According to Peter Calcara, vice president of PICPA’s government relations team, 2019 was a relatively stress-free year in Harrisburg, but business should get more tense in 2020, highlighted by numerous important elections and legislative priorities. In this podcast, Calcara recounts the advocacy work of 2019, including highlights for the PICPA and its members, as well as the major issues that will come to the foreground once the calendar flips to January.
By: Bill Hayes, Pennsylvania CPA Journal Managing Editor
As we head toward the new year, it's a perfect time to recount the legislative happenings of 2019, and what they mean to PICPA members. Who better to give that update than Peter Calcara, vice president of government relations for the PICPA. Today, he'll discuss not only the highlights of the year for the PICPA, but what we are anticipating for 2020.
Can you give us a brief recap of what 2019 looked like in the Pennsylvania General Assembly? What went down?
[Calcara] 2019 was an interesting year because it was rather uneventful compared to the past couple of years, when we had a couple of budgets that were very late. In fact, one budget went into the next year. So, it was rather uneventful.
I think you can characterize this year, 2019 ... keep in mind, too, that Pennsylvania is a two-year legislative session. We began January 1, 2019, and this session carries until November 30th, 2020.
A very long, two-year cycle. Uneventful, but filled with a lot of promise, in that there was a bipartisan effort on a number of issues. Not only the budget, but other legislative initiatives. We're hopeful that's good. It sets up carry-over for 2020.
2019 was, I think, a productive year for the General Assembly. There have already been 3,000 bills introduced, a little over 3,000.
About 100 of those have made it through the entire process, and made it to the end line, if you will, and have been signed into law. That's a pretty good percentage of legislation. People say the process moves slowly. There's a reason it moves slowly, to prevent a lot of bad things from happening. That's a pretty good track record for first year of a legislature.
We also had, in 2019, as I said, an uneventful budget. $34 billion spending plan, not a lot of drama with that. It provided increased spending for public education, provided funding for farmers and the agriculture industry. That was done in a bipartisan fashion.
As I said, early on, there were other initiatives outside of the budget.
Major election reform received bipartisan support, as well as state legislation creating a state-based health insurance exchange program that was supported almost unanimously in the General Assembly. Then, an issue that's of interest to CPAs is license portability, an initiative to allow out-of-state licensees to come into Pennsylvania more seamlessly, as long as they're in good standing with the state that they're coming into. Again, that was a bipartisan initiative.
2019 was uneventful, but productive, and hopefully setting up for a good 2020 year.
What would you say are the particular highlights for the PICPA this year, and what was accomplished?
I'd just mentioned that about 100 bills were signed into law, just in 2019. The PICPA had a couple of those. For an organization like ours, that's a pretty good track record.
One of the initiatives was included in this year's tax bill, Act 13. That was an overall tax bill. We were able to get inserted in the tax bill a provision from Rep. Keith Greiner, who is a CPA from the Lancaster County area, that allows for a combined Pennsylvania PA41 form, similar to what's allowed at the federal level. The change allows a fiduciary to file a joint tax return for an estate and trust, for the taxable years when trust income is reported as part of an estate income. That small change, but, again, streamlining. Any time you can piggyback or match with the federal government, I think that's a positive change. That provision takes effect tax years beginning after December 31, 2019.
The other one, and more significantly, is an initiative that the PICPA worked on with the Department of Revenue, and State Rep. Frank Ryan, who is also a CPA from the Lebanon County area. House Bill 17, which is now Act 90 of 2019, and that is, it establishes a ... attorneys will call it a statute of repose, but it establishes a 10-year time period on the collection of all taxes administered by the State Department of Revenue.
All taxes except for inheritance taxes. The Department felt that the inheritance taxes, the tail on closing out an inheritance tax return, typically goes beyond the 10 years, so they wanted to carve inheritance taxes out. That is a pretty significant provision. There is a federal statute of limitation, and a number of other states have similar statues. I think even the City of Philadelphia has its own statute of limitations, or statute of repose. Again, I've heard it used both ways.
