PICPA Provides Testimony on Philadelphia “Super Credit”
The state House Finance Committee, chaired by Rep. Bernie O’Neill (R-Bucks), held a public hearing Oct. 5 in Bensalem, Pa., on legislation to allow municipalities to receive a share of wage taxes collected from nonresidents who work in the city of Philadelphia.
David Caplan, CPA, chair of the PICPA Committee on State Taxation’s Act 32 Subcommittee, and Jim Newhard, CPA, also a member of the state tax committee, provided testimony to the members of the House committee.
Currently, Philadelphia imposes a city wage tax on nonresidents who work in the city. However, unlike the local taxes in surrounding jurisdictions, none of the nonresident’s city wage tax is returned to the nonresident’s home municipality or school district.
Three bills were discussed at the hearing:
- House Bill 2256, sponsored by Rep. Scott Petri (R-Bucks), would remove Philadelphia’s power of preemption on local income taxes by applying tax collection practices that mirror those exercised by other taxing jurisdictions under the Local Tax Enabling Act.
- House Bill 2257, also sponsored by Petri, would remove Philadelphia’s power of preemption on local income taxes by allowing individuals working in Philadelphia to pay their resident local tax and receive a credit against the Philadelphia nonresident wage tax.
- House Bill 2142, sponsored by Rep. Todd Stephens (R-Montgomery) would require Philadelphia to reimburse nonresidents’ city wage tax to the employees’ home taxing jurisdictions.
No action is expected on this legislation in the remainder of the year.
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Rep. Cox Introduces Property Tax Independence Act in House
State Rep. Jim Cox (R-Berks/Lancaster) introduced the Property Tax Independence Act in the Pennsylvania House.
House Bill 76 would replace school district property taxes by funding education in Pennsylvania with statewide revenue sources. It would increase the state personal income tax from 3.07 percent to 4.95 percent. It also would increase the state sales and use tax (SUT) from 6 percent to 7 percent. Additional revenue would be generated by an expansion of items and services subject to the state sales and use tax.
With a limited number of legislative days remaining in this session, the bill is unlikely to be considered, but Cox says he is introducing it at the request of 87 taxpayer groups from across Pennsylvania and many of his colleagues.
A similar proposal came up one vote short in the state Senate in November 2015. The PICPA opposes the proposal.
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IRRC Submits Comments to Act 32 Proposed Rulemaking
The Independent Regulatory Review Commission (IRRC) submitted comments in response to the Department of Community and Economic Development (DCED) local earned income tax proposed rulemaking.
The purpose of the proposed regulations is to interpret and make specific certain provisions within Chapter 5 of Act 32 of 2008. Chapter 5 provides for the consolidated collection of local earned income taxes, and states that DCED shall, by regulations, address the following areas:
- The filing of adjusted declarations of estimated net profits
- The criteria under which the tax officer may waive the quarterly return and payment of income tax
- The procedures for mandatory and voluntary mediation
- The establishment of new county tax collection committees in situations in which political subdivisions have withdrawn from an established tax collection committee
- The establishment of tax officer qualifications and requirements, including continuing education
- The creation of standardized forms, reports, notices, returns, and schedules in consultation with the Department of Revenue
The PICPA submitted comments on the proposed regulation.
The regulatory review process in Pennsylvania is a two-stage process. The submission of comments on this regulation concludes IRRC’s formal role at the proposal stage. The promulgating agency is required to respond to all comments received on the proposed regulation when submitting the final regulation, with or without changes, to IRRC and the legislative standing committees.
IRRC provides oversight and review of all proposed and existing rules and regulations issued by most state agencies and departments. IRRC also acts as a clearinghouse for complaints, comments, and other input regarding existing, proposed, final-form, and final-omitted regulations.
