Week Ending April 10, 2020

Apr 10, 2020


IFO Provides Projected Revenue Impact of COVID-19

Pennsylvania could be facing a multibillion dollar revenue deficit as a result of the COVID-19 pandemic, according to the Independent Fiscal Office (IFO). The report was initiated at the request of the General Assembly. It updates IFO’s official General Fund revenue estimate for fiscal year 2019-2020 to reflect the projected impact from COVID-19 and provides a preview of revenue estimates for fiscal year 2020-2021.

The estimates in the report represent potential outcomes based on the length of mandated business closures under two scenarios. The first scenario (S1) assumes a six-week closure that ends April 27, while the second (S2) assumes a 10-week closure that ends May 25. State revenues could fall by an estimated $2.7 billion to $3.9 billion due to the COVID-19 state shutdown (with $1.3 billion to $1.8 billion of that drop owing to the virus response during the current fiscal year), according to the report.

To provide context, the report compares these two scenarios to IFO’s preliminary revenue projection for fiscal year 2020-2021 made in January 2020 that assumes normal economic growth:

  • Corporate net income tax revenues decline by (S1) $517 million or (S2) $754 million.
  • Sales/use tax revenues decline by (S1) $46 million or (S2) $366 million.
  • Personal income tax revenues decline by (S1) $803 million or (S2) $997 million.
  • Total General Fund revenues decline by (S1) $1.4 billion or (S2) $2.2 billion.
  • For fiscal years 2019-2020 and 2020-2021 combined, revenues fall by (S1) $2.7 billion or (S2) $3.9 billion. The two-year total is not affected by revenue shifts because the amounts shifted into fiscal year 2020-2021 exactly offset the amount shifted out of the prior year. Both estimates exclude a potential gain of $400 million to $500 million from federal stimulus.

The IFO will revisit these assumptions for its May 20 Preliminary Revenue Estimate. 

 

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Charitable Organization Renewal Deadline Extended

The state Bureau of Corporations and Charitable Organizations (BCCO) extended the annual registration renewal deadlines for charitable organizations.

According to BCCO’s guidance posted on its website, due to the COVID-19 emergency charitable organization registration renewal deadlines that fall during April, May, and June 2020 have been extended for three months, with the renewal of each registration required to be postmarked by the 15th day of the 14th month following the close of the organization’s fiscal year. The corresponding registrations of these charitable organizations will be extended by three months as well. If the renewal due date falls on a weekend or holiday, the actual date will be the next business day. Aug. 15, 2020, is a Saturday; therefore, the renewal date is extended to Monday, Aug. 17, 2020.

The BCCO encourages charitable organizations to renew on time if possible. However, the waiver will ensure that if a charitable organization that is responding to or affected by the COVID-19 emergency misses the deadline, its registration will remain active and it may continue to solicit charitable contributions from Pennsylvania residents for charitable purposes.

In addition, on March 20, 2020, the BCCO launched an online system for filing initial and renewal registrations for charitable organizations (BCO-10 Form). The BCCO sent letters on March 17 to all registered charitable organizations announcing this new capability.

 

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Committee Approves PICPA-Supported Philadelphia Tax Measure

The state Senate Finance Committee recently considered two tax proposals, including one supported by the PICPA.

House Bill 1796, sponsored by Rep. Martina White (R-Philadelphia), amends the First Class City Business Tax Reform Act by extending the ability of businesses to carry forward net operating losses to 20 years. In its memo to senators, the PICPA wrote, “The legislation essentially would make the First Class City Business Tax Reform Act of 1984 consistent with the Philadelphia city ordinance as it relates to net operating loss (NOL) carryforward for businesses. Furthermore, the legislation helps Philadelphia’s competitiveness for attracting life sciences and similar businesses that have long development cycles. Importantly, enactment of House Bill 1796 will have no adverse fiscal impact on the state’s General Fund budget.” The bill was reported out of committee unanimously.

The committee also approved House Bill 1083, sponsored by Rep. Tommy Sankey (R-Clearfield, Cambria). This legislation repeals Section 707 of the act relating to capital stock and foreign franchise tax (CSFT) reports. The CSFT was eliminated for tax years beginning in 2016. The bill was reported out of committee with only one negative vote, Sen. Katie Muth (D-Montgomery).

Both bills now go to the full Senate for a vote.

 

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Local Government COVID-19 Emergency Relief Measure Approved by State Senate

The Pennsylvania Senate unanimously approved legislation that includes measures to help local governments respond to the COVID-19 public health emergency.