This hopefully will help. It's not an immediate provision. It goes into effect January 1, 2021. Then there's a 10-year tail on it, before we'll see the law fully in effect. It will, down the road, help taxpayers and practitioners, and prevent receiving those notices from the Department of Revenue that say, "You owe taxes from 1972." We think it's a positive change. No, it does not go into effect immediately, but down the road.
There are a couple of other provisions added to this bill, addressing some concerns, or some issues, that the Pennsylvania bankers and financial institution community were working on. One, it exempts canned software, utilized for the business of banking. There's an exemption from the sales and use tax for that. It also requires financial institutions to provide the State Department of Revenue with information about accounts of taxpayers subject to liens, for failure to pay state taxes. One final provision in Act 90: it strengthens the criminal statute of limitations from two years to three years.
It’s very unusual to have a tax bill outside of the budget season. As I mentioned earlier, we were able to get a provision, the Greiner provision in the tax bill, which was part of the budget. Unusual to get a tax bill outside of the normal budget process, so we're pretty happy about that. The Governor signed that bill, House Bill 17, into law last week. So, that is not Act 90 of 2019, as I mentioned earlier.
A couple of other issues that we continue to work on, trying to fix the 1099 miscellaneous withholding provision. That was part of the budget a couple years ago. Rep. Keith Greiner has legislation in to address that, that's House Bill 926. As I said, we'll have to tee that up in January, start again in January 2020 with that initiative.
You previewed it a little bit there. We talked about the things that were accomplished in 2019. What do we have in store for 2020 that we're looking forward to?
[Calcara] 2020 is going to be an incredibly crazy year, I think.
Start off by talking about the elections, and I won't talk about the national elections because I think you could probably spend a few hours, a multi-hour podcast, on the national elections.
For Pennsylvania purposes, all 18 members of U.S. Congress are up. That'll highlight the top of the ticket for Pennsylvania. Of course, in addition to the Presidential race, we also have our three row offices that are up. The State Attorney General, the State Auditor General, and the State Treasurer. Two of those offices, the Attorney General and Treasurer, have incumbents that will be seeking reelection. The Auditor General's office, Eugene DePasquale, is ending his second term, so that'll be an open seat. Attorney General Josh Shapiro is the incumbent, and there's still no Republican candidates, announced Republican candidates. As well as Treasurer, Treasurer Joe Torsella, is the incumbent. I have not heard any announcements on Republican challengers.
At the State General Assembly level, all 203 seats of the State House are up for reelection. That includes our five CPA legislators and I believe all five of those individuals will be seeking reelection. 25 of the 50 State Senate seats will be up next year, not including Pat Browne. Pat Browne, CPA, legislator from the Allentown/Lehigh Valley area, was elected last year for a four-year term.
From the political side, that's obviously something that we're going to be very focused on, from the CPA-PAC standpoint. Legislatively, obviously the one big item is the budget. That's the one initiative that the General Assembly has to address. It has to pass a budget every year. Some positive news, I guess, in the budget is that, so far, year to date, revenue collections are keeping pace with projections. There was significant budget surplus at the end of the 18/19 fiscal year. Doesn't look like there will be a surplus of that magnitude. I think it was in the realms of $800 or $900 million surplus. Probably not going to hit that, but hopefully there will be some surplus. Revenues are projecting strong throughout the year, but that's something that obviously can change.
A couple of things that we keep hearing discussions about, that will be part of the budget debate. Once again: combined reporting. This is combined reporting for corporate tax income reporting purposes. This is an issue that's been around since Governor Ed Rendell's days. It's an issue, now, that's tied to lowering the corporate net income tax, the 9.99 rate. That, again, will be part of the discussion.
The landscape on that has changed, too, where it's always been an issue that mostly Democratic lawmakers have been talking about closing the Delaware Loophole. That's just code for we need to go to combined reporting.
Now the landscape has changed, where Republicans are now saying, this is something, if we do want to lower the corporate net income tax rate, and everyone agrees that it does need to be lowered, maybe combined reporting is something we should take a serious look at. The venue really has changed in that, where it was really one side of the aisle talking about it. Now you're hearing rumblings in a bipartisan sense.
Tax on Marcellus Shale drillers, again, that's something that Governor Tom Wolf campaigned on six years ago, and two years ago. It's an issue that he will continue to advocate for.
