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Legislative Update

Week Ending Dec. 14, 2007

• Senate Unanimously Approves PICPA’s CPA Law Bill
• Consolidation of Earned Income Tax Collection Takes Critical Step Forward
• PICPA Touts Lawsuit Abuse Reform
  
• Mid-Year Report: PA Doing “OK,” Says Budget Secretary
• Hazardous Sites Cleanup Act Funding Bill Sent to Governor
• Sales Tax Expansion Battle Will Have to Wait Until ’08
• Revenue Department Releases November Collections
• Legislator Retirements Mounting
  

Senate Unanimously Approves PICPA’s CPA Law Bill

Legislation amending Pennsylvania’s CPA Law was unanimously approved by the state Senate on Tuesday, Dec. 11, by a vote of 49-0. The Law regulates the accounting profession in the Commonwealth and has not been amended since 1996.

Senate Bill 838, sponsored by Majority Policy Chairman Sen. Jake Corman and PICPA member Sen. Pat Browne, CPA, adds a “substantial equivalency” provision to the current law that will enhance the mobility and portability of the CPA license across state lines. The new system will give Pennsylvania CPAs the ability to practice in other states without the burden of applying and paying for additional licenses.

The PICPA-supported bill also proposes other changes to the law, including:

• Requiring that a person complete at least 150 semester hours of post-secondary education before receiving a CPA certificate, beginning in 2012. This provision is already required in 48 of the 55 CPA licensing jurisdictions.
• Eliminating the current two-tiered structure of experience requirements by setting a one-year experience requirement for all CPA candidates, beginning in 2012.
• Conforming with 38 other states by allowing up to 49 percent of a CPA firm to be owned by non-CPAs.
• Updating peer review terminology to reflect changes in the AICPA Peer Review Program.

Senate Bill 838 is similar to legislation that has already passed this year in several other states, including Indiana, Texas, Illinois, Maine, Rhode Island and Tennessee. Ohio, Virginia, Missouri and Wisconsin already have similar laws in place.

The bill has been referred to the House Professional Licensure Committee. For more information, members may contact your PICPA Government Relations Team.

Consolidation of Earned Income Tax Collection Takes Critical Step Forward

At its Dec. 5 meeting, the Senate Finance Committee unanimously approved Senate Bill 1063, PICPA-endorsed legislation that would streamline and consolidate the earned income tax (EIT) collection process. Sen. Jane Earll, prime sponsor of the bill, explained that the bill reflects the recommendations made in the 2004 report by the Department of Community and Economic Development’s Governor’s Center for Local Government Services.

Senate Bill 1063 would bring uniformity, clarity, and fairness to the local earned income tax collection process. The bill includes a number of PICPA-supported improvements:

• Establish uniform withholding, remittance, and distribution requirements;
• Require that employers withhold all local earned income taxes imposed on the compensation of their employees and remit those taxes to only one collector, even if an employer operates in multiple counties;
• Strengthen reporting requirements so that each tax dollar is tracked from the time it is withheld until it is received by the appropriate local taxing jurisdiction;
• Require that the Commonwealth issue one set of rules and regulations that apply to all collectors, taxpayers and employers;
• Require that the Department of Community and Economic Development develop uniform forms, notices, reports, returns, schedules and codes for school districts, municipalities and tax collection districts;
• Require that tax collectors keep a record of all public monies received and distributed, and submit monthly reports to each taxing jurisdiction and the tax collection district that must be reconciled with other records in an annual audit;
• Provide for more accountability, transparency, oversight and enforcement; and,
• Consolidate the system.

Sen. Earll noted that local tax collectors process approximately $2 billion annually, of which $100 million went uncollected. She explained that this was the result of mismanagement and miscommunication within and among the various municipalities across the state, and that SB 1063 would make collection of these monies more efficient.

PICPA urges our members to contact their local senators in support of this vital piece of legislation, which is long overdue and much needed in Pennsylvania.

PICPA President-Elect Touts Lawsuit Abuse Reform

On Monday, Dec. 3, PICPA President-Elect Eric Wallace, CPA, joined a handful of testifiers before the House Republican Caucus in a panel discussion regarding the importance of reforming Pennsylvania’s civil justice system. Speaking from the perspective of the CPA profession, Wallace emphasized the need to replace the doctrine of joint and several liability with one of proportionate liability.

Over the past decade in Pennsylvania, Wallace noted, the doctrine of joint and several liability has caused lawsuits alleging professional malpractice to escalate, especially against the CPA profession. He further explained some of the reasons behind this, particularly jurors’ misunderstanding of the audit process, the strict regulation of the accounting profession in overseeing this critical process, and the importance of “auditor independence.”

Wallace voiced PICPA’s strong support for passage of House Bill 850, also known as the Fair Share Act. The bill would eliminate joint liability for defendants in civil cases who are found to be less than 60 percent liable, replacing it with a system of comparative responsibility, in which a defendant is responsible for paying only his “fair share” of the damages. That means if a party were responsible for 10 percent of the fault, that party would be accountable for paying only 10 percent of the total award.

