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Legislative Update

Week Ending Feb. 16, 2007

• EMS Tax Bill Gets Senate Approval
• PICPA Members Nominated to State Accountancy Board
• Budget Hearings Begin Next Week
• Fire and Ambulance Program Reauthorized by Senate
• IRS Moves to Prevent Telephone Tax Refund Abuse
• LMSB Initiative to Address Certain Implications of FIN 48
• Rendell Nominates Three to Key Posts
• Insurance Commissioner Koken Announces Resignation
• IMRS Monthly Overview

EMS Tax Bill Gets Senate Approval

On Monday, the State Senate approved a measure reforming the 2004 Emergency and Municipal Services Tax (EMS) Act by a vote of 47 to 3. Republican Sens. John Rafferty, Stewart Greenleaf, and Bob Wonderling voted against the bill.

Senate Bill 218, introduced by PICPA member Sen. Pat Browne, would end the lump-sum maximum payment of $52 tax and set specific restrictions on how taxing entities may use revenues raised by the levy. The bill would require that the tax be withheld on a payroll-period basis with a maximum deduction of $1 per week.

In addition, under the bill, employers would be required to send collections on a quarterly basis. SB 218 also exempts those earning $12,000 or less per year from the tax, and would rename the tax the “Local Services Tax.”

The bill is now headed to the House of Representatives for consideration.

PICPA Members Nominated to State Accountancy Board

PICPA members Thomas Clark, William Park and Samuel Stephenson have been nominated by Gov. Ed Rendell to each serve another 4-year term on the State Board of Accountancy.

Clark, a member of the State Board since 2003, is a sole practitioner in Port Royal, PA.

Park, who currently serves as State Board chairman, is a partner with Deloitte & Touche, LLP, in the Philadelphia office. Park has been a member of the State Board since 2003.

Stephenson is a shareholder and managing director of the Pittsburgh office of Terry & Stephenson, PC. Currently the vice chair of the State Board, Stephenson was confirmed by the Senate on April 21, 2003.

All three nominations must be confirmed by the State Senate.

Budget Hearings Begin Next Week

Gov. Rendell’s proposed 2007-08 spending plan goes under the microscope next week as the House Appropriations Committee begins budget hearings on the nearly $28 billion General Fund budget. House lawmakers are first on the blocks as they are invited to present issues and projects important to them and their constituents. Budget Secretary Michael Masch and new Department of Revenue Secretary nominee Tom Wolf are scheduled to appear before the Committee on Feb. 20.

The Senate is scheduled to begin hearings the following week.

Fire and Ambulance Program Reauthorized By Senate

The State Senate this week unanimously approved legislation that would reauthorize a state grant program that provides financial support for volunteer firefighters and ambulance services.

The program provides grants to volunteer fire company and emergency services to assist in training, purchasing equipment, and for debt reduction. Volunteer fire companies are eligible to apply for a maximum grant of $15,000 and volunteer ambulance services for a maximum grant of $10,000. Senate Bill 10 reauthorizes the program for five years, to June 30, 2007.

The legislation now goes to the House for its consideration. For the grant program to be extended, the legislation must be acted upon by both the Senate and House and be signed by the Governor.

IRS Moves to Prevent Telephone Tax Refund Abuse

Criminal Investigation special agents and IRS revenue agents are conducting special site visits with tax preparers across the nation to prevent inflated requests made for the one-time telephone tax refund. Visits began recently to 22 different tax preparers who have handled more than 1,500 tax returns.

The IRS also authorized a one-time refund of the federal excise tax collected on service billed during the previous 41 months, stretching from the beginning of March 2003 to the end of July 2006. The tax continues to apply to local-only phone service.

The IRS has monitored telephone excise tax refund requests for potential problems since the tax-filing season opened in early January. The IRS has seen some problems with returns from tax preparers that may indicate criminal intent.

LMSB Initiative to Address Certain Implications of FIN 48

In anticipation of the implementation of FIN 48, an initiative by the IRS Large and Mid-Size Business (LMSB) Division will allow some taxpayers to greatly expedite examination and accelerate resolution of important issues within the framework of its normal processes and its normal rules of engagement. This initiative is not intended to produce a different result in the resolution of tax issues than would obtain under the normal pace of examination and resolution, but simply to speed up the processes by which such examination and resolution would otherwise result.

Rendell Nominates Three to Key Posts

Gov. Ed Rendell on Wednesday nominated Robin Wiessmann to replace now U.S. Sen. Bob Casey as Pennsylvania Treasurer. He also nominated James Fitzgerald III to replace retiring state Supreme Court Justice Sandra Shultz Newman, and Bob Daniels to fill a vacancy on the state Superior Court.

Wiessmann has been an investment banker in public finance for over two decades. She is currently serving as a director with Merrill Lynch and was a founding principal and president of Artemis Capital Group, the leading women owned investment banking firm in the U.S.
  
Fitzgerald first served on the bench when a vacancy occurred in the Philadelphia Court of Common Pleas. After winning election to a 10-year term in 1989, Judge Fitzgerald was retained in 1999, and, in 2002, was appointed administrative judge in the trial division by the Pennsylvania Supreme Court.

Daniels is currently special counsel to the law firm of Sprague and Sprague and was a former president of the Philadelphia-based law firm of Braverman Daniels Kaskey Ltd., which engages in civil trial and appellate litigation.

Both Fitzgerald and Daniels have agreed not to run for the offices for which they have been nominated.

Insurance Commissioner Koken Announces Resignation

Diane Koken, Pennsylvania’s longest-serving Insurance Commissioner, resigned this week. Gov. Rendell has appointed Randolph Rohrbaugh to serve as acting Insurance Commissioner during the formal search for a permanent successor.

Koken will serve as a senior advisor to the governor before returning to the private sector in mid-March. Koken has served as Insurance Commissioner since August 1997 and was first confirmed to the post by the State Senate in 1998. She has served in the administrations of three governors.

During Koken’s tenure, the Insurance Department conducted more than 7,000 field investigations and market-conduct examinations, which resulted in civil penalties and restitution totaling nearly $317 million. The department also recovered more than $69 million on behalf of consumers as a result of consumer complaints during this period.

Since 2001, Rohrbaugh has served as deputy insurance commissioner for the department’s Office of Insurance Product Regulation and Market Enforcement. He joined the department in 1994 after working in the private sector.

IMRS Monthly Overview

The Issue Management Resolution System (IMRS) January 2007 Monthly Overview is available on PICPA’s Web site. The Monthly Overview provides a brief synopsis of some of the issues that were received and/or closed during January by the IRS.

IMRS is a streamlined and structured process that facilitates stakeholder issue identification, resolution and feedback. Tax professionals should forward significant issues regarding IRS policies, practices and issues to their Stakeholder Liaison (SL) Local Contacts.