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Legislative Update

Week Ending Dec. 1, 2006

• Upheaval in the House?
• New Senate Leadership Team Elected
• Strategic Development Bill Now Law
• Governor Signs Bills Into Law
• Newman Leaving State Supreme Court
• Pass-Through Entities Q & A
• Fiscal Year 2006 Enforcement and Service Results
• Tax Professional e-Services Center is Here
• Thank You, Subscribers!

Upheaval in the House?

2006 has been the Super Bowl of general elections for spectators of Pennsylvania politics – and, since the outcome of the May primaries, it has been anyone’s game.

Early last week, as the final seconds of the fourth quarter were ticking away in this, the closest state political battle in recent history, the score remained 102-101, with Republicans fighting to maintain their tenuous lead.

Finally, the referee blows his whistle, and the Pennsylvania GOP breathes a sigh of relief: they would be the House majority party for another legislative cycle.

But wait! The Democrats are on their feet, demanding a review of the final moments of play. A hush falls over the crowd, fans of both parties certain that theirs is the winning team. Officials huddle on the field, and then, at last, a call is made: NO GOAL. The scoreboard still reads 102-101 – but now it will be in favor of the Democrats, not Republicans.

Overtime
The elections came down to two hotly contested races in Chester County; votes of which officials were still tallying three weeks after the polls had closed.

On Tuesday, House 167th district officials announced that the Republicans had eked out a win with Duane Milne defeating Anne Crowley, 13,556 votes to 13,412, to replace retiring GOP Rep. Robert Flick.

Unofficial Election Night results for the House 156th also had Republican Shannon Royer ahead of his opponent, Democrat Barbara McIlvaine Smith, by a scant handful of votes.

By Tuesday afternoon, however, word came that those projections were incorrect. The Democrats had scooped up enough ballots to defeat Royer by a mere 23 votes, giving them the House majority for the first time since 1994.

Play Continues
However, the game is far from over. There are still several potential pitfalls awaiting the Democrats.

First, with the result of the 156th Chester County seat now preliminarily certified by the Chester County Board of Elections, House Republicans will also almost certainly ask for an official recount of the results. A court challenge is also a possibility.

In addition, behind the scenes Republicans are reportedly hard at work wooing opposing party members of the House to join their side of the aisle, attempting to garner that critical majority vote.

Holding the majority is not only important in shaping future legislative agendas, but it will also determine who will hold the gavel as Speaker of the House. Current Speaker John Perzel has expressed confidence that he will be able to maintain the position, while Rep. Bill DeWeese – current House Minority Leader and prior Speaker – has stated with equal self-assurance that the Democrats will obtain the post.

The weeks leading up to the New Year will certainly be ones to watch as the outcome of the general elections continues to unfold. PICPA will continue to monitor developments and report as issues warrant.

New Senate Leadership Team Elected

Events have been quieter in the Senate chamber, as members met last week to elect their party leaders. Here, the Republicans maintain a firm hold on the majority. However, following the surprise ousting of both President Pro Tempore Robert Jubelirer and Majority Leader David Brightbill in the primary elections, the party still faced some difficult decision-making.

Sen. Joseph Scarnati won the nomination to serve as President Pro Tem. His position will not be official, however, until the full Senate reconvenes in January and holds its election. Sen. Scarnati will then be responsible for appointing the chairpersons and members of the standing committees of the Senate.

Sen. Dominic Pileggi will replace Sen. David Brightbill as Senate Majority Leader, while Sen. Gibson Armstrong will chair the chamber’s most powerful standing committee, Senate Appropriations.

The position of Majority Whip will go to Sen. Jane Clare Orie; Sen. Mike Waugh will take over the role of Majority Caucus Chairman from retiring Sen. Noah Wenger; and Sen. Robert Robbins will retain his position as Majority Caucus Secretary.

There will be no change in the Senate Democratic leadership for the 2007-08 legislative session:.

• Sen. Bob Mellow, Minority Leader
• Sen. Mike O'Pake, Minority Whip
• Sen. Vincent Hughes, Minority Deputy Whip
• Sen. Jay Costa, Jr., Caucus Chairman
• Sen. Gerald LaValle, Caucus Secretary
• Sen. Vince Fumo, Appropriations Chairman
• Sen. Connie Williams, Caucus Administrator
• Sen. Richard Kasunic, Policy Committee Chairman

For a full listing of election results, please see the Pennsylvania Department of State Web site.

Strategic Development Bill Now Law

Gov. Ed Rendell recently signed into law legislation creating strategic development zones that will attract new businesses and encourage job growth. Modeled after the state’s Keystone Opportunity Zone program, Senate Bill 854 will provide tax incentives for businesses that commit to creating jobs and investing in key geographic areas of Pennsylvania.

Two of the four zones will be established in southwestern Pennsylvania, with a third in the Lehigh Valley. The fourth has yet to be determined.

