Pennsylvania’s New Fiscal Year Starts Without Budget
Pennsylvania began its 2022-2023 fiscal year on July 1 without a state budget in place. Lawmakers and Gov. Tom Wolf’s administration are scheduled to negotiate through the July 4th holiday weekend and into next week on the fiscal year budget. Wolf proposed a $43.7 billion plan in February. Without a new budget, the state will lose the authority to make some payments.
Public education funding – a priority for Wolf in each of his previous seven budget proposals – is a stumbling block to an agreement this year. Wolf proposed a nearly $1.8 billion increase in public education as part of his plan, but lawmakers seem to be coalescing around an $800 million increase. Details are lacking as of this writing on July 1.
Another matter complicating negotiations is the state’s budget surplus. By some estimates, the state’s coffers have between $10 billion to $12 billion in unexpected revenues. Some lawmakers would like this budget to spend most of that surplus; others, arguing the long-term economic outlook for the state is not positive, urge more constrained spending.
A corporate net income tax decrease continues to be supported by a bipartisan group of lawmakers. For its part, the PICPA continues to pursue its pass-through-entity tax proposal as part of the budget. That bill is pending before the full House for consideration.
The PICPA government relations team is fully engaged and active in the capitol as negotiations proceed, and we are closely monitoring legislative activities.
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Multistate Tax Meeting to Be Held in July
The Multistate Tax Group that includes representatives from PICPA’s State Taxation Committee and their counterparts in New Jersey and New York will hold its next meeting on July 13 at 9:30 a.m. The meeting will include special guests from the Council on State Taxation (COST), who will provide an overview of multistate legislative items of interest and some of their recent policy positions.
The Multistate Tax Group was established as a forum where practitioners can share ideas and have real-time discussions on important cross-state tax matters. If you are a PICPA member and you would like to join the Multistate Tax Group, please email Alex Fabian, PICPA manager of government relations.
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Veteran-Friendly Professional Licensing Bill Passes
A bill that provides Pennsylvania’s military personnel with an easier path back into the civilian workforce by making the professional licensing process more veteran-friendly was unanimously approved by the state Senate. The bill passed the House unanimously in November 2021.
House Bill 1868, sponsored by Rep. Zach Mako (R-Northampton), addresses problems veterans commonly face when applying for professional licenses. The bill provides the following solutions:
- More veterans and military spouses on licensing boards and commissions
- Expedited application review for veterans and military spouses and initial licensure fee waivers for military spouses relocating to Pennsylvania
- Consideration of military experience when making qualification determinations
- Use of specific guidelines to help translate military experience into civilian licensure requirements
- Early submission for licensure renewals for military being deployed to allow them to immediately reenter employment upon return
The bill was amended in the Senate, and the amendments were concurred unanimously by the House. The bill now goes to Gov. Wolf for signature.
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Cannabis Protection Language Added to Banking Bill
The state Senate amended legislation that had passed both the House and Senate by adding language that would give cover to banks and insurance companies that do business with medical marijuana growers and dispensaries.
Language from Senate Bill 1167 was amended into House Bill 331 by the Senate and approved. House Bill 331, sponsored by Rep. Rosemary Brown (R-Monroe), authorizes banks to offer incentive programs that include prize drawings to customers, and Senate Bill 1167, sponsored by Sen. John DiSanto (R-Dauphin), adds protection for doing business with cannabis-related businesses.
House Bill 331 in its amended form was approved by the Senate by a vote of 46-4. The legislation goes back to the House for a concurrence vote before being sent to the governor for signature.
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Business Modernization Law Clears Pa. House
Legislation that modernizes and updates Pennsylvania’s Business Corporation Law (Title 15) was unanimously approved by the state House.
House Bill 2057, sponsored by Rep. Brad Roae (R-Crawford), makes revisions relating to filings with the Department of State. These revisions cover annual reports by active entities, bogus filings made to harass other parties or for fraudulent or other improper purposes, the use of statements of correction, tax clearance certificates when required for the protection of the Commonwealth, and clarification of certain filings involving nonstock corporations.
The bill also makes revisions based on changes in the Delaware General Corporation Law and Model Business Corporation Act.
The bill is pending in the Senate Finance Committee.
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Philadelphia Announces New Tax Rates
On June 23, Philadelphia City Council passed a final budget for the fiscal year 2023. Included in the plan are changes to the wage and earnings tax rates. New net profits tax and school income tax rates are applicable on income earned in tax year 2022 (returns due and taxes owed in 2023). A new business income and receipts income tax rate will be effective for tax year 2023 (returns due and taxes owed in 2024).
Starting July 1, 2022, the new resident rate for the wage and earnings taxes is 3.79%. The rate had been 3.8398%. The new nonresident rates will be a flat 3.44% for wage tax and the earnings tax. The rates were previously 3.4481%.
Employers must begin withholding wage tax at the new rate from all paychecks issued to residents and nonresidents after June 30, 2022. Both wage and earnings taxes apply to salaries, wages, commissions, and other employee compensation.
Likewise, Philadelphia’s net profits tax (NPT) is decreasing for residents and nonresidents. The NPT is paid on the net profits earned from a trade, business, profession, or other for-profit activity conducted in Philadelphia. The new NPT rates are 3.79% for residents and 3.44% for nonresidents.
These new rates will apply for net profits earned in 2022.
For tax year 2023, the net income portion of the business income and receipts tax (BIRT) will drop to 5.99% from its current 6.20% rate. This new BIRT rate will be effective for tax year 2023 (returns due and taxes owed in 2024).
The school income tax rate is also changing. As of July 1, 2022, the rate for residents will be 3.79% (previously 3.8398%). The new rate will apply to all applicable unearned income received in tax year 2022 (January through December 2022).
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Survey Shows Broad Biz Support for Keystone Saves
A recent AARP survey of small businesses with five to 100 employees revealed that only four in 10 businesses offer employees a retirement savings plan, but two-thirds believe more should be done to encourage employees to save for retirement. Employers referenced cost and time as the biggest drivers for not offering retirement savings options.
House Bill 2156, sponsored by Rep. Tracy Pennycuick (R-Montgomery), would create Keystone Saves, a program that will provide Pennsylvanians with an easy way to save for retirement out of their regular paycheck.
Keystone Saves offers businesses a cost-free retirement savings option to help employees save for the future. The AARP survey results demonstrate overwhelming small-business support for Keystone Saves, with 75% of small businesses backing the initiative. Nearly 80% believe lawmakers should support the legislation.
The PICPA is a member of the Keystone Saves Coalition.
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