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Amending Chapter 19-2600 of The Philadelphia Code, entitled “Business Income and Receipts Taxes,” to establish a Philadelphia Youth Employment Program Tax Credit for businesses that employ eligible youth or contribute to qualifying tax-exempt organizations employing such students; all under certain terms and conditions.
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THE COUNCIL OF THE CITY OF PHILADELPHIA HEREBY ORDAINS:
SECTION 1. Chapter 19-2600 of The Philadelphia Code is hereby amended to read as follows:
CHAPTER 19-2600. BUSINESS INCOME AND RECEIPTS TAXES.
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§ 19-2604. Tax Rates, Credits, and Alternative Tax Computation.
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(17) Philadelphia Youth Employment Program (“YEP”) Tax Credit.
(a) Definitions. For purposes of this subsection, the following definitions shall apply:
(.1) Department. The Department of Revenue.
(.2) Administering Agency. The Department of Commerce, or such other City
agency or office as the Mayor shall designate to perform the certification and program administration functions established by this subsection.
(.3) Eligible Educational Program. Any of the following:
(.a) A school program provided by a public, charter, private, or other school legally authorized to provide secondary education, including a lawful home education program;
(.b) A degree or certificate program offered by an accredited college, university, or community college;
(.c) A vocational, technical, trade, or career education program offered by an institution licensed, accredited, or otherwise approved by the governmental authority responsible for its operation; or
(.d) An apprenticeship program registered with the United States Department of Labor or the Pennsylvania Department of Labor and Industry.
(.4) Enrolled. Registered and participating, on a full-time or part-time basis, in an Eligible Educational Program. Enrollment shall include a regularly scheduled academic pause when the student remains eligible and intends to return for the next academic term. A student completing one Eligible Educational Program shall remain enrolled during a transition of not more than one hundred twenty (120) days to another Eligible Educational Program for which the student has documented acceptance and subsequently begins attendance.
(.5) Qualifying Employee. An individual certified by the Administering Agency who
(.a) Is at least twelve years of age and has not attained twenty-five years of age;
(.b) Resides in the City of Philadelphia;
(.c) Is enrolled in an Eligible Educational Program;
(.d) Performs employment in Philadelphia and earns wages subject to the tax imposed by Chapter 19-1500;
(.e) Is first hired by the participating employer after execution of the agreement required by subsection (e);
(.f) Receives compensation commensurate with comparable position(s) at the participating employer or, where no such position exists there, an average hourly wage, excluding benefits, of at least one hundred fifty percent (150%) of the applicable minimum wage, whichever is greater; and employer-provided educational assistance of at least two thousand dollars during each of the first two years of qualifying employment and one thousand dollars during the third year, prorated for partial years;
(.g) Is employed in compliance with applicable federal, Commonwealth, and City laws; and
(.6) Qualifying Full-Time Employee. A Qualifying Employee employed for at least thirty-seven and one-half hours per week.
(.7) Qualifying Part-Time Employee. A Qualifying Employee employed for at least twenty hours per week but fewer than thirty-seven and one-half hours per week.
(.8) Qualifying Exempt Organization. An organization exempt both from federal income taxation and from taxation under this Chapter that employs a Qualifying Employee and has been certified by the Administering Agency.
(b) Credit for Direct Employment.
(.1) A business shall be eligible for a credit against its total business income and receipts tax liability for each certified Qualifying Employee employed by the business for more than six months in qualifying employment.
(.2) The annual credit shall equal:
(.a) Ten thousand dollars multiplied by the portion of the tax year during which the individual was a Qualifying Full-Time Employee; plus
(.b) Five thousand dollars multiplied by the portion of the tax year during which the individual was a Qualifying Part-Time Employee.
(.3) The credit shall be available for qualifying employment occurring before satisfaction of the six-month threshold once that threshold has been satisfied. The Department shall permit an amended return where necessary to claim such credit for portions of qualified employment that occur during the prior tax year.
(c) Credit for Contributions to Qualifying Exempt Organizations.
(.1) A business shall be eligible for a credit against its total business income and receipts tax liability for a contribution made to a Qualifying Exempt Organization to support the employment of a certified Qualifying Employee who has completed at least six months of qualifying employment with that organization.
(.2) The contribution required for a tax year shall be at least ten thousand dollars for a Qualifying Full-Time Employee or five thousand dollars for a Qualifying Part-Time Employee. Where an employee changes status during the tax year, the required contribution shall be calculated proportionately.
(.3) The annual credit shall equal seven thousand dollars multiplied by the portion of the tax year during which the individual was a Qualifying Full-Time Employee, plus three thousand five hundred dollars multiplied by the portion of the tax year during which the individual was a Qualifying Part-Time Employee.
(.4) An Qualifying Exempt Organization may receive a qualifying contribution from only one business for each employee in a tax year. The organization shall apply the contribution to the employee’s wages, benefits, education, training, or employment support services.
(.5) No credit shall be allowed where the Administering Agency determines that the organization would have provided the same employment notwithstanding the contribution.
(d) Calculation and Limitations.
(.1) The portion of a tax year attributable to qualifying employment shall be calculated by dividing the number of qualifying weeks by the number of weeks in that tax year. Each day may be counted in only one employment category and for only one credit under this subsection. The Department shall prescribe rules for determining weekly employment status, including paid leave.
(.2) Credits shall be available for no more than thirty-six months of qualifying employment for an individual, cumulatively across all participating employers and contributing businesses. A change of employer shall not restart that period.
