State Lawmakers to Return for Short Fall Session
Pennsylvania lawmakers are heading back to Harrisburg for a quick legislative session. House members will be the first to return to the Capitol on Sept. 12; Senators will return Sept. 19. While there are only a handful of session days before November’s election recess, lawmakers can use this narrow window to add to their list of 2021-2022 legislative accomplishments.
The PICPA’s Harrisburg-based government relations team has been meeting with lawmakers and staff throughout the summer on several outstanding legislative proposals. To learn more about the legislation on PICPA’s fall agenda, take a minute to read the team’s latest CPA Now blog post, “Pennsylvania Lawmakers Return for Brief Pre-Election Session.”
All legislation not considered by Nov. 30 must be reintroduced in January, beginning the process from square one.
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PICPA Fall Government Relations Webinar Series
The PICPA government relations team will host a series of webinars this fall that cover a range of topics and issues impacting PICPA members and their clients. These webinars are free to PICPA members.
On Sept. 22, the PICPA will host representatives from the Philadelphia Department of Revenue as it prepares to release phase two of the new Tax Center functionality. Join Rebecca Lopez Kriss, deputy commissioner, Peter Donnelly, project director, Chris Hazle-Cary, project manager, and Monica Barr, training lead, for this session. They will provide a demonstration of the system and its new functions, which will roll out Oct. 3, 2022. Attendees will also have the chance to ask questions.
Bryan Smolock, director of the state Department of Labor and Industry’s Bureau of Labor Law Compliance, will provide an update on Oct. 6 on the new Pennsylvania Minimum Wage Act regulations. Smolock will breakdown the new rules and how they affect both tipped and salaried workers who have fluctuating work-week schedules. Register for this webinar today. Get a sneak peak in this CPA Now blog posted by Smolock in August.
Join Peter Calcara, PICPA vice president of government relations, on Nov. 30 for a post-election session where he provides an insider’s perspective on the year-end legislative and regulatory landscape in the state capital. In this 50-minute session, you will receive analysis of the 2022 general election, a recap of the fall session, and an update on the PICPA’s proposals and how we’ll move forward in the new year. This session qualifies for one hour of CPE.
On Jan. 5, join Ed Jenkins, CPA, CGMA, of Jenkins & Co. LLC, a member of the PICPA Federal Tax Thought Leadership Committee and the AICPA Tax Executive Committee, as he presents a webinar on year-end federal tax issues. He’ll just be returning from the AICPA National Tax Conference and AICPA committee meetings with key players in the tax world with the most up-to-date information for PICPA members. This session qualifies for one hour of CPE.
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Inheritance Tax Exemption for Decedent Active Military Members
Act 53 of 2022 ushered in significant state tax policy changes earlier this year. One change that recently took effect covers Pennsylvania’s inheritance tax.
Under the new law, transfers of property after the death of a member of the military on active duty shall be exempt from inheritance tax. It exempts the transfer of personal property, whether tangible or intangible, resulting from a decedent military member.
A "decedent military member" is defined as an individual who, while serving in the armed forces, a reserve component, or the National Guard of the United States, died as a result of injury or illness received while on active duty, including active duty training.
This change took effective Sept. 6, 2022.
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Student Loan Forgiveness Will Not Be Taxed in Pennsylvania
In response to President Joe Biden’s federal student loan forgiveness program, the PICPA wrote to state lawmakers with information and clarification regarding the state taxation of cancelled student loans.
Pennsylvania does not follow the federal cancellation of indebtedness rules, PICPA noted. The tax consequences of the cancellation of personal debt are set forth in Pennsylvania Department of Revenue Bulletin 2009-02, Cancellation of Personal Indebtedness. The bulletin was originally issued April 30, 2009, and reissued Dec. 17, 2021
When a taxpayer borrows money, he or she is not required to include the loan proceeds in income because he or she has an obligation to repay the lender. When the amount of the obligation is subsequently forgiven, the amount forgiven is income because the borrower no longer has an obligation to repay the lender. Cancellation, therefore, may be taxable income in Pennsylvania to the extent that it represents a substitute for one of Pennsylvania’s eight classes of income.
Based upon the PICPA’s analysis of the Biden administration’s plan, this particular loan forgiveness would not be subject to Pennsylvania personal income tax because it does not fall within one of the eight classes of income subject to state tax.
Student loan forgiveness also is not considered taxable income at the federal level.
