit. Ony credits that meet the foowing conditions can be assigned: A taxes (corporate, saes/use, empoyer withhoding, iquid fues, etc), interest, penaties, fees and additions to tax owed by the taxpayer (assignor) must be paid in fu. Restricted credits (credits originating from specia credit programs) may be sod or assigned. These credits incude the Research and Deveopment Tax Credit (R&D), Fim Production Tax Credit (FPT), Neighborhood Assistance Tax Credit (NAT), Resource Enhancement and Protection Tax Credit (REAP), Keystone Innovation Zone Tax Credit (KIZ) and Keystone Specia Deveopment Zone Credit (KSDZ). For information regarding the sae or assignment of R&D, KIZ, NAT, FPT and KSDZ credits, ca the Department of Community and Economic Deveopment at or visit For information regarding the sae or assignment of REAP tax credits, ca the State Conservation Commission at or visit Additiona information regarding the sae or assignment of tax credits can be obtained from Corporation Tax Buetin found on the Department of Revenue website at Ca the Bureau of Corporation Taxes Accounting Division at if you have questions regarding credit assignment or restricted credits imitations or to request the Rev-774 Assignment of Tax Credit Form. The form can aso be obtained at Send REV-774, in dupicate, directy to: PA DEPARTMENT OF REVENUE BUREAU OF CORPORATION TAXES ACCOUNTING DIVISION PO BOX HARRISBURG, PA DEPARTMENT NOTICES Notice of Adjustment This notice provides a copy of the changes if the department made one or more adjustment that resuted in a recacuation of tax. The accompanying worksheet detais the amounts originay reported and the adjustments made by the department. The notice aso provides instructions for amending if taxpayers beieve they submitted incorrect data on the origina report, and instructions of what taxpayers shoud do if they beieve the department s adjustments are in error. Biing Notice This notice identifies a specific tax type and tax period having unpaid baances(s) due the commonweath that resuted from a recent event that occurred on the taxpayer s account. These events incude fiing of a tax report, adjustments to tax, penaty and payments or a direct resut of account maintenance initiated by the department. Taxpayers have 30 days to remit payment or request credit offset prior to the department issuing an assessment. Assessment Notice This notice is provided to taxpayers as officia notification of an unpaid or underpaid baance due the commonweath. Baances incude tax, interest, penaty, other fees and forecasted interest. The eements of the notice are unique to a specific tax type and tax period. The date of the notice estabishes a ien with the commonweath and initiates the window to petition for reassessment. Taxpayers must fie petitions for reassessment on or before the due dates specified on notices. For additiona information visit the Board of Appeas website at Basis of Assessment Attached to every Assessment Notice is a Basis of Assessment, which expains the adjustments made by the department in the determination of the iabiity. This is in addition to other detaied worksheets that may have been prepared and provided to the taxpayer. Estimated Assessment Notice This notice identifies estimated iabiities that have been imposed for a specific tax type and tax period. Estimated iabiities are imposed for faiure to fie a compete corporate tax report. The assessment incudes tax, interest and penaties that represent a first ien upon the entity s franchise and property, both rea and persona. These iabiities are not subject to appea. To Page 7

14 resove the estimate, taxpayers must fie a compete corporate tax report. The Department of Revenue is required to remove estimated assessments 90 days foowing receipt of a compete tax report. Tax Period Overpayment Summary This notice confirms the disposition of a tax overpayment. Tax credits may deveop from the fiing of tax reports, adjustments to a tax iabiity by the Department of Revenue and the Department of the Auditor Genera, tax reief granted from various eves of appea or from account maintenance initiated by the department. Statement of Account This notice provides a summary of a taxpayer s account. Three categories of information are contained on the notice: Summary of Active (fied) tax periods Tax periods dispayed incude periods most recenty fied and those with open unpaid baances. Summary of Non-fied tax periods (incudes estimated tax and estimated prepayments) Tax periods dispayed incude the current non-fied tax period estimated prepayments and restricted credits. Summary of Restricted Credits This section incudes a summary of restricted tax credits avaiabe for future periods. Audit Assessment Notice This notice is provided to taxpayers as officia notification of an unpaid or underpaid baance due the commonweath as the resut of a fied audit. Baances incude tax, interest, penaty, other fees and forecasted interest. The eements of the notice are unique to a specific tax type and tax period. The date of the notice estabishes a ien with the commonweath and initiates the window to petition for reassessment. Taxpayers must fie petitions for reassessment on or before the due dates specified on notices. For additiona information visit the Board of Appeas website at AMENDED REPORTS Regardess of the tax year being amended, taxpayers must compete the most current non-year specific RCT-101, competing a sections of the report. This incudes those sections originay fied and those sections being amended. The amended report check box under Step B, Page 1 of RCT-101 must be checked and REV-1175 must be incuded with the report. Amended reports must be fied when requesting the Bureau of Corporation Taxes to adjust the capita stock/foreign franchise, oans or corporate net income taxes for a particuar year. Phone cas and/or etters submitted to the department are not acceptabe and wi not be considered an amended report. A taxpayer may fie an amended report anytime within three years of the fiing of the origina report. When fiing the amended report the taxpayer must consent to an assessment period of three years from the fiing of the origina report or one year from the fiing of the amended report, whichever expires ast. If you fai to provide such consent the department might not consider the amended report. This consent to extend the assessment period is incuded as part of the affirmation statement at the bottom of Page 1 of RCT-101. If, after reviewing the amended report, the department determines the tax iabiity refected on the taxpayer s PA corporate tax account is incorrect, an adjustment wi be made to the iabiity. The department wi then generate a credit for the amount of any overpayment, strike a or part of any previous assessment or issue an assessment for any additiona tax iabiity. An amended report shoud ony be fied if an origina PA Corporate Tax Report, RCT-101, was previousy fied for the same tax period. An amended report must contain documentation to support the adjustment(s). A amended RCT-101s must incude Schedue AR, REV-1175, which incudes a detaied expanation of the reason for fiing the amended report and a summary of the change to the tax iabiity. In competing the Summary of Tax Change, enter the type of tax (capita stock/foreign franchise, oans or corporate net income tax); the tax iabiity currenty refected on the taxpayer s account; the amended tax iabiity; and the amount of change in the tax. When fiing an amended RCT-101, the tax iabiity in Coumn A of Step D shoud refect the amended iabiity. Coumn B, Estimated Payments and Credits on Deposit, must refect the payments and credits on the account at the time the amended report is fied. Coumn C, Restricted Credits, must report the restricted credits the taxpayer is entited to based on the fiing of the amended report. Amended reports cannot be fied for the foowing: 1. Chaenging PA statute or reguations 2. Chaenging department poicy or interpretation of statutes or reguations 3. For the soe purpose of caiming the report is a fina report (REV- 238 or REV-181 shoud be fied instead) 4. To change or correct taxpayer information such as the Revenue ID or EIN 5. Changing the end of the tax year (A new origina report must be fied incuding an expanation why the origina tax year end was incorrect) See the foowing section concerning changes in federa taxabe income. IMPORTANT: The fiing of an amended PA corporate tax report does not repace the fiing of a petition, nor does it extend a corporate taxpayer s time to fie an appea. The department is not obigated to revise tax due the commonweath upon review of an amended report. Its faiure to revise tax due the commonweath is not an appeaabe action and wi not change any existing appea rights of the taxpayer. CHANGES IN FEDERAL TAXABLE INCOME/REPORTS OF CHANGE Changes in federa taxabe income must be reported to the department within the statutory period to report the change. This incudes changes in federa taxabe income resuting from the taxpayer fiing an amended federa income tax return and changes initiated by the federa government due to an audit or examination of the federa return. For tax years beginning prior to Jan. 1, 2013, changes in federa taxabe income must be reported to the department within 30 days of the change. This has been extended to six months for tax years beginning after Dec. 31, If a taxpayer fies an amended federa income tax return for a period for which the department issued an Officia Notice of Settement, the taxpayer must report the change on an amended PA corporate tax report. When competing an amended report, the taxpayer must indicate that the report is being fied due to the fiing of an amended federa income tax return and enter the date on Page 1 that the amended federa return was fied. If a taxpayer fies an amended federa return for a period for which the department did not issue an Officia Notice of Settement, the taxpayer must report the change on a Report of Change in Corporate Net Income Tax, RCT-128C. Changes to federa taxabe income initiated by the federa government as part of an audit or examination of the federa income tax return must be reported on RCT-128C, regardess of whether the PA corporate net income tax for that period was setted by the department. This ony appies to corporate net income tax. Page 8

15 SPECIFIC INSTRUCTIONS LINE BY LINE INSTRUCTIONS FOR THE PA CORPORATE TAX REPORT RCT-101 RCT PAGE 1. Indicate the type of return fied with the IRS. If the activity is incuded in the federa tax return of another company, either as part of a consoidated group or as a disregarded entity, indicate the type of return fied by the entity reporting the activity. If the taxpayer is a singe-member imited iabiity company and the member is an individua reporting the income on his/her persona income tax return, the 1040 Box shoud be checked. Step A Step B Step C TAX PERIOD (REQUIRED) Taxpayers must enter month, day and year (MM DD YYYY) for the tax period beginning and month, day and year (MM DD YYYY) for tax period ending. CHECK SPECIAL FILING STATUS Amended Report Check this box if the corporation is amending a PA corporate tax report previousy fied with the department. Federa Extension Granted Check this box if the corporation was granted an extension of time to fie its federa income tax return. A copy of the extension request must be incuded. Reguated Investment Company Check the bock if the corporation is a reguated investment company. See Page 25 for detais Week Fier Check the bock if the corporation is a week fier. Address Change Check the bock if the address reported in Step C is a change from prior tax periods. Be sure to fie REV-854 eectronicay using the e-services Center at Change Fed Group Check this box if the corporate taxpayer is fiing a PA Corporate Tax Report for ess than a fu year due to a change in federa consoidated group. This must be indicated on the ast report prior to the change. First Report Check the bock if this is the corporation s first PA corporate tax report fiing. KOZ/EIP/SDA Credit Check the bock if the corporate taxpayer is caiming the Keystone Opportunity Zone Credit, Empoyer Incentive Payment Credit or the Strategic Deveopment Area Credit. Fie Period Change Check the bock if the fiing period (tax period ending) is a permanent change. Be sure to fie REV-854 eectronicay using the e-services Center at This must be indicated on the first report fied with the new tax year end. NAME, ADDRESS, FEDERAL EIN, BUSINESS ACTIVITY CODE, REVENUE ID AND PARENT CORPORATION EIN. Print or type the corporation name, compete address, 10-digit Revenue ID and nine-digit Federa ID (EIN). The Revenue ID is a new, unique, 10-digit number assigned by the Department of Revenue to repace your seven-digit Tax Account ID number. You may continue to use your seven-digit number if you do not know your Revenue ID. You must provide one of these numbers on Page 1 of RCT-101. DO NOT LEAVE BLANK. Step D Step E IMPORTANT: If using your seven-digit Tax Account ID number, eft justify and do not use additiona zeros to fi the space. This is not the same number as the seven-digit Entity ID issued by the Department of State. Be sure to use ony address information for Address Line 1 and Address Line 2 on Page 1 of RCT-101 and a other tax forms. IMPORTANT: Do not incude individua s names on these ines. The six-digit Business Activity Code entered here is the same Business Activity Code reported to the IRS on the federa income tax return. Parent Corporation EIN Taxpayers that are incuded in a consoidated federa income tax return must provide the nine-digit EIN of the corporation that fies the consoidated federa income tax return. If you are not incuded in a consoidated federa return, eave bank. TAX SUMMARY Coumn A. Tax Liabiity from Tax Report. Carry tax iabiities from Pages 2, 3 and 4, Section A, C and D to Page 1: Line 18, Section A for capita stock/foreign franchise tax (on Page 2). Line 13, Section C for corporate net income tax (on Page 3). Loans Tax, Section D for oans tax (on Page 4). A tax cacuations must be shown in whoe doar amounts. Any amount ess than 50 cents is eiminated and any amount 50 cents or more is rounded up to the next doar. Do not carry a vaue ess than zero to Step D, Page 1, Coumn A. Add the individua tax iabiity amounts, and enter the sum on the Tota Line of Coumn A. Coumn B. Estimated Payments & Credits on Deposit. See Confirmation of Deposits on Account, Page 5. For each tax type, enter the tota of estimated payments and transfer credits appied to the current tax period. Coumn C. Restricted Credits For each tax type, enter the amount of restricted credit to be appied to the current tax year. Restricted credits may incude those originating from specia tax credit programs administered by various state agencies. See Page 23. PAYMENT DUE/OVERPAYMENT For each tax type, determine the tota payment due or overpayment by subtracting Coumn B and Coumn C from Coumn A. Negative amounts (identifying an overpayment) shoud be written as -1,000. If a net tota overpayment deveops, see instructions for competing Step F. Reminders: Payments due must be zero or greater; overpayments may be ess than zero. If the tota payment due with your RCT-101 is ess than $1,000, you may pay eectronicay or make a check payabe to the PA Department of Revenue. Page 9

