Week Ending April 3, 2020

Apr 03, 2020


PICPA, Pa. DOR Working Together in Face of COVID-19

On March 31, the PICPA hosted a webinar with the Pennsylvania Department of Revenue (DOR) on the COVID-19 crisis and its impact on state tax filing deadlines. The one-hour discussion with Secretary of Revenue C. Daniel Hassell, John Kaschak, CPA, executive deputy secretary, and Tracy Hulstine, acting director, Bureau of Individual Taxes, laid out the DOR’s response to the COVID-19 crisis and offered needed clarity to CPAs and tax practitioners in a rapidly changing economic environment. The panel also answered questions submitted by practitioners before and during the webcast. The PICPA and the DOR continue working together, along with other stakeholders, on providing answers to members’ ongoing questions. Get more on PICPA’s response to the coronavirus

The DOR later provided more clarification on state tax filing due dates in response to Act 10 of 2020 (House Bill 1232), which extended the due date of certain personal income tax returns and payments, and waived certain other income tax dates. The DOR also announced that it is extending the due date for corporations with tax returns due between May and Aug. 14, 2020.

Act 10 provides for an extension to July 15, 2020, of the following tax filing deadlines:

  • Declarations of estimated personal income tax
  • Payments of estimated personal income tax
  • Filing of informational returns related to Pennsylvania S corporations and partnerships (Form PA-20S/PA-65) and estates and trusts (Form PA-41).

Act 10 also extends by three months the filing date for certain information returns (1099-R, 1099-MISC, and W2-G).

In addition to the due dates changed by Act 10, the federal due date for calendar-year corporation returns that is normally April 15 has been moved to July 15. As a result, the due date for corporations with Pennsylvania returns and payments due on May 15 is now Aug. 14. There is no extension for the June 15 estimated payment due date for corporations.

In addition, the DOR is extending the due date for nonresident withholding and partnership corporate net income tax withholding payments to July 15.

Here is additional guidance (applies to calendar-year only):

 


Entity Federal Form Pa. Form Original Federal Due Date New Federal Due Date  Original Pa. Due Date New Pa. Due Date 
Partnerships 1065  PA 20S/PA-65  March 15  March 15  April 15
July 15
S Corps 1120S  PA-20S/PA-65  March 15  March 15  April 15
July 15 
Individuals 1040  PA-40  April 15  July 15  April 15
July 15 
Trusts/Estates 1041  PA-41
April 15  July 15  April 15
July 15 
Corporations 1120  RCT-101  April 15  July 15  May15
Aug.14

 

According to the DOR, there are no additional extensions for fiscal-year filers (taxpayers with a tax year other than January to December).

The DOR is issuing this guidance for taxpayers after announcing the extension of the filing deadline to July 15, 2020, for taxpayers to file their 2019 Pennsylvania personal income tax returns and payments. The extension gives taxpayers an additional 90 days to file from the original deadline of April 15 as the commonwealth takes steps to help prevent the spread of COVID-19.

Act 10 also extends the deadline for the filing of 2019 local tax returns and payments to July 15, 2020. For more information on local tax taxes, including a list of business privilege and mercantile taxes, visit PICPA’s COVID-19 webpage

 

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State House Lawmakers Return to Session

Starting April 6, state House lawmakers are back in legislative session. The Senate has not officially announced its members will be returning, but the chamber is on a 12-hour call of the president pro tempore.

House lawmakers have a number of hearings and voting meetings scheduled for the week. The House Finance Committee has scheduled a hearing on April 7 (the agenda had not been announced at the time of this writing).

Also, House lawmakers welcome a trio of new members. When K.C. Tomlinson (R-Bucks), Tim Bonner (R-Mercer), and Eric Davanzo (R-Washington) take the oath of office, they will bring the House to its full complement of 203. Republicans hold a 110-93 majority in the state House.

 

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March State Revenue Collections Down Sharply

Pennsylvania collected $4.4 billion in General Fund revenue in March, which was $294.6 million, or 6.2%, less than anticipated. Fiscal year-to-date General Fund collections total $25.3 billion, which is $45.6 million, or 0.2%, below estimate.

Here are a few key points to keep in mind when analyzing March revenues and the forecast for the remainder of the fiscal year:

  • Part of March tax revenues represent tax paid for past periods. For example, about 60% of the sales tax remitted in March was for retail sales in February. There are also final payments with 2019 tax returns, representing activity last year.
  • Only a portion of the shortfall in March is due to the economic impact of business closures and decreased consumer spending. As businesses have closed and laid off workers, withholding of income tax and sales tax have also fallen. These sources are below estimate in March by $20 million and $24.2 million, respectively.
  • March revenues also include estimated payments of corporation tax for 2020. If businesses believe that their income will be lower this year, they may cut their estimated payments. Corporation tax revenues in March are about $161.1 million below estimate.
  • A portion of the March shortfall is due to the delayed depositing of paper checks while the Department of Revenue’s offices are closed. This revenue is expected to be recouped in the near future.
  • The department anticipates the effect of the pandemic will be greater in the coming months, in part due to extensions of filing deadlines, including those for personal income tax returns and payments. Annual and quarterly payments of personal income tax were expected to total about $2.1 billion during April, May, and June. Most of this revenue will be delayed until July.

Here is an overview of March revenues by tax type:

Sales tax receipts totaled $839.2 million for March, $24.2 million below estimate. Year-to-date sales tax collections total $8.5 billion, which is $68.2 million, or 0.8%, more than anticipated.

Personal income tax (PIT) revenue in March was $1.1 billion, $120.6 million below estimate. This brings year-to-date PIT collections to $9.8 billion, which is $14.9 million, or 0.2%, below estimate.