(.3) Credits for direct employment shall not exceed thirty thousand dollars for any individual over all tax years. Credits based exclusively on part-time employment shall not exceed fifteen thousand dollars. Contribution credits shall not exceed twenty-one thousand dollars for any individual over all tax years, or ten thousand five hundred dollars where based exclusively on part-time employment.
(.4) No credit shall accrue for employment on or after an individual’s twenty-fifth birthday or during a period when the individual otherwise fails to satisfy the definition of Qualifying Employee. Loss of eligibility shall not invalidate credits properly earned for an earlier period.
(.5) Credits shall be nonrefundable. Unused credits may be carried forward for three tax years following the tax year in which they are earned.
(.6) Credits may be earned only during the five-year period beginning on the date the participating business executes its agreement under subsection (e).
(.7) A business shall not receive a credit under another provision of this Section for the same employee and tax year for which it receives a credit under this subsection. No contribution or employment expense may support duplicate credits under this subsection.
(e) Employer and Contribution Agreements.
(.1) Before hiring an employee for whom a direct employment credit will be sought, a business shall execute a YEP Tax Credit Agreement with the City.
(.2) Before a Qualifying Exempt Organization hires an employee whose employment will support a contribution credit, the contributing business and organization shall execute an agreement with the City.
(.3) Each agreement shall:
(.a) Set forth the applicable eligibility requirements, credit calculation(s), documentation requirements, and potential repayment obligations;
(.b) Require the employer to notify the Department and Administering Agency within one week after learning that an employee’s qualifying employment has ended or that a material eligibility condition has changed;
(.c) Require the business, and any participating Qualifying Exempt Organization, to substantially maintain its existing operations and the operations associated with the credit in Philadelphia for five years from execution of the agreement;
(.d) Require payroll records, verification of enrollment and residency, and other documentation reasonably necessary to establish eligibility; and
(.e) Require compliance with the employee protections established by subsection (g).
(f) Certification and Program Capacity.
(.1) Following execution of the applicable agreement, the participating employer shall apply to the Administering Agency for certification of each proposed Qualifying Employee.
(.2) Certification may relate back to the date of hire if the application was submitted before employment began and all eligibility conditions were satisfied from that date.
(.3) Certification shall require proof of age, Philadelphia residency, enrollment, and qualifying employment. Enrollment shall be verified at least once during each academic term or, for a program without academic terms, at intervals prescribed by regulation.
(.4) Certification shall terminate when qualifying employment ends or the employee exhausts the thirty-six-month limit. An individual whose certification terminates shall cease to count against the program’s capacity.
(.5) The Administering Agency shall deny certification where hiring the individual would displace another employee primarily to obtain the credit. Displacement includes termination, reduction of hours, or reassignment undertaken primarily for that purpose.
(g) Student Participation and Employment Protections.
(.1) Each Qualifying Employee shall execute a participation agreement describing the employment, educational program, and available training and support services. For a minor, a parent or guardian shall also sign where required by applicable law.
(.2) The Administering Agency shall coordinate access to job-readiness instruction, financial education, and employment-retention services appropriate to the participant’s age and educational commitments.
(.3) An employer shall schedule employment consistently with required school attendance and applicable restrictions on the employment of minors. Nothing in this subsection authorizes otherwise prohibited hours, occupations, or working conditions, or excuses any required employment certificate or work permit.
(.4) An employer shall not require a student to miss required classes, withdraw from an Eligible Educational Program, or violate applicable law to satisfy an employment-hours threshold under this Section.
(.5) A business or organization shall not discharge, threaten, or otherwise retaliate against an employee for reporting a violation of this Section or cooperating with its administration.
(.6) A student shall not be liable for repayment of an employer’s or contributing business’s tax credit solely because the student leaves employment, changes educational programs, or ceases to qualify.
(h) Repayment.
(.1) A business that fails to substantially maintain the Philadelphia operations required by its agreement shall repay credits received under this Section. A contributing business shall likewise repay contribution credits if the participating Qualifying Exempt Organization fails to maintain the required operations.
(.2) The Department may waive repayment under paragraph (.1) where the failure resulted from circumstances beyond the affected entity’s control, including natural disasters, acts of terrorism, or unforeseen industry conditions.
(.3) A business shall repay any credit obtained through a material misrepresentation or for employment or contributions that did not satisfy this Section, together with applicable interest and penalties.
(.4) The Department shall provide written notice of a denial, revocation, or repayment determination and identify the applicable administrative review procedures.
(i) Administration and Reporting.
(.1) The Department and Administering Agency may promulgate regulations necessary to implement this Section, including rules addressing changes in employment status, academic recesses, enrollment verification, contribution documentation, certification transfers, and prevention of duplicate claims.
(.2) Regulations shall protect confidential tax, education, and personal information and limit collection of such information to that reasonably necessary to administer the program.
(.3) By December 31 of each year, the Department, in consultation with the Administering Agency, shall submit a report to the Mayor, Council President, and Chief Clerk of Council stating the number of participating businesses and organizations; applications approved and denied; participating students by age group and educational program type; full-time and part-time placements; credits earned, claimed, carried forward, and recovered; employment retention; and recommendations for improving the program. Public reporting shall use aggregate information that does not identify individual students or disclose confidential taxpayer information.
SECTION 2. The Department of Revenue and the Administering Agency may prepare forms, promulgate regulations, and execute agreements beginning on the date this Ordinance becomes law. Credits shall be available for qualifying employment beginning on or after January 1 of the first calendar year beginning at least ninety days after this Ordinance becomes law.
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