16 Step F Use whoe doars ony. Attach the check to Page 1 of the RCT-101. If the tota payment due with your RCT-101 is $1,000 or more, you must make payment by an eectronic method. Refer to Page 6 for EFT requirements and options for submitting eectronic payments. TRANSFER/REFUND METHODS Transfer: Identify the amount to transfer from the current tax period overpayment to the next tax period for estimated tax purposes. Prior to any transfer, the department wi offset current period iabiities and other unpaid iabiities or commonweath obigations within the account. Refund: Identify the amount to refund from the current tax period overpayment. Prior to any refund, the department wi offset current period iabiities and other unpaid iabiities or commonweath obigations within the account. NOTE: If no option is seected, the department wi automaticay transfer any overpayment to the next tax year for estimated tax purposes after offsetting current period iabiities and other unpaid iabiities or commonweath obigations within the account. A tax period overpayment summary wi be maied to the taxpayer confirming the disposition of the credit. Step G SIGNATURE A corporate officer must sign the report. The signature must be origina; photocopies or faxes wi not be accepted. Aso provide teephone number, emai address and tite of the officer aong with the date signed. RCT-101 PAGE 2. SECTION A: CAPITAL STOCK/FOREIGN FRANCHISE TAX Investment in LLC If the corporation is not incorporated under the aws of the Commonweath of Pennsyvania and the corporation s ony activity in Pennsyvania is an investment in a imited iabiity company, check this bock. If this bock is checked, do not compete the remainder of Page 2. Attach schedue with the name, EIN and Revenue ID number of the LLC(s) in which the company has investments. Hoding Company Check the bock if the corporation is a quaified hoding company and is eecting to use the specia 10 percent apportionment for capita stock/foreign franchise tax. See Page 21 for detais. Taxpayers eecting the specia 10 percent hoding company apportionment shoud aso enter 1 on Line 4a of Schedue A-1 and 10 on Line 4b of Schedue A-1. Famiy Farm Check the bock if the corporation is a famiy farm and is not subject to the capita stock/foreign franchise tax. AVERAGE BOOK INCOME: History of Earnings: The history of earnings shoud incude a taxabe periods within the ast five years regardess of when PA activity commenced. Due to short tax periods, there may be more than five tax periods in the ast five years; however, the beginning of the odest tax period must not be more than five years prior to the end of the current tax period. IMPORTANT: First-year corporations must use the fractiona part of the year actuay in existence as the divisor. Enter the taxabe period s beginning and ending dates - month (MM), day (DD) and year (YYYY) - in the appropriate spaces. Enter the data for the first year on the first ine of the history of earnings. Continue entering the dates and book income (oss) of each taxabe period up through the immediate prior taxabe period. Losses shoud be indicated by signed fieds. Skip ines not required for competing the history of earnings. Line 1. Enter the dates and book income (oss) of the current tax period. The book income of imited iabiity companies (LLCs) and business trusts that are corporations or partnerships for federa income tax purposes is derived from their federa returns. In the case of a singe-member LLC or business trust disregarded for federa income tax purposes, whose member is a business entity, book income is derived from the pro-forma federa income tax return. If the singe member of the federa disregarded entity LLC or business trust is a natura person, the LLC is required to fie a copy of Schedue C or Schedue E of federa Form 1040 aong with PA Schedues L, M-1 and M-2 (REV-860) and Schedue X (REV-798). An LLC or business trust taxabe as a partnership for federa income tax purposes may adjust book income for distributions to members deemed materiay participating in the activities conducted by such LLC or business trust for purposes of Section 469 of the Interna Revenue Code of 1986 (Pubic Law , 26 U.S.C. 469). This provision was expanded to a LLCs and business trusts not cassified as corporations for federa income tax purposes, effective Jan. 1, In addition, singe-member LLCs and business trusts disregarded for federa income tax purposes and whose incomes are reported on persona income tax returns of individuas are entited to a deduction for any distributions to the natura person. For this purpose, distributions made to a member of a LLC or business trust within 30 days of the end of a given year may be treated as made in the preceding year. If net income per books is being adjusted for this item, the taxpayer is required to compete Schedue A-3, of REV-961. When cacuating the net income per books of a taxpayer with an investment in a LLC or business trust, the taxpayer must remove the income (oss) of this LLC or business trust from the net income per books reported on the federa income tax return and add to the net income per books any distributions received from the LLC during the year. Taxpayers making this adjustment must provide the foowing: 1. A copy of the federa Schedue K-1 issued by the LLC or business trust, if the LLC or business trust fies federa Form Beginning and ending baance sheets for the LLC or business trust and a reconciiation of the beginning and ending member s capita account, if the LLC or business trust is a disregarded entity. 3. A compete PA Schedue A-3 (REV-961). Other Book Income Issues Corporations iquidating under IRC Section 337 must incude the gains on sae of assets in book income in the history of earnings. Forgiveness of debt is incuded in book income. Line 2. Line 3. Add/subtract each book income (oss) entry, and enter the tota on Line 2. Enter in years (incuding fractiona part if necessary) the number of taxabe years in the corporation s history of earnings, carried three paces to the right of the decima point. a. If a corporation has existed for more than five fu years and there has been no change in its fiing period during this time, enter b. If a corporation has existed for ess than five years or if it has changed its fiing period, enter the number of fu years to the eft of the decima point. To the Page 10

17 right of the decima point, enter the resut of dividing the number of days in the short period by the number of days in the fu year. A taxabe periods faing competey within the ast five years must be incuded in the history of earnings. EXAMPLE: Assume BJM Corporation has a fisca year end of June 30 from 2009 through On Jan. 16, 2014, it is purchased by VMJ Corporation and changes to a caendar year-end. On Dec. 31, 2014, its five year history of earnings woud incude the foowing: BEGINNING ENDING Odest Period Year Year Year Year Current Tax Period Year The fisca year ending June 30, 2010, is excuded since it woud extend the history of earnings beyond five years. Since the history of earnings is 4.5 years in ength, 4 is paced to the eft of the decima point. The period extending beyond the four fu years is 184 days. Therefore, =.504, which is paced to the right of the decima point. The entry on Line 3 woud be Line 4. Divide the amount on Line 2 by the amount on Line 3. Line 5. Enter the amount on Line 4, but not ess than 0. Line 6. Capitaize the average book income by dividing Line 5 by EXAMPLE: If average book income on Line 5 is $ 100,000, Line 6 woud be $1,052,632 (100, = 1,052,632). See Page 26 for an exampe of the correct competion of the History of Earnings. NET WORTH: Line 7. Enter the end of the period net worth. To determine net worth, add capita stock, paid-in capita and retained earnings, and subtract treasury stock. A vaues are determined as of the end of the year. If negative, use negative numbers. The net worth for LLCs is the entity s assets minus its iabiities. A corporation with one or more subsidiaries must use consoidated net worth in computing its capita stock vaue and shoud attach a consoidated baance sheet that incudes a foreign and domestic subsidiaries. A taxpayers must incude beginning and ending baance sheets regardess of federa requirements. Line 8. Enter the beginning of the period net worth. See Line 7 above. If negative, use negative numbers. Line 9. Enter the amount on Line 7 uness: a. Line 7 is more than two times greater than Line 8 OR b. Line 7 is ess than one-haf of Line 8. If either (a) or (b) is true, add the end of the period net worth sum (Line 7) to the beginning of the period net worth sum (Line 8) and divide by 2. If either Line 7 or Line 8 is ess than 0, raise the vaue to 0 before averaging. Enter the amount on Line 9. Line 10. Enter the amount on Line 9 or 0, whichever is greater. Line 11. Mutipy Line 10 by CAPITAL STOCK VALUE: Line 12. Add Line 6 to Line 11. Line 13. Divide Line 12 by 2. Line 14. Enter the $160,000 vauation deduction on this ine. Line 15. The $160,000 vauation deduction (Line 14) is subtracted from Line 13 to determine capita stock vaue. On Line 15 enter this amount or 0, whichever is greater. TAXABLE VALUE AND TAX CALCULATIONS: Line 16. Enter the proportion from Schedue A-1, Line 5. See instructions for Schedue A-1, on Page 13. If there are no exempt assets and a business is conducted in Pennsyvania, make no entry on Line 16. Line 17. If Line 16 is bank, enter the amount from Line 15. If there is an entry on Line 16, mutipy Line 15 by the proportion on Line 16 to determine Line 17. If negative, enter 0. EXAMPLE: 1. Assume BJM, Inc. has a capita stock vaue of $200,000, has no exempt assets and is not eigibe to apportion. Line 16 woud be eft bank and $200,000 woud be entered on Line Assume VMJ, Inc. has a capita stock vaue of $200,000 with a 75 percent manufacturing exemption. Line 16 woud be and Line 17 woud be $50,000 ($200,000 x = $50,000). Line 18. Mutipy Line 17 by the tax rate appicabe for the current year, (See Page 24) and enter this amount on Line 18. Taxpayers fiing reports for short periods may prorate the tax based on the number of days in the tax year. TOTAL BEGINNING OF TAXABLE YEAR ASSETS TOTAL END OF TAXABLE YEAR ASSETS These amounts must equa the tota assets reported on the baance sheets submitted with the report. A corporate taxpayers are required to provide beginning and ending baance sheets on a separate company basis, regardess of IRS requirements. RCT-101 PAGE 3. SECTION B: This information is used by the Department of Revenue to hep cacuate the additiona depreciation deduction and must be competed if caiming this deduction. See instructions for Schedue C-3 and C-4 for additiona detais. See Page 26 for an exampe of the correct competion of this section. SECTION C: CORPORATE NET INCOME TAX A copy of federa Form 1120 or other appicabe form on a separate company basis (federa income tax return) must accompany the PA Corporate Tax Report (RCT-101). Business Trust Check the bock if the taxpayer is a business trust and fies as a partnership or disregarded entity for federa income tax purposes. Soicitation Ony Check the bock if the corporate taxpayer s activity in Pennsyvania is imited to activity protected under P.L REV-986 must be incuded. Page 11

