PICPA-DOR Quarterly Meeting Clarifies Tax Questions
Members of the PICPA State Taxation Steering Committee’s Liaison with the Department of Revenue subcommittee met virtually with representatives of the department on March 23 for its first quarterly meeting of the year. These regular quarterly meetings provide an opportunity for the PICPA and the DOR to discuss systemic and compliance-related matters.
The DOR provided the PICPA with an update on its continuing tax modernization efforts. The agency is in its fifth and final major phase, which will involve transitioning all business taxes into myPATH, including employer withholding tax, sales tax, and corporation taxes, among many others. It also involves the replacement of e-TIDES, its current online filing and payment system for business taxes, and the PA-100, the online system that taxpayers use to register a business entity. Work is scheduled to be completed by the end of 2022.
The DOR also provided responses to several questions from tax practitioners. The department clarified issues surrounding the treatment of Restaurant Revitalization Funding, the treatment of items related to Paycheck Protection Program loan forgiveness, and the effect on the Accumulated Adjustments Account and Accumulated Earnings and Profits, as well as the taxability of state and county CARES Act grants. In addition, the DOR provided the PICPA with revised clarification on the tax treatment of the employee retention credit for Pennsylvania purposes.
The PICPA and the DOR hope to reconvene in-person for the next quarterly meeting.
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Advocacy Town Hall with House Speaker Bryan Cutler
There is still time to register for PICPA’s Advocacy Town Hall with Pennsylvania House Speaker Bryan Cutler. Hear from one of Pennsylvania’s key decisionmakers as he discusses the spring legislative session, what’s happening with the 2022-2023 state budget, and related legislative priorities. A live Q&A will follow Cutler’s presentation.
The session is scheduled for Wednesday, April 6, beginning at 8:00 a.m.
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PICPA Receives Clarification on CP162A Penalty Notices
Several PICPA members reached out, reporting that they received federal CP162A notices. The CP162A are sent to announce penalties were assessed by the IRS for failure to file a timely or complete tax return. The PICPA reached out to Richard Furlong, IRS senior stakeholder liaison, for clarification regarding these late filing penalty notices.
Furlong noted that mailed-in extensions in 2021 may have experienced processing delays due to the paper-submissions backlog at IRS Service Centers. This could be a reason for the penalty notices.
Additionally, there could be a problem in the system for taxpayers who received filing extensions due to the storms spawned by Hurricane Ida in 2021. On the IRS website it states, "The IRS automatically identifies taxpayers located in the covered disaster area and applies filing and payment relief.” When a Federal Emergency Management Administration (FEMA) declaration is made, IRS computers program individual/business accounts located in the FEMA disaster declaration county zip codes based on prior-year filings to suspend late filing penalty notices if the extension was timely filed and processed. There may have been some instances where the programming didn’t pick up a particular employer identification number or Social Security number in the FEMA-declared disaster area.
If you or a client are in one of the areas impacted by the Ida storms (as designated by FEMA), timely filed your return, and have not received a subsequent notice nullifying the late-filing penalty, you should call Practitioner Priority Service at (866) 860-4259. Use prompt #3 for business accounts.
Note: if you do not have “checkbox” authority, you may need a Form 2848 from your client so you can receive assistance. Sending written correspondence to the IRS to request penalty abatement/nullification is not recommended at this time due to the ongoing backlog of correspondence.
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Senate Committee Approves Cannabis Banking Measure
The state Senate Banking & Insurance Committee this week unanimously approved legislation that would grant safe harbor from adverse regulatory and legal action to banks and insurance companies that do business with the cannabis industry. Pennsylvania is one of 37 states with legal medical cannabis, and legislation is pending in Harrisburg to allow for recreational use.
Senate Bill 1167, sponsored by Sen. John DiSanto (R-Dauphin), specifies that banks and insurance companies would be free to do business with cannabis-related businesses. The bill would also bar state agencies from taking action to punish or deter banks and insurance companies from doing business with growers and dispensaries.
The bill is before the full Senate for consideration.
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House Lawmakers Again Take Aim at RGGI
The battle over whether Pennsylvania should join a multistate environmental compact – an environmental priority for the Wolf administration – continues to be waged by many state lawmakers in Harrisburg.
