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Dec 8, 2016, 11:23 AM by PICPA State Taxation Committee

Act 52 of 2013 changed the criteria for when a resident credit may be claimed under Article III, Section 314, Income Taxes Imposed by Other States. Although the definition of a state under Article III, Section 301(t) includes a foreign country, it also includes an exception for that definition so that the definition of a state is that which is included in Section 314(a).

Act 52 of 2013 changed the criteria for when a resident credit may be claimed under Article III, Section 314, Income Taxes Imposed by Other States. Although the definition of a state under Article III, Section 301(t) includes a foreign country, it also includes an exception for that definition so that the definition of a state is that which is included in Section 314(a). The definition of a state in Section 314(a) does not include a foreign country.  Therefore, no credit on any income is permitted for foreign jurisdictions. Tax Reform Code, Article III, Sections 301(t) and 314(a) are as follows:

• Section 301(t).  "State" means, except as provided under section 314(a), any state or commonwealth of the United States, the District of Columbia, the Commonwealth of Puerto Rico, any territory or possession of the United States and any foreign country. ((t) amended July 9, 2013, P.L.270, No.52)
• Section 314. Income Taxes Imposed by Other States.--(a)  A resident taxpayer before allowance of any credit under section 312 shall be allowed a credit against the tax otherwise due under this article for the amount of any income tax, wage tax or tax on or measured by gross or net earned or unearned income imposed on him or on a Pennsylvania S corporation in which he is a shareholder, to the extent of his pro rata share thereof determined in accordance with section 307.9, by another state with respect to income which is also subject to tax under this article. For purposes of this subsection, the term "state" shall only include a state of the United States, the District of Columbia, the Commonwealth of Puerto Rico and any territory or possession of the United States. ((a) amended July 9, 2013, P.L.270, No.52)