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Legislative Update

Week Ending July 11, 2008

• PICPA Scores Two Major Legislative Victories
• Legislation Reforming CPA Law Gets Governor’s Signature
• Rendell Signs PICPA-Supported EIT Reforms
• Gov. Rendell Signs New Budget
• Bill Expanding KOZs to Become Law
• Mortgage Reform Bills Now Law
• Blues Oversight Bill Headed to Governor
• We Really Can Make a Difference in Pa. Politics
  

PICPA Scores Two Major Legislative Victories

PICPA scored two major victories in one week with the passage of Senate Bill 838, which updates the Pennsylvania CPA Law, and Senate Bill 1063, which reforms the earned income tax collection process.

Senate Bill 838 amends the CPA Law to establish a mandatory 150-hour education requirement for certification and licensure beginning in 2012, provide interstate practice mobility with no notification and no fee for CPAs under “substantial equivalency,” allow nonlicensees up to 49 percent ownership in a public accounting firms, and update the peer review provisions of the act. Enactment of SB 838 was necessary for Pennsylvania-licensed CPAs to be on equal footing with CPAs in other states.

PICPA’s proposed amendments to the Pennsylvania CPA Law unanimously passed both the House and Senate on July 3, and was signed by the governor on July 10.

Gov. Rendell signed into law Senate Bill 1063 at a July 2 ceremony attended by PICPA representatives, including Cheri Freeh, CPA, chair of the PICPA Local Tax Reform Subcommittee and one of the crafters of the legislation.

“Today marks the culmination of a tremendous grassroots effort by the business community, local government, and professional associations and, ultimately, the legislature,” said Gov. Rendell in signing the bill. “This fixes what is now, probably, the most complex and confusing local taxing environment in the nation, with more local earned income tax collectors—560—and more local taxing jurisdictions—nearly 2,900—than all other states combined.”

Legislation Reforming CPA Law Gets Governor’s Signature

Legislation sponsored by Sen. Jake Corman (R-Centre) that changes the certification process and allows unfettered practice mobility for Pennsylvania CPAs—a major PICPA legislative initiative—was signed by Gov. Rendell on July 10, and is now law. It will take effect in 60 days.

Senate Bill 838 brings Pennsylvania's CPA law into compliance with most other states as well as the national Uniform Accountancy Act. Passage of this legislation is necessary for Pennsylvania-licensed CPAs to be on equal footing with CPAs in other states.

The law provides interstate practice mobility under “substantial equivalency,” meaning that the education, examination, and experience requirements of another state are comparable to or exceed the requirements in the CPA Law. Thus, Pennsylvania CPAs will be authorized to provide services in states that also embrace substantial equivalency, without providing notice or paying fees.

To reach substantial equivalency standards, the Pennsylvania law increases the minimum amount of education required to obtain a CPA certificate and license from 120 to 150 hours, which is already the standard in 43 other states. However, CPA candidates may still sit for the exam with only 120 hours. CPAs currently licensed in Pennsylvania will be grandfathered into the new policy, and will not need additional training to practice in other states.

The new education requirements would not take effect until 2012.

The law also increases the ownership share that non-CPAs may hold in accounting firms. Presently, an accounting firm must be at least two-thirds owned by CPAs. The law changes that to a simple majority.

PICPA wishes to acknowledge and thank the following legislators who helped make passage of this legislation possible:  Sens. Jake Corman, Pat Browne, CPA, and Tommy Tomlinson, as well as Reps. Mike Sturla, Bill Adolph, Gordon Denlinger, CPA, John Maher, CPA, Mike Peifer, CPA, and Craig Dally.

Rendell Signs PICPA-Supported EIT Reforms

More than four years of grassroots lobbying culminated in Gov. Rendell’s July 2 signing into law of Senate Bill 1063, creating a new, more efficient tax collection system that could yield more than $200 million for municipalities and school systems and improve Pennsylvania’s business climate through the standardization, coordination, and accountability it provides.

Under the bill—now Act 32 of 2008—the Commonwealth’s Department of Community and Economic Development (DCED), will issue one set of rules and regulations that apply to all collectors, taxpayers, and employers. DCED also will develop uniform forms, notices, reports, returns, schedules, and codes to be used by municipalities, school districts, and tax collection districts.

The law requires employers to withhold local income taxes and remit them to one collector, even if an employer operates in multiple counties, and strengthens reporting requirements so that each earned income tax dollar is tracked from the time it is withheld until it is disbursed.

PICPA was a major architect of this legislative accomplishment. Cheri Freeh, CPA, chair of PICPA’s Local Tax Reform Subcommittee, attended the bill-signing ceremony. PICPA would like to thank our many legislative champions, without whom this bill would not have been enacted: Sens. Jane Earll and Pat Browne, CPA, and Reps. Dave Levdansky, Steve Nickol, and Gordon Denlinger, CPA.

The legislation arose from a 2004 report published by DCED, which documented the fragmentation, complexity, and inefficiency of the earned income collection system.

PICPA and DCED will begin to work on implementation immediately.