The Pennsylvania House approved legislation to halt the state's entry into the Regional Greenhouse Gas Initiative (RGGI) unless state lawmakers first approve the move. House Bill 637, which passed by a vote of 126-72, creates the Energy Sustainability and Investment Act to clarify that the state Department of Environmental Protection (DEP) does not have authority to join RGGI, or similar state or regional greenhouse gas cap-and-trade programs, unless authorized by the General Assembly. The bill will go to the Senate for consideration.
On Monday, the state House Environmental Resources and Energy Committee approved legislation dictating that the state’s entry into RGGI would depend on legislative approval. Senate Bill 119, sponsored by Sen. Joe Pittman (R-Indiana), is before the full House for consideration.
On Wednesday, the state Senate Environmental Resource and Energy and the Community, Economic, and Recreational Development committees held a day-long joint public hearing into the economic impact of joining RGGI. According to the Independent Fiscal Office's analysis provided to senators, Pennsylvania could spend upwards of $781 million annually on emission credits at RGGI auctions. The state DEP projects RGGI could have raised about $200 million this year had the state joined.
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Wolf Signs Bill Extending Waivers to Assist Continued Pandemic Recovery
Gov. Tom Wolf signed into law Senate Bill 1019, legislation sponsored by Sen. Michelle Brooks (R-Mercer), temporarily extending certain suspensions of regulations and statutes that were issued by agencies under the COVID-19 disaster declaration through June 30, 2022.
Some of the extended waivers allow for the following:
- Quicker access to home-health-care and home-care services.
- Access to behavioral, mental, physical, and drug and alcohol treatment services through telehealth, and ensures Medicaid providers are paid for them.
- Use of pharmacists, health care professionals, and alternative care sites to lessen the burden on hospitals and acute-care providers.
- Flexibility in scheduling hearings and telephone testimony for unemployment compensation and the issuing of work permits without in-person meetings.
- Use of commonwealth-owned or leased vehicles by Pennsylvania National Guard members.
- Alternative and temporary locations in banking for better access.
Now Act 14 of 2022, the legislation also states that, no later than Aug. 31, 2022, each authority that initially authorized a suspension that was extended shall issue an updated report, which shall be published online and provided to each member of the General Assembly.
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2022 AICPA Outstanding CPA in Government Award Nominations Open
Do you know an outstanding CPA in government? Please consider nominating a worthy colleague for the AICPA Outstanding CPA in Government Awards. The nomination period is April 1 through April 30.
- Impact Award: Recognize the significant contributions of a CPA to the efficiency, effectiveness, or innovative service delivery of their respective local, state, or federal employer organization. Current or recent accomplishments are the focus of this award.
- Career Contribution Award: Recognize the significant contributions to the CPA profession via government service at the local, state, or federal level over a candidate’s entire career.
The awards are scheduled to be presented virtually during the AICPA & CIMA National Governmental Accounting and Auditing Conference on Aug. 15, 2022.
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DeFoor: School Audit Responsibility Returns to Education Department
The Department of the Auditor General will return responsibility for performing school audits to the Pennsylvania Department of Education effective April 22, said Auditor General Timothy L. DeFoor.
DeFoor said the decision was driven in part by the following factors:
- In 2013, the office of the auditor general had 120 auditors; there are only 46 doing the work currently.
- The staffing challenges have resulted in a significantly lengthened audit cycle (currently five years). For the department to continue, the audit period would have to expand to seven years between audits, which is too long.
- The audits being performed were not fiscal audits, but were limited to issues such as reimbursement for transportation costs, teacher and bus driver certification, and fire/safety drill compliance.
- Since these audits are the responsibility of the Department of Education, the work should reside with that department.
Employees impacted by this change will be encouraged to apply for other positions within the department. Any audits now in process are expected to be completed by the end of 2022.
The auditor general may still audit specific activities of educational entities that use taxpayer dollars through its Bureau of Performance Audits. As with all performance audits, these audits would gauge whether government programs and activities are meeting stated goals and objectives, and if tax dollars are being spent efficiently and effectively.
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