(1) Tax On Salaries, Wages, Commissions And Other Compensation.

(a) Residents. An annual tax on salaries, wages, commissions and other compensation earned by residents of Philadelphia is imposed for general revenue purposes for the following periods at the following rates:

(b) Non-Residents. An annual tax on salaries, wages, commissions and other compensation earned by non-residents of Philadelphia for work done or services performed or rendered in Philadelphia is imposed for general revenue purposes for the following periods at the following rates:

(c) The tax imposed under §19-1502(1) (a) and (b) shall relate to and be imposed upon salaries, wages, commissions, and other compensation paid by an employer or on his behalf to any person who is employed by or renders services to him.

(2) Tax On Net Profits Earned In Businesses, Professions Or Other Activities.

(a) Residents. An annual tax on the net profits earned in businesses, professions or other activities conducted by residents of Philadelphia is imposed for general revenue purposes for the following periods at the following rates:

(b) An annual tax on the net profits earned in businesses, professions or other activities conducted in Philadelphia by non-residents is imposed for general revenue purposes for the following periods at the following rates:

(c) The tax levied under §19-1502(2)(a) and (b) shall relate to and be imposed on the net profits of any business, profession, or enterprise carried on by any person as owner or proprietor, either individually or in association with some other person or persons.

(d) For taxable years beginning on or after January 1, 1998, the tax levied under §19-1502(2)(a) and (b) shall not apply to any net profits earned by a domestic or foreign business trust, or any series thereof, that qualifies as a regulated investment company under Section 851 of the Internal Revenue Code and is registered with the United States Securities and Exchange Commission under the Investment Company Act of 1940, or any related domestic or foreign business trust, or any series thereof, which confines its activities in Philadelphia to the maintenance, administration and management of intangible investments and activities of regulated investment companies.

(3) Rate reductions on and after January 1, 2003.^[213.1]

(a) Definitions.

(.1) Certification Date. March 1, 2003 and each March 1 thereafter until and including March 1, 2006.

(.2) Prior Year. The calendar year that ends December 31 immediately prior to a Certification Date.

(.3) Base Year. The calendar year that immediately precedes the Prior Year.

(.4) Total Resident Tax Rate. The rate at which taxes are imposed on residents under this Section, plus the rate at which taxes are imposed under §19-2803 (relating to the annual tax on wages and net profit to provide revenues for the purposes of the Pennsylvania Intergovernmental Cooperation Authority).

(.5) Wage Tax Receipts. The total revenues the City receives from taxes imposed under this Section and from taxes imposed under §19-2803.

(.6) Resident Wage Tax Receipts. The total revenues the City receives from taxes imposed under subsections (1)(a) and (2)(a) of this Section (relating to residents) and under §19-2803.

(.7) City Real Estate Tax Receipts. The total revenues the City receives from taxes imposed under §19-1301 (entitled "Real Estate Taxes"). City Real Estate Tax Receipts shall be attributable to a given year if they were due in such year and collected on or before the last day of such year.

(b) Calculation of Amount of Annual Tax Rate Reductions.

(.1) By each Certification Date, the Revenue Department shall certify to the Mayor and to the Council in writing (A) the amount of Wage Tax Receipts for the Prior Year and for the Base Year; (B) the amount of Resident Wage Tax Receipts for the Prior Year and for the Base Year; and (C) the amount of City Real Estate Tax Receipts for the Prior Year and for the Base Year.

(.2) If the Wage Tax Receipts certified for the Prior Year are at least 3.5% greater than Wage Tax Receipts certified for the Base Year, then the "Reduction Amount" shall equal thirteen one-hundredths of one percent (0.13%); otherwise, the "Reduction Amount" shall equal three hundred seventy-five ten-thousandths of one percent (0.0375%).

(.3) A Further Reduction Amount shall be calculated as follows:

(A) An Excess Growth Amount is first calculated by subtracting from City Real Estate Tax Receipts for the Prior Year the product formed by multiplying City Real Estate Tax Receipts for the Base Year by 1.02; provided, however, that if the Base Year is 2002, City Real Estate Tax Receipts for the Base Year shall be the amount certified pursuant to § 19-1502(3)(b)(.1)(C) minus twenty-five million dollars ($25,000,000). Notwithstanding any provision to the contrary, if the Excess Growth Amount does not exceed zero, then the Further Reduction Amount shall equal zero.

(B) Total Resident Income for the Prior Year is then calculated by determining the quotient, the numerator of which is Resident Wage Tax Receipts for the Prior Year, and the denominator of which is the Total Resident Tax Rate in effect on December 31 of the Prior Year.

(C) The Further Reduction Amount shall equal the quotient, the numerator of which is the Excess Growth Amount and the denominator of which is Total Resident Income for the Prior Year.

(.4) (A) The rate for the tax imposed on residents under §19-1502(1)(a) shall be reduced by the Reduction Amount, effective on the July 1 that immediately follows the Certification Date, and the rate for the tax imposed on residents under §19-1502(2)(a) shall be reduced by the Reduction Amount, effective on the January 1 that immediately precedes the Certification Date. For example, if the Reduction Amount calculated for the March 1, 2003 Certification Date were 0.0375%, then the applicable tax rates would be reduced from 3.0% to 2.9625%. If the Reduction Amount calculated the next year (for the March 1, 2004 Certification Date) were 0.13%, then the applicable tax rates would be further reduced, from 2.9625% to 2.8325%. (B) In like manner, the rate for the tax imposed on residents under §19-1502(1)(a) shall be further reduced by the Further Reduction Amount, effective on the July 1 that immediately follows the Certification Date, and the rate for the tax imposed on residents under §19-1502(2)(a) shall be further reduced by the Further Reduction Amount, effective on the January 1 that immediately precedes the Certification Date. The rate, when expressed as a percentage, shall be rounded to the nearest ten-thousandth (for example, 2.9625%).^[213.2]

(.5) The rate for the tax imposed on non-residents under §19-1502(1)(b) shall be reduced by the same percentage reduction by which the Total Resident Tax Rate is reduced as a result of the rate reduction provided by §19-1502(3)(b)(.4)(A), effective on the July 1 that immediately follows the Certification Date, and the rate for the tax imposed on non-residents under §19-1502(2)(b) shall be reduced by the same amount, effective on the January 1 that immediately precedes the Certification Date. Such rates shall be rounded to the nearest ten-thousandth percent. Using the example given in the prior subsection (a Reduction Amount of 0.0375% the first year and 0.13% the second year), non-resident rates would be reduced from 3.9127% to 3.8801% the first year (approximately the same percentage reduction residents will realize when the Total Resident Tax Rate is reduced from 4.5% to 4.4625%), and non-resident rates would be reduced the second year from 3.8801% to 3.7671% (approximately the same percentage reduction residents would realize when the Total Resident Tax Rate was reduced from 4.4625% to 4.3325%).

(c) By April 15 of each year, the Revenue Department shall publish a notice in at least two newspapers of general circulation within the City, setting forth its most recent certifications under §19-1502(3)(b)(.1) and an explanation as to the effect of such certification on the rates of the wage and net profits tax on residents and non-residents.