Week Ending Dec. 14, 2018

by PICPA Government Relations | Dec 13, 2018

Midyear Budget Briefing Offers Optimistic Outlook 

Randy Albright, Gov. Tom Wolf’s budget secretary, provided an uncharacteristically optimistic assessment of the state’s financial outlook for the reminder of the 2018-2019 fiscal year. At his midyear budget briefing, Albright noted, “We are very confident that not only will we end the year with a balanced budget, but we will leave with a modest surplus.”

The strong revenue picture — a $264 million increase in total state tax revenue collections — through the end of November is a result of strong growth in corporate net income, sales, and personal income taxes, according to Albright. “Overall we are much more optimistic about how the budget year shapes up,” said Albright “We are in already a period of almost unprecedented sustained economic growth since the great recession.”

Albright outlined Wolf’s budget priorities for the upcoming fiscal year. They include sustained investment in public education; implementing the Ready to Start Task Force recommendations to address health, human services, and education policy for infants and toddlers; creating a fairer, more competitive business tax climate; and restraining state spending to balance budgets and build Rainy Day Fund reserves.

Budgetary challenges remain, however. Albright said the state will likely have to come up with additional funds related to increased expenditures in human services and state prisons that will likely be higher than budgeters had predicted. The human services costs are largely due to the struggle of paying for long-term care among the aging population, and state prisons are dealing with overtime costs, including those associated with the September crackdown to slow the smuggling of drugs into the state’s prisons, Albright explained.

As he concluded, Wolf joined Albright to announce that Albright would be stepping down at the end of the month. Jen Swails, current Department of Human Services fiscal management director, would be the new budget secretary. The state Senate must confirm Swails’s nomination.

Wolf presents his fiscal year 2019-2020 budget to the General Assembly on Feb. 5, 2019.


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DOR Outlines Plans for New Customer Service Center

The Pennsylvania Department of Revenue (DOR) is moving forward with plans to establish a new bureau, the Customer Experience Center (CEC), that will help the department with its goal to continually improve customer service. The plan was discussed at the PICPA-DOR annual meeting in October.

The CEC will serve as a centralized unit in the department where staff can better focus on customer service in one location, rather than in many bureaus. The CEC will also help the department improve its training and processes while adopting a more proactive approach for enhancing customers’ experiences with the department.

The CEC will be composed of three divisions:

  • Taxpayer Service and Information Center (TSIC): TSIC will continue to be the primary contact point for taxation questions. Employees who work in the TSIC will continue to staff the department’s main call center and respond to customer emails.
  • Academy of Continuing Education (ACE): This division will be the primary training area in DOR. The department is moving to implement a unified process to ensure that all employees are trained equally and acquire the same information. Training will focus on department processes, new tax law education, customer service strategies, and other pertinent topics.
  • Customer Outreach, Relations, and Engagement (CORE): This division will be tasked with leading internal and external communications efforts in a partnership with the department’s Executive Office and the Communications Office. The goal is to adopt a singular voice for the DOR to ensure consistency in all department messaging. This division will also be tasked with planning and creating materials for the department’s fall tax seminars and other relevant communications.

The department is confident the CEC will not only help improve customer service efforts, but also will create a better system to ensure that all department staff have the necessary tools and training.


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New IFO Report Compares State and Local Taxes

The Independent Fiscal Office (IFO) recently released a new report comparing Pennsylvania’s state and local tax effort to the rest of the country. State and Local Taxes: A Comparison Across States uses the most recent data from the U.S. Census Bureau and U.S. Bureau of Economic Analysis to facilitate a comparison of state and local tax systems across the 50 states.

The report examines the relative state and local tax burden across states, the distribution of state and local taxes across revenue sources (e.g., income, sales, and property), state tax rates, and state debt levels. Pennsylvanians’ overall burden is at about the national average. In addition, the report finds that that residents in the six states that border Pennsylvania face a greater overall tax burden.

Separately, IFO released its third quarter 2018 Natural Gas Production report, which uses data collected by the Pennsylvania Department of Environmental Protection to develop statewide and county-level tabulations of production volume and well counts.


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Revenue Department Issues Reminder on Bulk Ordering

With the 2018 tax filing season quickly approaching, the Pennsylvania Department of Revenue (DOR) wants to remind tax practitioners of changes to its online bulk tax form ordering process. The department has started to discontinue the practice of processing bulk orders of paper tax forms. For the 2018 tax year, this change will affect libraries, post offices, and tax preparers.

This decision was made because the majority of paper tax forms provided by the DOR through its bulk ordering process are not used by customers when they file their returns. Department research shows that nearly 90 percent of the roughly 750,000 paper tax forms annually provided through this process are never returned to the department. These forms are printed at an annual cost of $500,000.

This change mirrors a similar policy decision made by the IRS more than five years ago.

