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Legislative Update

Week Ending February 17, 2006

• Week in Review
• Political News & Notes
• Property Tax Relief Moving Forward
• Bank Bill Signed Into Law
• Budget Hearings Get Under Way
• Blighted Properties Bill Sent to Governor
• Fire & EMS Grant Program Bill Approved
• Alternative Energy Tax Credit Legislation Passes House
• IRS Releases 2005 Form 990

Week in Review

The state House voted unanimously Tuesday to reject a property tax relief plan that the Senate approved Feb. 6. The basic House objection to the Senate plan is its failure to provide large enough property tax cuts. The House vote, which was followed the next day with the Senate insisting on its plan, is a step toward creating a conference committee, a tool available to lawmakers to broker compromise.

A bill requiring voters to show identification at the polls cleared both chambers this week. Supporters maintain that the provision will fight voter fraud by ensuring that a person can cast only one ballot in an election, while opponents argued that the measure would open the door to countless voter challenges and create long lines at the ballot box that drive voters away. House Bill 1318 now awaits an uncertain fate at the hands of Gov. Ed Rendell.

The legislature begins a brief break for budget hearings over the next two weeks. The House returns on March 6 and Senate comes back to town a week later.

Political News & Notes

Panyard Out of Governor's Race. Jim Panyard, the last remaining opponent to Lynn Swann's candidacy for the GOP nomination for Governor, has withdrawn from the race. Former Lt. Governor Bill Scranton bowed out just prior to the Feb. 11 formal endorsement of Swann by the Republican State Committee. Panyard, who had not sought the Party endorsement, had said he would remain in the race thru the May Primary Election. He said he was withdrawing because of a lack of financial support for his campaign.

Casey Widens Lead Over Santorum. Democratic State Treasurer Robert Casey holds a 51 - 36% lead over incumbent Republican U.S. Sen. Rick Santorum in the Pennsylvania Senate race, with 10% undecided, according to a Quinnipiac University poll released this week. In this latest survey, Republicans back Santorum 70 - 21%, while Democrats back Casey 80 - 12% and independent voters back the Democrat 52 - 29%. Voters give Casey a 34 - 6% favorability rating, with 22% mixed and 38% who haven't heard enough to form an opinion. Santorum gets a 31 - 29% favorability rating, with 22% mixed and 17% who haven't heard enough to form an opinion.

State Supreme Court Vacancy Filled. Allegheny County Common Pleas Judge Cynthia Baldwin was confirmed this week by the state Senate to the state Supreme Court. Gov. Ed Rendell nominated Judge Baldwin to replace Russell Nigro, who lost a retention election in last November. She has agreed to serve only until Jan. 2008 and will not run next year for a full 10-year term.

Wenger Elected Senate Approps Chair. State Sen. Noah Wenger has been elected as Chairman of the Senate Appropriations Committee replacing Sen. Bob Thompson who died on Jan. 28. Wenger is not seeking re-election to the Senate so he will fill the Chairman's job only thru the end of this Session. Bucks County Republican Sen. Joe Conti, who also is not seeking re-election this year, was elected to replace Wenger as chairman of the Senate Republican Caucus for the remainder of his term in office.

Two More Lawmakers Announce Retirements. Berks County Republican state Rep. Dennis Leh and Huntingdon County Republican state Rep. Larry Sather announced this week that they will not seek re-election. Leh, chairman of the House Finance Committee, was first elected to the House in 1986. Sather was first elected in 1992. Twenty-three members of the House have announced that they will not seek re-election this year-14 Republicans and 9 Democrats.

Property Tax Relief Moving Forward

Finally, some positive news in the property tax relief sweepstakes. Tuesday evening House members rejected the Senate-adopted plan by a vote of 0 to 197. The next day the Senate "insisted" on its amendment to Special Session House Bill 39. How is this "positive" news you may ask!

The procedural votes are a step toward creating a conference committee, a tool available to lawmakers to broker compromise. Under this setup, the top leaders of each chamber appoint six conferees-3 from the Senate and 3 from the House. The conferees' task will be to hammer out a compromise bill-if possible-and send it back to each chamber for a yes or no vote.

Lawmakers are under pressure to take some action on property taxes as they start a three-week session recess that extends until March 6. During this recess, the House and Senate Appropriations Committees will hold public hearings on Gov. Ed Rendell's state budget proposal and candidates will circulate nominating petitions among voters to get a spot on the May 16 primary ballot.

Since the start of a special legislative session called five months ago by Rendell, the House and Senate have gone in separate directions on property taxes.

Legislative leaders suggested that a conference committee provides the best chance of a resolution this session of the issue, which has lingered for three decades. House and Senate leaders and staffers suggested the committee's work could be completed and ready for a vote when the legislature returns the week of March 6.

