Log In | About PICPA | Contact | FAQs

Legislative Update

Week Ending July 13, 2007

• Budget Agreement Reached
  
• Tax Bill Passes State House
  
• Barasch Joins Revenue Department
  
• Texas Governor Signs CPA Mobility Bill

Budget Agreement Reached

After a nine-day standoff in budget negotiations, Gov. Ed Rendell and lawmakers reached an agreement on a Fiscal Year 2007-08 spending plan that was announced by Rendell at a late-night press conference on July 9.

The $27.369 billion budget represents a 3.5 percent increase in spending, and, according to Rendell, includes all of the priorities he announced in his Feb. 5 budget address: additional funding for kindergarten and pre-K programs, laptops in high schools, and workforce and economic development; a reduction in the mental health/mental retardation waiting lists; and a COLA for human service workers.

However, consistent with the position held by the Senate Republicans, the budget failed to include any of the governor’s seven proposed new taxes and tax hikes. These included increases in sales, cigarette and landfill levies, the Oil Company Gross Profits Tax, a “fair share” payroll tax for employers who do not provide adequate health care coverage, and new taxes on electricity use, cigars and smokeless tobacco. Assisting in the campaign against additional taxation was the announcement by the Department of Revenue that the state was sitting on a $650 million surplus.

The governor also did not win his battle to levy a new electricity tax, which would have charged the average consumer an additional $5.40 per year, and businesses anywhere from hundreds of dollars to the $10,000 cap. This was accomplished with the agreement that lawmakers commit to going into special session in September to discuss further initiatives to fund alternative energy programs. 

The Jonas Salk Legacy Fund will be another initiative to be negotiated after the passage of the budget. Legislators did, however, agree upon a transportation package that would raise, on average, $946 million per year over the next decade. These monies include toll hikes on the turnpike and I-80.

Also among the provisions would be components of the governor’s health care reform proposal, including scope of practice expansion for certain health professionals and initiatives to reduce hospital-acquired infections. Agreement was also reached on legislation that would use slot-machine revenues to help fund a new arena for the Pittsburgh Penguins and expand the Philadelphia Convention Center.

Last on the negotiation list was a proposed film production tax credit program – an initiative that was supported by both sides of the aisle until the Democrats proposed removing any cap on funding the program. The two sides found compromise in limiting the cap to $25 million for the first year, with an option to expand that to up to $75 million in future years.

Predictions are that a budget should be in place by the July 14 weekend, as new restrictions of legislative actions in place this session delay proceedings. The House and Senate expect to work through the weekend in order to have a budget pass early in the following week.

Tax Bill Passes State House

As reported in last week’s Legislative Update, Senate Bill 97, a bill that amends the state Tax Reform Code, was approved by the State House on July 10. The legislation now returns to the Senate for further consideration.

In its current form, SB 97 includes the following Tax Code changes:

• An exclusion from the Bank Shares Tax for goodwill created as a result of the purchase method of accounting for business combinations
• An exemption from the sales tax for materials used for the rebuilding of locomotive engines
• A provision for the refund of sales tax attributed to bad debt
• An increase in the Capital Stock and Franchise Tax threshold to $175,000
• Language contained in House Bill 518 regarding neighborhood assistance tax credits 
• Language contained in House Bill 1528, which provides for a film production tax credit program
• The establishment of a Resource Enhancement and Protection Tax Credit to be granted toward projects on an agricultural operation
• Amendments to certain definitions by adding provisions relating to powdered metallurgy parts
• An extension of the breast cancer income tax check-off

The bill could reach to governor’s desk before summer recess.

Barasch Joins Revenue Department

Revenue Secretary Tom Wolf has named David Barasch to the position of Executive Deputy Secretary. As Executive Deputy Secretary, Mr. Barasch will be responsible for supervising the Deputy Secretary for Tax Policy, Deputy Secretary for Taxation, Deputy Secretary for Information Technology and Deputy Secretary for Compliance and Collections. He will be responsible for directing the Deputies in policy development for various programs.

Most recently, Mr. Barasch was a member of McNees Wallace & Nurrick LLC, a regional corporate law firm. Prior to that, he was a partner with Rhoads and Sinon LLP, a law firm in central Pennsylvania. Mr. Barasch was United States Attorney for the Middle District of Pennsylvania for seven years, and he served as Director of the Pennsylvania office of Consumer Advocate for seven years.

Mr. Barasch received his Juris Doctor from Cornell University Law School, and he received his Bachelor of Art in Political Science from the State University of New York at Stony Brook.

Texas Governor Signs CPA Mobility Bill

On June 15, Texas Governor Rick Perry signed into law House Bill 2144. The law eliminates unnecessary red tape for out-of-state CPAs who practice in Texas and requires out-of-state CPA firms to have a Texas license to perform audits on Texas companies.

For all other services, CPAs with qualifications that are substantially equivalent to those in Texas may practice in the state without notice or license. Accordingly, the CPA becomes subject to Texas laws and rules, including the jurisdiction of the Texas State Board of Public Accountancy. Texas is the seventh state to ease restrictions on interstate CPA practice joining Ohio, Indiana, Wisconsin, Missouri, Virginia and Tennessee.