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Legislative Update

Week Ending Jan. 26, 2007

• Rendell Announces Change at Revenue; Fajt Named Senior Advisor
• Key Committee Appointments Made; Browne to Chair Finance
• BPT Statute Limitations Set to Expire
• Governor Proposes Major Healthcare Plan
• PICPA Key Person Contact Program
• Taxpayers Have Until April 17 to File and Pay
• DOR Sends Incorrect 1099-G and 1099-INT Form

Rendell Announces Change at Revenue;
Fajt Named Senior Advisor

On Jan. 22, Gov. Ed Rendell announced his Cabinet choices to serve during his second term in office. For all but one office, there were no changes in leadership. The Department of Revenue, however, will be overseen by York businessman Tom Wolf, who, if confirmed by the Senate, will replace current Secretary and PICPA member Gregory Fajt. Rendell has instead named Fajt his senior advisor – a position in which he will begin serving on Feb. 15.

Wolf, 58, earned his PhD from the Massachusetts Institute of Technology and currently serves as chairman of the board for The Wolf Organization Inc., a distributor of building materials. Wolf also sits on many boards, including the Business Roundtable and the Pennsylvania State Chamber of Commerce. He is a past chairman of the United Way of York County.

Fajt has served as Revenue Secretary since the governor’s 2003 inauguration. As senior advisor, he is anticipated to not only assist in the upcoming budget negotiation process, but also focus on several of Gov. Rendell’s agenda items, including transportation funding, the governor’s legislative reform agenda and the Prescription for Pennsylvania health care reform plan.

Key Committee Appointments Made;
Browne to Chair Finance

Although not an active week legislatively, the state Senate and House of Representatives have been busy structuring their chambers, assigning members of each four caucuses to standing committees for the 2007-08 session. While the Republican-led Senate has completed the task, the House, split almost evenly between 102 Democrats and 101 Republicans and still fraught with uncertainty following a tumultuous internal election for Speaker, has only named committee chairmen.

PICPA member Sen. Pat Browne has been appointed Chairman of the Senate Finance Committee, the panel with the primary role of reviewing legislation affecting Pennsylvania's tax codes. 

Browne will be working with two relative newcomers as his counterparts in the House. Rep. David Levdansky will serve as majority chairman and Rep. Steven Nickol as Republican chairman on the House Finance Committee.

Levdansky has already laid out an aggressive agenda for the committee. His priorities include reforming the Emergency and Municipal Services Tax, expanding the homestead exemption, further reducing property taxes for homeowners, reforming business taxes so that the burden is more evenly spread among businesses, and consolidating and increasing the efficiency of earned income (wage) tax collection.

Historically, Nickol has also been a strong advocate for redesigning the state school subsidy distribution to accurately reflect the number of students a school district educates.

Another key committee for PICPA is the House Professional Licensure Committee, to which Rep. Mike Sturla has been named majority chairman, while State Rep. Bill Adolph will serve as the Republican chairman.

The House Professional Licensure Committee handles licensing matters for over 767,000 Pennsylvanians working in a variety of occupations and professions, including CPAs. This committee has the legislative authority to review and comment on all the regulations promulgated by the 27 professional and occupational licensing boards and commissions under the Pennsylvania Department of State Bureau of Professional and Occupational Affairs. 

Sturla also has been appointed by House Majority Whip Keith McCall to serve as a Majority Deputy Whip for the 2007-08 legislative session.

BPT Statute Limitations Set to Expire

The statute of limitations on credits for changes in the Business Privilege Tax (BPT) will expire for many on April 15, 2007. PICPA Greater Philadelphia Legislation and Local Taxes Committee has prepared an alert to remind members to review past BPT filings.

Most businesses would not want to make an involuntary contribution to the City of Philadelphia. That could be the outcome, however, if no action is taken by some companies. Recently, an official of the City of Philadelphia Revenue Department advised the Greater Philadelphia Chapter on Legislation and Local Taxes Committee that the statute of limitations is running out for a significant number and/or dollar amount of Business Privilege Tax (BPT) credits.

The credits in jeopardy primarily relate to the BPT change that took place in 2002, when the BPT went from a prospective to a retrospective tax. That change came with a provision for payment of a “mandatory 100 percent estimate.”

