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Legislative Update

Week Ending Sept. 26, 2008

• EIT Reform Update: Implementation Has Begun
• Business Privilege Tax Clarification Introduced
• Senate Passes Bill Limiting Local Government Appeals
• House to Consider Resale of Unregulated Securities
• Time is Running Out to Register to Vote!
  

EIT Reform Update: Implementation Has Begun

As PICPA reported in July 2008, the General Assembly recently enacted legislation reforming the state’s earned income tax collection system. Not only does the bill—now Act 32 of 2008—consolidate the system on a countywide basis, but the Commonwealth’s Department of Community and Economic Development (DCED) also plans to issue a single set of rules and regulations to 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.

Recently, DCED has also made available a Frequently Asked Questions document for use by tax practitioners, tax collectors, taxpayers, and employers affected by the new Act 32. They have also developed a working timeline as an additional reference. Both documents are available through PICPA’s Web site dedicated to information regarding EIT collection.

If members have additional questions or would like a more in-depth look at this important piece of legislation, please sign up for PICPA’s upcoming “Earned Income Tax Collection Reform Update” webinar. The webinar is free to PICPA members.

Business Privilege Tax Clarification Introduced

Legislation that would amend the Local Tax Enabling Act to clarify when a political subdivision may tax a company performing work within its borders was introduced this week by Sen. Pat Browne, CPA. PICPA has been working with Sen. Browne on a legislative remedy to address a state court decision that created uncertainties with respect to a municipality’s ability to tax any and all taxpayers conducting any business within its borders.  

The Pennsylvania Supreme Court in V.L. Rendina, Inc. v. Harrisburg and the Harrisburg School District reversed its previous position that a municipality cannot tax an entity that lacks a permanent base of operations within its borders. Previous decisions had held that a contractor was not subject to a city’s business privilege tax if it did not maintain a permanent office with the city limits. This most recent decision has muddied the local taxation waters.

Senate Bill 1595 provides that a business privilege tax may be imposed if the “privilege” of doing business is exercised through a “base of operations” in the local taxing jurisdiction. The legislation will further clarify that merely engaging in transactions within the taxing jurisdiction does not constitute the “privilege of doing business” in order to be subject to the business privilege tax.

The bill will be referred to the Senate Finance Committee. With time winding down on the current session, no legislative activity is anticipated this year.

Senate Passes Bill Limiting Local Government Appeals

The Senate approved legislation this week that would prevent school districts from raising property taxes on homeowners following the sale of a property.

Senate Bill 1258 includes compromise language that would limit local taxing districts to appeal an assessment. These restrictions would apply if a property is subdivided, improvements are added or removed, the property's market value changes by at least $200,000, or the additional revenue to be collected exceeds $5,000.

Senate Bill 1258 would apply to counties of the Fourth through Eighth Class, including all counties with populations under 210,000. Fifty-one of the state's 67 counties would be covered under the bill.

The bill now moves to the House for consideration.

House to Consider Resale of Unregulated Securities

On Wednesday, September 24, the House Appropriations Committee approved legislation that would close a loophole in the Pennsylvania Securities Commission’s oversight of venture capital investments.

House Bill 61 amends the Pennsylvania Securities Act to state that any resale of securities that are exempt from regulation be registered with the Commission if resold within one year of the original date of purchase to anyone other than an accredited investor. The bill would also require that the issuer of securities has a reasonable belief that the purchaser is buying them with the intent of investment, rather than resale.

Current state law does not explicitly require that accredited investors who make securities purchases not engage in immediate resale, thus opening the door to potential abuse. An example of such an instance can be found in SEC v. U.S. Wind Farming, in which general public investors were purposely misled by the issuer of securities.

The Commission already has this practice in place as a working policy – HB 61 was introduced on their behalf merely to place the practice in statute to ensure its perpetuity.

The bill has now been placed on the House calendar for the full chamber’s consideration.

Time is Running Out to Register to Vote!

While the weather is cooling down, the elections are heating up. You can make a difference this fall by voting for the candidates that best represent your interests. But you can’t vote unless you are registered. PICPA wants you, your family, your friends, and your neighbors to be registered to vote. Download the voter registration forms, print them out, complete them, and mail them back to your county as instructed at www.pavoterservices.state.pa.us. In Pennsylvania, you must be registered by October 6 to vote in the November Election. Register today so your voice can be heard on November 4th!