18 LLC Singe-Member/Muti-Member - Check the appropriate bock if the corporate taxpayer is an LLC fiing as a partnership or a disregarded entity for federa income tax purposes. PA-S Check the bock if the corporate taxpayer is a federa subchapter S corporation that has not eected to not be taxed as a Pennsyvania S corporation, or a quaified subchapter S subsidiary whose parent has not made the eection to not be a Pennsyvania S corporation for the current year. Taxabe Buit-in Gains PA S corporations and QSSS are subject to PA corporate net income tax. Their taxabe income is their net recognized buit-in gains as determined for federa income tax purposes pursuant to IRC Section 1374(d) (2). To report taxabe buit-in gains, check the bock and compete Line 1 of Section C. IMPORTANT: If any of these bocks are checked, do not compete the remainder of Page 3 uness the corporate taxpayer is a PA S corporation with taxabe buit-in gains. DEDUCTIONS FROM AND ADDITIONS TO INCOME: Line 1. Income represents taxabe income as returned to and ascertained by the federa government before the net operating oss deduction and specia deductions. (Line 28 of federa Form 1120.) Line 2. a. Corporate dividends received. Dividends received from U.S. corporations are deductibe to the same extent as aowed to arrive at the federa dividend deduction as indicated on federa Schedue C, Coumn C. An additiona deduction wi be aowed for dividends received from foreign corporations and reported on Lines 13 and 14 of the federa Schedue C, pus a deduction wi be aowed for dividends received under Section 78 (foreign dividend gross-up) of the Interna Revenue Code of Taxpayers must compete Schedue C-2, PA Dividend Deduction Schedue. Specific instructions for Schedue C-2 are shown on Page 17 in this booket. b. Interest on U.S. Securities. Interest on U.S. securities is deductibe, but must be reduced by: Any interest on indebtedness incurred to carry the securities; Any expenses incurred in the production of such interest income; Any other expenses deducted on the federa income tax return that woud not have been aowed under Section 265 of the Interna Revenue Code of 1986, if the interest were exempt from federa income tax. However, interest from repurchase agreements is not considered interest from U.S. securities. Therefore, it is not deductibe. To cacuate the net U.S. interest deduction on Line (2b): Provide a detaied schedue showing the cacuation of net U.S. interest deduction and incude a isting of investments that generated the exempt interest income. Pennsyvania aows a pass-through exemption from corporate net income for interest or dividend income received from a reguated investment company to the extent such distribution or dividend is derived from obigations free from state taxation. Such obigations incude those issued by the U.S. Government; the Commonweath of Pennsyvania; any pubic authority, commission, board or other agency created by the commonweath; any poitica subdivision of the commonweath; or any pubic authority created by any such subdivision. To support any caim for a pass-through deduction for corporate net income tax purposes, the taxpayer must submit evidence that the income was received from a reguated investment company. A schedue must be submitted indicating the percentage of income appicabe to exempt obigations and the percentage of income appicabe to nonexempt obigations, incuding repurchase agreements, obigations of the Federa Nationa Mortgage Association, (Fannie Mae), the Government Nationa Mortgage Association (Ginnie Mae) and any other obigations that were not actuay issued by the U.S. Government. A income caimed to be exempt must be reduced by any expenses incurred in the production of such income and this information must be incuded to support a entries on Line 2b. c. This is the amount of additiona depreciation aowed under Act 89 of 2002 for IRC Section 168(k) property. See instructions for Schedue C-3 for additiona detais. d. Other aowabe deductions. As an exampe, certain charitabe contributions may be deductibe for a subsidiary corporation which has income on a separate company basis. Targeted jobs credit wages is another deductibe item. If issued prior to Feb. 4, 1994, net gains on the sae of U.S. or PA securities are deductibe. FICA tax obigation on empoyee tips, if taken as a credit for federa purposes, are aso deductibe. The 50 percent of trave and entertainment expense that is disaowed on the federa form is not permitted as a deduction for Pennsyvania purposes. A other deductions must be reported on PA Schedue OD, Other Deductions. Insert the sum of Lines 2a, 2b, 2c and 2d on Line 2, Tota Deductions. Line 3. a. Enter the tota amount of taxes imposed on or measured by net income and deducted on the attached copy of the federa tax return. A taxpayers reporting expenses for taxes on federa income tax returns must compete Schedue C-5, Schedue of Taxes, even if no taxes are imposed on or measured by net income. If a state s tax is based on the higher of a tax on net income or a tax on another item, such as gross receipts or net worth vaue, the taxpayer is required to add back the entire amount of the tax in periods where the iabiity is based on net income. If a state s tax is a combination of a tax on net income and a tax on another item, such as gross receipts or net worth, the income portion of the tax is added back. NOTE: The PA capita stock/foreign franchise tax is not a tax measured by net income. The portion of Phiadephia business tax measured by net income must be incuded. b. Enter the tota of the tax preference items as defined in Section 401 of the Tax Reform Code of 1971, to the extent that such preference items are not incuded in Taxabe Income as returned to and ascertained by the federa government. A copy of federa Form 4626 must be attached to the report even though the tax preference items do not exceed the appicabe federa deductions. The acceerated cost recovery deduction under Section 57(a)(12)(B) of the Interna Revenue Code (recovery property which is 15 year reaty) is a tax preference item. It shoud be incuded on this ine, but ony to the extent it is not incuded in taxabe income as returned to and ascertained by the federa government. Page 12

19 c. Empoyment incentive payment credit adjustment. In cacuating wages as a cost for tax purposes, empoyment incentive payment credits sha be deducted, reducing the wages cost item by any empoyment incentive payment credit taken by the corporation. Attach PA Schedue W to the RCT-101. d. This is the amount of bonus depreciation caimed by the corporate taxpayer under IRC Section 168(k) in the cacuation of federa taxabe income. See instructions for Schedue C-3 for additiona detais. e. Other additions-attach PA Schedue OA, Other Additions. Insert the sum of Lines 3a, 3b, 3c, 3d and 3e on Line 3, Tota Additions. Line 4. Line 1 minus Line 2 pus Line 3. If a business is transacted in Pennsyvania, skip Lines 5 through 9. Enter amount from Line 4 on Line 10. APPORTIONMENT AND ALLOCATION: A taxpayer must have income from business activities taxabe by Pennsyvania and at east one other state to aocate and apportion income. For purposes of aocation and apportionment of income, a taxpayer is taxabe in another state if, in that state, the corporation is subject to a net income tax, a franchise tax measured by net income, a franchise tax for the priviege of doing business or a corporate stock tax or if that state has jurisdiction to subject the taxpayer to a net income tax regardess of whether the state does or does not. Business income is income arising from transactions and activity in the reguar course of the taxpayer s trade or business and incudes income from tangibe and intangibe property if the acquisition, management or disposition of the property constitutes integra parts of the taxpayer s reguar trade or business operations. Business income incudes a income that is apportionabe under the U.S. Constitution. Nonbusiness income is a income other than business income. The Schedue of Nonbusiness Income (REV-934) must be competed by a taxpayers aocating nonbusiness income and apportioning business income. Refer to the Apportionment, Exemptions and Aocation portion of the booket for more detai. Line 5. Line 6. Line 7. Line 8. Line 9. Line 10. Enter the tota amount of nonbusiness income (oss) from Coumn C, REV-934. (Must be incuded with report) Enter the amount of income to be apportioned by adding the oss or subtracting the income refected on Line 5 to or from Line 4. Enter the apportionment percentage from Schedue C-1, Line 5. Enter the income apportioned to Pennsyvania by mutipying Line 6 by Line 7. Enter the tota amount of nonbusiness income (oss) aocated to Pennsyvania from Coumn A, REV-934. Add the income or deduct the oss refected on Line 9 to or from Line 8. If the entire business is transacted in Pennsyvania, enter the amount from Line 4 on Line 10. If a oss exists, add to RCT-103. NET OPERATING LOSS DEDUCTION Line 11. Net Operating Loss Deduction. Enter the tota of Coumn 3 from RCT-103. Compete RCT-103 incuded in this booket and attach the form to your RCT-101. See instructions for RCT-103, found on Page 16 for detais. Short periods are considered to be one tax year for purposes of computing the carryforward. DETERMINATION OF TAX Line 12. Line 13. PA Taxabe Income or Net Loss. Line 12 must equa Line 10 minus Line 11. Cacuate and enter the PA corporate net income tax by mutipying the amount refected on Line 12 by the current rate of 9.99 percent (0.0999). A taxes due shoud be shown in whoe doar amounts. RCT PAGE 4 SECTION D: LOANS TAX CORPORATE LOANS TAX INFORMATION New - Loans tax has been repeaed for tax periods beginning on or after Jan. 1, Do not compete Section D. SCHEDULE A-1 APPORTIONMENT SCHEDULE FOR CAPITAL STOCK/FOREIGN FRANCHISE TAX THREE-FACTOR Lines 1-3. Eigibe corporations eecting to use three-factor apportionment shoud compete these ines. Those caiming the manufacturing exemption shoud transfer the numerators and denominators for the property, payro and saes factors from RCT-105 to Schedue A-. Corporations not caiming the manufacturing exemption shoud obtain this information from RCT-106, Page 2. SINGLE-FACTOR Line 4. Corporations eecting to use the singe-factor taxabe assets proportion shoud compete this ine. Those caiming the manufacturing exemption shoud transfer the numerator and denominator from RCT-102 to Schedue A-1. Corporations not caiming the manufacturing exemption shoud obtain this information from RCT-106, Page 1. Foreign corporations eecting to use the singe-factor must cacuate the fraction exacty ike domestic corporations. See the instructions for Additiona Schedues for Apportionment of Franchise Tax. Line 5. For the apportionment proportion, enter either the three-factor or the singe-factor proportion, but do not combine the two methods. a. Three-factor apportionment: Add the decimas on Lines 1c, 2c and 3c, and divide by 3 if a three proportions appy. A factor is ignored if both the numerator and denominator are zero. Divide the sum by 2 if ony two of the proportions appy, or by 1 if ony one proportion appies. Enter the resuting decima on Line 5. Carry to six decima paces. OR b. Singe-factor proportion and specia apportionment: Divide Line 4a by 4b and enter the resut on Line 5. Carry to six decima paces. For corporations using specia apportionment, see Specia Apportionment Fractions Instructions section of these instructions. SCHEDULE C-1: APPORTIONMENT SCHEDULE FOR CORPORATE NET INCOME TAX For tax years beginning on or after Jan.1, 2013, income is apportioned by saes factor ony. Line 1A. Line 1B. Line 1D. Line 2A. Enter zero. Enter zero. Enter zero. Enter zero. Page 13

