Legislative Update - Week Ending March 11, 2022

by PICPA Government Relations | Mar 11, 2022


Pa. House Wraps Up Budget Review, Senate Continues

The House Appropriations Committee wrapped up its three-week review of Gov. Tom Wolf’s proposed funding plan for the 2022-2023 fiscal year that begins July 1. The Senate Appropriations Committee has not yet concluded and continues with its hearings. In February, Wolf proposed a $43.7 billion spending plan for Pennsylvania.

The House Appropriations Committee heard from the Department of Education. Wolf’s proposed budget increases basic education funding by $1.55 billion, a 24% increase over the current year. According to testimony from the department, over the course of the COVID-19 pandemic, three federal relief packages provided Pennsylvania schools with over $6.5 billion to Pre-K through grade 12 education, and more than $5 billion of that amount was unspent. Schools have until September 2024 to seek reimbursement.

The House’s hearings concluded with Greg Thall, Wolf’s budget secretary. Republican members of the committee asked pointed question of Thall, who defended the governor’s spending proposal. Committee members also questioned officials from the Department of Transportation (PennDOT), the Pennsylvania State Police, and the departments of State, Agriculture, Labor and Industry, Health, and Drug and Alcohol Programs.

The review of the governor’s budget continues in the Senate. The past week included appearances from the departments of Health, Human Services, State, and Education. Senate hearings continue next week. 

 

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PICPA, AICPA Continue to Urge IRS to Suspend Notices

The PICPA, the AICPA, and other state CPA societies continue pressing the IRS to suspend various taxpayer notices. The coalition continues seeking the support of congressional allies in the fight.

U.S. Sens. Robert Menendez (D-N.J.) and William Cassidy (R-La.) and Reps. Abigail Spanberger (D-Va.), Mike Kelly (R-Pa.), Jimmy Panetta (D-Calif.), and Gus Bilirakis (R-Fla.) are circulating bipartisan letters to IRS Commissioner Charles P. Rettig asking for clarification on which additional notices can be paused by the IRS and where Congressional intervention may be required to temporarily suspend other notices. The letter says, “We remain concerned that the IRS does not have a comprehensive plan to remedy the numerous problems affecting taxpayers, despite the fact that this filing season is already well underway. For example, there is continued confusion about which notices may be unilaterally suspended by the IRS, beyond the notices the IRS has already suspended, among other issues.”

The PICPA has reached out to members of the Pennsylvania congressional delegation for support. Special thanks are due to Rep. Kelly for his leadership on this effort, as well as to Sen. Pat Toomey and Rep. Brian Fitzpatrick who have already joined as co-signers. We anticipate additional support from Pennsylvania members on this important issue which is sure to come, and thank them in advance for their support.

 

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DOR Releases New Employee Retention Credit Guidance

The Pennsylvania Department of Revenue (DOR) released revised guidance on the Employee Retention Credit (ERC), which under the federal CARES Act encourages businesses to keep employees on their payroll. The ERC is a refundable tax credit against certain employment taxes equal to 50% of the qualified wages an eligible employer paid to employees after March 12, 2020, and before Jan. 1, 2021.

According to the IRS, the refundable tax credit is 50% (or 70% for wages paid during the first three quarters of 2021) of up to $10,000 in wages paid by an eligible employer whose business has been financially impacted by COVID-19.

The guidance has raised some implementation questions. PICPA members with questions about the department’s guidance should contact the PICPA government relations team at governmentrelations@picpa.org.

 

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Corman, Other Lawmakers Call for Suspension of State Gas Tax

Lawmakers in both the state House and Senate are proposing legislation to temporarily suspend the Pennsylvania gas tax.

Senate President Pro Tempore Jake Corman (R-Centre) this week called for a temporary reduction in the state’s gasoline tax. Corman’s Consumer Gas Prices Relief Act, coupled with a federal gas tax holiday, would cut gas taxes by almost 50% through Dec. 31, 2022.

To offset the lost revenue for road and bridge repair, Corman’s legislation would dedicate $500 million in federal relief dollars to fund state police operations so money would no longer need to be diverted from the Motor License Fund. The legislation also would require PennDOT to issue a $650 million bond to ensure critical infrastructure projects remain funded during the period of the gas tax reduction.

