HB 2541

                                                PRINTER'S NO.   3447
                THE GENERAL ASSEMBLY OF PENNSYLVANIA
                    HOUSE BILL
                    No. 2541
                                          Session of
                                            2026
INTRODUCED BY ORTITAY, FLEMING, HANBIDGE, PASHINSKI AND NEILSON,
   MAY 27, 2026
REFERRED TO COMMITTEE ON EDUCATION, MAY 27, 2026
                               AN ACT
1 Amending the act of March 4, 1971 (P.L.6, No.2), entitled "An
2    act relating to tax reform and State taxation by codifying
3    and enumerating certain subjects of taxation and imposing
4    taxes thereon; providing procedures for the payment,
5    collection, administration and enforcement thereof; providing
6    for tax credits in certain cases; conferring powers and
7    imposing duties upon the Department of Revenue, certain
8    employers, fiduciaries, individuals, persons, corporations
9    and other entities; prescribing crimes, offenses and
10    penalties," in tax credit and tax benefit administration,
11    further providing for definitions; and providing for Keystone
12    Literacy Investment Tax Credit.
13    The General Assembly of the Commonwealth of Pennsylvania
14 hereby enacts as follows:
15    Section 1.    The definition of "tax credit" in section 1701-
16 A.1 of the act of March 4, 1971 (P.L.6, No.2), known as the Tax
17 Reform Code of 1971, is amended by adding a paragraph to read:
18 Section 1701-A.1.    Definitions.
19    The following words and phrases when used in this article
20 shall have the meanings given to them in this section unless the
21 context clearly indicates otherwise:
22    * * *
23    "Tax credit."    A tax credit authorized under any of the
1 following:
2* * *
3(14.2)    Article XVIII-I.
4* * *
5    Section 2.       The act is amended by adding an article to read:
6ARTICLE XVIII-I
7KEYSTONE LITERACY INVESTMENT TAX CREDIT
8 Section 1801-I.       Scope of article.
9    This article relates to the Keystone Literacy Investment Tax
10 Credit.
11 Section 1802-I.       Legislative intent.
12    It is the intent of this article to fund the evidence-based
13 reading instruction program under Article XV-N of the act of
14 March 10, 1949 (P.L.30, No.14), known as the Public School Code
15 of 1949. Proficiency in reading is foundational to academic
16 achievement across all disciplines and essential to long-term
17 success in life and the workforce. By investing in evidence-
18 based structured literacy instruction, the Commonwealth ensures
19 that every student acquires the literacy skills necessary to
20 thrive, while also strengthening workforce productivity,
21 expanding economic opportunity and reducing long-term social
22 costs.
23 Section 1803-I.       Definitions.
24    The following words and phrases when used in this article
25 shall have the meanings given to them in this section unless the
26 context clearly indicates otherwise:
27    "Allocation amount."       The total amount of tax credits
28 purchased by a qualified taxpayer.
29    "Capital."       The amount of money that a purchaser contributes
30 to the program.
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1    "Department."     The Department of Community and Economic
2 Development of the Commonwealth.
3    "Fund."     The Keystone Literacy Investment Fund.
4    "Insurance premiums tax liability."     Any liability incurred
5 by an insurance company under Article IX.
6    "Program."     The Keystone Literacy Investment Program.
7    "Qualified taxpayer."     Any of the following that has
8 insurance premiums tax liability and contributes capital to
9 purchase premiums tax credits under this article:
10(1)   An insurance company authorized to do business in
11    this Commonwealth.
12(2)   A holding company that has at least one insurance
13    company subsidiary authorized to do business in this
14    Commonwealth.
15    "Tax credit."     A credit against insurance premiums tax
16 liability offered to or held by a qualified taxpayer under this
17 article.
18 Section 1804-I.    Tax credit.
19    A qualified taxpayer may purchase tax credits from the
20 department in accordance with this article and may apply the tax
21 credits against the qualified taxpayer's insurance premiums tax
22 liability in accordance with this article.
23 Section 1805-I.    Duties.
24    (a)     Sale of tax credits.--The department may sell up to
25 $150,000,000 in tax credits to qualified taxpayers. The sale of
26 the tax credits shall be in accordance with section 1808-I.
27    (b)     Time of sale.--The sale authorized under subsection (a)
28 shall occur by January 31, 2027.
29 Section 1806-I.    Use of tax credits by qualified taxpayers.
30    (a)     Use against insurance premiums tax liability.--A
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1 qualified taxpayer that purchases tax credits under section
2 1805-I may claim the credits beginning in calendar year 2029
3 against insurance premiums tax liability incurred for a taxable
4 year that begins on or after January 1, 2028.