20 Line 2B. Line 2D. Enter zero. Enter zero. TABLE 3 (RCT-106) SALES FACTOR Amount for interest, rents and royaties shoud be added and refected on the appropriate ine of Tabe 3, Page 2 of the Insert Sheet (RCT-106). Gross saes price of assets sod excuding securities (not gains or osses) shoud be refected on the appropriate ine. A remaining income items shoud appear on the Other Income ine. Do not ist non-receipts such as discounts or receipts from saes of securities, uness a securities deaer. Line 3A. Enter the tota from RCT-106, Page 2, Tabe 3, Coumn A, Saes inside Pennsyvania. Line 3B. Enter the tota from RCT-106, Page 2, Tabe 3, Coumn B, Saes inside and outside Pennsyvania. Line 3D. Divide Line 3A by Line 3B, cacuate to six decima paces. IMPORTANT: Ony corporations required to use specia apportionment (such as rairoad, truck, bus, airine, pipeine, natura gas and water transportation companies - refer to instructions) shoud compete Line 4. Others shoud skip to Line 5. Line 4A. Enter PA revenue mies (or other specia factor). Line 4B. Enter tota revenue mies (or other specia factor). Line 5. For the apportionment proportion, enter either the saes factor apportionment or the specia apportionment, (Line 4A divided by Line 4B-carry to six decima paces) but do not combine the two methods. See Page 27 for exampes of the correct competion of this section. RCT PAGES 5 AND 6 SECTION E: CORPORATE STATUS CHANGES Corporate taxpayers that ceased a business activity (domestic corporations) or ceased business activity in Pennsyvania (foreign corporations) and disposed of a assets or Pennsyvania assets may be removed from the active records of the Bureau of Corporation Taxes by doing the foowing: 1. Indicate in this section that the current year report is the fina report by checking the box to the right of Fina Report. 2. Entities formed under the aws of the Commonweath of Pennsyvania must answer the questions under PA Corporations in this section. If a PA corporation ever transacted business anywhere, the date business activity ceased must be provided. If a PA corporation ever hed assets anywhere, it must provide the date of fina disposition of the assets. 3. Entities formed under the aws of another jurisdiction are required to answer the questions under Foreign Corporations. If a foreign corporation ever transacted business in Pennsyvania, the date Pennsyvania activity ceased must be provided. If a foreign corporation ever hed assets in the commonweath, it must discose the date a PA assets were disposed of or moved outside of Pennsyvania. Taxpayers who hed any assets during the year must compete Schedue DA, Disposition of Asset Schedue. If a taxpayer ses 51 percent or more of any cass of asset during the tax period, the taxpayer shoud check the box. This incudes any stock of goods, wares, merchandise of any kind, fixtures, machinery, equipment, buidings or rea estate. A taxpayer who ses 51 percent or more of any cass of asset is required to obtain a Buk Sae Certificate by competing an Appication for Corporate Cearance, REV-181, and fiing a PA Corporate Tax Report RCT-101, up to the date of the sae. Attach schedue if additiona space is needed. SECTION F: GENERAL INFORMATION QUESTIONNAIRE Taxpayers are required to provide a brief description of business activities in Pennsyvania. Mutistate corporations are required to provide a brief description of business activities outside of PA and indicate a other states where the taxpayer has business activity (use the two etter posta abbreviations). If taxpayer has no activity in Pennsyvania, indicate so in this area. Taxpayers shoud indicate in this section if they are incorporated under the aws of the Commonweath of Pennsyvania. Taxpayers incorporated under the aws of another jurisdiction whose ony activity in Pennsyvania is the soicitation of saes, must indicate so in this section. Taxpayers are required to indicate by what means these saes are soicited. The taxpayer must report the name of any corporation, individua or other business entity which hods a or a majority of the stock of the taxpayer, and the name(s) of any corporation in which the taxpayer owns a or a majority of the stock. This is done by checking the appicabe box(es) and competing Schedue X. If the federa government has changed the taxabe income for any prior year, the taxpayer must indicate this on RCT-101 to incude the first and ast tax periods changed. The taxpayer must aso fie RCT-128C reporting the changes in income for each tax year. Indicate the method of accounting used for federa income tax reporting and financia accounting purposes. Taxpayers must report the ocation of any rea property utiized in the Commonweath of Pennsyvania during the current tax period. Incude an indication if the property was rented or owned by the taxpayer and if the property was ocated in a Keystone Opportunity Zone/Keystone Opportunity Expansion Zone or Strategic Deveopment Area. IMPORTANT: Taxpayers annua affirmation of a corporate officer s information must be incuded on the RCT-101. When information is provided on RCT-101, REV-1605 is not required. REV-1605 shoud be fied eectronicay, using the e-services Center at to report changes in corporate officers during the tax year. When competing the affirmation of corporate officer section, LLCs, business trusts and other unincorporated entities required to fie RCT-101 must enter the names and Socia Security numbers of individuas who are responsibe for the tax and/or business matters of the entity (i.e. Tax Matter Partner, Managing Partner, Trustee). PAID PREPARER S MAILING ADDRESS Enter Y or N in the bock abeed Mai to Preparer to indicate if any notice resuting from the review of this tax report, or request for additiona information is to be maied to the preparer s address. If Y is entered in this box, the notices and a correspondence wi be sent to the name and address provided in this section. If N is entered, a notices wi be maied to the corporation s address. Paid preparers must sign and date a tax returns. The preparer s name, compete address, teephone number, emai address, federa PTIN and the date prepared must be typed or printed in the appropriate bocks. Page 14

21 SUPPLEMENTAL SCHEDULES SCHEDULE A-2 RECONCILIATION OF RETAINED EARNINGS OF A FEDERAL SUBCHAPTER S CORPORATION To be used by taxpayers who fie federa Form 1120S when net income per books does not equa the change in retained earnings reported on federa Schedue L pus distributions reported on the federa return. The PA Department of Revenue utiizes the change in retained earnings reported on Schedue L of federa Form 1120S, pus distributions reported on federa Form 1120S to verify the net income per books reported by a federa subchapter S corporation. Whie this method normay resuts in no change to the net income per books reported by the taxpayer, there are occasions when the taxpayer makes other adjustments to retained earnings which woud not affect net income per books. When this occurs the taxpayer shoud compete Schedue A-2, reconciing the retained earnings reported on federa Schedue L to the net income per books reported on federa Schedue M-1 or federa Schedue M-3, and the distributions reported on federa Schedue K. In competing Schedue A-2, the taxpayer must provide a compete description of a increases and decreases recorded to retained earnings in the current year. Line 1. Line 2. Enter beginning retained earnings from Coumn B, Line 24 of Schedue L on federa Form 1120S. Enter net income per books as reported on federa Schedue M-1, or federa Schedue M-3. Line 3. List a other increases to retained earnings. Taxpayers must provide a detaied description of these items. Attach schedue if additiona space is needed. Line 4. Tota of Lines 1, 2 and 3. Line 5. Distributions (other than dividends). In most cases the amount of distributions (other than dividends) reported on federa Schedue K equas the amount of distributions debited against the retained earnings during that year. In this case the taxpayer wi enter the distributions from federa Schedue K on Line 5a and report the some amount on Line 5d. When a taxpayer accrues distributions at the end of a tax year it may be necessary to adjust the distributions reported on federa Schedue K for the accrued distributions to arrive at the distributions debited against retained earnings during the current year. In this case the taxpayer woud compete this section as foows: Line 5a. Line 5b. Enter the distributions (other than dividends) reported on federa Schedue K. Enter the accrued distributions or distributions payabe reported on the beginning baance sheet on federa Schedue L. Line 5c. Enter the accrued distributions or distributions payabe reported on the ending baance sheet on federa Schedue L. Cacuate the distributions debited against retained earnings in the current year by subtracting Line 5b from Line 5a and adding Line 5c. This is entered on the far right ine on Line 5C. Line 6. Enter the amount of dividend distributions reported on federa Schedue K. Line 7. List a other decreases to retained earnings. Taxpayers must provide a detaied description of these items and incude an additiona schedue if necessary. Line 8. Tota Lines 5, 6 and 7. Line 9. Subtract Line 8 from Line 4. This must equa retained earnings from Coumn D, Line 24 of Schedue L on federa Form 1120S. SCHEDULE A-3 ADJUSTMENTS TO NET INCOME PER BOOKS This schedue is to be used by taxpayers required to make adjustments to net income per books reported on the federa income tax return to arrive at net income per books, cacuated on a separate company basis, used in the cacuation of the capita stock vaue. Line 1. Enter net income per books as reported on the federa income tax return as submitted with the PA Corporate Tax Report (RCT-101). IMPORTANT: A corporate taxpayers fiing federa Forms 1120, 1120S and 1065 must compete federa Schedue M-1 or federa Schedue M- 3, regardess of federa requirements. Additions Line 2. Line 3. Line 4. Line 5. Enter dividends reported in the cacuation of federa taxabe income but not incuded in the cacuation of net income per books reported on Line 1. Enter osses from subsidiary corporations deducted in cacuating net income per books reported on Line 1. Enter osses from LLCs deducted in cacuating net income per books reported on Line 1. Enter a distributions received from LLCs not incuded in the cacuation of net income per books reported on Line 1. Line 6. A other additions required in the cacuation of net income per books to be used in the determination of the capita stock vaue. These adjustments must be itemized. Line 7. Tota Lines 1 through 6. Reductions Line 8. Enter income from subsidiary corporations incuded in net income per books reported on Line 1. Line 9. Enter income from LLCs incuded in net income per books reported on Line 1. Line 10. Enter distributions to quaifying members of LLCs and business trusts. When cacuating net income per books, LLCs and business trusts that do not fie as corporations for federa income tax purposes are aowed to deduct distributions to materiay participating members as defined in Section 469 of the Interna Revenue Code. In addition, singe-member LLCs and business trusts owned by individuas -- where income for which is reported on the persona income tax return of the individua -- are aso aowed to deduct distributions made to the individua when cacuating net income per books. Taxpayers making this adjustment to net income per books are required to compete Part B of this schedue. Line 11. A other reductions caimed in the cacuation of net income per books to be used in the determination of the capita stock vaue. These adjustments must be itemized. Line 12. Tota of Lines 8 through 11. Line 13. Line 7 minus Line 12. This is the net income per books used in the cacuation of the capita stock vaue. Carry this amount to the Book Income coumn on the CUR YR ine on Page 2 of RCT-101. Page 15

22 PART B To be competed by LLCs not taxed as corporations for federa income tax purposes. LLCs caiming a deduction for distributions to materiay participating members as defined in IRC Section 469, must provide the name and Socia Security number or EIN of the member receiving the distribution aong with the amount of the distribution made to each member and a description of how each member quaifies. Singe-member LLCs and business trusts owned by individuas -- where income for which is reported on the persona income tax return of the individua -- shoud enter Individua on this ine. SCHEDULE C-2: PA DIVIDEND DEDUCTION SCHEDULE This schedue must be competed by a taxpayers caiming a Corporate Dividend Deduction on Line 2 of Section B. Line 1. Line 2. Line 3. Line 4. Enter from federa Schedue C, Line 20, tota deductions. S corporations must submit a schedue refecting this information if subject to PA corporate net income tax. Enter federa Schedue C, Line 15 Foreign Dividend Gross- Up (Section 78 tota Coumn A). Enter dividends from ess than 20 percent owned foreign corporations isted on Lines 13 and 14 of federa Schedue C times 70 percent. Enter dividends from 20 percent or more owned foreign corporations isted on Lines 13 and 14 of federa Schedue C times 80 percent. Line 5. Enter dividends isted on Lines 13 and 14 of federa Schedue C from foreign corporations that meet the 80 percent voting and vaue test of IRC Section I504(a)(2) and otherwise woud quaify for 100 percent deduction under IRC Section 243(a)(3), if they were from a domestic corporation. Line 6. Enter the tota PA dividend deduction by adding Lines 1, 2, 3, 4 and 5. Enter On RCT-101, Page 3, Section C, Line 2A. SCHEDULE X: OTHER COMPANIES OF WHICH THIS COMPANY OWNS ALL OR A MAJORITY OF THE STOCK Corporate taxpayers who answer yes to Question 2, Section F of RCT-101 are required to report the name, EIN and Revenue ID, if appicabe, of a corporate entities of which the corporate taxpayer owns more than 50 percent of the stock. In addition, taxpayers who own more than 50 percent of the stock of other corporate entities are required to submit a consoidated baance sheet. Taxpayers who answer Yes to Question 1 of Section F must report the name, EIN or SSN and Revenue ID Number, if appicabe, of any corporation, individua or other business entity that owns a or a majority of the stock of the taxpayer. PA SCHEDULES L, M-1 AND M-2 Beginning in 1998, the Bureau of Corporation Taxes has required any singe-member LLC or business trust, whose member is an individua reporting the activity of the LLC and business trust on Schedue C of a persona income tax return, to provide baance sheets for the beginning and end of the tax period, a reconciiation of beginning and ending member s equity account and the name and Socia Security number of the member reporting the income on a persona income tax return. These singe-member LLCs and business trusts are required to provide copies of Schedue C, Schedue E or Schedue F of federa Form 1040 aong with PA Schedues L, M-1 and M-2 (REV-860) and Schedue X (REV-798). NOTE: Since Schedue M-1 is a reconciiation of net income per books to taxabe income reported on Schedue C, Schedue E or Schedue F of federa Form 1040, other income or expenses reated to the LLC or business trust reported on other schedues shoud be reported as income or expenses reported on the books and not reported on Schedue C, Schedue E or Schedue F (Line 3 and Line 5). IMPORTANT: Any singe-member LLC or business trust, whose member is a business entity, is sti required to attach a pro-forma federa tax return to RCT-101. RCT-103 NET OPERATING LOSS SCHEDULE PART A Cacuation of Net Operating Loss Limitation Act 48 of 2009 increased the net operating oss imitation. For years beginning after Dec. 31, 2013, the net operating oss imitation is the greater of $4 miion or 25 percent of the PA taxabe income before the net operating oss deduction. To support the net operating oss carryforward aowed for the current tax period, taxpayers are required to compete Part A of RCT-103 as foows: Line 1. Enter the taxabe income from RCT-101, Section C, Line 10 Line 2. Enter tota net operating oss carryforward to current period from RCT-103, Part B, Coumn C. Line 3. Mutipy Line 1 by 25 percent (0.25). If Line 3 is ess than $4 miion then enter the esser of Line 1 or Line 2 on Line 4, not to exceed $4 miion. If Line 3 is greater than $4 miion enter the esser of Line 2 or Line 3 on Line 4. Line 4. This is your net operating oss deduction for the current period. PART B Compete this schedue to cacuate the amount of net oss carryforward avaiabe to be deducted in the current period and the net oss carryforward to the next period. Enter a dates and amounts from periods with returns fied. If no net oss carryforward is avaiabe, enter 0. If short periods exist in caendar year or fisca year, enter the month, day and year of the beginning and end of a short periods and the net oss carryforward for a short periods in the appropriate row of the tabe. Do not combine amounts. Coumn A. Beginning with the first ine, enter the month, day and year (MMDDYYYY) corresponding to the beginning date of each tax period. Start with tax periods beginning in 1998 or with the entity s very first tax period, whichever is more recent. Do not incude the current tax period. Coumn B. Enter the month, day and year (MMDDYYYY) corresponding to the ending date of the tax period indicated in Coumn A. Coumn C. Enter the net oss carryforward corresponding to each tax period end from Coumn E of the RCT-103 (Net Operating Loss Schedue) for the prior year. Coumn D. Enter the amount to be used as a net oss deduction to offset income in the current tax period. The tota amount of net oss carryforwards shoud not exceed the amount reported on Part A, Line 4. Coumn E. Subtract Coumn D from Coumn C and enter the difference in this Coumn. Net operating osses generated in tax periods beginning prior to Jan. 1, 1998, have expired and are no onger avaiabe. Net operating osses generated in tax periods beginning after Dec. 31, 1996, and before tax periods beginning prior to Jan. 1, 1998, may be carried forward for 10 tax periods. Net operating osses generated in tax periods beginning after Dec. 31, 1997, may be carried forward 20 periods. Short years are considered to be one tax period for purposes of cacuating the carryforward. SCHEDULE C-5 SCHEDULE OF TAXES REV-860 Section 401(3)1.(o) of the Tax Reform Code of 1971 requires taxpayers to add-back taxes imposed on or measured by net income, expensed on the federa income tax return, in cacuating PA corporate taxabe income. Schedue C-5 incudes the most common taxes expensed by corporate taxpayers on the federa income tax return. This schedue Page 16

