Estimated Payments, Tax Credit Bills Advance
The Pennsylvania House and Senate finance committees held voting meetings this week. The bills approved by the committees will be of interest to PICPA members as they cover an array of tax topics, from estimated payment and electronic filing to tax credits. The bills are now before their respective chambers for consideration.
House Bill 1303, sponsored by Rep. Jason Ortitay (R-Allegheny), was unanimously reported from the House Finance Committee. The bill amends the Tax Reform Code (TRC) by providing for tax credit and tax benefit administration. The bill provides for the electronic submission of applications and training for the staff of an administering agency of a tax credit or tax benefit program. It would also standardize annual reports that disclose the recipients, the amounts of benefits awarded, and the increased jobs and economic activity attributed to the programs. There would also be registration of tax credit brokers with the Department of Revenue (DOR), recourse for the denial of a tax credit or tax benefit application, and various changes for DOR to review applications. The bill was amended to provide an appeals process for a tax credit or tax benefit program administered by the Department of Community and Economic Development (DCED).
House Bill 1059, sponsored by Rep. Dave Hickernell (R-Lancaster), was also reported unanimously by the committee. The bill amends the TRC by increasing the personal income tax threshold for estimated payments from $8,000 to $20,000, by requiring personal income tax payments of more than $5,000 to be made electronically, and by making technical changes to reflect the recent federal changes to Form 1099-NEC for reporting nonemployee compensation.
The committee also reported Senate Bill 74, sponsored by Sen. Scott Martin (R-Lancaster) to expand cancer research funding. Senate Bill 74 would create a tax credit program for qualifying donations to a Pennsylvania pediatric cancer research hospital. The program would be capped at $10 million per year over the next 10 years.
The Senate Finance Committee approved three bills this week at its meeting on May 25.
Senate Bill 288, introduced by Sen. Bob Mensch (R-Berks, Bucks, Montgomery), expands the 21st Century Manufacturing Innovation and Reinvestment Deduction Act. This bill adds two tiers below the current program: one from $1 million to $10 million and one from $10 million to $60 million, and clarifies when the deduction takes place, after the allocation and apportionment of income.
The committee also approved Senate Bills 681 and 682, introduced by Sen. John Yudichak (I-Luzerne). Senate Bill 681 provides for two, one-year carry forwards for tax credit purchases in 2020 and 2021. This means that tax credits purchased in 2020 could be used for 2020 or 2021, and tax credits purchased in 2021 could be used for 2021 or 2022. Senate Bill 682 extends the eligibility timeline for the Keystone Innovation Zone credit program from eight years to 10 years.
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State Lawmakers Wrap Up a Busy May
The Pennsylvania General Assembly closed out the month of May with a flurry of activity as lawmakers prepare for a busy budget season in the coming weeks. Lawmakers are scheduled to return to Harrisburg the week of June 7. The new fiscal year begins July 1, and lawmakers are jockeying to get their legislative priorities in position in hopes of getting bills to the governor’s desk before the deadline.
Senators this week approved several bills to rein in regulations. The package of bills would require (Senate Bill 28) all agencies that issue permits to post information about the permits on an accessible tracking system for applicants to check the status of their applications; provide an automatic review (Senate Bill 126) after three years of all regulations with an economic impact or cost to Pennsylvania, local governments, and the private sector exceeding $1 million; provide additional legislative oversight (Senate Bill 426) of the regulatory review process; and require (Senate Bill 520) the General Assembly to approve all regulations with an economic impact or cost to Pennsylvania, local governments, and the private sector exceeding $1 million.
In addition, the Senate approved two measures aimed at bringing high-speed broadband service to more areas of Pennsylvania. One bill would remove regulatory barriers to broadband deployment for landline telecommunications providers. A second measure would fund access to broadband by using revenue from renting excess wireless capacity on towers, land, and assets owned by Pennsylvania.
