Legislative Update - Week Ending June 10, 2022

Jun 10, 2022


PICPA-Backed Pass-Through Entity Tax Bill Advances

The state House Finance Committee approved several bills at a recent voting meeting, including a measure backed by the PICPA to create a pass-through entity (PTE) tax structure. House Bill 1709, sponsored by Rep. Martina White (R-Philadelphia), was approved by a vote of 14-10. Prior to the vote, lawmakers adopted an omnibus amendment crafted by the PICPA by a vote of 17-7.

The federal Tax Cuts and Jobs Act of 2017 (TCJA) mandated a $10,000 state and local tax deduction limitation (SALT cap) on federal taxes through 2025. The SALT cap prevents many individuals from being able to fully deduct state and local income and property tax on their individual federal income tax returns. To mitigate the impact of the federal SALT cap, close to 30 states – including Connecticut, New Jersey, New York, Maryland, and Virginia – have adopted statutes that facilitate the deduction of additional state taxes on federal returns. These efforts are commonly achieved through the imposition of PTE taxes.

House Bill 1709 would provide certain federal tax benefits via an elective PTE tax and clarifies the statutory language under which the Department of Revenue currently penalizes Pennsylvania resident partners for electing PTE taxes in other states. It also explicitly allows a credit for resident partners and S corporation shareholders in Pennsylvania. The PTE tax is an entity-level income tax with a related credit for owners to claim on their respective state individual income tax returns.

The legislation awaits consideration by the full House. Other bills approved by the committee are as follows:

  • Senate Bill 347, sponsored by Sen. John DiSanto (R-Dauphin), permits tax deferrals for certain like-kind exchanges.
  • Senate Bill 562, sponsored by Sen. Mario Scavello (R-Monroe), establishes the Airport Land Development Zone Program under the state Tax Reform Code.
  • House Bill 2640, sponsored by Rep. Aaron Kaufer (R-Luzerne), clarifies the exclusion of traffic signal foundations, poles, and mast arms from sales and use tax.
  • House Bill 2645, sponsored by Rep. Michael Peifer (R-Pike), defines the deduction for goodwill recorded by institutions filing the banks and trust company shares tax.

The House and Senate reconvene June 13. See the full schedule of committee meetings.

 

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DOR Announces Changes to Overpayment Offsetting Procedures

The Department of Revenue (DOR) is moving forward with its modernization project that involves moving all the taxes the agency administers into one integrated tax system. The DOR will upgrade its technology and expects to greatly improve customer service and meet its goal of gaining efficiencies in the administration of taxpayers’ accounts. Most importantly, the agency will effectively link all tax accounts owned by a single taxpayer in one place.

As the work proceeds, the DOR will be changing the way it handles taxpayer overpayments. Effective Dec. 1, 2022, the agency will implement an offsetting of existing overpayments unused from older final returns against collectible liabilities of all tax types under one taxpayer. The DOR does possess the authority to do this under Pennsylvania law.  

Questions regarding the policy should be submitted through the department’s online customer service center.

In addition, over the Memorial Day weekend the DOR had a technical issue that has since been resolved. The department is once again receiving Modernized e-File (MeF). All electronic filings that occurred between May 26 and June 2 have been received and no further action is needed by the practitioner or taxpayer. 

 

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Longtime PICPA Ally Sen. Browne Concedes Reelection Bid

One of PICPA’s longest and most influential allies won’t be returning to Harrisburg next year. State Sen. Patrick Browne conceded his Republican primary election for the 16th District (Lehigh Valley). Browne, a CPA and PICPA member, lost to Jarrett Coleman by a razor thin margin of 19 votes.

In a statement to lehighvalleylive.com, Browne congratulated Coleman and wished him the best of luck in the fall general election. Reflecting on his time in public service, Browne said, “It has been an honor and a privilege to serve the citizens of the 16th Senatorial District as their Senator for the past 17 years and the Commonwealth as a member of the General Assembly for 28 years. I look forward to finishing my service by delivering a budget this year which places Pennsylvania in its strongest financial position in decades.”

Browne was first elected to the state House in 1994. In 2005, he won a special election to become a state senator representing the Lehigh Valley. He has served as chair of the Senate Appropriations Committee since 2014.

Coleman garnered 17,041 votes to Browne’s 17,022 votes, according to election results.
In the November General Election, Coleman will face Democrat Mark Pinsley, who is currently the Lehigh County controller.

The entire PICPA thanks Sen. Browne for his nearly three decades of staunch support and his unwavering commitment to the CPA profession in Pennsylvania. We wish him well in all his future endeavors. 

