In general, you report the income in your home state and on the state(s) where you work. This property in Europe is, in a sense, where you work (yes, I realize how complex that is). So you report it in both places.
So, how do you normally avoid double taxation? Simple, when you pay tax in the European country, you declare this tax on form 1116, which acts as a credit for US taxes.
Of course, we are speaking of Pennsylvania, not the US. While the system I describe above works for most states, it no longer works for Pennsylvania. Pennsylvania says, "Note: Act 2013-52 effective Jan. 1, 2014, eliminated the resident credit for personal income tax paid to foreign countries." See page 4 of PA PERSONAL INCOME TAX GUIDE DEDUCTIONS AND CREDITS.
So the issue is that the PA legislature eliminated the ability for you to avoid double taxation on your foreign rental property.
The quote you gave above in toto (as a whole) is "Allocation or Apportionment of Rents and Royalties from the Extraction of Minerals or from Copyrights and Patents". That is, for the extraction of minerals or from Copyrights and Patents. And your real estate in Europe is neither. So your quote does not apply.
A resident of Pennsylvania "is taxed on all of his or her taxable income whether it is received from sources inside or outside Pennsylvania." See How Residents are Taxed.
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