Log In | About PICPA | Contact | FAQs

Legislative Update

Week Ending June 20, 2008

• Committee Advances EIT bill; House Vote Next Week
• PICPA Meets with Revenue Department
• Tax Stimulus Package Wins Senate Approval
• Senate Passes 2008-2009 Budget Bill
• Panel Moves 100 Percent Tax Relief Bill
• Rendell Advances Energy Conservation Initiatives
• Register Now for PICPA’s 2008 Local Government Conference
  

Committee Advances EIT Bill; House Vote Next Week

The House Finance Committee voted overwhelmingly June 16 in support of a bill that would streamline and consolidate the collection of the earned income tax (EIT) and net profits tax in Pennsylvania, 25-1.  

Senate Bill 1063, sponsored by Sens. Jane Earll (R-Erie) and Pat Browne, CPA (R-Lehigh), was referred to the House Appropriations Committee for a fiscal note and is expected to be voted on by the full House next week. PICPA once again urges members to contact their state representative in support of SB 1063 and to urge a “NO” vote on all non-agreed-to amendments.

A recent Pennsylvania Economy League review estimated that as much as $237 million in EIT revenue is gone un-collected annually by municipalities and school districts. Lack of uniform withholding, varying thoroughness of tax collectors’ records, training, and a lack of coordination are among the problems that plague the system.

Senate Bill 1063 includes a number of important improvements:

• Consolidating the system into 69 independent tax collection districts roughly congruent with counties, but not a function or department of county government
• Establishing uniform withholding, remittance, and distribution requirements
• Requiring that the Commonwealth develop uniform forms, notices, reports, returns, schedules, and codes for school districts, municipalities, and tax collection districts
• Requiring that employers withhold all local 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
• Strengthening reporting requirements so that each tax dollar is tracked from the time it is withheld until it is received by the appropriate taxing jurisdiction
• Requiring that the Commonwealth issue one set of rules and regulations that apply to all collectors, taxpayers, and employers
• Instituting a continually updated, comprehensive tax register, maximum twice-yearly rate changes, a uniform definition of taxable income, and a system of appeals
• Requiring 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
• Providing for more accountability, transparency, oversight, and enforcement
• Allowing full implementation to start in 2012 with 2011 being a transition year

PICPA Meets with Revenue Department

PICPA committees on State and Federal Taxation met this week with senior officials at the Department of Revenue for their “Questions and Answers” session. This annual meeting gives committee members an opportunity to pose questions to the Department on behalf of all 19,000 PICPA members. Written responses to this year’s set of questions will be available and posted on PICPA’s Web site within the next six weeks.  

Tax Stimulus Package Wins Senate Approval

The state Senate this week approved a four-bill stimulus package that would provide nearly $96 million in tax relief in the upcoming fiscal year, and $246 million by 2010-11, for lower-income working Pennsylvanians and small businesses looking to expand, as well as major employers and job creators.
  
Senate Bill 1385, sponsored by Senator Jake Corman (R-Centre), would expand the cap on the Net Operating Loss provision of the Corporate Net Income Tax to $5 million or 20 percent of taxable income. The NOL cap is currently set at $3 million or 1 percent of taxable income. If enacted, the effective date of the increase would be January 1, 2009. The NOL expansion is projected to save Pennsylvania employers $21 million in Fiscal Year 2008-09, $68 million in Fiscal Year 2009-10, and $78 million in Fiscal Year 2010-11.

Senate Bill 1386, sponsored by Senator Bob Regola (R-Westmoreland), would increase the eligibility limits for special tax forgiveness for low-income Pennsylvanians. The bill would increase claimant income eligibility limits by a total of $2,000 over three years and the dependent allowance by $500 over the same period. Currently, a family of four with a combined income of less than $32,000 pays no state income tax. Under SB 1386, families earning $37,000 or less would be exempt. That increase is projected to provide $75 million annually in savings to low-income working Pennsylvanians.

