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Legislative Update

Week Ending June 13, 2008

• PICPA Members Advocate Legislation in Harrisburg
• Earned Income Tax Modernization Bill Headed for Vote
• House Passes Legislation Targeting Unfair Employer Practices
• Volunteer Firefighters, EMS Workers Tax Credits Bill Passes Senate
• H2O PA Plan Passes Senate Unanimously
• House Committee Moves Forward on Mortgage Reform Bills
• Senate Republicans Offer Alternative Health Care Plan
• Workforce Initiative Passes Key Hurdle 
• Rendell Signs Clean Indoor Air Act
• Appropriations Committee Amends Budget Bill
• Register Now for PICPA’s 2008 Local Government Conference
  

PICPA Members Advocate Legislation in Harrisburg

On June 11, more than 80 CPAs attended PICPA’s Day on the Hill Program in Harrisburg. The program offered members the opportunity to see first hand the legislative process at work, as well as lending their own thoughts and opinions to state law and policymakers.

"I felt privileged to be asked by the Republican Floor Leader Sam Smith to communicate our concerns about the state’s economy. This was a good opportunity for the voice of certified public accountants to be heard by someone that can make a real difference.  I was impressed that Rep. Sam Smith appreciated the perspective we have as financial advisors and valued our opinion on the economy. The trip was worthwhile for my clients and me as a citizen of this state because I felt I was able to contribute valuable perspectives and technical advice," noted PICPA member Karen Facer-Mee, president of Facer, Mee & Associates PC, about the program. 

After presentations from Department of Community and Economic Development Secretary Dennis Yablonsky, Senate Majority Leader Dominic Pileggi, Senate Democratic Caucus Secretary Vincent Hughes, Deputy Speaker of the House Rep. Josh Shapiro, Republican Floor Leader Rep. Sam Smith, and Deputy Secretary of Revenue Dan Hassell, members took to Capitol Hill to discuss issues important to all PICPA members.

Earned income tax collection reform (see below) and CPA practice mobility were two of the major issues on which members lobbied lawmakers. With their efforts and assistance, PICPA’s Government Relations Team will be working overtime during the hectic budget season to see that these priorities make their way through the complex political system.

Mark your calendars for next year’s PICPA Day on the Hill – May 14, 2009.

Earned Income Tax Modernization Bill Headed for Vote

Legislation reforming Pennsylvania’s earned income tax collection system is headed for a vote. House Finance Committee Chairman Rep. David Levdansky has scheduled Senate Bill 1063 for committee consideration on Monday, June 16.

Senate Bill 1063, introduced by Sen. Jane Earll and passed by the Senate on April 30 by a vote of 41-8, amends the Local Tax Enabling Act by consolidating earned income tax (EIT) collection from more than 560 collectors for almost 2,900 jurisdictions to a countywide system of only 69 collection districts (Allegheny County will be divided into four tax collection districts). This bill will modernize and streamline the structure of tax collection and improve collaboration between taxing jurisdictions.  

If your representative is a member of the House Finance Committee, a phone call or e-mail Monday voicing your support for Senate Bill 1063 to your legislator could prove invaluable. Please ask your representative to support SB 1063. For more information on this issue, visit PICPA’s EIT Reform Web page. For more information on the state Department of Community and Economic Development's EIT Collection Reform Initiative, click here.

House Passes Legislation Targeting Unfair Employer Practices

Employers would no longer go unpunished when misclassifying legitimate employees as independent contractors to avoid paying state and federal taxes and workers’ compensation premiums under legislation the House passed Monday.

The bill’s prime sponsor, state Rep. Bryan R. Lentz (D-Delaware), said employers who misclassify their workers as independent contractors not only avoid paying their fair share of taxes, but they also deprive their employees of workers' compensation, unemployment insurance, overtime and other due benefits.

House Bill 2400 would establish that individuals who perform services in the construction or commercial carrier industries are employees of the party that pays their wages unless it can be  shown to the satisfaction of the Department of Labor and Industry that they have been and will continue to be free from the direction and control of their employer; that the service performed is  outside the usual course of the business of the employer; and that they are customarily engaged in an independently established trade, occupation, profession or business.