23 must be competed and submitted by a corporate taxpayers who are subject to corporate net income tax, and the tota must equa the tota tax expense reported on the federa income tax return. If a state s tax is based on the higher of a tax on net income or a tax on another item, such as gross receipts or net worth vaue, the entire amount of the tax is entered on the ine abeed Income Taxes Other States in years where the iabiity is based on net income. Otherwise the entire amount of the tax is incuded on the ine abeed Other Taxes Not Based on Income. If a state s tax is a combination of a tax on net income and a tax on another item, such as gross receipts or net worth, the income portion of the tax is entered on ine abeed Income Taxes Other States. The remainder of tax is incuded on the ine abeed Other Taxes Not Based on Income. Pease refer to Corporation Tax Buetin for a ist of taxes imposed on or measured by net income. Tax buetins are avaiabe at IMPORTANT: Not a corporations wi have expensed every tax isted on this schedue. SCHEDULE OA-OTHER ADDITIONS SCHEDULE OD-OTHER DEDUCTIONS REV-860 A taxpayers reporting other additions on RCT-101, Section C, Line 3E, and other deductions on RCT-101, Section C, Line 2D, are required to incude a competed Schedue OA and/or Schedue OD with RCT-101. SCHEDULE DA DISPOSITION OF ASSETS SCHEDULE REV-861 This schedue repaces Page 2 of the Out-of-Existence/Withdrawa Affidavit and must be competed and submitted by a corporate taxpayers who have indicated they desire to be removed from the active records of the Bureau of Corporation Taxes. The Description of Assets coumn shoud give a brief description of the assets sod, assigned or distributed in the fina year of the corporate taxpayer's existence. Simiar assets may be incuded on one ine with a genera description (i.e. automobies) rather than isting each individua asset separatey. The Cost of Assets As Reported on Baance Sheets coumn shoud report the cost of the assets prior to depreciation, as woud have been reported on the baance sheet immediatey prior to the sae or distribution of the assets. If the gain on the disposition of an asset is not reported on Schedue D or federa Form 4797, the taxpayer must provide an expanation why the gain is not reported in the cacuation of federa taxabe income. INSTALLMENT SALES - If the iquidating distribution incudes a note receivabe due to an instament sae, the corporate taxpayer must ensure the entire gain from the instament sae has been incuded in net income per books. If the entire gain was not recognized in net income per books prior to the year of the distribution, the corporation is required to recognize the remaining gain in the year of distribution. SCHEDULE OF NONBUSINESS INCOME REV-934 Taxpayers reporting nonbusiness income must incude REV-934 when fiing RCT-101. SCHEDULE TO SUPPORT CLAIM OF EXEMPTION FROM CORPORATE NET INCOME TAX UNDER P.L REV-986 Taxpayers who check the box on Page 3 of RCT-101 indicating their activity in Pennsyvania is imited to activity protected under P.L , and therefore exempt from PA corporate net income tax, must compete this section on REV-986 each year. Taxpayers answering yes to any of these questions are subject to corporate net income tax. Faiure to answer a questions in this section coud resut in the imposition of corporate net income tax for this period. A taxpayer caiming exemption from corporate net income tax under P.L and reporting property owned and/or rented in Pennsyvania must provide a description of this property. DECLARATION OF DE MINIMIS PA ACTIVITY- RCT-101D IMPORTANT: RCT-101D is ony for use by non-pennsyvania corporations. A non-pennsyvania corporation whose Pennsyvania activity during a tax period is considered de minimis as outined in Tax Buetin is not required to fie a compete PA Corporate Tax Report, RCT-101, for that period. Instead, such a corporation may fie RCT-101D, affirming that PA activity during that period is de minimis. In fiing RCT-101D a corporation is reminded of the foowing: 1. RCT-101D is not a tax report. For this reason the statute of imitations regarding the assessment of tax does not appy to RCT-101D. 2. For a taxpayer to reaize any tax benefits from a year the taxpayer fied RCT-101D, the taxpayer wi be required to fie a compete RCT-101 for each year, beginning with the year the benefit is generated through the year the benefit is to be used. In cases where the taxpayer fies RCT-101D and ater fies RCT-101, the taxpayer wi be iabe for a taxes due for these periods. Appicabe interest wi aso be imposed from the origina due date of the report to the date the taxes are paid. The imposition of ate fiing penaties wi be based on the fiing date of the RCT-101D. Exampe 1 Company A fies RCT-101D for Dec. 31, 2010, on March 14, On Apri 15, 2012, the taxpayer fies RCT-101 for Dec. 31, 2010, in order to utiize a net operating oss from this period in the cacuation of the Dec. 31, 2011, corporate net income tax. The RCT-101 for Dec. 31, 2010, reports $200 of foreign franchise tax which is paid with the report. In this case the taxpayer woud be assessed interest on $200 from Apri 15, 2011, to Apri 15, Since the taxpayer did fie RCT-101D for 2010 prior to the due date of the RCT-101 for 2010, a ate fiing penaty wi not be imposed. Exampe 2 Same facts as Exampe 1, except Company A did not fie RCT-101D unti Dec. 15, In this case, since RCT-101D was not fied prior to the due date of the RCT-101 for 2010, Company A woud be assessed both interest and ate fiing penaty. Tax Buetin is avaiabe on the PA Department of Revenue website at SCHEDULE C-3: ADJUSTMENT FOR BONUS DEPRECIATION IMPORTANT: Taxpayers are not required to adjust Pennsyvania taxabe income for 100 percent bonus depreciation of quaified property caimed and aowabe for federa tax purposes under Section 168(k) of the IRC. See Corporation Tax Buetin Taxpayers who took advantage of the 100 percent bonus depreciation in cacuating federa taxabe income must enter the amount of the 100 percent bonus depreciation in the designated box at the bottom of Schedue C-3. DECOUPLING FROM FEDERAL BONUS DEPRECIATION Act 89 of 2002 requires corporate taxpayers who eect the bonus depreciation under IRC Section 168(k) to make the foowing adjustments in arriving at Pennsyvania taxabe income: A. Add to federa taxabe income the amount of bonus depreciation expensed on the federa income tax return. Page 17

24 B. Deduct from federa taxabe income additiona PA depreciation, cacuated as foows: federa depreciation on Section 168(k) property caimed in the current year X 3/7. C. In the year of disposition of an asset, the taxpayer may decrease taxabe income by the amount of bonus depreciation on that asset disaowed in the year of acquisition and not deducted as additiona depreciation. These provisions appy to tax periods beginning after Sept. 10, When fiing PA corporate tax reports, taxpayers who expensed federa bonus depreciation in the cacuation of federa taxabe income are required to incude Schedue C-3, Adjustment for Bonus Depreciation, showing the cacuation of these adjustments and the amount of bonus depreciation to be recovered in subsequent years. If the taxpayer disposes of Section 168(k) property during the tax period, the taxpayer must aso incude Schedue C-4 showing the cacuation of the remaining recovered in the year of disposition. IMPORTANT: This schedue must be updated each year and submitted with RCT-101 (i.e., Schedue C-3 for the current year wi refect the adjustments made for a prior years aong with the adjustments made for the current year). Enter information for prior years from Schedue C-3 as fied for the immediate prior year. Coumn A. End of Tax Year Enter the end date of each tax year in which the taxpayer adjusted taxabe income for federa bonus depreciation. Coumn B. Federa Depreciation This is the amount of depreciation expense, incuding the bonus depreciation, reported on the federa tax return for a property that quaified for the bonus depreciation and for which the taxpayer caimed the bonus depreciation, either in the current year or in a prior year, in the cacuation of federa taxabe income. Carry this amount to RCT-101, Section B, Line 1, current year federa depreciation of 168(k) property. This does not incude Section 179 expenses reated to this property. Coumn C. Bonus Depreciation This is the amount of bonus depreciation deducted in the current year. Carry this amount to RCT-101, Section C, Line 3d, Current Year Bonus Depreciation. Coumn E. Additiona PA Depreciation Coumn D x 3/7. Coumn F. Other Adjustment In some cases, the remaining bonus depreciation to be recovered is ess than 3/7 of current year depreciation on that asset. In those cases, enter the excess of 3/7 of current year depreciation over the bonus depreciation to be recovered. Carry this amount to RCT-101, Section B, Line 3, Other Adjustment. Coumn G. Adjustment for Disposition of 168(k) Property This is bonus depreciation disaowed for property disposed of during the tax period minus the additiona PA depreciation deducted whie this property was hed. Schedue C-4 must be attached. Carry this amount to RCT-101, Section B, Line 2, Current Year Adjustment for Sae of 168(k) property. Coumn H. Additiona PA Depreciation pus Adjustment for Disposition Coumn E minus Coumn F pus Coumn G. Carry this amount to RCT-101, Section C, Line 2c, Current Year Additiona PA Depreciation Pus Adjustment for Disposition. Coumn I. Baance Prior baance pus Current-Year Coumn C minus Current-Year Coumn H. This is a running tota of federa depreciation disaowed ess additiona PA depreciation, other adjustments and adjustment for disposition of assets. This coumn may not be ess than zero. SCHEDULE C-4: ADJUSTMENT FOR DISPOSITION OF SECTION 168(K) PROPERTY & RECAPTURE OF DEPRECIATION ON LISTED PROPERTY Coumn B. Federa Accumuated Depreciation Accumuated depreciation of Section 168(k) property disposed of during the year pus accumuated depreciation used to cacuate recapture when business use fas to 50 percent or ess. This amount shoud not incude Section 179 expense. Do not incude depreciation on property for which a disaowed bonus depreciation has been recovered. Coumn C. Disaowed Bonus Depreciation Bonus depreciation disaowed in the cacuation of PA corporate net income in the year of purchase. Do not incude bonus depreciation fuy recovered in prior years. Coumn E. Additiona PA Depreciation Additiona depreciation aowed in the cacuation of PA corporate net income in the year of purchase and in subsequent years. (Coumn D x 3/7) Coumn F. Adjustment for Disposition Adjustment for the gain on sae of Section 168(k) property (Coumn C Coumn E). Carry tota to Coumn G of Schedue C-3. An exampe of propery competed Schedues C-3 and C-4 is avaiabe at SCHEDULE AR - REV-1175: AMENDED REPORTS A amended RCT-101s must incude Schedue AR, REV-1175, which incudes a detaied expanation of the reason for fiing the amended report and a summary of the change to the tax iabiity. In competing the Summary of Tax Change, enter the type of tax (capita stock/foreign franchise, oans or corporate net income tax); the tax iabiity currenty refected on the taxpayer s account; the amended tax iabiity; and the amount of change in the tax. When fiing an amended RCT-101, the tax iabiity in Coumn A of Step D shoud refect the amended iabiity. Coumn B, Estimated Payments and Credits on Deposit, must refect the payments and credits on the account at the time the amended report is fied. Coumn C, Restricted Credits, must report the restricted credits the taxpayer is entited to based on the fiing of the amended report. Amended reports cannot be fied for the foowing: 1. Chaenging PA statute or reguations 2. Chaenging department poicy or interpretation of statutes or reguations 3. For the soe purpose of caiming the report is a fina report (REV- 238 or REV-181 shoud be fied instead) 4. To change or correct taxpayer information such as the Revenue ID or EIN 5. Changing the end of the tax year (A new origina report must be fied incuding an expanation why the origina tax year end was incorrect) Page 18