5    (b)   Application to department.--A qualified taxpayer seeking
6 to use purchased tax credits may submit an application to the
7 department in a manner prescribed by the department.
8    (c)   Construction.--
9(1)   A qualified taxpayer may not be required to reduce
10    the amount of insurance premiums tax included by the taxpayer
11    in connection with ratemaking for any insurance contract
12    written in this Commonwealth because of a reduction of the
13    taxpayer's insurance premiums tax liability derived from the
14    tax credit purchased under this article.
15(2)   If, under the insurance laws of this Commonwealth,
16    the assets of the qualified taxpayer are examined or
17    considered, the taxpayer's balance of tax credits shall be
18    treated as an admitted asset subject to the same financial
19    rating as held by the Commonwealth.
20    (d)   Limitations.--
21(1)   The total amount of tax credits applied against
22    insurance premiums tax liability by all qualified taxpayers
23    in a fiscal year may not exceed $50,000,000 per year
24    beginning in calendar year 2029.
25(2)   The credit to be applied in any one year may not
26    exceed the insurance premiums tax liability of the qualified
27    taxpayer for that taxable year.
28 Section 1807-I.    Sale, carryover and carryback.
29    (a)   Carryover.--If the qualified taxpayer cannot use the
30 entire amount of the tax credit for the taxable year in which
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1 the taxpayer is eligible for the credit, the excess may be
2 carried over to succeeding taxable years and used as a credit
3 against the qualified tax liability of the taxpayer for those
4 taxable years, provided that the credit may not be carried over
5 to any taxable year that begins after December 31, 2034.
6    (b)   Sale.--No sooner than 30 days after providing the
7 Insurance Department and the department written notice of the
8 intent to transfer tax credits, a qualified taxpayer may
9 transfer tax credits held without restriction to any entity that
10 is a qualified taxpayer in good standing with the Insurance
11 Department and agrees to assume all of the transferor's
12 obligations with respect to the tax credit.
13    (c)   Carryback.--A qualified taxpayer may not carry back a
14 tax credit.
15 Section 1808-I.   Sale of tax credits to qualified taxpayers.
16    (a)   Conduct of sale.--The sale of tax credits authorized
17 under section 1805-I(a) shall be conducted in accordance with
18 this section.
19    (b)   Process.--The department may sell the tax credits
20 authorized under this article or may contract with an
21 independent third party to conduct a bidding process among
22 qualified taxpayers to purchase the credits. In raising capital
23 for the program, the department shall have the discretion to
24 distribute credits using a market-driven approach or any
25 approach that maximizes the yield to the Commonwealth.
26    (c)   Application.--A qualified taxpayer seeking to purchase
27 tax credits may apply to the department in the manner prescribed
28 by the department.
29    (d)   Bidding process.--Using procedures adopted by the
30 department or, if applicable, by an independent third party,
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1 each qualified taxpayer that submits an application shall make a
2 timely and irrevocable offer, subject only to the department's
3 issuance to the taxpayer of tax credit certificates, to make
4 specified contributions of capital to the department on dates
5 specified by the department.
6    (e)   Contents of offer.--The offer under subsection (d) must
7 include all of the following:
8(1)   The requested amount of tax credits, which may not
9    be less than $500,000.
10(2)   The qualified taxpayer's capital contribution for
11    each tax credit dollar requested, which may not be less than
12    the greater of:
13(i)    75% of the requested dollar amount of tax
14credits; or
15(ii)    the percentage of the requested dollar amount
16of tax credits that the department and, if applicable,
17the independent third party determines to be consistent
18with market conditions as of the offer date.
19(3)   Any other information the department or, if
20    applicable, independent third party requires.
21    (f)   Notice of approval.--A qualified taxpayer that submits
22 an application under this section shall receive a written notice
23 from the department indicating whether or not the qualified
24 taxpayer has been approved as a purchaser of tax credits and, if
25 so, the amount of tax credits allocated.
26    (g)   Limitation.--No tax credits may be sold if the bidding
27 process, upon completion, has failed to yield at least
28 $20,000,000 in revenue.
29 Section 1809-I.       Payment for tax credits purchased and
30certificates.
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1    (a)   Payment of capital.--
2(1)   Capital committed by a qualified taxpayer shall be
3    paid to the department for deposit into the fund.
4(2)   Nothing in this section shall be construed to
5    prohibit the department from establishing an installment
6    payment schedule for capital payments to be made by the
7    qualified taxpayer.
8    (b)   Issuance of tax credit certificates.--On receipt of
9 payment of capital, the department shall issue to each qualified
10 taxpayer a tax credit certificate representing a fully vested
11 credit against insurance premiums tax liability.