The bill would make intentional misclassification of an employee a third-degree felony and imposes hefty fines. Misclassification due to negligence would be a summary offense with fines.

The bill now goes to the Senate for consideration. 

Volunteer Firefighters, EMS Workers Tax Credits Bill Passes Senate

The state Senate approved legislation June 9 that would provide nearly $23 million in tax credits and tuition reimbursements by fiscal year 2009-10 for Pennsylvania’s fire and emergency medical services volunteers and employers.
 
The three bills passed by the Senate this week are as follows:

• Senate Bill 1314 (Sen. Lisa Baker) – Establishes a $500 tax credit for active members of volunteer firefighting and emergency medical services organizations, as certified by the State Fire Commissioner or the Director of the Emergency Medical Services Office in the Department of Health.
• Senate Bill 1315 (Sen. Mike Waugh) – Creates a post-secondary education tuition reimbursement program, providing volunteer firefighters, emergency services personnel, and fire police a reimbursement of 50 percent for each course credit, to be paid directly to the college or university.
• Senate Bill 1316 (Sen. Lisa Baker) – Establishes a $1,000 tax credit against an employer’s personal income tax for each volunteer fire and emergency services member who is employed.  The credit could not exceed $5,000 per employer during a specific tax year.

The bills are the result of a 2004 report that studied and recommended changes and enhancements to emergency service providers across the Commonwealth. All three bills now head to the state House for consideration.

H2O PA Plan Passes Senate Unanimously

The state Senate has unanimously approved a plan to provide $800 million in funding for critical water and sewer projects and other infrastructure needs.

Senate Bill 2, or the H2O PA plan, introduced by Senator Jane Earll (R-Erie), Senate Majority Leader Dominic Pileggi (R-Delaware) and Senator Mike Folmer (R-Lebanon), would also provide funding for storm water projects, flood control projects, and high-hazard dam repairs.

As amended in the Senate Appropriations Committee, the H2O PA bond issue would total $800 million. Funding will be available for projects throughout Pennsylvania, with priority being given to projects which are subject to a court order, agency order, or consent decree. Priority will also be given to projects involving consolidation and other regional projects. The bond would be paid with revenue from the Pennsylvania Gaming Economic Development and Tourism Fund.

To be eligible for funding, a project must be owned by a municipality or authority, and must include local matching funds. The Commonwealth Financing Authority will evaluate applications, with the Department of Environmental Protection and the Pennsylvania Infrastructure Investment Authority providing technical review and assistance.

Senate Bill 2 now moves to the state House for consideration.

House Committee Moves Forward on Mortgage Reform Bills

The state House Commerce Committee has voted unanimously this week in favor of three Senate bills intended to reform mortgage lending practices in Pennsylvania. The overall package takes aim at predatory and other questionable mortgage lending practices in Pennsylvania.

"These instrumental bills exemplify a bipartisan effort between the House and the Senate." said state Rep. Peter Daley, majority chairman of the committee. "After a yearlong process of hearings and negotiations, it seems we have collaborated on the most ideal legislation to aid Pennsylvania residents."

The bills approved by the Commerce Committee include the following:

• Senate Bill 483 would amend the Loan Interest and Protection Law of 1974 to increase the monetary cap in the act from $50,000 to the base figure of $217,873, as adjusted annually for inflation. Mortgage contracts below the cap cannot include prepayment penalties.
• Senate Bill 484 would permit the Department of Banking to publicly release information on pending enforcement actions and fines levied against non-depository licensees. 
• Senate Bill 486 would amend the Housing Finance Agency Law to require lenders to send copies of foreclosure notices to the Pennsylvania Housing Finance Agency so that mortgage foreclosures can be monitored on a statewide basis. The bill also would require PHFA to commence on ongoing study of mortgage foreclosures in the Commonwealth.

The final bill in the reform package – Senate Bill 485 – will be considered by the committee Tuesday, June 17.

The Senate bills are now headed to the full House for consideration.

Senate Republicans Offer Alternative Health Care Plan

This week, Senate Republicans unveiled a comprehensive health care package designed to improve health care access and affordability in what they view as a fiscally responsible way.

