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HB 181

An Act amending Title 53 (Municipalities Generally) of the Pennsylvania Consolidated Statutes, in general provisions relating to government and administration, providing for transparency of political subdivision authorities; and, in municipal authorities, providing for transparency of municipal authority.

2025-2026 Regular Session Introduced by Johanny Cepeda-Freytiz and 13 co-sponsors

The bill reenacts a refundable state EITC equal to a percentage of the federal EITC to increase after‑tax income for low- and moderate‑income workers, beginning 2025.

Referred to Local Government
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WeVote Research Nonpartisan
Bill Summary · HB 181

HB 181 — Tax Relief for Working Families Act

Status: Passed 1st Reading (introduced Aug 15, 2025)
Subjects: Individual income, family issues, tax credits, taxation

Purpose / Intent

The bill reenacts a state Earned Income Tax Credit (EITC) to provide tax relief to low- and moderate‑income working households — particularly families with children — by linking a state tax credit to the federal EITC. The stated goal is to increase after‑tax income and financial security for working families facing rising living costs.

Key provisions

  • Reenactment and recodification
    • Reenacts the prior state EITC statute (previously G.S. 105‑151.31) and recodifies it as G.S. 105‑153.12.
  • Amount of credit
    • The state credit equals a percentage of the amount the taxpayer qualifies for under the federal EITC (section 32 of the Internal Revenue Code).
    • The bill specifies the percentage as follows: 4.5% for taxable year 2013 and 5.0% for all other taxable years (text mirrors the prior statutory structure).
  • Refundability
    • The credit is refundable: if the credit exceeds the taxpayer’s state tax liability (after other credits), the excess must be refunded to the taxpayer.
    • The bill excludes application of the federal Advance Payment of EITC mechanism (IRC §3507) to the state credit.
  • Nonresidents / part‑year residents
    • Nonresidents and part‑year residents claiming the credit must prorate the allowable amount based on the statutory apportionment fraction (references to existing G.S. proration rules).
  • Effective date
    • The reenacted EITC applies to taxable years beginning on or after January 1, 2025.

Who is affected

  • Primary beneficiaries: low‑ and moderate‑income workers who qualify for the federal earned income tax credit — especially families with children.
  • State revenue administrators: the Department of Revenue (or equivalent tax agency) will implement, process refunds, and apply proration rules for nonresidents/part‑year residents.
  • State budget / General Fund: the credit will reduce net tax receipts (increase refunds), producing a fiscal cost to the State.

Fiscal and administrative impact

  • The bill text does not include a fiscal note in the provided materials. Reinstating a refundable EITC will reduce net tax revenues and increase refund outlays; the total cost depends on (a) number of eligible taxpayers, and (b) federal EITC amounts in each year.
  • Administrative impact includes changes to tax forms, programming, taxpayer guidance, and refund processing; the Department of Revenue will need to operationalize the credit and proration rules.

Other notable details / limitations

  • The statute preserves the order of credit application rule: nonrefundable credits are subtracted before refundable credits when computing final liability.
  • The bill restores a credit form and structure that previously expired; prior statute had a sunset for taxable years beginning on or after Jan 1, 2014.
  • The bill as drafted contains an archival reference to the 2013 4.5% rate and a 5% rate for other years; confirm final percentage language in committee reports or engrossed text before relying on precise rates.

Procedural / timeline notes

  • As provided, the bill was introduced and has passed first reading; the text sets the credit to apply beginning with taxable year 2025 (i.e., effective Jan 1, 2025).
  • If enacted, implementation will require Department of Revenue rulemaking, form updates, and taxpayer outreach ahead of the next filing season.

If you want, I can:
- Draft a short fiscal estimate outline showing how to estimate annual cost (using federal EITC aggregate amounts and state filers), or
- Produce a one‑page explainer for taxpayers on eligibility and refund mechanics.

Compiled from official sources — confirm details with the bill’s official record.

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