The Senate has basically favored settling the issue by mandating local referendums to shift the tax burden from property to income and steering clear of any state tax hike. The plan would also nearly double the number of people eligible for housing assistance to low-income senior citizens. The amount of assistance would vary between $250 and $650 a year, with the higher amount going to the poorest seniors.

Bank Bill Signed Into Law

Gov. Ed Rendell has signed into law legislation designed to help embattled Sovereign Bancorp in its fight against shareholders.

Senate Bill 595 would make changes concerning the removal of directors, "controlling persons" and for the appointment of minors to advisory committees for certain non-profit corporations. Currently, a "controlling person or group" in a business corporation is defined as a person or group of persons acting in concert that have voting power over voting shares of the registered corporation that entitles the holders to cast 20% of the votes that all shareholders would be entitled to cast in an election of the corporation's directors.

The bill would prohibit shares acquired directly from the corporation in a transaction exempt from the registrations requirements of the Securities Act of 1933 from being used in the calculation of the 20% threshold required to constitute a controlling person or group.

Further, the legislation outlaws the removal of directors without cause unless the articles of incorporation contain a specific and unambiguous statement that directors may be removed from office without cause.

Budget Hearings Get Under Way

Lawmakers will begin to examine Gov. Ed Rendell's proposed 2006-07 General Fund Budget following his annual address to a joint session of the state Legislature Feb. 8. The budget process will begin in earnest next week as the House and Senate Appropriations Committees begin budget hearings by gathering testimony from lawmakers and representatives from various state agencies.

The proposed $25.4 billion budget plan for Pennsylvania includes increased spending of nearly $1 billion. Some lawmakers are concerned about the spending increase, as it is greater than the anticipated 3.4% increase in revenues and could place the state in a difficult financial situation in the near future.

Lawmakers were pleased with some parts of the proposed plan, particularly the additional funding dedicated to public education and long-term care services for seniors citizens. However, a number of important programs were also cut from the budget proposal, including transportation services for disabled veterans, rural health care initiatives, and math and science education outreach.

According to the state constitution, the final budget must be enacted by June 30.

Blighted Properties Bill Sent to Governor

The state House overwhelmingly voted to send a proposal to the governor that will allow for claims on delinquent property taxes to be dissolved if the owner donates the property to a political subdivision.

House Bill 459 amends the Real Estate Tax Sale Law by allowing for the release of delinquent taxes when property is donated to a political subdivision such as a city, county, township or school district. The legislation also requires that the claim docket in the tax claim bureau should include the owner's last known address and that the tax claim bureau maintain a public list of properties and owners for which taxes have not been paid.

Under the current law, there is no provision for discharge of delinquent taxes when a property is donated. The law requires a claim docket that includes the property owner's name for which the claim is made, except for the properties of owners who are unknown for at least five years.

If signed into law, the bill will become effective in 60 days.

Fire & EMS Grant Program Bill Approved

Legislation that reauthorizes Pennsylvania's $25 million grant program for volunteer fire and ambulance companies has been sent to the governor for his approval.

House Bill 599 renews the Volunteer Fire Company and the Volunteer Ambulance Service Grant Program. The direct state grant program provides grants to volunteer fire, rescue, and emergency medical services (EMS) organizations for the acquisition or upgrading of equipment, the training of volunteers, the construction or renovation of their primary buildings, or the reduction of debt from previous qualified purchases.

Volunteer emergency responder organizations must apply for the grants by April 30 of this year.

Alternative Energy Tax Credit Legislation Passes House

Legislation that will help reduce Pennsylvania's dependence on foreign sources of energy by establishing tax credits for alternative energy businesses was passed unanimously by the state House this week.

House Bill 1964 would create a Renewable Energy Tax Credit and allow businesses to offset the Personal Income Tax, Corporate Net Income Tax or Capital Stock and Franchise Tax by an amount equal to 15% of the cost of capital equipment directly related to qualified alternative energy activities. The total amount of all renewable energy investment tax credits allowed would not exceed $15 million in any one fiscal year.

The bill now moves to the state Senate for consideration.

IRS Releases 2005 Form 990

The IRS released a 2005 Form 990 for tax-exempt organizations Feb. 1 that includes new questions about compensation and benefits for current and former officers, directors, trustees and senior staff of charities and foundations, as well as whether the organization has a written conflict of interest policy.

The new form is two pages longer than the 2004 return. The changes are reflective of the agency's stated enforcement goal to identify and halt abuses by tax-exempt organizations that pay excessive compensation and benefits to their officers and other insiders.

Another new question in Part III of the Form 990 asks about contributions of qualified real property interest under Section 170(h). This question was prompted by recent congressional hearings on cases where the valuation of donations of easements to charities was inflated.