Senate Bill 841, sponsored by Sen. Scott Martin (R-Lancaster), takes a number of steps to ensure local governments can continue to operate during the coronavirus pandemic:

  • Allows local governments to provide greater flexibility on property tax deadlines.
  • Permits local governments to conduct remote meetings.
  • Gives notaries emergency authorization to notarize documents remotely using communications technology.

Under the bill, local governments would be authorized to extend deadlines for property tax discount rates to any date up until Aug. 31. The legislation would also allow local governments to waive any fee or penalty for late payments of property taxes if paid in full by the end of the year. The provisions give local taxing bodies more flexibility to help local taxpayers who are struggling financially due to the COVID-19 crisis.

Senate Bill 841 also extends the ability of notaries to conduct business remotely to meet the needs of local governments and individuals. A notary public would still be required to confirm an individual’s identity and reasonably identify records, and an audio/visual recording of the notarial act and all related interactions would be required.

The legislation would allow members of local governments to participate in meetings and conduct other business remotely during the governor’s disaster declaration. Additional requirements are included to ensure transparency of remote meetings, including provisions for public notice and posting minutes.

Additional time would also be allowed for businesses to contribute to educational scholarship programs to earn tax credits.

In addition to providing emergency provisions for local governments, the bill also reauthorizes the Pennsylvania Health Care Cost Containment Council, which is responsible for collecting and analyzing data about the cost and quality of health care in the state and making recommendations to reduce the cost of care. The panel would be responsible for preparing a report on the effect of the COVID-19 disaster emergency on health care facilities, including expenses and lost revenue during the crisis to determine additional financial assistance.

The bill is pending in the House Rules Committee.

 

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Pa. House Approves Measure Creating COVID-19 Recovery Task Force

Though many members were participating remotely from their districts, the state House returned to session this week. Like their colleagues in the Senate, House lawmakers passed COVID-19 legislation. One House bill would create a task force that would catalog Pennsylvania’s response to the disaster emergency and creates a recovery plan for the COVID-19 pandemic.

Senate Bill 327, sponsored by Sen. Dave Argall (R-Berks, Schuylkill), would establish a COVID-19 Cost and Recovery Task Force, an interbranch bipartisan group assigned to track and manage the crisis while also developing a long-term recovery plan. According to the bill’s proponents, the recovery plan would be aimed at how state and local officials could expeditiously resume mission-critical functions, including the restoration of housing, transportation, education and other public services, and economic activity to levels equal to predisaster conditions.

The legislation is not without controversy, as Democratic lawmakers argued that the task force would usurp power from the governor. The bill passed along party lines 108 to 93.

The bill is pending consideration in the Senate.

 

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Bills Proposed to Help Manufacturers Produce Personal Protection Equipment

State Sens. Vincent Hughes (D-Philadelphia, Montgomery) and John Blake (D-Lackawanna, Luzerne, Monroe) unveiled plans to help manufacturers retrofit their facilities to begin producing much-needed personal protection equipment (PPE) in response to the COVID-19 pandemic.

Under the proposal, manufacturers that need to borrow money to retrofit their facilities to produce PPE would receive loan guarantees from existing state programs, as well as tax credits for the costs associated with retrofitting operations. The senators are hopeful the state legislature can quickly move to get Pennsylvania manufacturers producing PPE.

Hughes’s proposal would expand the First Industries Program within the Department of Community and Economic Development’s Commonwealth Financing Authority and allow for loan guarantees to businesses that need to borrow money to retrofit facilities to produce PPE.

Blake’s proposal would create a tax credit program for up to 100% of the costs manufacturers incur while retrofitting facilities and operations to produce PPE. The program would be capped at $50 million.

 

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Committee Advances Regulations Review Plan

The House State Government Committee approved legislation sponsored by Rep. Seth Grove (R-York) to establish a process for a state commission to review regulatory actions.

House Bill 1874 would expand the current process for reviewing whether the requirements of a regulatory action should have been submitted as a regulation under the Regulatory Review Act. The bill as amended would allow for regulated entities to use an existing process and petition the Joint Committee on Documents to review a regulatory action, including any policy guideline or permit. The Joint Committee would then determine if the action must be submitted as a regulation. Following this determination, entities would not have to comply with the requirements associated with the action unless they are approved by the Independent Regulatory Review Commission as a separate regulation.

House Bill 1874 is in the full House for consideration.

 

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