Week Ending Oct. 9, 2020

Oct 09, 2020

PPP Loan Forgiveness Bill Clears State Senate Committee

The state Senate Finance Committee unanimously approved legislation that clarifies the treatment of Paycheck Protection Program (PPP) loan forgiveness under the Pennsylvania personal income tax (PIT) law. The measure is supported by the PICPA.

House Bill 2497, sponsored by Rep. George Dunbar (R-Westmoreland), amends the Tax Reform Code to exempt forgiveness of indebtedness granted under Section 1106(B) of the federal Coronavirus Aid, Relief, and Economic Security Act from taxation under the state’s PIT law (Article III). Pennsylvania personal income tax does not conform to the federal individual income tax base, and as a result there is uncertainty as to whether such forgiveness for PPP loans would be considered taxable income for state PIT purposes.

Sen. John Blake (D-Lackawanna), Democratic chair of the committee, offered an amendment on behalf of the state Department of Revenue (DOR). The amendment would, according to Blake, ensure that taxpayers are not able to double dip because of the changes made.

Sen. Pat Browne, CPA (R-Lehigh), argued against the amendment, saying, "The provisions of this amendment would make the treatment by Pennsylvania of this section of our tax reform code different than what is provided under federal law." He also noted, "Given the challenges we have now, we should follow the policy of our federal government in relation to the loans that they are providing and have a consistent treatment in our tax code in order to provide the necessary relief to our business community."

The Sen. Blake's amendment to the bill on behalf of the DOR failed to pass. House Bill 2497 is now before the full Senate for consideration.


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Coalition Urges Continuation of PPP to Help Small Businesses

The PICPA joined a coalition of banking concerns, contractors, and the restaurant and lodging industries urging Congressional leaders to expand the federal Paycheck Protection Program (PPP). The program has helped more than 5 million small businesses since the start of the pandemic and the subsequent economic shutdown.

“As these businesses continue to recover, they will need additional resources to maintain business operations, and the PPP remains the most efficient and effective means to assist them through this challenging period,” the coalition wrote to lawmakers. “Helping struggling small businesses should not be a partisan issue. While we support Congressional efforts to assist all Americans through this crisis, we do not believe small businesses should be entangled in the many differences over a larger COVID relief package.”

Lawmakers in both the U.S. House and Senate have introduced bipartisan proposals to make the forgiveness process easier for small-business borrowers. Examples of proposals that should receive immediate consideration include the forgiveness simplification as offered by S. 4117, the Paycheck Protection Program Small Business Forgiveness Act, sponsored by Sens. Kevin Cramer, Bob Menendez, Thom Tillis, and Kyrsten Sinema, and the House companion, H.R. 7777, sponsored by Reps. Chrissy Houlahan and Fred Upton.


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Supplemental Appropriations Bill Moves in Senate

The Pennsylvania Senate Appropriations Committee approved a supplemental appropriations bill to the 2020-2021 Fiscal Year state budget.

Senate Bill 1350 sponsored by Sen. Pat Browne, CPA, chair of the Senate Appropriations Committee, makes available federal COVID-19 appropriations in the amount of $1,196,983,000 from the General Fund and $7,500,000 from the Tobacco Settlement Fund for the current fiscal year. The legislation clarifies that these appropriations are a supplemental appropriation and shall be in addition to the appropriations contained in the General Appropriation Act of 2020.

According to the fiscal note prepared by the Appropriations Committee, the COVID-19 funds being appropriated in this bill are federal funds being distributed to the Commonwealth for purposes of supplementing current and prior fiscal year appropriations.

The bill was returned to the Appropriations Committee pending further discussions on a final budget.


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New Report Gives Pa. Failing Grades on Financial Condition

A recent Truth in Accounting report gives Pennsylvania a “D” for its overall fiscal health, ranking 38th in the nation in managing its total debt load.

“Pennsylvania did not have enough money set aside to weather the current pandemic and fluctuations in the market. According to rough estimates by Truth in Accounting, Pennsylvania is projected to lose $14 billion in revenue as a result of this crisis,” the report notes. “The uncertainty surrounding this crisis makes it impossible to determine how much will be needed to maintain government services and benefits, but Pennsylvania’s overall debt will most likely increase.”

The Pennsylvania Treasury Department and the state Department of Revenue recently provided members of the House Finance Committee with updates on the financial challenges facing the state.

The Truth in Accounting report, Financial State of the States 2020, provides an analysis of the fiscal health of all 50 states based on fiscal year 2019 comprehensive annual financial reports. It looks at the most recent available data and represents the states’ finances before the global coronavirus pandemic and lockdowns. 


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Senate Approves IT Modernization, Consolidation Proposal

The state Senate approved comprehensive legislation that would strengthen, secure, and consolidate information technology (IT) across state agencies to modernize and streamline operations.

Senate Bill 810, sponsored by Sens. Kristin Phillips-Hill (R-York) and Ryan Aument (R-Lancaster), would implement a strategic plan for future IT projects, manage and maintain all procurement of IT for state agencies, and establish cybersecurity standards for state government under the newly created Office of Information Technology (OIT).

The office would also make recommendations for future consolidation, integration, and investment.

The Senate Appropriations Committee fiscal note estimates the measure would save taxpayers between $21 million and $32 million annually.

The legislation heads to the state House for consideration.


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IFO Report Examines Impact of TCJA on Pa. Taxpayers

The Independent Fiscal Office (IFO) posted an analysis of the impact of the Tax Cuts and Jobs Act (TCJA) on Pennsylvania taxpayers. The data show that taxpayers benefited from lower rates and the expanded child tax credit but claimed fewer deductions.

IFO’s research brief provides a review of how tax law changes affected total income, taxable income, various deductions and tax credits, and tax liability. According to IFO, the data suggest that the TCJA likely reduced the federal income tax due by Pennsylvania residents by roughly $7.5 to $8.0 billion. Lower income taxpayers benefited from the larger child tax credit; higher income taxpayers benefited from lower marginal tax rates.

The impacts of the TCJA on Pennsylvania federal income taxpayers depend on income level, family size, filing status, homeownership status, and various other factors, says IFO. 


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Relief Announced for Small Businesses Impacted by COVID-19

The Wolf administration this week announced an additional $96 million in state grants for 5,373 Pennsylvania small businesses that were affected by the business closure order due to the COVID-19 public health crisis.

The COVID-19 Relief Statewide Small Business Assistance funding was developed in partnership with state lawmakers and allocated through the state budget, which included $2.6 billion in federal stimulus funds through the Coronavirus Aid, Relief, and Economic Security Act, of which $225 million was earmarked for relief for small businesses.

The Department of Community and Economic Development (DCED) distributed the funds to the Pennsylvania Community Development Financial Institutions (CDFIs), which are administering the grants.

To date, more than 10,000 businesses were approved for $192 million in grants through the COVID-19 Relief Statewide Small Business Assistance Program.


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