A new one on the block is legalizing recreational marijuana. Pennsylvania enacted medical marijuana maybe a year or so ago. Now there's talk about legalizing recreational marijuana. I liken this to when we had the debate, many years ago ... this is my 33rd year, I'll be going into my 34th budget next June. I recall the early days on gaming, when it was riverboat gambling that we were talking about. We went from riverboat gambling, to slots at the racetracks to help the horse racing industry, and we've gone to full Las Vegas in a matter of a couple of years. I think legalization of recreational marijuana is in that same trajectory.
Minimum wage increase: Pennsylvania's minimum wage laws are still, I think, $7.25 an hour, in that ballpark. It's one of the lowest in the region. The State Senate just last month passed an increase to $9.50 an hour over a three-year period. There's some resistance in the House to do anything. It's still short of the $12 or $15 an hour that a lot of advocates were looking for, but this is a compromise, $9.50, that was reached with the administration. The House is not yet on board. I could see some give-and-take in the budget negotiations on some kind of minimum wage increase.
A couple of other carry-over issues that are on our radar: One is corporate tax or business tax reform. The House Finance Committee's Tax Modernization and Reform Committee, it's one of these committees that's been a while, it's been dormant. It's now resurrected under the leadership of Rep. Keith Greiner, who is chairing that. They're really just doing an environmental scan right now, with Pennsylvania's tax laws, and how it compares to other states. There was a public hearing last month, where the task force heard testimony with regard to Pennsylvania's corporate tax structures. That's something that we could likely see move a little bit more quickly next year, and it's something we certainly will be involved in.
Treasury Secretary Joe Torsella convened a retirement security task force last year. Bob Jazwinski, a past president of the PICPA, was a member of that. They issued a report, and their findings were pretty concerning in the number of individuals who had no retirement plan available to them. One of the recommendations of the task force was to enact some type of auto-IRA program, where individuals could take advantage of retirement savings through their employer. There is legislation in the works. It has bipartisan support. Senator Pat Browne is one of the prime sponsors, as well as Democratic Senator Art Hayward. In the House, Mike Peifer, chairman of the House Finance Committee, and Representative Mike Driscoll are looking at introducing similar legislation to enact an auto-IRA program.
There are several states who have enacted this. I think either Oregon or Washington. I think Illinois as well. We're at the forefront. Pennsylvania is not known for being at the forefront of these type of issues, but this is something that the treasurers and the retirement security task force feel there is a need in Pennsylvania.
Last, but not least, is the decades-old issue of property tax, either elimination or reform. Use whatever term you want to use. There are a number of bills. I think, last count, at least six or seven that either reform the system, provide some relief to senior citizens, to a full-blown property tax elimination. That has a pretty significant price tag to it. If you're talking about eliminating all school property taxes, that's about $15 billion that you have to make up. That's not an easy number to hit.
There are two competing elimination bills. House Bill 13, which is sponsored by Rep. Frank Ryan, and House Bill 76/Senate Bill 76, which has been around for a number of years. The problem with House Bill 76/Senate Bill 76 is, from our standpoint, it doesn't add up. It doesn't make up for the lost revenue.
House Bill 13 is intriguing because, for the first time, Rep. Ryan puts on the table taxing retirement income in Pennsylvania. Right now, it's not taxed. He is proposing to tax it under House Bill 13.
There's also an interchamber working group. There's a House/Senate bipartisan working group of lawmakers that have been meeting for at least the past year to try to come up with some common ground, or some compromise areas on this issue. As of a few weeks ago, that group was still not able to reach any type of compromise. That is an issue, particularly in an election year, that I think you're definitely going to continue to hear about until, or if ever, we see any type of major relief or elimination proposal actually getting to the governor's desk. I think that's the missing element.
You need gubernatorial leadership. Not that this is an issue that Governor Wolf hasn't taken leadership in, it just needs to be a centerpiece of your legislative agenda. We haven't had that since, probably, Governor Bob Casey in the mid-eighties.
I expect 2020 to be a little bit more eventful than 2019 because of the elections, budget, and other issues. It will certainly be a busy year.