Log In | About PICPA | Contact | FAQs

Legislative Update

Week Ending January 20, 2006

• Week in Review
• Political News & Notes
• PICPA Tells Senate Property Tax Plan Bad for Business
• Governor and Key Legislators Address PICPA Members
• Rendell Calls for Wage Increase
• GASB Publishes Guide to Implementation of GASB Statement 44

Week in Review

On Wednesday, a special Senate committee heard from the PICPA and other business leaders on Senate Bill 854, the Scavello-Benninghoff property tax relief-sales tax expansion plan. Raising the state sales tax to 6.5%, which would generate about $650 million a year for property tax relief, is the latest idea being considered, according to Senate Majority Leader David Brightbill. He added that the Senate might vote on it within a few weeks.

Political News & Notes

Wenger Announces Retirement. Lancaster County state Sen. Noah Wenger announced this week that he will retire at the end of this year. Wenger joins Sen. Charles Lemmond as the second member of the Senate, both Republicans, to announce his retirement. Sen. Wenger was first elected to the Senate in 1982. A champion of many business and accounting issues, Sen. Wenger will be sorely missed.

Four More Announce House Retirements... Four more state House members, State Reps. Larry Roberts (D-Fayette), Michael Gruitza (D-Mercer), Lynn Herman, (R-Centre), and Tom Tigue (D-Luzerne), announced this week that they will not seek re-election this year. Sixteen House members-9 Republicans and 7 Democrats-have announced that they will voluntarily retire.

PICPA Tells Senate Property Tax Plan Bad for Business

The PICPA opposes the House-passed plan to fund property tax relief through an expanded sales and use tax base, PICPA President-Elect J. Andrew Weidman, CPA, told the Senate Special Session Legislation Committee this week, because the bill "violates a number of principles of good tax policy, including certainty, simplicity and neutrality."

Weidman continued saying, the PICPA is "a strong proponent for tax simplification. As you may know, we have been working with Sen. Scarnati on Senate Bill 292, legislation streamlining the local earned income tax collection system. Senate Bill 854 is not tax simplification. It can easily be called a full employment act for Pennsylvania CPAs and attorneys, but I believe with some certainty that most of our members don't want to earn their livelihood trying to interpret the provisions of this legislation."

Small and emerging businesses are especially disadvantaged under Senate Bill 854, Weidman told senators. "These businesses generally must purchase services that larger businesses may provide internally. These small businesses will bear not only the higher cost of an externally provided service but the tax on that service as well. Further, the additional compliance costs associated with such a tax are proportionally greater for small businesses and make up a higher percentage of their total purchases. A tax on services also creates an incentive for larger business not to contract-out services to small businesses or independent contractors because of the additional cost burden of the tax," said Weidman.

William Lazor, CPA, also testifying for the PICPA, told senators that Senate Bill 854 gives "vast and unfettered new powers to the Department of Revenue that mirror the Internal Revenue Service's 482 powers. Section 482 of the Internal Revenue Code (IRC) authorizes the IRS to reallocate income among commonly controlled corporations when necessary to prevent the evasion of taxes or to properly reflect the income of related parties. Congress enacted 482 to ensure that commonly controlled corporations report and pay tax on their actual share of income arising from related party transactions. The IRS has a vast array of personnel with expertise in many areas of tax law and related matters to properly and fairly evaluate these transaction.

"Moreover, our reading of Senate Bill 854 leads us to conclude that inter-company transactions would be subject to a 6 percent sales tax. It is common practice in today's business world to push down administrative or management functions at cost to inter-company affiliates. There are legitimate business reasons to do this. This would be a significant economic burden to many employers in the state of Pennsylvania," according to Lazor.

Lawmakers hope to have a bill on Gov. Rendell's desk before the end of February.

Governor and Key Legislators Address PICPA Members

For the third time in four years Gov. Rendell appeared before PICPA to garner support and answer questions about important legislative issues at a meeting of the CPA-PAC Board and Legislation Committee on Thursday in Harrisburg. After thanking PICPA for its past support, he ran through the list of his gubernatorial accomplishments including expansion of the PACE program, strategic sourcing of state government suppliers that resulted in $500 million per year savings, and his aggressive economic stimulus plan. He confidently predicted a property tax reform proposal on his desk by mid-February and he supports utilizing the estimated $1 billion of gaming revenue and an increased local earned income tax (EIT) to fund the reform.

Legislative leaders from each caucus also attended the meeting.

Read more

Rendell Calls for Wage Increase

Joined by several Pennsylvanians working to support their families on minimum wage, Gov. Ed Rendell this week renewed his call for legislators to immediately increase the state's minimum wage to $6.25 an hour this year and increase it to $7.15 per hour by 2007, with a cost of living increase thereafter.

The federal minimum wage has remained at $5.15 an hour since 1997. The last time Pennsylvania's General Assembly increased the minimum wage was in 1988.

GASB Publishes Guide to Implementation of GASB Statement 44

To assist preparers and auditors of governmental financial statements and those that advise them as they implement the updated and expanded statistical section, the GASB has published a Guide to Implementation of GASB Statement 44 on the Statistical Section. The statistical section is the part of a state or local government's comprehensive annual financial report (CAFR) that presents trend information for the last ten years about a government's financial results, major own-source revenues, outstanding debt, economic and demographic indicators, and operating activities.

The Implementation Guide also includes a glossary, topical index, and the Standards section of Statement 44. It can be ordered (product code GQA44) through the GASB's order department at 800-748-0659 or via its website at www.gasb.org.