Pennsylvania Code › Title 61 - REVENUE › Part I - Department of Revenue › Subpart B - General Fund Revenues › Article V - Personal Income Tax › Chapter 103 - IMPOSITION AND DETERMINATION OF TAX › Subchapter B - DETERMINATION OF TAX › Section 103.16 - Interest

Current through Register Vol. 54, No. 28, July 13, 2024
(a)
Generally.
Interest includes any charge for the use or
						detention of money or for a forbearance from enforcement of a debt that is due,
						whether or not payable as such or as principal, including, for taxable years
						beginning on or after January 1, 1993, any excess of a publicly offered
						obligation's stated redemption price at maturity over the first price at which
						a substantial amount of the obligations included in the issue is sold to the
						public. For this purpose, the public does not include bond houses, brokers or
						other persons or organizations acting in the capacity of underwriters or
						wholesalers. As a general rule, interest received by or credited to the
						taxpayer constitutes gross income and is fully taxable. Interest income
						includes interest on savings or other bank deposits; interest on coupon bonds;
						interest on an open account, promissory note, mortgage or corporate bond or
						debenture; the interest portion of a condemnation award, usurious interest
						(unless by state law it is automatically converted to a payment on the
						principal); interest on legacies and life insurance proceeds held under an
						agreement to pay interest thereon; and interest on refunds of taxes.
(b)
Bonds bought when interest
						defaulted or accrued.
If a taxpayer purchases bonds where interest has
						accrued but has not been paid, interest which is in arrears but has accrued at
						the time of purchase is not income and may not be taxable as interest if
						subsequently paid. The payments are returns of capital which reduce the
						remaining cost basis. Interest which accrued after the date of purchase is
						taxable interest income for the year in which received or accrued, depending on
						the method of accounting used by the taxpayer.
(c)
Bonds sold between interest
						dates.
If bonds are sold between interest dates, part of the sale
						price represents interest accrued to the date of the sale and shall be reported
						as interest income.
(d)
Annuities.
Interest does not include amounts received under an
						annuity contract.
(e)
Government obligations.
Interest derived from obligations
						which are not statutorily free from state or local taxation under any other act
						of the General Assembly or under the laws of the United States is taxable under
						this section. Interest on obligations issued by or on behalf of the United
						States Government is not taxable under this section. Interest on obligations
						issued by the Commonwealth, a public authority, commission, board or other
						agency created by the Commonwealth, a political subdivision of the
						Commonwealth, or a public authority created by a political subdivision which is
						for the performance of essential governmental functions and which is in all
						respects for the benefit of the people of this Commonwealth, for the increase
						of their commerce and prosperity and for the improvement of their health and
						living conditions is not taxable under this subsection. Interest on obligations
						issued by other states and territories, their political subdivisions and
						instrumentalities is taxable under this section.
(f)
Unstated or imputed
						interest.
Unstated or imputed interest for a taxable year beginning on
						or after January 1, 1993, including interest derived from government
						obligations, shall be computed in the same manner as it is required to be
						computed for Federal Income Tax purposes.
The provisions of this §
														103.16 amended under section 354
							 of the Tax Reform Code of 1971 (72 P. S. §
															7354).