House lawmakers approved legislation that would ensure oversight of the conventional oil and gas industry. House Bill 1144 would enact the Conventional Oil and Gas Wells Act to govern the conventional, shallow-well oil and gas industry, which is different from the deep-well Marcellus shale drilling.
Two COVID-19-related bills were passed by the full House this week. House Bill 1264 would establish the COVID-19 Pandemic Reporting, Response and Accountability and Vaccine Personal Information Privacy Act, which will require the review of personal protective equipment, COVID-19 vaccines, and COVID-19 tests. House Bill 996 would allow visitation to long-term-care facilities by members of the clergy during a declaration of disaster emergency.
In the Pennsylvania House, lawmakers approved House Bill 939, sponsored Rep. Kate Klunk (R-York). Currently, there is no legislative authority providing for an independent, regular, and systematic review of existing statutes and regulations. Klunk’s bill provides for a process to review obsolete regulations on the books.
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IFO Releases Initial Revenue Estimate for FY 2021-2022
The Independent Fiscal Office (IFO) released its Initial Revenue Estimate for Fiscal Year (FY) 2021-2022 and revisions to the FY 2020-2021 estimate.
Pennsylvania’s current economy is overperforming due to an infusion of federal monies and transfers. According to IFO, an estimated $160 billion of federal monies has been injected into the state’s economy since 2020. The economic forecast used by IFO for its estimate assumes that a new variant of COVID-19 does not emerge which would result in further mitigation efforts and business closures. It also assumes that no new federal monies flow to state residents and that temporary unemployment compensation programs expire as scheduled in September.
IFO is revising its FY 2020-2021 General Fund revenue estimate to $40.1 billion, up from $38.4 billion in January of this year, an increase of $1.7 billion. The upward revision includes significant increases in all three major tax types—corporate net income (CNI), sales and use (SUT), and personal income (PIT). CNI tax collections are expected to exceed IFO’s revised official estimate by $529 million. The revision is largely attributable to temporary federal tax relief provisions that increased tax year 2020 profits and behavioral responses to a potential federal corporate tax rate increase in the near term. The updated SUT estimate is $382 million above the IFO’s revised official estimate, with an increase in both nonmotor and motor vehicle collections. The upward revision is related to increased spending associated with payments to individuals under the American Rescue Plan Act, which was not included in previous estimates. Lastly, PIT estimates exceed the IFO’s revised official estimate by $449 million due largely to an improved outlook for wages (tax years 2020 and 2021), as well as capital gains and net profits (tax year 2020).
For FY 2021-2022, IFO’s initial estimate is $38.0 billion, a reduction of $2.2 billion from the current fiscal year or an increase of $255 million (0.7%) after adjustments for COVID-related delayed tax due dates in 2020, an extra withholding due date in FY 2020-2021, and one-time transfers. The IFO’s initial General Fund revenue estimate for FY 2021-2022 is built on the expectation that once there is an end to the COVID-19 federal spending the state’s economy and the revenues generated from various sources will revert to the former path it was on prior to COVID-19. While it remains unclear how much of a hole will have to be filled for the FY 2021-2022 budget to balance, it will be a daunting figure.
The IFO’s revenue estimates and overall General Fund forecasts differ from those used by the state Budget Office. Revenue collections for May will not be released until the start of June, but the figures for the month are expected to be more than the estimate by a sizable amount given that the deadline for PIT return filing was delayed from April 15 until May 17. That pushed into May a significant portion of PIT collections that would have been received by the state in April. Even with those delayed payments, Pennsylvania’s General Fund collections in April managed to stay slightly ahead of estimate, with the General Fund, through April, having $1.3 billion more than expected.
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Speaker Calls for Establishing Bureau of Election Audits
Pennsylvania Speaker of the House Bryan Cutler (R-Lancaster) introduced legislation that would establish a Pennsylvania Bureau of Election Audits under the state’s auditor general.
