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Legislative Update

Week Ending Feb. 23, 2007

• Amnesty Offered by State Treasury Department
• Acting Revenue Secretary Discusses Tax Proposals
• Health Care Reform Plan Comes Under Fire
• Primary Election Information Available on P2
• PICPA Government Relations Team in Full Swing
• PA Form 1099 Update

Amnesty Offered by State Treasury Department 

The State Treasury Department has offered businesses in Pennsylvania amnesty from penalties and interest to any company filing an unclaimed property report, for the first time, by April 15, 2007. The Pennsylvania Abandoned and Unclaimed Property Act requires holders of unclaimed property to file a report each year.

According to Treasury, unclaimed property is any financial asset that has been left with a “holder,” such as a bank, insurance company or other business or organization, without activity or contract for a period of about five years.

Examples of unclaimed property include bank accounts, uncashed payroll checks, accounts payable or receivable checks, credit balances, gift certificates, stocks and bonds, escrow accounts, money orders, travelers checks, utility refunds, safe deposit box contents and insurance proceeds.

It is important to note that this is not a new reporting requirement, but, until recently, it has been largely ignored and rarely enforced by the state. PICPA has urged Treasury to extend the amnesty period beyond the April 15 deadline. PICPA will keep members apprised of our efforts.

Acting Revenue Secretary Discusses Tax Proposals

Gov. Ed Rendell’s nominee for Revenue Secretary Tom Wolf appeared before the House Appropriations Committee this week to discuss, and at times defend, the administration’s tax proposals that are part of the 2007-08 General Fund budget.

In his opening remarks to the Committee, Wolf acknowledged the Governor’s “aggressive budget” but justified the plan by saying it is needed “[t]o continue to sustain … economic competitiveness” while addressing “issues facing Pennsylvania such as transportation needs, the rising costs of health care and creating incentives to use alternative energies.”

The proposed Oil Company Gross Profits Tax, which mandates oil companies to use unitary combined reporting, would generate $760 million, said Wolf, and would replace the Corporate Net Income (CNI) tax. That, along with his proposal to lease the Pennsylvania Turnpike, would generate an additional $1.7 billion annually for transportation and transit needs.

Under questioning from lawmakers, Wolf admitted that the Governor would likely abandon the concept if he is unable to fulfill his promise to ensure that the cost to oil companies would not be passed on to consumers.

In addition to fielding several questions about the oil gross profits tax, Wolf was asked about Rendell’s proposal to increase the state sales tax from 6 percent to 7 percent in most parts of the state and 8 percent in Philadelphia and Pittsburgh.

Wolf said that the state has mitigated the regressive nature of the state sales tax by exempting food, clothing, and both prescription and non-prescription drugs. He noted that one-third of the proposed sales tax increase in 2007-08 and as much as 50 percent in future years would go toward reducing property taxes, which he said are even more regressive than the sales tax.

Finance Chairman Rep. David Levdansky (D-Allegheny) later announced that he would be introducing legislation to mandate unitary combined reporting on businesses across the board.

Health Care Reform Plan Comes Under Fire   

Gov. Ed Rendell’s Prescription for Pennsylvania – a plan to create a state-run health insurance plan for the poor – came under intense questioning this week by both Republican and Democratic members of the House Appropriations Committee.

During Tuesday’s House Appropriations Committee, Rosemarie Greco, director of the Governor’s Office of Health Care Reform, spent more than three hours answering questions from lawmakers regarding many of the key components of the proposal, including a 3 percent payroll tax on businesses that do not offer health benefits to all full-time employees.

Greco explained that the plan was generated through a year-long effort to discern how to make healthcare more accessible, affordable and quality-driven. Various stakeholder groups and individuals from across the Commonwealth were brought together by the Rendell administration to help with the identify issues of concern, according to Greco.

Primary Election Information Available On P2 

The Pennsylvania Prosperity Project (P2), a non-partisan effort that focuses on providing objective, factual information about public policy issues and candidates for federal, state, and local office, has recently added to its website previews of select local and statewide judicial races.

The 2007 Local Races page features links to separate pages focused on the Philadelphia mayoral election, Pittsburgh mayoral election, and Allegheny County executive election. Candidate profiles, including basic biographical information, are available on the respective pages.

A comprehensive list of all judicial races and links to more specific information, including candidate information for Supreme Court, Superior Court, and Commonwealth Court races can be found at 2007 Judicial Races.

PICPA Government Relations Team in Full Swing

Although the 2007-08 legislative session is still in its preliminary stages, your PICPA Government Relations team is already busy drafting, positioning, and monitoring bills of interest to PICPA  members.

These include House Bill 11 and Senate Bill 218, identical pieces of legislation that mirror the Emergency and Municipal Services Tax (EMST) bill from last session, which was vetoed by the governor in the 11th hour. PICPA member Sen. Pat Browne (R-Lehigh), Senate Finance Committee chair, is the lead sponsor of the Senate bill.

Another bill reintroduced from last year’s session is House Bill 122, which amends the Tax Reform Code to further define "installment sales method of reporting" to mean the method by which a taxpayer reports the gain upon the sale of property when the sale of such property qualifies for treatment as an installment sale as defined under the Internal Revenue Code.

Senate Bill 97 also amends the Tax Reform Code. The bill clarifies that goodwill recorded as having derived from the use of purchase accounting for an acquisition or combination after June 30, 2001, can be disregarded when determining the book value of the total assets. It also changes the method for computing from a "pooling of interest method" to a "purchase method."

Rep. Steve Barrar (R-Delaware) has introduced two additional bills of note: House Bill 340 and House Bill 342. HB 340 enables the surviving spouse of a deceased individual to file a joint return. HB 342 would empower the Pennsylvania Department of Education (PDE) to establish a reporting standard for public school annual reports, which would conform to fund level reporting criteria only and will allow other comprehensive basis of accounting.

Your government relations team will continue to report on these and additional pieces of legislation as they make their way through the General Assembly. PICPA members are encouraged to contact the team with questions concerning legislative matters.

PA Form 1099 Update

PICPA was provided clarification by the PA Department of Revenue of its position regarding Form 1099 reporting for 2006 Personal Income Tax (PIT) purposes.

Taxpayers receiving and reporting 1099R distributions on their PA-40 income tax returns are to report and include all 1099R distributions whether or not the distributions are taxable to Pennsylvania on PA Schedule W-2S, Part B. Taxpayers should also report on PA Schedule W-2S, Part B, all 1099MISC income not reported on Schedule C, whether or not taxable to Pennsylvania.

Taxpayers filing paper returns are required to include a photocopy of all 1099Rs and 1099MISCs reported on PA Schedule W-2S, Part B, with their returns, regardless of whether or not there is PA tax withheld from the distribution or payment. Tax filers using the e-file method are not required to submit or have their preparer submit the 1099R forms separately to the Department of Revenue. The Department of Revenue receives these information returns along with the PA-40 information it receives from the IRS as part of the Fed/State e-file program.