12    (c)   Certificate issued in accordance with bidding process.--
13 The department shall issue tax credit certificates to qualified
14 taxpayers in accordance with the bidding process selected by the
15 department or the independent third party.
16    (d)   Contents.--The tax credit certificate shall state:
17(1)   The total amount of premiums tax credits that the
18    qualified taxpayer may claim.
19(2)   The amount of capital that the qualified taxpayer
20    has contributed or agreed to contribute in return for the
21    issuance of the tax credit certificate.
22(3)   The dates on which the tax credits will be available
23    for use by the qualified taxpayer.
24(4)   Any penalties or other remedies for noncompliance.
25(5)   The procedures to be used for transferring the tax
26    credits.
27(6)   Any other requirements the department considers
28    necessary.
29 Section 1810-I.     Failure to make contribution of capital and
30reallocation.
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1    (a)   Prohibition.--A tax credit certificate under section
2 1809-I may not be issued to a qualified taxpayer that fails to
3 make a contribution of capital within the time the department
4 specifies.
5    (b)   Penalty.--A qualified taxpayer that fails to make a
6 contribution of capital within the time the department specifies
7 shall be subject to a penalty equal to 10% of the amount of
8 capital that remains unpaid. The penalty shall be paid to the
9 department not later than 30 days after demand.
10    (c)   Reallocation.--The department may offer to reallocate
11 the defaulted capital among other qualified taxpayers so that
12 the result after reallocation is the same as if the initial
13 allocation had been performed without considering the tax credit
14 allocation to the defaulting qualified taxpayer.
15    (d)   Contribution.--If the reallocation of capital under
16 subsection (c) results in the contribution by another qualified
17 taxpayer of the amount of capital not contributed by the
18 defaulting qualified taxpayer, the department may waive the
19 penalty provided under subsection (b).
20    (e)   Transfer.--
21(1)   A qualified taxpayer that fails to make a
22    contribution of capital within the time specified may avoid
23    the imposition of the penalty by transferring the allocation
24    of tax credits to a new or existing qualified taxpayer not
25    later than 30 days after the due date of the defaulted
26    installment.
27(2)   A transferee of an allocation of tax credits of a
28    defaulting qualified taxpayer under this subsection shall
29    make the required contribution of capital not later than 30
30    days after the date of the transfer.
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1 Section 1811-I.        The Keystone Literacy Investment Program.
2    (a)   Establishment.--The Keystone Literacy Investment Program
3 is established within the department.
4    (b)   Fund.--The Keystone Literacy Investment Fund is
5 established in the State Treasury.
6    (c)   Distribution.--The department shall deposit the net
7 proceeds received by the department as a result of the sale of
8 tax credits under section 1805-I(a) into the fund.
9    (d)   Deposit of money.--No administrative action shall
10 prevent the deposit of money into the fund in the fiscal year in
11 which the money is received.
12    (e)   Continuing appropriation.--The money in the fund is
13 appropriated to the Department of Education on a continuing
14 basis to award grants to school entities under Article XV-N of
15 the act of March 10, 1949 (P.L.30, No.14), known as the Public
16 School Code of 1949.
17 Section 1812-I.        Guidelines.
18    The department, in consultation with the Department of
19 Education, shall publish guidelines implementing this article.
20 Section 1813-I.        Report.
21    (a)   Duties.--On or before January 31, 2029, and January 31
22 of each subsequent year through 2035, the department, in
23 consultation with the Department of Education, shall:
24(1)   Submit a report on the implementation of the program
25    to all of the following:
26(i)    The Governor.
27(ii)    The chairperson and minority chairperson of the
28Appropriations Committee of the Senate.
29(iii)    The chairperson and minority chairperson of
30the Appropriations Committee of the House of
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1Representatives.
2(2)   Publish the report under paragraph (1) on the
3    department's publicly accessible Internet website.
4    (b)   Contents.--The report under subsection (a) shall include
5 the following:
6(1)   The name of the purchaser of premiums tax credits.
7(2)   The amount of premiums tax credits allocated to the
8    purchaser.
9(3)   The amount of capital the purchaser contributed for
10    the issuance of the tax credit certificate.
11(4)   The amount of any tax credits that have been
12    transferred under section 1810-I(e).
13(5)   The amount of funds received by the recipients
14    during the previous year.
15(6)   The cumulative amount of capital received by the
16    department in connection with the sale of the tax credits.
17(7)   The names and locations of school entities receiving
18    grants under section 1507-N of the act of March 10, 1949
19    (P.L.30, No.14), known as the Public School Code of 1949.
20    Section 3.    This act shall take effect in 60 days.
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