Gov. Rendell Signs New Budget 

Late in the afternoon on July 4, Gov. Rendell signed into law Pennsylvania's 2008-2009 General Fund budget. The $28.3 billion spending plan represents a 3.98 percent increase over last fiscal year's budget. Gov. Rendell hailed the plan’s new investments in energy, education, and infrastructure. 

“Even in tough national economic times, this budget shows that Pennsylvania has the resources and the resilience to keep moving forward,” Gov. Rendell said.  “Because we have worked hard over the past five years to trim the cost of government by $1.5 billion and control spending, we have been able to make major new investments in educating our children, repairing our bridges, and moving toward energy independence in Pennsylvania."

Senate Bill 1389 calls for $28.3 billion in General Fund spending, which is nearly $150 million less than the $28.35 billion proposed by Gov. Rendell. Overall, the 3.98 percent increase is below the 4.4 percent rate of inflation.

The budget includes no new taxes, while the phase out of the Capital Stock and Franchise Tax continues unmodified. House Bill 377, a tax code bill that is part of the budget agreement, does provide for a $100 tax credit for active volunteer firefighters and EMS workers. Gov. Rendell is expected to sign the bill.

One key element in the budget is a more equitable proposal for funding basic education in Pennsylvania, including an overall 5.5 percent increase ($275 million) in basic education funding to a total of $5.2 billion. House Bill 1067, the education bill that is part of the budget package, ensures that every school district in Pennsylvania receives a minimum 3 percent increase in its basic education subsidy – providing increased support for 238 districts.

The budget provides for borrowing to make prudent investments in public infrastructure, such as bridges, dams, and water and sewer projects. In particular, $350 million is set aside to make critical improvements to 400 bridges across the state (House Bill 2522 and House Bill 1589). Senate Bill 2 would authorize $800 million in bonds for water and sewer maintenance that would be paid back from slots funds. In addition, under Senate Bill 1341, the voters will have the opportunity to participate in a referendum that would invest $400 million in new water and sewer projects across the Commonwealth. These bills have been signed into law.

A three-bill package authorizing the borrowing of $500 million to invest in energy projects and mandating alternative fuels at the pump is also part of the budget. The package includes Special Session House Bill 1, House Bill 1202, and Special Session Senate Bill 22. All three bills have been signed into law by Gov. Rendell.

Graphics, budget highlights, and additional details about the 2008-09 state budget are online at www.budget.state.pa.us.

Bill Expanding KOZs to Become Law 

Legislation to expand programs that use tax abatements to attract employers to Pennsylvania communities has been approved by the General Assembly and sent to the governor to be signed into law.

Senate Bill 1412 amends the Keystone Opportunity Zone, Keystone Opportunity Expansion Zone, and Keystone Opportunity Improvement Zone Act to create 15 more of such sites. It also extends the duration of the designation for seven to 10 years, depending on the project.

The bill also addresses zones where an endangered species or other environmental concern is discovered that would prohibit development.  The measure would allow the Department of Community and Economic Development to replace such sites with nearby parcels to allow development to go forward.

The bill also prohibits a person receiving tax exemptions from knowingly allowing illegal aliens to work in the zone.

The Keystone Opportunity Zone, Keystone Opportunity Expansion Zone, and Keystone Opportunity Improvement Zone Act was originally enacted in 1998.

Mortgage Reform Bills Now Law

On July 8, Gov. Rendell signed into law a mortgage industry reform package. Senator and PICPA member Pat Browne, CPA, championed the legislation.

Senate Bill 483 would amend the Loan Interest and Protection Law of 1974 to increase the monetary cap from $50,000 to $200,000, meaning that there could be no prepayment penalties on mortgages of $200,000 or less.

Senate Bill 484 would permit the Department of Banking to publicly release information on pending enforcement actions and fines levied against nondepository licensees.

Senate Bill 485 would amend the Real Estate Appraisers Certification Act to expand the Board of Real Estate Appraisers from seven to 11 members. It also hikes penalties for appraisal violations from $1,000 to $10,000.

House Bill 2179 creates a new state-licensing requirement for all mortgage loan officers. Current law only requires mortgage brokers and bankers to be licensed, but not individual loan processors.

Senate Bill 486 amends 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.

Blues Oversight Bill Headed to Governor

Legislation providing for state oversight of the proposed mergers of nonprofit health insurance companies was signed into law by Gov. Rendell July 9.

House Bill 1150 would require the proposed merger of Highmark and Independence Blue Cross be subject to approval by the Department of Insurance. In addition, 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.

House Bill 1150 will also require insurance companies to provide coverage for autism services and colorectal cancer screenings.

We Really Can Make a Difference in Pa. Politics

Senate Bills 838 and 1063 were passed as a result of the hard work of PICPA members. Through testimony, letter writing, phone calls, and legislative visits of our Key Persons, and donations by members to the CPA-PAC, members truly made a profound effect on the business climate in Pennsylvania. Now is your chance to get involved. Demonstrate your support of an increased CPA presence in Harrisburg. Sign up to be a Key Contact Person or make an investment in CPA-PAC.