Legislative Update - Week Ending Sept. 23, 2022

Legislative Update - Week Ending Sept. 23, 2022

by PICPA Government Relations | Sep 23, 2022


Senate Finance Committee Approves Several Key Tax Bills

The state Senate Finance Committee held a voting meeting to consider several bills. One, approved along party lines by a vote of 7-4, was Senate Bill 1320 sponsored by Sen. Ryan Aument (R-Lancaster). This is a PICPA-supported optional pass-through entity (PTE) tax that serves as a workaround for the federal state and local tax (SALT) cap.

The Tax Cuts and Jobs Act of 2017 imposes a $10,000 SALT cap applicable for tax years 2018 through 2025. The cap prevents individuals from being able to fully deduct state and local income and property taxes on their federal individual income tax returns. To mitigate the impact, many states have adopted statutes that facilitate the deduction of additional state income taxes on federal returns.

The PTE tax is an entity-level income tax with a related credit that owners can claim on their respective state individual income tax returns. Across the country, nearly 30 states have enacted PTE taxes, with several others considering enactment.

The committee approved two other PICPA-supported bills. House Bill 1059, sponsored by Rep. David Hickernell (R-Lancaster), would provide a phase-in schedule for increasing the threshold for making required quarterly estimated payments under the personal income tax from $8,000 to $20,000, with an annual increase of $500 thereafter. House Bill 2277, sponsored by Rep. Jesse Topper (R-Bedford), would repeal the requirement for Pennsylvania businesses to remit “prepayments” for their sales tax collections.

The committee also approved the following bills:

  • House Bill 1377, sponsored by Rep. Karen Boback (R-Luzerne), would prohibit Keystone Opportunity Zone (KOZ) zone-hopping.
  • House Bill 2057, sponsored by Rep. Brad Roae (R-Crawford), would update Pennsylvania corporation laws and related provisions of Title 15 of the Consolidated Statutes.

 

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Grantor Trust Reform Measure Clears Senate Committee

The state Senate Judiciary Committee unanimously approved legislation supported by the PICPA that addresses the law regarding grantor trusts. Pennsylvania law, which differs from federal law, imposes income tax on grantor trusts according to the same state personal income tax rules that apply to irrevocable trusts, unless the grantor trust is a wholly revocable trust.

Senate Bill 1321, sponsored by Sen. Lisa Baker (R-Luzerne), would allow Pennsylvania to accept grantor trust status at the state level. Pennsylvania is the only state in the country that does not give the grantor of an irrevocable trust the choice to remain legally obligated to pay state income on the trust's income. All states except Pennsylvania that impose an income tax follow the federal rules.

The legislation is before the full Senate for consideration.

 

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Bonus Depreciation Bill Introduced in State House

State Rep. Rob Mercuri (R-Allegheny) introduced legislation backed by the PICPA State Taxation Steering Committee that would further conform Pennsylvania law to the Internal Revenue Code (IRC) and allow a bonus depreciation deduction for corporate income tax purposes.

Act 72 of 2018 eliminated Pennsylvania’s adverse tax treatment for corporations that take advantage of the 100% bonus depreciation rules for federal tax purposes. However, Pennsylvania still does not allow bonus depreciation for state corporate net income tax purposes. Under Act 72, Pennsylvania taxpayers may depreciate those assets under IRC Sections 167 and 168 – excluding the bonus depreciation rules of Section 168(k). These rules apply to property placed in service after Sept. 27, 2017.

Pennsylvania’s current corporate net income tax (CNIT) bonus depreciation provisions need to be amended to achieve the stated objectives of Act 72 and to promote simplicity in its application. House Bill 2825 seeks to address complexities that makes compliance with, and administration of, these provisions difficult and costly to businesses in the state, and that frequently result in desk review or audit adjustments or assessments. The bill has been referred to the House Finance Committee. 

 

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Lawmaker Seeks Legislation to Help Interstate Commuters

Pennsylvania residents who work in Maryland may soon be able to participate in telework opportunities under a bill approved by the state Senate Finance Committee.

Senate Bill 1315, sponsored by Sen. Kristin Phillips-Hill (R-York), would make temporary guidance issued by the Pennsylvania Department of Revenue during the pandemic permanent. The guidance allowed employees who work for out-of-state corporations to work from home without triggering state tax laws that would require the company to pay the corporate net income tax (CNIT).

The measure advances to the full Senate for consideration. 

 

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Bill to Protect Insurance Consumers from Cyberattacks Heads to Senate

Legislation to combat cybercrime within the insurance industry and to help protect consumers passed unanimously in the Pennsylvania House.

House Bill 2499, sponsored by Rep. Tina Pickett (R-Bradford/Sullivan/Susquehanna), would establish standards to mitigate the potential damage of an insurance data breach and protect consumers’ personal information from cybersecurity events. The bill adopts uniform data security standards as well as investigation and notification requirements in collaboration with the state Insurance Department to better protect consumers’ personal and private information from a data breach.

At least 18 other states have adopted similar legislation based on recommendations from the National Association of Insurance Commissioners.

House Bill 2499 will next be considered by the Senate.

 

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Philadelphia Updates Like-Kind Exchange Treatment Guidance

The Philadelphia Department of Revenue recently updated its guidance on the tax treatment of Internal Revenue Code (IRC) Section 1031 Exchanges for the business income and receipts tax and net profits tax.  

The guidance notes that Philadelphia does not have an ordinance that specifically adopts IRC Section 1031 treatment for the nonrecognition of capital gains on the sale or exchange of like-kind property. Therefore, the Philadelphia Department of Revenue will not recognize IRC Section 1031 on like-kind exchanges.

 

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Oct. 24 Deadline to Register to Vote in Pa.

The deadline for Pennsylvanians to register to vote in the November election is Oct. 24.

To register to vote, Pennsylvanians must be:

  • A citizen of the United States for at least one month before the election
  • A resident of Pennsylvania and the election district (municipality or precinct) in which the individual desires to register and vote for at least 30 days before the election
  • At least 18 years of age on or before the date of the election

Pennsylvanians who are already registered to vote can check their registration status online and update their voter record with changes such as name or address.

Also, Nov. 1 is the deadline to apply for a mail-in ballot if that is your preferred method of voting.

 

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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.

Address:
500 N. 3rd St., Ste. 600A 
Harrisburg, PA 17101