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Legislative Update

Week Ending June 27, 2008

• CPA Law, EIT Reform Bills Closer to Governor’s Desk
• Governor, Legislators Move Toward Budget Deal
• Bill Seeks to Simplify Filing of Amended Tax Returns
• Committee Approves Bill to Promote Cooperative Efforts
• Committee Approves Blues Merger Oversight Bill
• Bill to Divest from Iran, Sudan Passes House
• Committee Approves Bills to Close Property Tax Loophole
• Effort to Improve Protection of Personal Information Passes Senate
• Register Now for PICPA’s 2008 Local Government Conference
  

CPA Law, EIT Reform Bills Closer to Governor’s Desk

PICPA’s legislative agenda was on the move this week in the Pennsylvania House as two of our major legislative initiatives—revising the CPA Law and reforming the earned income tax collection system—both took giant leaps forward.   

Senate Bill 838, legislation amending and revising the Pennsylvania CPA Law, was unanimously reported June 25 by the House Professional Licensure Committee, where the bill had languished since being passed by the Senate, also unanimously, on Dec. 11, 2007. Passage of this legislation is necessary in order for Pennsylvania licensed CPAs to be on equal footing with CPAs in other states.

If enacted, SB 838 will allow for seamless practice mobility, require 150-hours of education prior to licensure, and allow for simple majority firm ownership by non-CPAs.

The same day as the committee vote, the full state House overwhelmingly passed Senate Bill 1063, legislation that would reform the earned income tax (EIT), also known as the wage tax, and net profits tax collection system, consolidating tax collection districts from 560 to 69, and saving municipalities and school districts millions of dollars in lost revenue.

House Finance Committee Chairman David Levdansky (D-Allegheny), who championed this issue for several years and spoke forcefully during floor debate, said Pennsylvania has a reputation of having the most fragmented local tax system in the nation, and that SB 1063 would simplify what is currently an inefficient and cumbersome system.

Senate Bill 1063 would reduce the number of EIT collectors from 560 to 69; enact standardized collection practices, coordination, reporting, and accountability among and between jurisdictions and collectors; reduce the loss of revenue for municipalities and school districts; and enhance business development by allowing companies dealing with multiple collectors and jurisdictions to remit to a single collector.

During his comments on the House floor, Rep. Levdansky acknowledged the efforts of PICPA and other stakeholders for their efforts on the legislation.  

The bill now returns to the Senate for a concurrence vote. Due to the legislature’s extended schedule during the budget discussions (see below article), PICPA will be working through the weekend and into next week to ensure further progress of both of these critical initiatives.

On behalf of the PICPA Government Relations Team, we would like to extend our gratitude to those of our members who took the time to contact their local legislators to educate them regarding these two important issues. Certainly, your invaluable help continues to build momentum behind the legislation, and is paramount to our efforts in Harrisburg. Thank you. 

Governor, Legislators Move Toward Budget Deal

With less than a week to go before the end of the state’s fiscal year, legislative budget negotiators and Governor Rendell appear to be making necessary progress toward a 2008-09 budget. 

Democratic and Republican leaders have spent much of the week discussing a new state spending plan focusing on cuts and spending increases to February’s proposed $28.3 billion budget, particularly in light of a last quarter dip in expected state revenues that has significantly reduced the year’s expected surplus. 

At the conclusion of June 25 discussions, differences were narrowing to the point that the Governor’s chief of staff, Greg Fajt, CPA, indicated that a “framework for a final budget” had been established. While details still need to be worked out, it is being reported that negotiators have globally agreed to the following:

• An overall spending increase tied to the rate of inflation - approximately four percent - which is higher than the original GOP proposal but below earlier Democratic plans.
• No use of the state’s Rainy Day Fund to close budget gaps.
• Borrowing for public works projects, including sewer and water projects, bridge repairs, and the state’s Redevelopment Capital Assistance Program.

While parties are coming to agreement, much remains to be accomplished, and specific details regarding spending levels have yet to be resolved.  In addition, discussions continue around an energy proposal and long-term education spending.

Legislative leaders will return to the table today and plan to continue to meet through the weekend, hoping to strike a deal and begin voting on a final proposal by early next week.

In a budget-related matter, the Senate Finance Committee June 26 approved an amended House bill that would provide nearly $96 million in tax relief in the upcoming fiscal year for lower-income working Pennsylvanians, small businesses looking to expand, as well as major employers and job creators.

House Bill 377, as approved by the Finance Committee, provides for a number of economic initiatives: an expansion of the cap on the Net Operating Loss provision of the Corporate Net Income Tax to $5 million or 20 percent of taxable income; an expansion of the special tax forgiveness program for low-income Pennsylvanians; an increase of the cap on the amount that small businesses may deduct as Section 179 expenses annual deduction to $50,000; and an expansion of the sales factor under Pennsylvania’s Corporate Net Income Tax to 85 percent. 

