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Legislative Update

Week Ending Sept. 29, 2006

• EIT Reforms Clear Senate Committee
• Charitable Organizations Bill Goes to Full Senate
• PICPA-DOR Q&As Now Available
• House to Consider Tax Appeals Proposal
• Treasury Unveils Strategy for Reducing Tax Gap
• IRS Phone Forum - AUR Program
• New Publication Requirements for New York Limited Liability Entities

EIT Reforms Clear Senate Committee

Legislation reforming and consolidating the local earned income tax (EIT) collection system-a top PICPA legislative priority-was approved by the Senate Finance Committee this week by a 9 to 1 vote. Sen. John Gordner was the only "No" vote.

The proposal, offered as an amendment to House Bill 1427, would require consolidation of collection at the county level, strengthen auditing and reporting requirements, and require the Department of Community and Economic Development (DCED) to establish uniform rules and regulations, including standard forms and returns.

Employers with multiple worksites across the Commonwealth will be permitted to remit and report local income taxes to just one local collector under the amended HB 1427. The bill also establishes a uniform process for distributing and tracking income tax monies.

Taxes collected on and after Jan. 1, 2009 will by collected by new countywide collectors.

HB 1427 now goes to the full Senate for consideration. PICPA continues to urge lawmakers to support legislation that significantly streamlines the EIT collection system for all taxpayers.

PICPA, the PA Chamber of Business and Industry, and the National Federation of Independent Business will host an educational forum with House and Senate lawmakers on Oct. 3 in Harrisburg. The session is being held to familiarize members of the General Assembly with the overall  issue and the provisions contained in HB 1427, as approved by the Finance Committee.

For more information on how you get help PICPA with this legislation, please contact your Government Relations Team at GovernmentRelations@picpa.org or (717) 232-1831.

Charitable Organizations Bill Goes to Full Senate

The Senate State Government Committee approved House Bill 632 on Tues., Sept. 26, without amendments, sending it to the full Senate for consideration.

House Bill 632 amends the Solicitation of Funds for Charitable Purposes Act of 1990 by removing the exemption for first responder organizations, such as veterans', volunteer fireman's, ambulance and rescue squad organizations.

The bill also increases the audit threshold for organizations that receive annual contributions of more than $300,000-up from $125,000. Organizations that receive annual contributions of between $50,000 and $300,000 would be required to have a compilation, review or audit of their financial statements.

PICPA-DOR Q&As Now Available

Your PICPA Committee on State Taxation meets annually with representatives of the Pennsylvania Department of Revenue to discuss issues of importance to practitioners and their clients. A written summary of Revenue's responses to PICPA members' questions from our June 2006 Question and Answer Session has been added to our Web site.

PICPA would like to thank Sec. Greg Fajt and his senior staff for their cooperation and assistance with this and many other projects. 

House to Consider Tax Appeals Proposal

PICPA is urging legislators to support Senate Bill 993, which is tentatively scheduled for a vote in the State House the week of Oct. 2.

Senate Bill 993 reforms and consolidates the tax administration process in Pennsylvania making it more efficient and less burdensome for taxpayers. The bill also addresses all or parts of 5 recommendations made by the Governor's Business Tax Reform Commission to improve tax administration and appeals. Those include:

• Standardizing assessment terminology to use "assessment" throughout.
• Requiring all assessments to be prominently labeled and sent via certified mail.
• Changing the settlement of corporate taxes to an assessment process used in other taxes.
• Standardizing all administrative appeal periods to 90 days, while maintaining the appeal period to Commonwealth Court at 30 days.
• Requiring the Department of Revenue to provide the taxpayer with an explanation of the basis for any assessment.

Sen. Pat Browne, CPA, is prime sponsor of the bill.

Treasury Unveils Strategy for Reducing Tax Gap

The Treasury Department issued to Congress on Sept. 26 a comprehensive strategy for reducing the tax gap, estimated by the IRS earlier this year at $345 billion annually.

The tax gap is the difference between the amount of tax owed by taxpayers and the amount actually paid on time. The strategy outlined by Treasury this week builds upon current enforcement efforts at the IRS, and is intended as a broader base on which to build. The more detailed elements of the strategy are contingent on the budget process for fiscal year 2008.

The report shows that over 70 percent of the tax gap is attributable to individual income tax and over 80 percent is caused by underreporting of tax. Of that 80 percent figure, roughly half that amount resulted from underreporting of net business income by individuals, including the self-employed.

IRS Phone Forum - AUR Program

The IRS Small Business and Self Employed Stakeholder Liaison is hosting Practitioner Phone Forums on October 25, 2006 to discuss "Navigating the IRS - Campus Compliance Services Automated Underreporter AUR Program". The forums are being offered throughout the day. However, registration is required.

New Publication Requirements for New York Limited Liability Entities

Limited liability entities, whether organized in New York or organized in other states and qualified to do business in New York, will face new publication requirements under recently adopted amendments to the New York law governing such entities.

Failure to comply with the new publication provisions will result in the suspension of such entity's authority to conduct business in New York. While the new law became effective on June 1, 2006, certain aspects are applicable to entities organized prior to that date.