For the 2018 tax filing season, tax practitioners will not be able to order tax forms in bulk through the online tax form ordering system. Taxpayers may access tax forms online. For instance, the PA-40 Pennsylvania Income Tax Return can be found at www.revenue.pa.gov/PIT by selecting the Forms and Publications link on the right; the PA-1000 Property Tax or Rent Rebate Claim can be found at www.revenue.pa.gov/PTRR by selecting the Forms and Publications link on the right.

Reminder: practitioners with 11 or more clients are required to file PA-40 Personal Income Tax returns electronically. Electronic filing helps reduce return errors, shortens the time for customers to receive their refunds, and allows the department to operate more efficiently.


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Oberlander Names 10 as Deputy Policy Committee Chairs

In working to develop public policies that address Pennsylvania’s most critical issues, Donna Oberlander (R-Clarion/Armstrong/Forest), chair of the House Majority Policy Committee, announced that 10 of her colleagues will serve as deputy Policy Committee chairs for the 2019-2020 legislative session, which begins Jan. 1, 2019.

The new deputy Policy Committee chairs are Reps. Sheryl Delozier (R-Cumberland), Mindy Fee (R-Lancaster), Marcia Hahn (R-Northampton), Zach Mako (R-Lehigh/Northampton), Eric Nelson (R-Westmoreland), Chris Quinn (R-Delaware), Tommy Sankey (R-Clearfield/Cambria), Craig Staats (R-Bucks), Justin Walsh (R-Washington/Fayette), and Jeff Wheeland (R-Lycoming).

Oberlander said the slate reflects the geographic diversity of the Commonwealth while also benefiting from the broad range of legislative, professional, and community experiences shared by the selected members.


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PSERS Certifies Employer Contribution Rate for 2020

The Pennsylvania Public School Employees’ Retirement System (PSERS) board of trustees met and certified an annual employer contribution rate of 34.29 percent for fiscal year 2020, which begins July 1, 2019. The fiscal year 2020 employer contribution rate is less than the previously projected 34.79 percent due in part to positive fiscal year 2018 economic and demographic experience, including growth in active membership after a seven-year decline and investment out performance.

The employer contribution rate marks the fourth consecutive year the employer rate provides 100 percent of the actuarially required rate, which is necessary to pay down existing pension debt. In the past, various pieces of pension legislation suppressed the employer contributions paid to PSERS by school employers and the Commonwealth.

The increase in funding from school employers and the Commonwealth has already had a positive impact on the system. The 56.5 percent actuarial funded ratio as of June 30, 2018, is a significant turning point, as future funded ratio projections are now projected to rise -- reversing years of decline since the 123.8 percent funded peak on June 30, 2000. On a market value basis, PSERS’s funded ratio, which began to improve in 2016, also continued to increase.

Total employer contributions to PSERS of $4.8 billion are estimated in fiscal year 2020. Pennsylvania directly reimburses school employers for no less than 50 percent of the total employer contribution rate.


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National CPA Groups Look at Licensing Requirements

Leaders of the CPA profession, the regulatory community, and representatives from critical stakeholder groups are joining together to explore possible changes to the CPA licensure model that embrace the need for expanded skill sets. The goal of the effort is to align licensure with how CPAs will perform services in an increasingly technologically-driven environment.

The CPA Evolution Working Group was formed by the National Association of State Boards of Accountancy (NASBA) and the American Institute of CPAs (AICPA).

“We really value the early engagement we’ve seen from the profession’s key stakeholders,” said Susan S. Coffey, CPA, CGMA, AICPA’s executive vice president for public practice. “Based on what we’ve heard, there is no question that the profession is ready to take action to capitalize on the opportunities that technology presents to us.”

The CPA Evolution Working Group consists of representatives from boards of accountancy, state CPA societies, CPA firms of all sizes from around the country, the accounting academic community, and NASBA and AICPA volunteer committees. It has been tasked with advising NASBA and the AICPA on actions that would position the profession for the future while continuing to protect the public interest.

In the last year, the AICPA and NASBA have discussed potential alternatives to the current licensure model with key stakeholders and have gathered valuable feedback. A principal theme that has emerged is support for action to evolve the approach to licensure.

The working group will meet again this winter, and recommendations on a path forward regarding the licensure model are expected to be shared with state boards, state societies, CPAs, and other stakeholders next year.


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State Lawmaker Resigns

Rep. Vanessa Lowery Brown (D-Philadelphia), who ran unopposed in the November election for her state House seat in the 190th District, resigned effective immediately. Brown was convicted by a jury in October of bribery, conflict of interest, and failure to properly file a financial disclosure report.

Brown, 52, did not go quietly. In her resignation letter to House Speaker Mike Turzai (R-Allegheny), she said, “The Court’s findings that the investigation and the prosecution carried overtones of racism and political animus is only the first step in the ultimate vindication of my God-given and constitutional right to be treated fairly and equally under the law.”

Speaker Turzai will call a special election to fill the seat in early 2019.


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The Pennsylvania Institute of Certified Public Accountants (PICPA) is a premiere statewide association of more than 22,000 members working in public accounting, industry, government, and education. Founded in 1897, the PICPA is the second-oldest and fourth-largest state CPA organization in the United States.

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