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Private Retirement Savings Plan Proposed
State Sens. John Eichelberger (R-Blair) and Art Hayword (D-Philadelphia) have joined together to propose a new plan to increase retirement savings for Pennsylvania workers. The legislation would establish a way for Pennsylvanians currently working in jobs without a pension or 401(k) plan to save for retirement in a new state-managed program.
In 2012, the Employee Benefit Research Institute projected that almost half of current workers are at risk of having insufficient income to meet basic expenses in retirement. Many older adults run out of money during retirement.
Under the senators’ proposal, all employees who do not have a retirement plan at work are automatically enrolled in the state plan. The state plan will be professionally managed without the high fees that erode savings. Contributions will be pretax, with no maximum contribution. The minimum contribution would be $25 per month. Individuals will be given a choice of investment options, and the plan will not compete with existing private employer pension plans.
Several states have similar plans, the senators noted.
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House Committee to Examine Election Integrity
The House State Government Committee convened a public hearing focusing on preparations for the November general election and ongoing efforts to protect and improve election integrity throughout Pennsylvania.
The hearing featured Secretary of the Commonwealth Pedro Cortés; J. Christian Adams of Public Interest Legal Foundation; Suzanne Almeida of the League of Women Voters of PA; Joe DeFelice of the Republican City Committee of Philadelphia; David Thornburgh of the Committee of Seventy; and several others.
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2014 Personal Income Tax Statistics Report Available
The Pennsylvania Department of Revenue released its report on 2014 Personal Income Tax Statistics. This publication provides data extracted from tax returns and summarized in various formats.
Highlights for the 2014 tax year include the following: all income classes, with the exception of interest, showed growth; total taxable income increased by just under 5 percent in 2014, while taxable compensation – the largest component of the eight taxable income categories – improved, growing by 3.3 percent; the sale of property and estates and trusts showed double-digit growth; and income from net profits, rents, and royalties, as well as gambling and lottery winnings, experienced growth following minimal growth or decreases in 2013.
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Lawmakers Urge Christie to Keep Interstate Income Tax Agreement
State Reps. Steve Santarsiero (D-Chester) and Madeleine Dean (D-Montgomery) introduced a House resolution urging New Jersey Gov. Chris Christie to reconsider ending a 39-year-old tax accord between New Jersey and Pennsylvania.
House Resolution 1060, which has bipartisan support across the state, asks Christie to reverse course on his plan to dissolve the Reciprocal Personal Income Tax Agreement of 1977, which provides that residents of New Jersey and Pennsylvania who work across state lines pay personal income tax only to the state in which they reside.
The withdrawal is set to take effect Jan. 1 if Christie finalizes it.
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Monthly Revenue Trends Report
The September edition of the Monthly Trends Report by the Independent Fiscal Office is now available.
The September 2016 General Fund revenues were $2.63 billion, a decrease of $106.5 million (-3.9 percent) compared with the same month in the prior year. Fiscal year-to-date revenues of $6.61 billion sowed a decrease of $121.2 million (-1.8 percent) compared with the prior year. Other revenue highlights:
- Tax revenue decreased by 3.1 percent for the month and declined by 1.5 percent for the fiscal year. Personal income tax due dates motivated most of the monthly decrease.
- Non-motor sales tax increased by 4.6 percent for the month, bringing the three-month average growth rate to 0.6 percent and the 12-month average growth rate to 2.8 percent.
- Motor vehicle sales tax decreased by 1.6 percent for the month, bringing the three-month average growth rate to -2.8 percent and the 12-month average growth rate to 0.7 percent.
- Personal income tax withholding decreased by 10.0 percent for the month, bringing the three-month average growth rate to 3.1 percent and the 12-month average growth rate to 2.3 percent.
- Realty transfer tax increased by 15.6 percent for the month, bringing the three-month average growth rate to -3.2 percent and the 12-month average growth rate to 9.2 percent.
The report also discusses recent trends in the dairy industry, focusing on how demand overseas, a stronger U.S. dollar, and energy prices have led to a surplus of dairy products and a related price reduction.
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