State Reps. Anthony DeLuca (D-Allegheny) and Ryan Warner (R-Fayette) both announced plans for legislation that would halt the collection of gas tax at the pumps.

Appearing before the House Appropriations Committee, Greg Thall, Gov. Wolf’s budget secretary, may have thrown cold water on the idea. Thall told lawmakers the administration would like to see a plan for how the state would continue fixing roads and bridges before the governor commits to supporting a gas tax holiday.

Earlier this week, Wolf called on Congressional leaders to enact a federal gas tax holiday through the end of the year. The federal gasoline tax is 18 cents per gallon.

 

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Senators to Propose Small-Business Workforce Tax Credit

State Sens. Ryan Aument (R-Lancaster) and John Yudichak (I-Luzerne) are proposing legislation to create a Small-Business Workforce Tax Credit. The intent of the tax credit is to incentivize hiring by small businesses throughout Pennsylvania for the purpose of drawing Pennsylvania’s citizenry back to work.

Specifically, the senators say their legislation will reduce the amount of state taxes that small businesses owe if they are able to boost employment figures compared with the previous year. Under the proposal, businesses would qualify for a tax credit if they had 50 or fewer employees as of Dec. 31, 2019, and experienced at least a 25% decrease in income tax gross receipts when comparing the second quarter of 2020 to the second quarter of 2019.

Once introduced the bill will be referred to a committee.

 

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Proposal to Enact Earned Income Tax Credit in Pa.

Sen. Mario Scavello (R-Monroe) is proposing legislation to enact a Pennsylvania Earned Income Tax Credit (EITC). “The inability to afford basic necessities is all too common for many of the Commonwealth’s lower income, working households,” said Scavello. “The COVID-19 pandemic only made this problem worse for many, and it is time we enact a reasonable solution that helps low-income, working families.”

The federal government has been incentivizing work through an EITC since 1975. Today, 29 states offer a tax credit against state income taxes.

Studies show that EITC dollars provide a concentrated cash infusion to local economies. “This policy could resolve several issues, including addressing the financial needs of families while addressing our Commonwealth’s projected revenue shortfalls in the coming years,” Scavello said.

Senate Bill 1082 is pending in the Senate Finance Committee.

 

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IFO Examines Impact of Student Loan Moratorium on Employment

An Independent Fiscal Office (IFO) report examines the impact of the COVID-19 pandemic and the related federal student loan repayment moratorium on payroll employment and employment-to-population ratios by age group. The IFO says the largest relative reductions in employment numbers as of the second quarter of 2021 (Q2) are among young workers. The IFO points out that many of those in these age brackets, or cohorts, also have student loans.

According to the report, the data show an overall reduction in the employment-to-population ratio of 4.7 percentage points as well as a drop of 341,800 (6.1%) in payroll jobs from 2019 Q2 (pre-COVID) to 2021 Q2. For the 55-64 age cohort (potential early retirements), the ratio declined 3.4 percentage points and employment fell by 60,100 (5.5%), which is less than the overall average across all age groups. For seniors 65 or older, the employment-to-population ratio declined by 2.8 percentage points and employment fell by 10,700 (2.7%).

The largest decline in the employment-to-population ratio from 2019 Q2 to 2021 Q2 was the 22-24 age cohort, which fell by 7.3 percentage points, while employment declined by 35,400 (11.4%). The next largest reduction was the 25-34 age cohort, as the employment-to-population ratio declined 4.9 percentage points and employment fell by 95,400 (7.7%).

The IFO speculates that a policy that may have contributed to the decline in employment-population ratios for the two younger-age cohorts is the federal student loan repayment moratorium. Notes the IFO, “The moratorium is only one factor that may explain the larger reduction in employment-population ratios, but for individuals with loans, the repayment suspension could be a material factor in decisions to actively seek and accept employment.” While the IFO did provide the total number of Pennsylvania residents who have outstanding federal student loans (1.86 million), it did not present the percentage of Pennsylvania’s younger-age cohorts who attended college compared to noncollege potential workers, or how many of those who attended college within these cohorts currently have student loan obligations.

 

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About PICPA

The Pennsylvania Institute of Certified Public Accountants (PICPA) is a premier 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.

Learn more about how you can become involved in the legislative process, through PICPA's Key Contact Program and CPA-PAC.

Contact the Government Relations Team at governmentrelations@picpa.org or (717) 232-1821.

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