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Legislative Update

Week Ending Feb. 1, 2008

• Crash and Burn—Sales Tax Expansion Plan
• Earned Income Tax Reforms Stalls
• Rendell Promises Stimulus Package
  
• Senate Approves Open Records Bill; Back to House
• Revenue Department Releases January Collections
• Reading Chapter Meets with the Berks EIT Bureau
• AICPA Applauds Supreme Court Decision in Stoneridge Case
• Save the Date: PICPA Day on the Hill Returns June 11
  

Crash and Burn—Sales Tax Expansion Plan Defeated

On Tuesday, Jan. 29, the state House soundly defeated a plan offered by Rep. Sam Rohrer (R-Berks) that claimed to eliminate school property taxes, by a vote of 47-148. The proposal was offered on the House floor as an amendment to House Bill 1600. Proponents maintained that the plan would succeed in eliminating school property taxes by replacing the funding source with an income tax increase and applying the state sales tax to a variety of services, including those performed by accountants. 

PICPA actively opposed the measure. Through the course of the more than 10 hours of debate on the House floor, several legislators cited communications they had received from their constituent CPAs in their arguments opposing the Rohrer plan.  

During floor debate on the Rohrer amendment, it became clear that the plan did not generate sufficient revenues to fund a complete elimination of all school property taxes. Fiscal notes prepared by each caucus’s appropriations committee indicated that by the time the property tax is fully phased out, around 2011-12, the state would be facing deficits of about $3 billion.

Legislators from both sides of the aisle also expressed reservations with the plan’s requirement that the Commonwealth assume the $24 billion of debt now held by school districts.

After the defeat of the Rohrer plan, the House adopted another amendment to HB 1600 offered by former Speaker of the House Rep. John Perzel (R-Philadelphia) that would eliminate the school portion of real estate property taxes for Pennsylvania's senior citizens. Under Perzel's amendment, which was adopted by a vote of 159-36, school property taxes for all Pennsylvania homeowners aged 65 or older with incomes of $40,000 or less are eliminated. The  program's estimated $1 billion dollar annual cost will be funded from gaming revenue.

The House will continue debating House Bill 1600 next week.

Earned Income Tax Reforms Stalls 

Last minute opposition from tax collectors and municipal governments temporarily stalled an effort to reform and consolidate Pennsylvania’s archaic and inefficient earned income tax collection system this week when the Senate Appropriations Committee failed to report the legislation out of committee by a vote of 13-13.   

Senate Bill 1063 would establish various reforms in relation to the collection of earned income taxes that would consolidate, modernize, and introduce uniformity to the system. The bill would consolidate local income tax collection on a countywide basis, thereby reducing the number of collectors from 560 to 66, or one for each county.

PICPA and its coalition partners – the Pennsylvania Chamber of Business and Industry, the Allegheny Institute, the Pennsylvania Retailers, the National Federation of Independent Business, and the Department of Community and Economic Development – will continue to urge passage of SB 1063.

Rendell Promises Stimulus Package

In a recent interview with a Philadelphia radio station, Gov. Rendell this week indicated that he would propose in his new budget an economic-stimulus plan that would produce "immediate jobs" in Pennsylvania. The governor will make his annual budget address Tuesday, Feb. 5.

The only specifics the governor would offer were that he would renew his call to increase the cigarette tax 10 cents per pack and to levy a new tax on smokeless tobacco and cigars, both of which have failed to pass the General Assembly. Gov. Rendell did say that Pennsylvania needed to spend billions of dollars on roads, bridges and ports. Jobs created by such projects pay well and cannot be outsourced, Rendell said.

Finally, he called the state's economy "very strong" and noted that in 20 of the last 22 months, the state's unemployment rate was lower than the national average.

PICPA will provide complete coverage of Gov. Rendell’s budget address in next week’s PICPA Legislative Update.

Senate Approves Open Records Bill; Back to House

Senate Bill 1 , legislation to strengthen Pennsylvania's Open Records Law, was approved unanimously by the Senate on Wednesday, Jan. 30. The bill, which will now return to the House for its concurrence, makes dramatic changes in the records available from various government agencies.

For executive agencies and local agencies, Senate Bill 1 reverses the presumption of access to records and puts the burden of proof on a government agency denying access to a record. This is the one change that many advocates of open government consider the most essential. Legislative records and financial records of the judiciary are subject to the same presumption and the same burden of proof.