Under current law, the doctrine of joint and several liability establishes that any defendant in a multi-defendant civil case may be required to pay any or all damages associated with the actions of his or her co-defendants.

“PICPA has been strong advocate of civil justice reform in Pennsylvania for several years,” Wallace explained to the legislators. “By speaking before your caucus this morning, we in the accounting profession hope we are continuing to forge ahead in our effort to change state law and establish a more balanced civil justice system.”

Mid-Year Report: PA Doing “OK,” Says Budget Secretary   

A number of programs funded in the 2007-08 enacted budget are reporting strong results, Budget Secretary Michael Masch said at his annual mid-year budget briefing Dec. 13. The Commonwealth has seen progress in key areas, such as education, health care and transportation, noted Masch.

In reviewing the Commonwealth’s revenues, Masch said Pennsylvania collected $1.7 billion in General Fund revenue in November – $89.4 million above the Revenue Department’s November estimate. However, collections for this period included two large one-time corporate tax settlements totaling nearly $48 million – more than half of the amount above the November estimate.

Because of the settlements, fiscal year-to-date General Fund revenue collections total $9.5 billion, which is $135.9 million, or 1.5 percent, above estimate. Without the two settlements, year-to-date collections would be $88 million, or 0.9 percent, above estimate, Masch said.

Most revenue categories were slightly ahead of official estimates in the first five months of the year, Masch said. The motor vehicle sales tax was an exception; it was behind by $22.3 million, or 4.4 percent.

Masch said problems in the housing and credit sectors, along with concerns over rising fuel costs, have rippled through the U.S. economy, causing economists to forecast a significant slowdown in real U.S. gross domestic product growth in the last quarter of 2007 and continuing into 2008. GDP growth in 2008 is expected to be 1.9 percent – the lowest level since 2002 – and down a full percentage point from 2006, according to the economic forecasting firm Global Insight.

Hazardous Sites Cleanup Act Funding Bill Sent to Governor

Legislation to provide funding for the Hazardous Sites Cleanup Act Fund (HSCA) was sent to Gov. Rendell this week after it passed the state House unanimously.

Senate Bill 1100 would transfer about $17 million to HSCA from legislative accounts for the current fiscal year. In addition to providing funding for the remainder of the 2007-08 session year, SB 1100 earmarks $40 million in existing revenues for HSCA from the Capitol Stock and Franchise Tax for fiscal years 2008-09 through 2010-11. This legislation does not change the scheduled phase-out of the Capital Stock and Franchise Tax.

The HSCA Fund finances cleanups at contaminated sites and the investigation of illegal hazardous waste disposals.

Sales Tax Expansion Battle Will Have to Wait Until ‘08

In the face of turmoil that has seemingly paralyzed the state House’s ability to pass legislation, the property tax relief debate scheduled for early December will have to wait until some time in 2008, according House Majority Leader Bill DeWeese. PICPA will continue to monitor this issue throughout the winter break and report on any developments.

The two major competing relief proposals PICPA is following closely are House Bill 1275 and House Bill 1600. House Bill 1275, also called the School Property Tax Elimination Act, would raise the personal income tax by 0.85 percent, to a total of 3.92 percent, and expand the current 6 percent sales tax to include a long list of "services."

Members are encouraged to contact their PICPA Government Relations Team with questions.

Revenue Department Releases November Collections

On Nov.30, Revenue Secretary Tom Wolf reported that Pennsylvania collected $1.7 billion in General Fund revenue in November, $89.4 million, or 5.6 percent, more than anticipated. Fiscal year-to-date General Fund collections total $9.5 billion, which is $135.9 million, or 1.5 percent, above estimate.

Sales tax receipts totaled $677.5 million for November, which was $14.8 million above estimate. Sales tax collections, year-to-date, total $3.6 billion, which is $26.9 million, or 0.7 percent, above estimate.

Personal Income Tax (PIT) revenue in November was $679.7 million, which was $16.7 million above estimate. This brings year-to-date PIT collections to $3.7 billion, which is $14 million, or 0.4 percent, above estimate.

November corporation tax revenue of $108.8 million was $47.6 million above estimate. Year-to-date corporation tax collections total $988.9 million, which is $50 million, or 5.3 percent, above estimate. Corporate tax collections in November included two large tax settlements totaling nearly $48 million. These two settlements are the primary reason for the year-to-date surplus.

Legislator Retirements Mounting

State Rep. Edward Wojnaroski of Cambria County and Rep. Carole Rubley of Chester County both announced this week that they are stepping down at the end of next year. The announcements bring the total number of state House members retiring following the 2007-08 legislative session to nine.

Others who have announced their plans to depart the House include Reps. Art Hershey, Jerry Nailor, Steve Nickol, David Steil, Tom Yewcic, Tom Tangretti and Steve Cappelli, who has announced that he will run for the seat vacated by the retiring state Sen. Roger Madigan of Bradford County.

In the Senate, the chairman of the Appropriations Committee, Sen. Gib Armstrong, stunned his colleagues, constituents, and most of Harrisburg this week when he announced that he, too, would retire at the conclusion of his term current term.