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  • May 18, 2022

    Making State Tax Legislation Isn’t Always Pretty

    Jonathan LissBy Jonathan Liss


    Certainly, you have heard the old line that producing legislation is akin to sausage making, and that knowing the details can be … off-putting. Perhaps this is not the most appetizing analogy, but it hits close to the mark. The process of making legislation can get messy, and sometimes you might be better off not watching it. This blog describes the process in Pennsylvania through which state tax laws are enacted or, in some cases, repealed. It is my hope that, in the end, we remove some of the mystery of lawmaking.

    Like the U.S. Congress, state legislatures (other than Nebraska) are bicameral, consisting of two separate chambers: a smaller senate and a larger house. Forty-six state legislatures meet annually. Regular sessions generally begin in January and run through late spring or early summer. The Pennsylvania General Assembly has 253 members, consisting of a 50-member Senate and a 203-member House, making it the second-largest state legislature in the nation (behind New Hampshire) and the largest full-time legislature.

    Inside the Pennsylvania General AssemblyState legislatures have a responsibility to set the direction of tax policy within the state. Western political theory from the 17th and 18th centuries (or before if you go back to the Magna Carta) holds that the power to raise income for the state through taxes arises from “the people.” So, rules of procedure require tax legislation to originate in a specific chamber. Some states require tax bills or bills that raise revenue to be passed by a super majority of votes. There are also states that allow tax issues to be adopted by ballot initiative (direct voter approval). In addition, state tax laws must comply with federal constitutional restrictions and state constitutional restrictions, such as Pennsylvania’s uniformity clause.

    To pass a tax bill, many steps are required. And the truth of the matter is that there are no simple steps in state government. Legislators, special interest groups, and associations all have ideas and input on drafting a bill. State tax legislation may be intended to achieve any number of goals (referred to as “legislative intent”), including tax relief for individuals or businesses, closing corporate “loopholes,” economic development, the establishment of new taxes, and conformity with or decoupling from federal tax laws.

    An example of legislation intended to close a corporate “loophole” would be the adoption of mandatory unitary combined reporting or related-expense “add-back” legislation. Legislation to promote economic development may call for the implementation of a tax-incentive program. Recently, state legislatures have proposed levying new taxes, such as Maryland’s digital advertising tax and Indiana’s gross receipts tax on social media providers. In some cases, the state’s judicial branch may even attempt to assess legislative intent where the legislation is ambiguous or does not appear to adequately address a specific issue.

    Passing a law in Pennsylvania (or any state) is a long process. After the idea for a new piece of legislation arises, the first step in the political process is the issuance of a co-sponsorship memorandum that describes the intent of the bill and invites other policymakers to support the bill as co-sponsors. The requested bill is then drafted, either by the Legislative Reference Bureau, a nonpartisan legislative service bureau serving the members and staff of the Pennsylvania General Assembly, or, in some cases, policy experts in the field. Members of PICPA’s State Taxation Committee often draft legislative language due to the members’ unique insight into the inner workings of the tax system. From there the bill is typically introduced and assigned to a committee for first consideration. It is the legislative committee’s responsibility to prepare the bill for floor debate, line up support, or sometimes withhold the bill from receiving further consideration.

    Legislative committees will often hold public hearings where committee members gather testimony from stakeholders representing various viewpoints on the proposed legislation. State legislatures have guidelines for attending a hearing and submitting testimony (which becomes a part of the public record).

    In Pennsylvania, if a bill is approved by a committee on first consideration, it is presented to either the House or Senate for second consideration. At this point, amendments can be offered on the House or Senate floor. It is important to note that a bill must be approved three times in each chamber before being considered for final passage. On the third day of consideration, it is determined if the bill will receive final passage by the chamber. Both chambers must pass identical versions of the bill. If the versions are different, the bill goes to conference committee to work out a compromise. After receiving final passage, there is one more hurdle – the governor. All approved bills are sent to the governor for consideration, and at that point he or she has the executive authority to sign the bill into law, veto it, or let it become law without his or her signature.

    Perhaps this process seems simple enough, but quite often it isn’t. During the lawmaking process, lobbyists, trade associations, nonprofit organizations, and advocacy groups will attempt to influence the passage or defeat of specific legislation. Each state legislature has rules regulating lobbyists, political action committees, and other external factors that could impact the legislative process. Extensive disclosures are necessary for these highly regulated facets of state government. Also, amendments and political affiliations are a few examples of the political factors that can alter the consideration of any piece of legislation, and they play a big role in the legislative process.

    Like sausage making, the legislative process is imperfect and can be difficult to watch. In the end, though, it is still the best way to make the finished product.


    Jonathan Liss is senior revenue policy analyst for the Philadelphia Department of Revenue. He is also an adjunct professor at Drexel University and Villanova University School of Law. He can be reached at jonathan.liss@phila.gov.

    Special thanks to Alexandra Fabian, PICPA manager of government relations, for her contributions to this article.


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Statements of fact and opinion are the authors’ responsibility alone and do not imply an opinion on the part of PICPA officers or members. The information contained in herein does not constitute accounting, legal, or professional advice. For professional advice, please engage or consult a qualified professional.