25 APPORTIONMENT, EXEMPTIONS AND ALLOCATION APPORTIONMENT OF TAXABLE INCOME Corporate taxpayers with activity in mutipe states may be abe to apportion taxabe income. In order to apportion income, a corporation must be subject to tax in another state. For tax years beginning on or after Jan. 1, 2013, uness the taxpayer is required to use a specia apportionment method, the apportionment factor used in the cacuation of the PA taxabe income wi consist ony of saes attributabe to PA divided by tota saes of the taxpayer. NOTE: This ony appies to the cacuation of the corporate net income tax. CORPORATE NET INCOME TAX APPORTIONMENT Saes Factor The numerator is the tota gross receipts of the taxpayer inside this state during the tax period, and the denominator is the tota gross receipts of the taxpayer everywhere during the taxabe period. Gross receipts are net of returns and aowances. Saes of tangibe persona property are inside this state if the property is deivered or shipped to a purchaser within this state. The partnership s gross receipts sha be incuded in the denominator of the taxpayer s saes factor to the extent of the taxpayer s ownership interest in the partnership. The amount of such gross receipts attributabe to Pennsyvania sha be incuded in the numerator of the saes factor. These figures shoud be refected on the Partner s Share of Saes from Partnerships ine of Tabe 3, Page 2 of the Insert Sheet (RCT-106). Amounts appicabe to an ownership interest in an LLC or business trust that is a partnership or disregarded entity for federa income tax purposes must be incuded ony for PA corporate net income tax. Act 52 of 2013 estabished the foowing criteria for determining if receipts from other than the sae of tangibe persona property are sourced to PA: o Saes from the sae, ease, renta or other use of rea property, if the rea property is ocated in this state. If a singe parce of rea property is ocated both inside and outside this state, the sae is in this state based upon the percentage of origina cost of the rea property ocated in this state. o Saes from the renta, ease or icensing of tangibe persona property, if the customer first obtained possession of the tangibe persona property in this state. If the tangibe persona property is subsequenty taken out of this state, the taxpayer may use a reasonaby determined estimate of usage in this state to determine the extent of sae in this state. o Saes from the sae of service, if the service is deivered to a ocation in this state. If the service is deivered both to a ocation inside and outside this state, the sae is in this state based upon the percentage of tota vaue of the service deivered to a ocation in this state. If the state or states of assignment cannot be determined for a customer who is an individua who is not a soe proprietor, a service is deemed to be deivered at the customer's biing address. o If the state or states of assignment cannot be determined for a customer who is a soe proprietor, a service is deemed to be deivered at the ocation from which the services were ordered in the customer's reguar course of operations. If the ocation from which the services were ordered in the customer's reguar course of operations cannot be determined, a service is deemed to be deivered at the customer's biing address. Dividends and income from U.S. securities and receipts from saes of securities (uness a securities deaer) must be excuded from both the numerator and denominator of the saes factor. SPECIAL APPORTIONMENT FRACTIONS Rairoad, Truck, Bus or Airine Companies: A business income of rairoad, truck, bus or airine companies sha be apportioned to the Commonweath of Pennsyvania by mutipying the income by a fraction. The numerator is the taxpayer s tota revenue mies within the commonweath during the taxabe period. The denominator is the tota revenue mies of the taxpayer everywhere during the taxabe period. A revenue mie means the average receipts derived from the transportation by the taxpayer of persons or property one mie. Where revenue mies are derived from the transportation of both persons and property, the revenue mie fractions attributabe to each such cass of transportation are cacuated separatey. The average of the two fractions, weighted in accordance with the ratio of tota receipts from each such cass of transportation everywhere to tota receipts from both such casses of transportation everywhere, is used in apportioning business income to the commonweath. Pipeine or Natura Gas Companies: A business income of pipeine companies is apportioned to the commonweath by mutipying the income by a fraction. The numerator is the revenue ton mies, revenue barre mies or revenue cubic feet mies of the taxpayer inside the commonweath during the tax period. The denominator is the revenue ton mies, revenue barre mies or revenue cubic feet mies of the taxpayer everywhere during the tax period. A revenue ton mie, revenue barre mie or revenue cubic feet mie means, respectivey, the receipts derived from the transportation by the taxpayer of one ton of soid property, one barre of iquid property or one cubic foot of gaseous property transported one mie. A business income of natura gas companies subject to reguation by the Federa Power Commission or by the Pennsyvania Pubic Utiity Commission is apportioned to the Commonweath of Pennsyvania by mutipying the income by a fraction. The numerator is the cubic foot capacity of the taxpayer s pipeines inside the commonweath. The denominator is the cubic foot capacity of the taxpayer s pipeines everywhere, at the end of the taxabe period. Determine the cubic foot capacity of a pipeine by mutipying the square of its radius by its ength in feet. Water Transportation Companies Operating on High Seas: A business income of water transportation companies operating on high seas is apportioned to the Commonweath of Pennsyvania by mutipying the business income by a fraction. The numerator is the number of port days spent inside the commonweath. The denominator is the tota number of port days spent inside and outside the commonweath. Port days do not incude periods when the ships are not in use because of strikes or withhed from service for repair or because of seasona reduction of services. Days in port are cacuated by dividing the aggregate number of hours in a ports by 24. Water Transportation Companies Operating on Inand Waters: A business income of water transportation companies operating on inand waters is apportioned to the Commonweath of Pennsyvania by mutipying the business income by a fraction. The numerator is the taxpayer s tota revenue mies inside the commonweath during the taxabe period. The denominator is the tota revenue mies of the taxpayer everywhere during the taxabe period. In the determination of revenue mies, one-haf of the mieage of a navigabe waterways bordering between the commonweath and another state sha be considered commonweath mies. A revenue mie means the rev- Page 19

26 enue receipts derived from the transportation by the taxpayer of persons or property one mie. APPORTIONMENT OF CAPITAL STOCK AND FOREIGN FRANCHISE TAX A corporation is permitted to cacuate and pay its capita stock/foreign franchise tax by empoying the three-factor apportionment. A domestic or foreign corporation can use the three-factor apportionment ony if it quaifies. To quaify, the corporation must be taxabe outside Pennsyvania and be transacting business outside the commonweath. Page 2 of RCT-106 must be competed by companies eecting to cacuate taxabe vaue of capita stock by utiizing the three-factor apportionment. However, companies caiming the manufacturing, processing, or research and deveopment exemption and eecting to utiize the three-factor apportionment formua shoud compete RCT-105, Three-Factor Capita Stock/Foreign Franchise Tax Exemption Schedue. IMPORTANT: When cacuating capita stock/foreign franchise tax, the three factors are equay weighted. THREE-FACTOR APPORTIONMENT Page 2 of the Insert Sheet (RCT-106) is used to cacuate the three-factor apportionment. A amounts differing from information on federa Form 1120, 1120S or 1065 must be reconcied. The totas from the RCT-106 are then transferred to the appropriate ines on Schedue C- 1 of RCT-101. Property Factor The numerator is the average vaue of the taxpayer s rea and tangibe persona property, owned and used or rented and used, in Pennsyvania during the taxabe period. The denominator is the average vaue of a the taxpayer s rea and tangibe persona property, owned and used or rented and used, during the taxabe period. Property owned by the taxpayer is vaued at its origina cost. Property rented by the taxpayer is vaued at eight times the net annua renta rate. Net annua renta rate is the annua renta rate paid by the taxpayer ess any annua renta rate received by the taxpayer from subrentas. The average vaue of property is determined by averaging the vaues at the beginning and ending of the taxabe period. The Pennsyvania Department of Revenue may require the averaging of monthy or daiy vaues during the taxabe period if reasonaby required to propery refect the average vaue of the taxpayer s property. A corporation s ownership interest in a partnership or other unincorporated entity (hereinafter referred to as a partnership) sha be incuded in the apportionment fraction as a direct interest of the corporation in the assets of the partnership. A portion of the partnership s rea and persona property, owned and used or rented and used during the taxabe period, to the extent of the taxpayer s interest in the partnership, sha be incuded in the numerator and denominator of the taxpayer s property factor. The owned and used property shoud be refected on the Partner s Share of Property Owned by Partnerships ine of Tabe 1, Page 2 of the Insert Sheet (RCT-106). The rented and used property shoud be refected on the ine tited Partnership Tangibe Property Rented. A compete copy of the partnership s federa Form 1065 or PA Schedue H-Corp issued by the partnership aong with a detaied description of a partnership activity must be attached to the Insert Sheet (RCT-106). Amounts appicabe to an ownership interest in an LLC or business trust that is a partnership or disregarded entity for federa income tax purposes must be incuded ony for PA corporate net income tax. The vaue of construction in progress incuded in any amounts reported on Tabe 1, Property Factor, must be entered on the Less Construction In Progress (if incuded above) ine. Payro Factor The numerator is the tota amount paid in Pennsyvania during the tax period by the taxpayer for compensation, and the denominator is the tota compensation paid everywhere during the tax period. If the taxpayer has adopted the accrua method of accounting, a compensation propery accrued sha be deemed paid. Compensation is paid in this state if: 1. The individua s service is performed entirey inside Pennsyvania; 2. The individua s service is performed inside and outside Pennsyvania, but the service performed outside the state is incidenta to the individua s service inside the state; or a. Some of the service is performed inside the state and the base of operations is inside the state; b. If there is no base of operations, the pace from which the service is directed or controed is inside the state; or c. The base of operations or the pace from which the service is directed or controed is not in any state in which some part of the service is performed, but the individua s residence is inside this state. Compensation means wages, saaries, commissions and any other form of remuneration paid to empoyees for persona service. The partnership s payro sha be incuded in the denominator of the taxpayer s payro factor to the extent of the taxpayer s ownership interest in the partnership. The amount of such payro attributabe to Pennsyvania sha be incuded in the numerator of the payro factor. These figures shoud be refected on the Partner s Share of Payro from Partnerships ine of Tabe 2, Page 2 of the Insert Sheet (RCT-106). Amounts appicabe to an ownership interest in an LLC or business trust that is a partnership or disregarded entity for federa income tax purposes must be incuded ony for PA corporate net income tax. Saes Factor Refer to Corporate Net Income Tax Apportionment section for Saes Factor and Specia Apportionment Fractions. APPORTIONMENT AND INVESTMENTS IN UNINCORPORATED ENTITIES A corporate taxpayer s investment in an unincorporated entity is considered a direct ownership in the corporation s share of the assets of the unincorporated entity rather than an intangibe interest. When determining the property, payro and saes factors, the numerator and the denominator of each factor must incude the property, payro and saes of the corporate taxpayer pus the corporate taxpayer s share of the property, payro and saes of the unincorporated entity. In situations where the corporate taxpayer has an investment in a business entity subject to the capita stock/foreign franchise tax, but not subject to the corporate net income tax (i.e. an LLC that fies federa Form 1065 with the IRS), the apportionment factors used in the cacuation of the corporate net income tax wi incude ony the saes of the LLC. The activity of the LLC wi not be incuded in the apportionment factor used for the cacuation of the capita stock/foreign franchise tax. Since most LLCs and business trusts are subject to the capita stock/foreign franchise tax the property, payro and saes of the investee LLC or business trust woud not be incuded in the three-factor apportionment of the investor corporation in cacuating the capita stock/foreign franchise tax, regardess of the federa fiing status of investee LLC or business trust. A corporate taxpayer with an investment in a LLC or business trust that fies a federa partnership return or is disregarded for federa income tax purposes, woud incude the activity of the investee LLC or business trust in the singe saes factor apportionment used in the cacuation of the corporate net income tax. Since a corporate taxpayer's investment in an LLC or business trust can be treated differenty for capita stock/foreign franchise tax and corporate net income tax, it is possibe for a taxpayer to be required to compete two RCT-106's. When competing RCT-106 a corporate taxpayer must indicate which tax the apportionment schedue appies to; cap- Page 20