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AICPA Requests Guidance on Schedule K-2 and K-3 Requirements
Last year, the IRS introduced a new reporting requirement for the 2021 tax year for any pass-through entities with international activities, including entities with foreign partners. The agency created two new forms, Schedules K-2 and K-3, to supplement all Schedule K-1 filings.
The new forms are a major shift in reporting standards for international tax-related matters for income, expenses, and credits for pass-through entities. The AICPA’s executive tax committee recently issued a comment letter urgently requesting immediate guidance regarding the new reporting requirements.
In the letter, the AICPA acknowledges the substantial efforts of the Department of the Treasury and the IRS in developing a redesigned international tax reporting pass-through form, releasing final instructions, and providing certain transition penalty relief for tax year 2021. The AICPA, however, also identified several items urgently requiring clarification for taxpayers to properly comply with the reporting requirements for the 2021 tax year and beyond:
- Provide broader exceptions to Schedules K-2 and K-3 relevance exception
- Provide a permanent extension of the exception from filing Schedules K-2 and K-3 for certain domestic partnerships and S corporations as provided in FAQ 154
- Allow for a consolidated Form 8082 disclosure filing
- Clarify and simplify the foreign tax credit information reporting on partnership level on Schedules K-2 and K-3, Part II
- Allow summarized information on Schedule K-3, Part I, Box 1, Gain on Sale of Personal Property
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August State Revenue Collections Strong
Pennsylvania collected $2.9 billion in General Fund revenue in August, which was $63.8 million, or 2.3%, more than anticipated, according to the Department of Revenue. Fiscal year-to-date General Fund collections total $5.6 billion, which is $60.4 million, or 1.1%, above estimate.
The Independent Fiscal Office (IFO) August Monthly Revenue Update shows that actual collections were $104.8 million above IFO projections. The report also shows that August 2022 General Fund revenues of $2.86 billion reflect an increase of $290.7 million (11.3%) compared with the same month in the prior year.
Sales tax receipts totaled $1.2 billion for August, $45.5 million above estimate. Year-to-date sales tax collections total $2.4 billion, which is $45.4 million, or 1.9%, more than anticipated.
Personal income tax (PIT) revenue in August was $1.2 billion, or $6.4 million below estimate. This brings year-to-date PIT collections to $2.2 billion, which is $6.4 million, or 0.3%, below estimate.
August corporate tax revenue of $111.3 million was $1.8 million below estimate. Year-to-date corporate tax collections total $285.8 million, which is $5.1 million, or 1.8%, below estimate.
Inheritance tax revenue for the month was $116.7 million, $3.3 million below estimate, bringing the year-to-date total to $226.9 million. This is $3.3 million, or 1.4%, below estimate.
Realty transfer tax revenue was $88.8 million for August, $18.1 million above estimate, bringing the fiscal-year total to $123.2 million. This is $18.1 million, or 17.3%, more than anticipated.
Other General Fund tax revenue – including cigarette, malt beverage, liquor, and gaming taxes – totaled $161.0 million for the month, $6.3 million below estimate. The year-to-date total is $264.7 million, which is $6.4 million, or 2.4%, below estimate.
Nontax revenue totaled $35.0 million for the month, $18.1 million above estimate. This brings the year-to-date total to $77.5 million, which is $18.1 million, or 30.5%, above estimate.
In addition to the General Fund collections, the Motor License Fund received $239.7 million for the month, $25.3 million below estimate. Fiscal year-to-date collections for the fund – which include the commonly known gas and diesel taxes, as well as other license, fine, and fee revenues – total $480.6 million, which is $24.7 million, or 4.9%, below estimate.
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Pa. Local Governments to Get Second Round of Federal Funding
Pennsylvania local governments are scheduled to receive nearly $500 million in the second and final round of Local Fiscal Recovery funding provided by the federal American Rescue Plan Act (ARPA). County and municipal governments that received local fiscal recovery ARPA funding in 2021 will automatically receive the new allocations the week of Sept. 12.
The $491,504,064 will be distributed to eligible local governments that are not metropolitan cities or counties – called nonentitlement units of local government (NEUs) – that originally requested and received the first round of funding in 2021.
As part of the ARPA, the federal government has provided a total of about $6.1 billion to Pennsylvania counties, metropolitan cities, and local government units to support pandemic response efforts, replace lost revenue, support economic stabilization for households and businesses, and address systemic public health and economic challenges.
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