Under the new law, the Governor will be empowered to identify the strategic development areas (SDAs). Companies choosing to locate in these areas will benefit from state and local tax abatements for 15 years, unless the municipalities and property owners agree to an earlier termination. Local municipal officials must also agree to the SDA designation.

Each SDA must be between 10 acres and 1,500 acres in size. The cumulative total land area for all four zones may not exceed 5,000 acres.

To be eligible for the tax breaks, companies must commit to creating or maintaining at least 500 jobs and make $45 million or more in capital investments within three years.

Governor Signs Bills Into Law

On Nov. 29, 2006, Gov. Rendell signed a number of bills into law, including the following:

Senate Bill 1139 amends the Tax Reform Code of 1971 by giving a state income tax exemption for income received from the United States government or the Commonwealth of Pennsylvania for active state duty for emergencies within or outside Pennsylvania. The bill becomes effective immediately and applies to tax years beginning after Dec. 31, 2006.

House Bill 183 will allow local governments to appropriate money to a land trust or local land trust for the acquisition of, or conservation and preservation of, interests in real property for the purpose of achieving open space benefits. The bill becomes effective in 60 days.

The bill also permits local governments to transfer open space property interests to a land trust or local land trust and elect to accept any nominal consideration for the transfer it deems appropriate. It expressly prohibits either a land trust or a local land trust from acquiring an interest in real property through eminent domain.

Senate Bill 628 relates to health care power of attorney, living wills and out-of-hospital do-not-resuscitate orders. The bill re-writes and replaces Chapter 54 of Title 20 to provide a statutory means for competent adults to control their health care through written instructions or by health care agents or representatives and requested orders, for execution and revocation of living wills, for health care power of attorney and for the appointment and revocation of health care agents and selection and duties of health care representatives. The bill becomes effective in 60 days.

Senate Bill 665 permits letters of administration to be granted to a redevelopment authority. The letters may not be granted before 30 days following the decedent’s death. The bill says that a redevelopment authority that is granted letters of administration will have the power to take, clear, combine, or transfer title to real property of the estate as necessary to return such property to productive use, and upon payment of fair market value of the property in its current state, to the estate. The bill becomes effective in 60 days. 

Newman Leaving State Supreme Court

Pennsylvania Supreme Court Justice Sandra Schultz Newman will resign from the court at the end of the year to take a job with a Philadelphia area law firm. Newman, 68, who served on the Supreme Court for 11 years, narrowly won her 2005 retention election.

Gov. Rendell will have 90 days to nominate Newman’s replacement, which must then be confirmed by the state Senate. The nominee will serve until the 2007 Municipal Election in November, at which time the voters will elect two Supreme Court justices to replace Justice Newman and Justice Russell Nigro, who was defeated in his 2005 retention election.

Pass-Through Entities Q & A

Act 67 of 2006 made significant changes to the subchapter S election process. To this end, the Department of Revenue has put together of series of answers to commonly asked Pass-Through Entities questions. Members are encouraged to contact your PICPA Government Relations Team with other questions concerning Act 67. 

Fiscal Year 2006 Enforcement and Service Results

The IRS made progress in a number of key enforcement categories in 2006. Billions of dollars are being brought into the Treasury through expanded enforcement activities. For complete information, statistics, and charts, read the Commissioner's statement.

Tax Professional e-Services Center is Here

Responding to insights gained from its survey of tax professionals in December 2005, the Department of Revenue has unveiled an expansion of its Web site. The “Tax Professional e-Services Center” organizes most of the information and services in one place and will soon include access to clients’ Pennsylvania Personal Income Tax data. The Center will require a one-time easy registration process to access this information. For registration information, go to the Department’s e-Services Web site.

Thank you, Subscribers!

As 2006 comes to a close, the PICPA Government Relations Team would like to extend a note of sincere appreciation to our Legislative Update subscribers. Thank you for your continued support of our efforts. Without it, none of the strides we have made in Harrisburg over the past legislative cycle would have been possible.

Much like 2006, the year to come will certainly be one to watch in the Pennsylvania legislature. PICPA and CPA-PAC will be faced with more than 50 new legislators in the General Assembly, new leadership in the Senate, and what appears will be new party majority in the House of Representatives.

In short, we will be relying on your help, feedback and volunteerism more than ever before in order to develop and implement a viable, effective legislative strategy. Now is a great time to sign up to be a PICPA Key Person, if you’re not already participating in the program.

Also, if you have yet to make your 2006 CPA-PAC contribution, you are now able to invest easily online.

By continuing to subscribe and read Legislative Update, you are already performing a tremendous service to the CPA profession: You are staying informed. And for this, we at PICPA again thank you.

Unless issues warrant, this will likely be the final edition of Legislative Update for 2006. We will be back when the House and Senate convene in January. Of course, PICPA's Government Relations Team always welcomes your questions or comments.

Again, thank you for your support. We wish you all a healthy and prosperous 2007.