27 ita stock/foreign franchise ony, corporate net income tax ony or both capita stock/foreign franchise and corporate net income taxes. CLAIMING EXEMPTIONS TO CAPITAL STOCK/FOREIGN FRANCHISE TAX When caiming an exemption to capita stock/foreign franchise tax, the taxpayer must compete Schedue A-1 of the RCT In addition the caim must be supported by competing the first page of RCT-106, Insert Sheet, or in the case of a corporation caiming the manufacturing, processing or research and deveopment exemption, the RCT-102, Capita Stock Tax Manufacturing Exemption Schedue. The appicabe part of RCT-106 must be competed if any constitutiona, pubic poicy or other statutory exemption is caimed. EXEMPTIONS TO CAPITAL STOCK TAX Because the tax is imposed upon property, constitutiona restrictions require that certain property be exempted in arriving at a taxabe vaue. A taxabe proportion is determined by a fraction, the numerator of which is the average vaue of nonexempt assets, and the denominator of which is the average vaue of tota assets. When the tota vaue of a corporation s capita stock is mutipied by the taxabe proportion fraction, the taxabe vaue resuts. The foowing exemptions are aowed: CONSTITUTIONAL EXEMPTIONS 1. Tangibe property ocated outside Pennsyvania. Retention of ien or tite as security interest is not considered tangibe property. Movabe tangibe persona property must acquire an out-of-state tax situs to be considered exempt. 2. Shares of stock of other PA corporations subject to capita stock tax or bank shares tax. Nationa bank shares are exempt ony if subject to the PA shares tax. This incudes PA LLCs and business trusts that are defined as corporations. 3. U.S. Government obigations, incuding obigations issued by Bank for Cooperatives, Commodity Credit Corp., Export Import Bank, Farmers Home Administration, Federa Deposit Insurance Corp., Federa Farm Credit Bank Consoidated System Wide Notes, Federa Financing Banks, Federa Home Loan Bank Notes and Consoidated Bonds, Federa Housing Administration Mutua Mortgage Insurance Fund Debentures, Federa Intermediate Credit Bank Bonds, Federa Land Bank Bonds and Federa Land Bank Association Bonds, Federa Reserve Stock, Federa Savings & Loan Insurance Corporation, Genera Insurance Fund, Guam Bonds, Production Credit Association, Puerto Rico Bonds, Saes of Securities under Agreements to Repurchase, Sma Business Administration Notes, Student Loan Marketing Association, Tennessee Vaey Authority Power Program Bonds, U.S. Posta Service, U.S. Treasury Notes, Bonds, Bis, Obigations and Certificates, Virgin Isands Bonds, Zero Coupon bonds and notes. 4. A pass-through exemption is aowed for investments in mutua funds and/or reguated investment companies that invest in Pennsyvania and/or U.S. Government securities that woud quaify as exempt assets if directy owned. The exemption wi be granted for the same percentage as the deduction aowed from the taxabe income, on a pass-through basis, for purposes of the PA corporate net income tax. STATUTORY EXEMPTIONS 1. Manufacturing, Processing or Research and Deveopment Exemptions. That portion of the capita stock vaue of corporations organized for manufacturing, processing or research and deveopment purposes invested in and actuay and excusivey empoyed in carrying on manufacturing, processing or research and deveopment (except those corporations that exercise the right of eminent domain) is exempt. That portion of capita stock vaue invested in any property or business not directy reated to the manufacturing, processing or research and deveopment business remains taxabe. Corporations entited to the manufacturing, processing or research and deveopment exemption shoud refer to the instructions refected on Page 1 of RCT-102, Capita Stock Tax Manufacturing Exemption Schedue. 2. Poution contro devices, equipment, machinery, faciities and other tangibe property empoyed or utiized within the Commonweath of Pennsyvania for water and air poution contro and abatement devices empoyed or utiized for the benefit of the genera pubic are exempt. The poution contro devices exemption is imited to tangibe property ony. Corporations caiming this exemption shoud excude the average net book vaue from the numerator of the taxabe proportion if the singe apportionment formua is used. The vaue of the poution contro devices excuded shoud be refected in the appropriate space on Page 1, Line B of the Insert Sheet (RCT-106). Corporations eecting to use the three-factor apportionment formua shoud excude the origina cost vaue from the numerator of the property factor (does not appy to corporate net income tax apportionment). A caims for exemptions must be accompanied by schedues refecting descriptions of the poution contro devices, ocations and vaues. In addition, a copy of the certification issued by the PA Department of Environmenta Protection must be submitted initiay in support of the exemption caimed for each and every new device. 3. Obigations issued by the Commonweath of Pennsyvania; any pubic authority, commission, board or other agency created by the commonweath; any poitica subdivision of the commonweath; or any pubic authority created by any such subdivision. 4. Stock of foreign corporations in which the taxpayer owns more than 50 percent of the outstanding shares of voting stock. This incudes LLCs and business trusts defined as corporations. 5. Shares of stock of cooperative agricutura associations. 6. Student oan assets owned or hed by an entity created for the securitization of student oans, or by a trustee on its behaf. Student oans assets incudes the foowing: a. Student oan notes. b. Federa, state or private subsidies or guarantees of student oans. c. Instruments that represent guarantees of debt, certificates or other securities issued by entities created for the securitization of student oans or by a trustee on its behaf. d. Contract rights to acquire or dispose of student oans and interest rate swap agreements reated to student oans. e. Interests in debt obigations of other student oan securitization trusts or entities. f. Cash or cash equivaents representing reserve funds or payments on or with respect to student oan notes, the securities issued by an entity created for the securitization of student oans or the other student oan reated assets. Soey for purposes of this definition, cash or cash equivaents sha incude direct obigations of the U.S. Department of the Treasury; obigations of federa agencies whose obigations represent the fu faith and credit of the U.S. Government; investment-grade debt obigations or commercia paper, deposit accounts, federa funds and banker s acceptances; prefunded municipa obigations; money market instruments; and money market funds. HOLDING COMPANIES Any hoding company may eect to cacuate the capita stock/foreign franchise tax by appying the tax rate upon each doar to 10 percent of the capita stock vaue. If exercised, this eection sha be in ieu of any other apportionment or aocation to which such company woud otherwise be entited. A hoding company is any corporation that meets the foowing tests: 1. The company must have gross income, at east 90 percent of which is derived from dividends; interest; gains from the sae, exchange or other disposition of stock or securities; and the Page 21

28 rendition of management and administrative services to subsidiary corporations, and 2. The company must have assets, and at east 60 percent of the actua vaue of the ending tota assets must consist of stock, securities or indebtedness of subsidiary corporations. This two-part test must be met annuay, and schedues must be attached. Hoding companies shoud enter 1 on Line 4A, 10 on Line 4B and the eected taxabe proportion of on Line 5 of Schedue A- 1 on Page 4 of RCT-101. Check Hoding Company bock in Section A. FAMILY FARM A corporation that quaifies as a famiy farm is exempt from capita stock/foreign franchise tax provided it actuay is engaged in the business of agricuture in Pennsyvania. For the purposes of this exemption, the business of agricuture means commerciay cutivating the ground to produce products in fieds or in arge quantities, incuding the preparation of soi; the panting of seeds; the raising and harvesting of crops; the business of operating a commercia greenhouse; the business of horticuture and foricuture; beekeeping; or the rearing, feeding, breeding and management of ivestock. The business of agricuture aso sha incude aquacuture, defined as the raising of fish and other aquatic animas for direct commercia use as food or other products. The foowing activities are not considered the business of agricuture: a. Recreationa activities such as, but not imited to, hunting, fishing, camping, skiing, show competition or racing; b. The raising, breeding or training of game animas or game birds, cats, dogs or pets, or animas intended for use in sporting or recreationa activities; c. Fur farming; d. Stockyard and saughterhouse operations; and e. Manufacturing or processing operations of any kind. For a corporation to quaify for the famiy farm exemption, the foowing conditions must be met: a. At east 75 percent of the famiy farm corporation s assets must be devoted to the business of agricuture and empoyed within Pennsyvania. The origina cost of such assets is utiized in determining whether a corporation meets the asset test uness the taxpayer can show by cear and convincing evidence the market vaue is different. To quaify as assets used in the business of agricuture, the assets must be owned and used directy by the corporation caiming the exemption, be devoted principay to the business of agricuture and be property of the sort commony utiized in such business. Effective Jan. 1, 1998, assets devoted to the business of agricuture sha incude easing, to members of the same famiy, of assets which are directy and principay used for agricutura purposes. b. At east 75 percent of a shares of stock issued by the corporation must be owned by individuas who are members of the same famiy to satisfy the stock ownership test. Members of the same famiy mean an individua, his brothers and sisters, the brothers and sisters of the individua s parents and grandparents, the ancestors and inea descendants of any of them, and a spouse of any of them. Individuas reated by haf-bood or ega adoption are treated as if they were reated by whoe bood. Stock of the famiy farm corporation owned, directy or indirecty, by or for a partnership, trust or estate sha be considered as owned proportionatey by its partners or beneficiaries. If stock of the famiy farm corporation is owned by another corporation, such stock sha be considered owned by a famiy member in the proportion that stock of such other corporation owned by famiy members bears to a of the stock in such other corporation, providing that famiy members own 50 percent or more of the stock of such other corporation. Where more than one cass of stock is issued, the 75 percent stock ownership test must be met for each cass of stock issued. Corporations caiming the famiy farm exemption must fie annuay, with the corporate tax report, a schedue refecting the foowing: a. A brief description of the agricuture business; b. A isting of a assets refecting their origina cost and designating which are and which are not used principay in the corporation s agricutura business; and c. A isting of a owners of stock incuding the number of shares of stock owned, the cass of stock and the reationship of each stockhoder within the famiy. Nonbusiness Income TRC 401(3)2.(a)(1)(A) defines business income as income arising from transactions and activity in the reguar course of the taxpayer's trade or business and incudes income from tangibe and intangibe property if either the acquisition, the management or the disposition of the property is an integra part of the taxpayer's reguar trade or business operations. The term incudes a income apportionabe under the U.S Constitution. Nonbusiness income means a income other than business income. Rents and royaties from rea or tangibe persona property, gains, interest, patent or copyright royaties, to the extent that they constitute nonbusiness income, are aocated as refected beow: 1. Net rents and royaties from rea property ocated in this state are aocabe to this state. 2. Net rents and royaties from tangibe persona property are aocabe to this state to the extent the property is used in this state. The extent of utiization of tangibe persona property in a state is determined by mutipying the rents and royaties by a fraction, the numerator of which is the number of days of physica ocation of the property in the state during the renta or royaty period in the taxabe year and the denominator of which is the number of days of physica ocation of the property everywhere during a renta or royaty periods in the taxabe year. If the physica ocation of the property during the renta or royaty period is unknown or unascertainabe by the taxpayer, tangibe persona property is utiized in the state in which the property was ocated at the time the renta or royaty payer obtained possession. Net rents and royaties from tangibe persona property are aso aocated to this state if the commercia domicie of the taxpayer is in PA and the taxpayer is not organized or subject to tax in the state where the property is utiized. Commercia domicie means the principa pace from which the trade or business of the taxpayer is directed or managed 3. Interest is aocabe to this state if the taxpayer s commercia domicie is in this state. 4. Patents and copyright royaties are aocabe to this state if and to the extent that the patent or copyright is utiized by the payer in this state, or if and to the extent that the patent or copyright is utiized by the payer in a state in which the taxpayer is not taxabe and the taxpayer s commercia domicie is in this state. A patent is utiized in a state to the extent that it is empoyed in production, fabrication, manufacturing or other processing in the state or to the extent that a patented product is produced in the state. If the basis of receipts from patent royaties does not permit aocation to states or if the accounting procedures do not refect states of utiization, the patent is utiized in the state in which the taxpayer s commercia domicie is ocated. A copyright is utiized in a state to the extent that printing or other pubication originates in the state. If the basis of receipts from copyright royaties does not permit aocation to states or if the accounting procedures do not refect states of utiization, the copyright is utiized in the state in which the taxpayer s commercia domicie is ocated. NOTE: Taxpayers caiming non-business income must incude REV- 934, Schedue of Non-Business Income, when fiing RCT-101. IMPORTANT: Nonbusiness income of rairoad, truck, bus or airine companies; pipeine or natura gas companies; and water transportation companies operating on high seas or inand waters aso is aocated as noted above. Page 22