Senate Bill 1387, sponsored by Senator Pat Vance (R-Cumberland), would double the amount that small businesses may deduct as Section 179 expenses on their income tax filings. Section 179 of the federal Internal Revenue Code provides for the deduction of all or part of the costs of machinery and equipment used for business purposes. SB 1387 would increase the maximum annual deduction to $50,000, which is projected to provide $7 million in savings to Pennsylvania's small businesses.

Senate Bill 1388, sponsored by Senator John Eichelberger (R-Blair), would amend Pennsylvania's Corporate Net Income Tax to expand the sales factor to 85 percent. 

The bills now move to the House for consideration where they will have to be reconciled with the proposed Tax Code changes found in House Bill 2250. That bill is currently in the House Appropriations Committee awaiting action.

Senate Passes 2008-2009 Budget Bill

Though it’s been six years since a state budget has been completed by the June 30 deadline, there were signs this week that the General Assembly and Governor Rendell may be making progress to bring a 2008-09 spending plan in nearly on time.

Before they adjourned for the week, the Senate, by a vote of 28-21, passed a spending plan for the new fiscal year. Senate Bill 1389 calls for $27.9 billion in general fund spending, which is an increase of $749 million (2.76 percent) over the current budget. However, the proposal is nonetheless $416 million lower than what the Governor requested for FY 2008-09.

The Senate Republican proposal adds $41 million in spending not requested by the Governor, primarily through a 1-percent COLA for community MH/MR providers ($33 million). The remaining $8 million is for restorations of cuts proposed by the Governor.

While the House of Representatives did not debate a budget bill this week, discussion at the end of Wednesday’s session set the schedule for a full week of budget debate starting June 23.  

At the conclusion of this week’s legislative activity Wednesday, Democratic Leader Bill DeWeese (D-Greene) announced that key leaders of all four legislative caucuses met Wednesday to work on the 2008-09 Budget.  He went on to say that there will be additional meetings continuing through the remainder of this week and into the weekend (Thursday, June 19 through Sunday, June 22, 2008). Next week, all House members were told to expect to be in session for the full week and likely into the weekend. While negotiations are moving forward on issues such as energy and infrastructure, talks are still being conducted relating to the amount of borrowing to be authorized for the next fiscal year.

Republican Leader Sam Smith (R-Jefferson) agreed that progress was being made, but expressed the opinion that a budget agreement is not as close as some may believe. He also indicated that agreements relating to issues such as debt borrowing and education spending have yet to be decided.  Like his Democrat colleague, Smith confirmed that a good amount of discussion between the four legislative caucuses is ongoing. He too expects the House Session go seven to ten days beginning Monday, June 23.

Panel Moves 100 Percent Tax Relief Bill

The Senate Finance Committee approved legislation June 18 that would allow for a 100 percent homestead exemption, according to Committee Chairman Senator Pat Browne, CPA (R-Lehigh).

Senate Bill 404 is a proposed constitutional amendment that would lift the current cap on the homestead exemption that may be granted by county and local taxing jurisdictions. Currently, homestead exemptions can be no more than 50 percent of the median assessed value of all residential properties.

“This bill is not a mandate, but rather is intended to provide flexibility to state, county, and local taxing bodies by allowing them to provide homestead exemptions of up to 100 percent of each property’s assessed value,” said Senator Browne, the prime sponsor of the bill. “This gives taxing officials the opportunity to provide true and total relief to residential homeowners.”

Constitutional amendments must be approved during two consecutive sessions of the General Assembly and then approved during a statewide referendum of the voters.

Rendell Advances Energy Conservation Initiatives

Gov. Ed Rendell announced a number of strategic initiatives the Commonwealth will immediately make to reduce energy use, stimulate the renewable energy sector, and cut costs.

“Rising energy prices affect every customer, including state government,” Governor Rendell said. “We need to make immediate, sweeping adjustments to the way state government operates to counter escalating gas prices and rising energy prices.

Gov. Rendell also urged the General Assembly to pass his comprehensive Energy Independence Strategy initiatives that he proposed in February 2007.

“We need to take steps to reduce our demand for energy to help drive down costs,” said the Governor. “That’s true today with oil, and because electricity rates will soon skyrocket, it’s the case with electricity, too.”

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.