The bureau would be required to conduct result-confirming audits of each election, completed by the third Friday following the election. The audits would comprehensively examine all future elections, looking at all aspects of the process and results, including equipment, absentee and mail-in ballots, performance audits of election systems at least every five years, and any other audit deemed necessary by the Bureau of Election Audits to ensure the public trust in the outcome of each election. Additionally, the bureau would be required to provide corrective action plans to address any errors or deficiencies discovered in the audit.
The bureau would not look back at previous elections, and if the standing auditor general is running for reelection or any other office, he or she would be required to appoint an independent auditor to oversee the bureau for that general or primary election.
The legislation will be considered by the House State Government Committee.
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Senators Propose Water Infrastructure Program
State Sens. Lindsey Williams (D-Allegheny), Maria Collett (D-Montgomery, Bucks), and Katie Muth (D-Chester, Montgomery, Berks) plan to introduce legislation that will allocate $350 million of Pennsylvania’s share of funding from the federal American Rescue Plan for clean water, sewer, and stormwater infrastructure projects.
This legislation will distribute the $350 million as grant funding through the Commonwealth Financing Authority's (CFA) small water and sewage projects program and PENNVEST. Eligible projects will include collection, treatment, or disposal of wastewater, including industrial waste.
These grants can also be used to fund projects that address the increasing challenges that our communities are facing from stormwater runoff and increased flooding. This runoff contributes to individual property damage, increased pollution to waterways, and the erosion and collapse of vital infrastructure.
This legislation is part of the Senate Democratic Caucus’s comprehensive New Deal for Pennsylvania spending plan to invest $6.15 billion of the state’s share of the American Rescue Plan in our communities, working families, and small businesses.
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House and Senate committees were very active moving legislation in the rush up to budget season. Here are some of the bills reported from committee and sent to a full vote.
The House State Government Committee reported House Resolution 106, sponsored by House Majority Leader Kerry Benninghoff (R-Centre), and Rep. Frank Ryan’s (R-Lebanon) House Bill 117. Benninghoff’s resolution would terminate parts of Gov. Tom Wolf’s COVID-19 Disaster Emergency while extending what is not terminated until Oct. 1, 2021, unless terminated or extended by the General Assembly. Ryan’s House Bill 117 requires new Department of the Auditor General employees to possess the proper certification necessary to conduct an audit that the employee's job requires and requires the department to develop a policy encouraging current employees to obtain the proper certification to conduct audits that their jobs require.
The House Urban Affairs Committee reported House Bill 730, sponsored by Rep. Rosemary Brown (R-Monroe, Pike). The bill would establish a savings accounts for first-time home buyers.
The Senate Labor and Industry Committee voted unanimously to advance legislation sponsored by Sen. Christine Tartaglione (D-Philadelphia) to extend family and medical leave benefits for employees who take time away from work to care for an ailing relative. Senate Bill 617, known as the Pennsylvania Family and Medical Leave Act, would require employers to provide up to six weeks of unpaid leave to an employee to care for a sibling, grandparent, or grandchild with a certified terminal illness if the ailing relative has no living spouse, no son or daughter over age 17, and no parent under age 65.
The Senate Communications and Technology Committee unanimously approved a proposal that will strengthen the state’s Breach of Personal Information Act following a massive data breach with the state’s contact tracing program. Senate Bill 696, sponsored by Sen. Dan Laughlin (R-Erie), would require any state agency, county, school district, or municipality that experiences a data breach to provide notice of the breach within seven days of discovery. The state’s attorney general would be notified within three business days of the breach that occurs in a state agency. The county district attorney would be notified within three business days if the breach occurred in a county, school district, or municipality.
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AICPA Seeks Key Contacts
PICPA’s policy role is generally limited on the federal level because we are a state-based organization, so we defer and cooperate with the AICPA at that level. The AICPA works closely with members of Congress and is currently seeking CPA volunteers to act as key contacts for those members.
Leveraging our members’ existing relationships is important to advocacy efforts. If you have a relationship with any of the members of the Pennsylvania congressional delegation, AICPA’s government relations team would like to know about it. You can find your member here.
Please contact Alex Fabian with your interest in serving as a key contact for federal-level legislators by June 7.
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