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Legislative Update

Week Ending Sept. 15, 2006

• PICPA Urges Legislature to Pass EIT Reforms
• EMS Tax Changes Needed PICPA Tells Lawmakers
• PICPA Provides Input to Legislators
• Revenue Revises PIT Bulletin
• 2006 Professional Issues Updates

PICPA Urges Legislature to Pass EIT Reforms

PICPA and Committee on State Taxation member Cheri Freeh testified before members of the House Finance Committee this week in Pittsburgh that the current Earned Income Tax (EIT) collection system is a "mess" and urged them to support proposed legislation that would simplify and streamline the local EIT collection process.

"We often find that dealing with the local tax collection system is more time consuming and confusing than dealing with the state or federal tax systems," according to Freeh. "With the recent passage of Special Session Act 1, it has the potential to become even more of an administrative nightmare."

"The problems with earned income tax collection go beyond tax collectors ignoring the law - which, by the way, is more prevalent and widespread than should be the case. The reporting, operating, and audit provisions of Act 511 are vague and ambiguous. Moreover, Act 511 does not include procedural or standardized reporting requirements," Freeh told legislators.

The Department of Community and Economic Development (DCED) has drafted a comprehensive amendment, with PICPA's input and support, which will be offered as an amendment to House Bill 1427 or Senate Bill 292. The proposal will stem the loss of local tax revenues; make the system more employer friendly, fairer and less formidable for taxpayers; and create as much uniformity and clarity in the system as possible.

PICPA has been at the forefront of this issue with its passage of Act 166 of 2002, which amended Act 511 to conform the definitions of earned income and net profits used for state tax purposes. Following the Sept. 2004 release of the Department of Community and Economic Development's report on the EIT system, PICPA began working with Sen. Joe Scarnati and Rep. Gordon Denlinger, CPA, on legislation to address the administrative problems identified in the DCED study.

For more information on the DCED proposed EIT Collection Reform & Consolidation process, visit www.newPA.com.

EMS Tax Changes Needed PICPA Tells Lawmakers

PICPA members Barry Gerber and Larry Hankinson testified before the House Finance Committee Sept. 13, 2006 regarding concerns and problems with Act 57 of 2004, the Emergency and Municipal Services (EMS) Act.

Gerber, with Kesich Consulting Group LLP in Pittsburgh, Pa., told legislators that the "simplest and most efficient collection of the $52 EMS tax would be a single withholding from each employee's paycheck during the first pay period of each year, which would be remitted quarterly, possibly at the same time quarterly payroll taxes are due."

"The $52 EMS tax should be the only rate available to a municipality if the old $10 occupation privilege tax is legislatively discarded. Likewise, the $12,000 annual exemption should be fixed and mandatory," according to Gerber.

Hankinson, controller with New Enterprise Stone & Lime Company, in New Enterprise, Pa., told legislators that the "EMS tax is one more 'nuisance' tax being collected by the same cumbersome system. Currently, New Enterprise and its subsidiaries file local tax information with some 215 different local taxing jurisdictions in Pennsylvania. This includes some separate 45 EMS tax filings."

Legislation to make changes to the EMS Act - Senate Bill 157 - is currently pending in the Senate.

PICPA Provides Input to Legislators

At the request of the House Finance Committee, PICPA offered testimony recently on two Tax Reform Code proposals pending before the Committee.

The first bill, House Bill 2649, would preclude senior citizens from filing state personal income tax returns. PICPA members Cheri Freeh of Hutchinson, Gillahan & Freeh, PC, and Timothy Billow of Highmark, Inc., urged legislators to consider allowing senior citizens to file a single-page certification rather than a return. 

"In most cases, once seniors reach the point where they qualify for 100 percent tax forgiveness, they remain in that situation for the rest of their lives. As such, we suggest including language in any proposed bills that requires the Department of Revenue to honor the original certificate each year, unless they are notified of a change in the information. This would save seniors from having to file a new certificate each year, it would save the department processing time, and it would save a few trees," wrote PICPA. 

House Bill 2774 would amend the Tax Reform Code and is intended to clarify that for purposes of determining the taxable value of shares, the book value of any surplus may be determined on a pooled basis without any addition to the value of goodwill ascribed to a combination occurring after June 30, 2001.

PICPA members Barry E. Smith, of Smart and Associates, LLP, and Bruce K. Darkes, of Beard Miller, LLP, provided testimony and answered questions from legislators.

Revenue Revises PIT Bulletin

The Department of Revenue recently provided PICPA with a revised Personal Income Tax Bulletin 2005-03, Deferred Compensation Under Nonqualified Plans. The Bulletin was originally issued Oct. 12, 2005, and has been revised Dec. 22, 2005 and more recently Sept. 8, 2006.

2006 Professional Issues Updates

Join PICPA President Andy Weidman and CEO Bert Trexler as they travel across the state to discuss the issues that matter most to you and your profession. In just two hours, you'll learn what's affecting the profession and hear how PICPA is advocating on your behalf. You will also be able to share your opinions with leadership and earn valuable CPE. Register for the Professional Issues Update in your area.