29 MISCELLANEOUS EXAMPLE: Tota of Monthy No. of (1) Net Asset Vaues Months Net Asset Vaue $633,000, = $52,750,000 $1,000,000 = $53* x $75 = $3,975(A) *Rounded to the nearest whoe number. Income Distributed to Pennsyvania Individuas (2) Undistributed Income Estates or Trusts by Undistributed Income Persona Income for Persona Income Tota Income Distributed for Persona Income Tax Rate Tax Purposes During Period Tax Purposes ( %) $1,000,000 $500,000 X $50,000,000 = $10,000 x = $307 (B) (A) (B) Tota Tax (3) $3,975 + $307 = $4,282 REGULATED INVESTMENT COMPANIES Every domestic and foreign corporation that meets the foowing four parameters wi be taxed as a reguated investment company for Pennsyvania purposes: 1. Is registered to do business in PA; 2. Maintains an office in PA; 3. Has timey fied an eection to be taxed as a reguated investment company by the federa government; and 4. Duy quaifies to be taxed as a reguated investment company under the provisions of the IRC. The capita stock or foreign franchise tax sha be the sum of: 1. $75 mutipied by the quotient rounded to the nearest whoe number, produced by dividing the net asset vaue by $1 miion. Net asset vaue is determined by adding the net asset vaues as of the ast day of each month during the taxabe period and dividing the tota sum by the number of months invoved. Each monthy net asset vaue sha be the actua market vaue of a assets owned without any exemptions or excusions, ess a iabiities, debts and other obigations. See exampe above. 2. Apportioned undistributed income for PA persona income tax purposes of the reguated investment company mutipied by the persona income tax rate for the same period. See exampe above. Income for PA persona income tax purposes incudes compensation; net profits from the operation of a business (investment), profession or farm; interest income; dividends; net gains or income from the sae or disposition of property, rents, royaties, patents and copyrights; income from estates or trusts; and gambing and ottery winnings. Undistributed income for PA persona income tax purposes means a income, other than that undistributed on account of the capita stock/foreign franchise tax, ess a income distributed to sharehoders. At the eection of the company, income distributed after the cose of a taxabe period, but deemed distributed during the taxabe period for federa income tax purposes, sha be distributed during that period. If a company in a taxabe period has both current income and income accumuated from a prior period, distributions made during the year sha be deemed to have been made first from current income. Undistributed income for PA persona income tax purposes is apportioned to Pennsyvania by a fraction. The numerator is a income distributed during the taxabe period to sharehoders who are PA resident individuas, estates or trusts. The denominator is a income distributed during the taxabe period. Resident trusts sha not incude charitabe, pension, profit-sharing or retirement trusts. Income for PA persona income tax purposes and other income of a company each sha be either distributed to sharehoders or undistributed in the proportion each category bears to a income received by the company during the taxabe period. Reguated investment companies shoud refect their sef-assessed tax on Line 18, Section A on Page 2 of RCT-101 and enter y in the box next to Reguated Inv. Co. on Page 1. The tax is prorated for short periods. A schedue refecting the data utiized in cacuating the capita stock/foreign franchise tax must be attached to the RCT-101 PA Corporate Tax Report. These reports must be sent to: PA DEPARTMENT OF REVENUE, BUREAU OF CORPORATION TAXES, P O BOX HARRISBURG, PA RESTRICTED CREDITS Depending on the type of business, empoyers may be eigibe for tax credits offered by the state. For more information on the foowing tax credits, visit the Department of Revenue s website at Research and Deveopment Tax Credit Empoyment Incentive Payment Credit Organ and Bone Marrow Donor Tax Credit For more information and sae/assign procedures on the foowing tax credits, visit the Department of Community & Economic Deveopment s website at Community Based Services Tax Credit Neighborhood Assistance Program Tax Credit Keystone Opportunity Zone (KOZ) Credit Keystone Innovation Zone Credit Fim Production Tax Credit Educationa Improvement/Opportunity Schoarship Tax Credit Jobs Creation Tax Credit Keystone Specia Deveopment Zone Credit Research and Deveopment Tax Credit (Sae or assign ony) For more information on the foowing tax credit, visit the Department of Agricuture s website at Resource Enhancement and Protection Tax Credit Page 23

30 Capita Stock/Foreign Franchise Tax TAX PERIOD BEGINNING TAX RATE CAPITAL STOCK VALUATION DEDUCTION THREE FACTOR APPORTIONMENT MILLS $150,000 EQUALLY WEIGHTED MILLS $150,000 EQUALLY WEIGHTED MILLS $160,000 EQUALLY WEIGHTED MILLS $160,000 EQUALLY WEIGHTED MILLS $160,000 EQUALLY WEIGHTED MILLS $160,000 EQUALLY WEIGHTED MILLS $160,000 EQUALLY WEIGHTED MILLS $160,000 EQUALLY WEIGHTED Corporate Net Income Tax TAX PERIOD BEGINNING TAX RATE WEIGHTING OF FACTORS PROPERTY PAYROLL SALES NET LOSS LIMITATION PERCENT OF INCOME AMOUNT % ½% $3,000, % % $3,000, % % $3,000, % % $3,000, % % $3,000, % % $3,000, % % $4,000, % % $5,000,000 Page 24

31 PREVENTING RCT-101 PROCESSING ERRORS The integrated tax system enabes a more robust and anaytica review of corporation tax return data, incuding prior year data for history of earnings, net operating osses, cacuations, vauation deduction and rate changes. To prevent a return from suspending, taxpayers are encouraged to provide a compete and accurate report that wi process smoothy, foowing the beow tips. 1. Never input the word none in numeric fieds. 2. History of earnings for capita stock/foreign franchise tax must be in order, starting with the odest year on Year 1. If ony one year is appicabe, the first year shoud be entered on the Current Year ine. There shoud be no gaps in the history of earnings, and the most recent consecutive five years must be provided. 3. Checkbox indicators on the return: a. If checking Hoding Company, do not use three-factor apportionment. b. If checking Soicitation Ony, Singe-Member LLC, Muti- Member LLC or PA S Corporation, do NOT compete Section C, Corporate Net Income Tax, on Page If taking a deduction for bonus depreciation, Section B1, Current Year Federa Depreciation of 168K Property, must be competed on Page 3. Aso, Schedue C-3 (REV-799) must be competed and incuded with the RCT Use ony the most current version of the generic, non-year specific RCT If an amended report must be fied, taxpayers must compete the most current non-year specific RCT-101, competing a sections of the report. This incudes those sections originay fied and those sections being amended. The amended report check box under Step B, Page 1 of RCT-101 must be checked and REV-1175 must be incuded with the report. 7. Competing apportionment factors as 0/0, eaving the factor fieds bank or typing none in these fieds wi resut in apportionment being changed to 100 percent in Pennsyvania, automaticay changing the reported tax iabiities. Partnerships factors aso must be provided, per a corporation s ownership percentage and not entered as zeroes. 8. Eigibe corporations eecting to use three-factor apportionment shoud compete the RCT-105 or RCT-106, as appicabe. Tota factors from the RCT-105 or 106 shoud then be transferred to Schedue A-1 and/or Schedue C-1 on Page 4 of the RCT-101. Amounts differing from information on federa forms 1120, 1120S or 1065 must be reconcied. Additiona Guidance on Apportionment and Partnerships If a corporation owns underying partnerships, the partnerships property, payro and saes factors must be passed through to the corporate owner, in reation to the ownership percentage. A corporation s ownership interest in a partnership or other unincorporated entity (hereinafter referred to as a partnership) must be incuded in the apportionment fraction as a direct interest of the corporation in the assets of the partnership. Property Factor -, the portion of the partnerships rea and persona property, owned or rented and used during the taxabe period, to the extent of the taxpayer s interest in the partnerships, must be incuded in the numerator and denominator of the taxpayer s property factor. This property shoud be refected on the Partner s Share of Property Owned by Partnerships ine on Tabe 1, Page 2 of the RCT-106. Property amounts appicabe to an ownership interest in an LLC or business trust that is a partnership or disregarded entity for federa income tax purposes must be incuded ony for Pennsyvania corporate net income tax factors. Payro Factor - the portion of the partnerships payro has to be incuded in the numerator and denominator of the corporation s payro factor to the extent of the taxpayer s interest in the partnerships for that period, as appropriate. This payro cacuation shoud be refected on the Partner s Share of Payro from Partnerships ine on Tabe 2, Page 2 of the RCT-106. Payro amounts appicabe to an ownership interest in an LLC or business trust that is a partnership or disregarded entity for federa income tax purposes must be incuded ony for Pennsyvania corporate net income tax factors. Saes Factor - the portion of the partnerships gross receipts net of returns and aowances are incuded in the numerator and denominator of the corporation s saes factor to the extent of the taxpayer s interest in the partnerships for that period, as appropriate. Saes of tangibe persona property are considered in-state if the property is deivered or shipped to a purchaser within Pennsyvania. This saes cacuation shoud be refected on the Partner s Share of Saes from Partnerships ine on Tabe 3, Page 2 of the RCT-106. Payro amounts appicabe to an ownership interest in an LLC or business trust that is a partnership or disregarded entity for federa income tax purposes must be incuded ony for Pennsyvania corporate net income tax factors. For tax periods beginning on or after Jan. 1, 2013, a business income must be apportioned to the state by mutipying income by the saes factor ony for corporate net income tax. NOTE: A corporation with no property, payro or saes both inside and outside Pennsyvania, shoud compete Schedue A-1 and/or C-1 on Page 4 of the RCT-101, using zero as the numerator and one as the denominator. Reports where the taxpayer is cacuating a iabiity using a method other than the standard cacuation, incuding any position granted as the resut of an appea in a prior year, cannot be fied eectronicay. In such cases, the RCT-101 report and a required attachments, incuding the reason the report cannot be e-fied, must be maied to: PA DEPARTMENT OF REVENUE BUREAU OF CORPORATION TAXES PO BOX HARRISBURG, PA Page 25

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