 

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Pa. Senate Committee Approves Corp Tax Measure

The Senate Finance Committee approved by a vote of 7-4 legislation lowering Pennsylvania’s corporate net income (CNI) tax. Senate Bill 721, sponsored by Sen. Bob Mensch (R-Montgomery), would gradually reduce the CNI tax from its current rate of 9.99% to 6.99% by 2024. The rate could then be further reduced if certain revenue projections are met or exceeded.

The state House recently approved its own tax reform package of bills. Those bills are pending in the Senate. These proposals are all in play with the budget deadline fast approaching and lawmakers in deep discussions on a final spending plan. Pennsylvania’s new fiscal year begins July 1.

The bill is before the full Senate for a vote.

 

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Wolf Highlights Priorities as Budget Talks Continue

Speaking in Harrisburg to a group representing the area’s business community, Gov. Tom Wolf highlighted his commitment to workforce and economic development and opportunities to make major investments in Pennsylvania families, businesses, and communities.

“We have an opportunity before us to build on the work we’ve done over the past seven years and make a major new investment in our economy and in Pennsylvanians,” Wolf said. “That’s exactly what I want to do in this year’s budget: build on our successes in order to pave the way to a prosperous future for all Pennsylvanians. And right now, we have the money to do it.”

Highlights from Wolf’s budget include the following:

  • $1.25 billion in basic education funding to support students and provide relief to taxpayers.
  • $300 million for the Level Up initiative launched last year to support the 100 most underfunded schools in the state.
  • $200 million for the Nellie Bly Tuition Program so more people can earn a degree with less debt and more young people will remain in Pennsylvania.
  • Increase the minimum wage to $12 per hour on July 1, 2022, with annual increases of $0.50 until reaching $15 in 2028.
  • Reduce the corporate net income tax rate from 9.99% to 7.99% immediately, with a path to 4.99%.
  • $1.5 million increase for the PREP Network to help small businesses and higher education institutions partner to benefit students and entrepreneurs.
  • $8 million for job training through the Workforce and Economic Development Network of Pennsylvania, which has helped more than 2,000 companies train nearly 1.3 million Pennsylvanians, and an $18 million increase to support the Ben Franklin Technology Development Authority for innovation in the commonwealth.

In addition, Wolf wants to spend $1.7 billion of Pennsylvania’s remaining federal American Rescue Plan Act money to lower costs for Pennsylvanians struggling with higher prices. This would include:

  • $500 million to create the PA Opportunity Program to give money directly to Pennsylvania families in need.
  • $225 million to help small businesses through the COVID Relief Statewide Small Business Assistance Program.
  • $204 million to increase property tax relief through the existing Property Tax/Rent Rebate Program.

As of the end of May, Pennsylvania has collected record revenues for the 2021-2022 fiscal year, totaling more than $4.9 billion above estimate.

 

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Coalition Applauds Effort to Prevent Liability Case Venue Shopping

The Pennsylvania Coalition for Civil Justice Reform (PCCJR) applauded state Rep. Rob Kauffman (R-Franklin) for introducing House Bill 2660 and for spearheading an effort to amend Pennsylvania’s constitution to prohibit venue shopping in medical liability cases. The PICPA is a member of the PCCJR.

“Pennsylvania has seen firsthand the negative impacts venue shopping can have on access to health care and jobs,” said Curt Schroder, executive director of PCCJR. “We can’t afford to go back to the days when rampant venue shopping led to skyrocketing liability premiums – driving many physicians and specialists out of the state. Rep. Kauffman’s proposed constitutional amendment addresses this issue by bringing much needed checks and balances to the venue rule.”

Kauffman, who chairs the House Judiciary Committee, introduced House Bill 2660 to amend the state constitution to give the General Assembly the power to establish venues for civil lawsuits by statute. Absent this amendment, the Pennsylvania Supreme Court will determine the venue issue.

A proposed amendment to the state constitution must pass the state General Assembly in two consecutive sessions prior to going before voters in a ballot referendum.

 

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State Senate Welcomes Newest Member

Following his special election victory in May, Jimmy Dillon (D) was sworn into office this week to represent the 5th District (Philadelphia) in the Pennsylvania State Senate. The position was formerly held by Judge John Sabatina, who resigned from the Senate following his election to the Philadelphia County Court of Common Pleas. Dillon’s  committee assignments have yet to be announced.

The Senate is at its full complement of 50 members: 28 Republicans, 21 Democrats, and one Independent.

State Rep. Michael J. Driscoll (D-Philadelphia) said goodbye this week to his House colleagues. He was elected last month to fill the Philadelphia City Council seat left vacant after Bobby Henon resigned last month following his conviction on federal corruption charges. Driscoll was elected in 2014 to serve as state representative for the 173rd District (Philadelphia).

 

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