March corporation tax revenue of $2.2 billion was $161.1 million below estimate. Year-to-date corporation tax collections total $4.1 billion, which is $246.8 million, or 5.7%, below estimate.

Inheritance tax revenue for the month was $116.1 million, $20.6 million above estimate, bringing the year-to-date total to $867.4 million, which is $65.8 million, or 8.2%, above estimate.

Realty transfer tax revenue was $38.6 million for March, $4.9 million below estimate, bringing the fiscal-year total to $405.1 million, which is $9.6 million, or 2.4%, more than anticipated.

Other General Fund tax revenue, including cigarette, malt beverage, liquor and gaming taxes, totaled $58.8 million for the month, $1.9 million above estimate. The year-to-date total is $1.3 billion, which is $8 million, or 0.6%, above estimate.

Nontax revenue totaled $117.1 million for the month, $6.3 million below estimate, bringing the year-to-date total to $401.7 million, which is $64.6 million, or 19.2%, above estimate.

In addition to the General Fund collections, the Motor License Fund received $217.7 million for the month, $6.5 million below estimate. Fiscal year-to-date collections for the fund – which include gas and diesel taxes, as well as other license, fine, and fee revenues – total $2 billion, which is $21.3 million, or 1%, below estimate.

 

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Proposals to Address Federal and State Relief Legislation

Congress passed the Coronavirus Aid, Relief, and Economic Security (CARES) Act at the end of March to provide federal level relief for many of the hardships created by the coronavirus pandemic. State lawmakers are working to figure out how to best apply the resources in this legislation to Pennsylvanians.

Sen. Judy Schwank (D-Berks) plans on introducing a bill that would exempt money received by individuals from the CARES Act from certain definitions of “income.” Under the CARES Act, Americans who pay taxes will receive a one-time direct deposit of up to $1,200, married couples will receive $2,400, and those with dependent children will receive an additional $500 per child. The payments will be available for incomes up to $75,000 for individuals and $150,000 for married couples. For individuals making under $99,000, a onetime cash payment will be provided. However, some individuals, particularly seniors, who rely on a variety of state programs that include a verification of income, could lose benefits when their income is recertified. This legislation would exempt any payment received by an individual under the CARES Act from the definition of “income” in the programs such as property tax/rent rebate, PACE/PACENET, childcare subsidies, medical assistance, and CHIP.

In addition, Sen. James Brewster (D-Allegheny/Westmoreland) plans to introduce legislation to exempt funding that individuals receive from the federal government through the CARES Act from state and local taxation. Congress exempted the payments from federal taxes, but it is up to Pennsylvania to decide whether the stimulus payments are taxed under state law. This legislation would ensure payments can be used to buy food or pay for medication, rent, or mortgages.

Similarly, Rep. Joe Ciresi (D-Montgomery) and Rep. Liz Hanbidge (D-Montgomery) plan to introduce legislation that would piggyback on Act 10 of 2020 (House Bill 1232), which was recently signed into law. The legislation included amendments to extend the deadline for filing local taxes, but did not include extending deadlines for paying local property taxes. To provide for taxpayers and protect citizens during this public health emergency, this legislation will waive the requirement that tax collectors must hold office hours during the last two weeks of the discount period, and to require counties, municipalities, and school districts to give their taxpayers an additional 60 days to pay property taxes.

All three bills await formal introduction.

 

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State Lawmakers Sound Off on Veto of Petrochemical Tax Bill

State lawmakers voiced their strong displeasure over Gov. Tom Wolf’s recent veto of House Bill 1100, legislation creating an Energy and Fertilizer Manufacturing Tax Credit as an incentive for natural gas companies to build manufacturing facilities in Pennsylvania.

“The veto of House Bill 1100 places Gov. Wolf on the side of anti-job, radical environmentalists who have maliciously misrepresented the facts on this pro-worker, pro-jobs piece of legislation, and places the governor’s policies squarely in opposition to legislation that has the potential to attract thousands of prevailing wage jobs and billions of dollars in private investment to Pennsylvania when we need jobs more than ever,” Sen. John Yudichak, (I-Carbon/Luzerne).

Rep. Aaron Kaufer (R-Luzerne) said, “I am disappointed that the governor would turn his back on the opportunity to bring jobs to our region while our communities are suffering immense financial distress. House Bill 1100 provides an opportunity for our state to curb further economic distress – sadly this opportunity was brushed aside.”

Procedurally, the General Assembly has until the end of this legislative session to override the veto of House Bill 1100. The bill passed both chambers in January by veto proof majorities – 157 to 35 in the House and 39 to 11 in the Senate.

 

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Department Offers Info on New Paid Family and Medical Leave Requirements

As part of a new federal law to respond to the coronavirus, certain employers will be required to provide employees with paid sick leave or expanded family and medical leave for absences related to COVID-19. Wages paid under the new law will be reimbursed to business owners on a dollar-for-dollar basis through business tax credits.

The Pennsylvania Department of Labor and Industry has created a webpage to help employers and employees better understand the new requirements. Fact sheets for employers and employees, answers to frequently asked questions, and other helpful links are available.

 

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REAL ID Enforcement Date Delayed Until October 2021

The federal REAL ID law imposes tougher identification standards on state-issued driver licenses and photo identification cards. The new standards were originally designed to take effect on Oct. 1, 2020, but the COVID-19 public health emergency cut into the amount of time Pennsylvanians had to purchase an optional REAL ID license. PennDOT’s driver and photo license centers have been closed since March 16.

Pennsylvanians are not required to purchase a REAL ID, but beginning Oct. 1, 2021, normal state driver licenses and ID cards will no longer be considered a valid form of identification for the purposes of boarding a commercial flight or visiting a secure federal building, such as a federal courthouse.

 

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