By Peter N. Calcara, vice president – government relations
With spring comes warmer weather, baseball, hockey and basketball playoffs, and a renewed sense of optimism after the long, dreary winter months. It also marks the end of another tax season and moves Pennsylvania a bit closer to its June 30 budget deadline. While there seems to be some optimism regarding this budget process, I’ve been around too long to plan any vacation for the first few weeks in July.
The budget is one of several issues that state lawmakers are working on, but it is the one that can easily suck the air out of the capitol and bring all other legislative plans to a grinding halt. Many of you have been knee deep in tax returns, so let me take this opportunity to bring you up to speed on some of the issues the PICPA and its government relations team in Harrisburg has been working on.
Since it’s the biggest kid on the block, let’s start with the budget. In February, after Gov. Tom Wolf proposed his $33 billion spending plan for the 2018-2019 fiscal year that begins July 1, state lawmakers dove into the details through the annual budget hearings ritual. For nearly three full weeks, members of the House and Senate appropriations committees probed and prodded cabinet secretaries and agency heads with questions about specific line items, programs, and services. The hearings have concluded, and lawmakers must now cobble together their own budget plans.
On a positive note, as of March 30, 2018, fiscal year-to-date General Fund collections total $25.3 billion, which is $221.7 million, or 0.9 percent, above estimate, according to the Department of Revenue. While two of the big three General Fund revenue sources are down (corporate tax and sales tax receipts) and personal income tax revenues are up slightly, the one-time revenues received from the sale of new gaming licenses, the securitization of the Tobacco Settlement Fund, and state liquor store profit payments have helped offset economic sluggishness.
The PICPA testified before the House Finance Select Subcommittee on Tax Modernization and Reform in February and April on the personal income tax and the corporate income tax and how Pennsylvania law compares with other states. The subcommittee is charged with investigating, reviewing, and making recommendations concerning the process, rates, and methods used to collect taxes in the state. A final report is due Nov. 30, 2018.
The PICPA continues to be at the forefront of the debate on state bonus depreciation in Harrisburg. There are currently two bills in play. The PICPA supports both House Bill 2017 and Senate Bill 1056, sponsored by PICPA member state Rep. Frank Ryan (R-Lebanon) and Sen. Michelle Brooks (R-Crawford), respectively. HB 2017 was approved by the state House on March 14 by a vote of 183-4. SB 1056 is pending in the Senate Finance Committee. Both bills would reverse Department of Revenue (DOR) Corporate Tax Bulletin 2017-02, with SB 1056 restoring full depreciation under federal law while the House bill provides some level of depreciation. The PICPA is urging lawmakers to pass legislation now and not wait until a full budget agreement is in place.
House Bill 866, PICPA’s legislative proposal to ensure that Pennsylvania taxpayers are not double taxed by local jurisdictions that levy a local earned income tax, has been stuck in the state Senate for several months. The bill, sponsored by Rep. George Dunbar (R-Westmoreland), received unanimous approval by the House last June. It provides greater uniformity and clarity in the collection of local income taxes. We continue to press the Senate to pass this important pro-taxpayer legislation.
The PICPA continues to work with the DOR on a variety of issues. From the new 1099-MISC withholding requirement to the department’s review of Schedule Cs, the PICPA and the DOR have had active and open lines of communication to discuss members’ concerns.
A host of other issues – including tax matters such as combined reporting and sales tax on professional services – are never too far removed, and can quickly go from the legislative back burner to the front burner.
So, enjoy the warm weather and take in a ball game. We have Harrisburg covered for you while you recover from tax season, but be ready to play your part as legislative issues come to the forefront.