Senate Bill 1 provides a list of 29 plainly stated exceptions for executive agencies and local agencies. These exceptions include such things as criminal investigations, Social Security Numbers, personal financial information, and individual medical records.

The Office of Open Records is nominally housed in the Department of Community and Economic Development, so that DCED can help provide training to local and Commonwealth agencies. Legislative agencies, including the Senate and the House, are required to provide access to 19 categories of records.

Revenue Department Releases January Collections 

On Jan. 31, Secretary of Revenue Tom Wolf reported that Pennsylvania collected $2.3 billion in General Fund revenue in January, $23.7 million, or 1 percent, more than anticipated.  Fiscal year-to-date General Fund collections total $14 billion, which is $199.4 million, or 1.4 percent, above estimate. 

Year-to-date collections include two large corporate tax settlements totaling nearly $48 million. Without these two settlements, year-to-date collections would only be $151.4 million, or 1.1 percent, above estimate.

Sales tax receipts totaled $838.5 million for January, which was $20.2 million below estimate.  Sales tax collections year-to-date total $5.1 billion, which is $11.2 million, or 0.2 percent, above estimate.    

Personal Income Tax (PIT) revenue in January was $1.2 billion, which was $40.6 million above estimate.  This brings year-to-date PIT collections to $5.6 billion, which is $73.7 million, or 1.3 percent, above estimate.   

January corporation tax revenue of $138.2 million was $14 million above estimate.  Year-to-date corporation tax collections total $1.7 billion, which is $124.4 million, or 8 percent, above estimate.

Other General Fund revenue figures for the month included $66.3 million in inheritance tax, which was $2.5 million above estimate, bringing the year-to-date total to $463.5 million, which is $5 million above estimate.

Realty transfer tax was $35.4 million for January, bringing the total to $281 million for the year, which is $9.8 million more than anticipated.

The Gaming Fund received $44.8 million in unrestricted revenues for January.  Fiscal year-to-date collections for the fund total $503.9 million.  Gaming Fund receipts include taxes, fees and interest.  Of the total for the month, $41.9 million was collected in state taxes for property tax relief, bringing the year-to-date total to $246.9 million.  

Reading Chapter Meets with the Berks EIT Bureau

Recently, members of PICPA Reading Chapter’s Local Taxation and Government Committee met with the Berks County Earned Income Tax Collector’s office to discuss the issues that affect both CPAs and tax collectors.  

The meeting covered a wide range of topics, including whether Berks requires filers to use their earned income tax form or if a generic form may be used, the electronic submission process, and issues regarding credit card payments.

AICPA Applauds Supreme Court Decision in Stoneridge Case

In ruling 5 to 3 that third parties cannot be sued in corporate fraud cases, the U.S. Supreme Court decided in favor of a position held by the AICPA , as represented by the amicus brief they filed in the case of Stoneridge Investment Partners LLC v. Scientific Atlanta Inc. and Motorola Inc.

The U.S. Supreme Court heard arguments in the case last October, but did not make its official decision until January 15. Stoneridge is an investment fund that lost money in shares of Charter Communications Inc., and which accused third-parties Motorola Inc. and Scientific-Atlanta, Inc., of helping Charter inflate its revenues. Motorola and Scientific-Atlanta were not alleged to have made any misstatements to the public, but to have engaged in transactions with Charter that it mischaracterized on its financial statements.

In its amicus brief, the AICPA argued that the court should uphold established law under the Securities Exchange Act of 1934, by not allowing third parties who are essentially alleged to be aiding and abetting a security fraud, to be held responsible for another person’s primary violation.

Save the Date: PICPA Day on the Hill Returns June 11

Mark your calendar now to attend PICPA Day on the Hill, which will take place on Wednesday, June 11, 2008, at the State Capitol in Harrisburg.

The day’s activities will include opportunities for PICPA members to speak directly with state representatives and senators about issues of critical importance to the profession, including improving the earned income tax collection process, updating Pennsylvania’s antiquated CPA statute to reflect national trends, and reforming our current joint-and-several judicial system.

Continue to monitor PICPA’s Legislative Update for additional details and registration information, or contact your PICPA Government Relations Team.