The bill now goes to the Senate Appropriations Committee before being considered by the full Senate. However, as Senate Finance Committee Chair Pat Browne, CPA (R-Lehigh), explained, HB 377 is merely a step in budget negotiations with the House and administration.

Bill Seeks to Simplify Filing of Amended Tax Returns

In an effort to make the process of filing an amended state tax return easier for taxpayers, state Rep. Bill Adolph (R-Delaware) has introduced legislation that will establish a separate tax return form specifically for amended returns. PICPA supports the initiative and will work with the House to move the bill – House Bill 2673 – forward.

As the system currently stands, a single annual tax return form can be used for both annual returns and amended annual returns. There is a specific section to indicate whether the form is for an annual return or an amended return; however, Rep. Adolph noted that this indication does not provide enough contrast for clarity in the process.

The new form for amended tax returns would be referred to as a PA-40X. Once passed into law, the act would take effect immediately, but would only apply to tax years beginning after Dec. 31, 2008.

The bill has been referred to the House Finance Committee.

Committee Approves Bill to Promote Cooperative Efforts

The Senate Local Government Committee June 25 approved Senate Bill 1496, a measure that would help municipal authorities work together.

Current state law allows municipalities to enter into intergovernmental cooperation agreements, but municipal authorities -- such as those overseeing water treatment plants or redevelopment efforts -- are not specifically mentioned in that authorization.

The bill is the result of a hearing the Senate Local Government and Urban Affairs & Housing Committees held jointly earlier this year on “Multi-Municipal Planning and Shared Services.”

The bill now proceeds to the full Senate for consideration.

Committee Approves Blues Merger Oversight Bill

The Senate Banking and Insurance Committee June 26 approved a bill that provides state oversight of proposed mergers involving non-profit health insurance companies and requires insurance companies to provide coverage for autism services and colorectal cancer screening.

House Bill 1150, as amended in the committee, would ensure the state has regulatory authority over the proposed merger of Highmark and Independence Blue Cross, the two largest health care insurance companies in the Commonwealth.

A key provision in HB 1150 is a requirement that any merger involving the “Blues” be subject to approval by the Department of Insurance. While the Insurance Department would hold final decision-making authority for a merger of non-profit health insurance companies, the bill empowers the Senate Banking and Insurance Committee and the House Insurance Committee to receive and review all filings submitted to the Department and to develop written comments and recommendations on the merger filings.

Coverage for autism services would begin one year after the bill is signed into law and would be capped at $36,000 per year. The cap would be adjusted on an annual basis based on the rate of inflation. Coverage would be required for businesses having 51 or more employees, a standard used by Florida, South Carolina, and other states that require coverage. Companies with 50 or fewer employees would not be required, but could voluntarily purchase coverage.

Bill to Divest from Iran, Sudan Passes House

The state House June 25 passed a bill that would require the state treasurer and state pension funds to withdraw investments from foreign companies doing substantial business in Iran or Sudan.

House Bill 1086 would require the state treasurer, the State Employees' Retirement System, and the Public School Employees' Retirement System to use publicly available information to identify whether they have money invested in any foreign companies doing substantial business in Iran or Sudan. The treasurer and the funds would be required to send written notices to such companies and to divest holdings in those companies after 90 days if the companies persist in doing business in either country.

The bill now goes to the Senate for consideration.

Committee Approves Bills to Close Property Tax Loophole

The Senate Finance Committee June 25 approved legislation designed to close a legal loophole that has resulted in property tax increases for many Pennsylvania homeowners.

Senate Bill 1247 and House Bill 1438 would set specific limits regarding when a local government can reassess property. The bills would limit local taxing districts’ ability to appeal an assessment only if a property is subdivided or when improvements are added or removed.

Currently, Pennsylvania’s Real Estate Assessment Law precludes a taxing body from appealing a property’s assessed value following a purchase.  However, when the purchase price of a property is dramatically different than its assessed value, a local government can argue to increase the assessed value of the property.

The bills now move to the Senate Appropriations Committee for consideration.

Effort to Improve Protection of Personal Information Passes Senate

Legislation that would require government agencies to report data breaches involving personal information was approved unanimously by the Senate June 26.

Senate Bill 1266 was introduced by Senate Majority Leader Dominic Pileggi after three thefts of state-owned computers containing personal information were reported in the second half of 2007. The stolen computers contained the personal information of nearly 400,000 individuals.

An existing law requires that the public be notified of such data breaches “without unreasonable delay,” thus Senate Bill 1266 specifies a one-week notification period for any breaches involving state or local government.

The legislation would also require government agencies to report data breaches to the Attorney General within three business days. It would authorize the Attorney General to investigate all breaches to determine the cause, review existing procedures, and make recommendations to prevent future incidents.

Senate Bill 1266 now moves to the state House for consideration.

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.