Many taxpayers, it appears, may have failed to properly claim credits relating to the estimated payment. Those taxpayers have unused credits sitting with the city of Philadelphia. For example, the credits for estimated payments associated with the 2003 BPT return, which was due April 15, 2004, will expire April 15, 2007. After three years, the credits cannot be used.

Although the Revenue Department routinely mails notices to taxpayers, those notices do not always reach the CPA. The Committee advises members, clients, and all BPT taxpayers to review BPT filings since 2002, to make sure that credits have been used or a refund has been requested.

Governor Proposes Major Health Care Plan

In his first major announcement of his second term, Gov. Ed Rendell says he wants to reform the state’s health care system. His plan, "Prescription for Pennsylvania”, is modeled after his “Cover All Kids” program and will require 47 separate pieces of legislation to be implemented.

To pay for his proposal, the governor is proposing, among other things, a new 3 percent “fair share” payroll assessment on employers who do not provide employees with health insurance. During the first year of the program’s implementation, the assessment would exempt a company’s first 50 employees, which could decrease incrementally over a five year period, until the employer pays a fee for every uninsured worker.

Uninsured individuals will also be able to obtain insurance directly from the state. At full cost, this would mean paying approximately $280 per month, but subsidized coverage would apply to Pennsylvanians earning up to 300 percent of the federal poverty limit, or $60,000 for a family of four.

The plan also calls for an increase in the cigarette tax to $1.35 per pack and new tax to be levied on smokeless tobacco products and cigars.

Gov. Rendell hopes to have his plan in place by January 2008.

PICPA Key Person Contact Program

Fifty-five. That’s the number of new legislators who were sworn into office on Jan. 2 of this year. This freshman class of new lawmakers is the largest in nearly a quarter century!

PICPA is looking for the few, the proud, the Key Person Contacts for these new legislators, as well as for those reelected to office.

As a Legislative Update subscriber, you are already a prime candidate to become a Key Person Contact for your local legislator! You do not need to already know your state representative or senator, nor do you need to be affiliated with his or her party. You do not need to have voted him or her into office or agree with his or her point of view.

All you need to do is be open to beginning a dialogue with local lawmakers, educating them from the perspective of a CPA on issues relevant to your profession and legislation that impacts you, your clients and your community.

Join the Key Person Contact Program today by going to the PICPA Government Relations Web site, or contacting us in our Harrisburg office at (717) 232-1821.

Taxpayers Have Until April 17 to File and Pay

The IRS announced this week that taxpayers have until Tues., April 17, 2007, to file their 2006 returns and pay any taxes due. April 15 falls on a Sunday this year, and the following day, Monday, April 16, is Emancipation Day, a legal holiday in the District of Columbia.

The Pa Department of Revenue announced that it will be following IRS guidelines for state personal income tax filings.

The April 17, 2007 deadline will apply to any of the following:

• 2006 federal individual income tax returns, whether filed electronically or on paper.
• Requests for an automatic six-month tax-filing extension, whether submitted electronically or on Form 4868.
• Tax year 2006 balance due payments, whether made electronically (direct debit or credit card) or by check.
• Tax-year 2006 contributions to a Roth or traditional IRA.
• Individual estimated tax payments for the first quarter of 2007, whether made electronically or by check.
• Individual refund claims for tax year 2003, where the regular three-year statute of limitations is expiring.

Other tax-filing and payment requirements affected by this change are described in IRS Publication 509, Tax Calendars for 2007.

DOR Sends Incorrect 1099-G and 1099-INT Forms

The state Department of Revenue mailed incorrect 1099-G and 1099-INT forms to taxpayers earlier this month. The forms report tax refunds or interest received from the Commonwealth and may be used by taxpayers to prepare their federal tax returns.

The incorrect forms contained information for refunds and interest paid in 2005, rather than 2006. Revenue Sec. Greg Fajt stated that correct 1099-G and 1099-INT forms will be mailed within 15 days.

Because the incorrect mailing was based on 2005 tax data, taxpayers who received refunds or interest in 2006, but not in 2005, were not included in the initial mailing. Those taxpayers will receive 1099 forms from the Revenue Department for the first time in the second mailing. Taxpayers who received incorrect 1099-G or 1099-INT forms will receive new forms labeled "corrected" in the second mailing.

Additional information about the 1099 form mailings may be obtained by calling the Revenue Department's Taxpayer Services and Information Center at (717) 787-8201, or by visiting the department's Web site.