HealthNET PA is a $100 million blueprint that expands access to health care and medicine to 507,000 uninsured and low-income working Pennsylvanians. It utilizes information technology to control costs and reduce health care-associated infections, and provides expanded insurance options for employers and families.

Pennsylvania is ranked fifth-best in the nation in the number of citizens covered by health insurance, with 92 percent of the population covered. Nearly 16 percent of Pennsylvanians, or 2 million residents, are already covered by government-subsidized health care.

HealthNET PA will be funded through existing sources. Approximately $225 million is annually deposited into the Health Care Provider Retention Account from the current cigarette tax and the CAT Fund surcharge. An estimated $125 million a year is needed to fully fund the current MCARE abatement, which makes the remaining $100 million available for HealthNET PA.

As of June 30, 2008, approximately $500 million exists in the Health Care Provider Retention Account, which can be used to eliminate the MCARE unfunded liability when it comes due.

Workforce Initiative Passes Key Hurdle 

Legislation sponsored by state Rep. Josh Shapiro (D-Montgomery) aimed at improving the state's workforce and help reduce violence in the Commonwealth was unanimously adopted by the House Finance Committee on Monday.

House Bill 2196 would create a Youth Employment Incentive Tax Credit to provide businesses with tax credits in the amount of 70 percent of the business’s total expenses in employing a disadvantaged youth. A disadvantaged youth is defined in the legislation as an individual between 14 and 21 whose median family income does not exceed 235 percent of the federal poverty level.

House Bill 2196 now goes to the full House for consideration. 

Rendell Signs Clean Indoor Air Act

Gov. Ed Rendell signed into law Pennsylvania’s Clean Indoor Air Act on June 13, finalizing the 14 month-long process of ironing out an agreed-to version of the bill between the House and Senate. The bill was approved by the state Senate this week.

The approved bill is the result of work among members of a legislative conference committee appointed to work out differences in the conflicting House and Senate versions of the legislation.  

The state law does not allow for municipalities to enact their own bans, but will not affect Philadelphia’s current ban.

Appropriations Committee Amends Budget Bill

 The state House Appropriations Committee June 11 amended Gov. Ed Rendell’s 2008-09 budget proposal by restoring $147 million to programs that historically are funded by the state.

"Governor Rendell’s proposal gave us a starting point, but our amendment reflects the priorities of House members from both sides of the aisle," said state Rep. Dwight Evans (D-Philadelphia), who is chairman of the House Appropriations Committee and sponsor of HB 2380, the budget bill. "This is a difficult budget year for all of us. Even so, it’s important we continue our investments in the people, programs and policies that will move Pennsylvania forward."

Rendell’s proposed $28.3 billion General Fund spending plan is 4.2 percent higher than the state’s current plan. The Appropriations Committee added a little more than 0.5 percent in spending. Overall, spending would be 4.8 percent higher than the current fiscal year under the amended plan.

The amendment passed by a vote of 21 to 13, largely among party lines. With the committee’s action, the bill is poised to move to the floor for debate the week of June 23 if necessary.

Amending the budget proposal is part of broader negotiations that are underway to craft the state’s new budget. Appropriations Committee members and staff continue to meet daily with their counterparts in the Senate, along with the representatives of the administration. In addition, leadership from both chambers has scheduled weekly meetings with the governor.

"We’re negotiating and we are moving the process forward," said Evans who said he is committed to finalizing the budget by June 30, the last day of the current fiscal year. "What I hope for is a settlement with the Senate and the governor’s office." 

Register Now for PICPA’s 2008 Local Government Conference

PICPA’s 2008 Local Government Conference is scheduled for July 14-15, 2008 at the Hershey Lodge & Convention Center in Hershey, Pa. Invest two days and learn about required audits and initiatives for local governments from the Auditor General, discover what GASB issued this year, examine AICPA and federal activities in response to the federal government’s study on the quality of single audits, understand effective approaches to uncover evidence of a financial crime, and more! You can also personalize this conference by selecting your concurrent sessions! Register now.