Governor Tom Cobett has signed into law a measure that permits certain employers to keep wages withheld for employees’ personal income tax. Corbett characterized the new law, known as the Promoting Employment Across Pennsylvania Act, as an economic development tool.

“I am committed to ushering in an economic environment where the private sector can grow and create jobs,” Corbett said.

Legislative sources said the tax credit is designed to lure the software giant Oracle Corp. to central Pennsylvania.

But the Pennsylvania Budget and Policy Center, a liberal-leaning think tank, said the act is imbalanced in favor of employers.

“New employees are literally paying their employer for the privilege of working,” the organization argued. “Most tax credits reduce the amount the company pays in taxes. This plan is very different, allowing employers to keep 95 percent of employees’ personal income tax withholdings for five years or longer, even if the company pays no taxes.”

Under the new law, a qualified company that enters into an agreement with the Department of Community and Economic Development will be eligible to retain 95 percent of the qualified company’s withholding taxes for individuals employed in new jobs created by the company. Qualified companies must create at least 250 new jobs in Pennsylvania within a five-year period, 100 of which must be created within the first two years.

The act also allows for an alternate process by which an employer may remit all of the personal income tax withheld from its employees and then receive a rebate of that personal income tax from the state.

The program is capped at a total of $5 million per year and is set to expire January 1, 2018.

— John L. Kennedy, for the Law Weekly