Legislative Update - Week Ending Nov. 4, 2022

Legislative Update - Week Ending Nov. 4, 2022

Nov 04, 2022

Election Day Is This Tuesday, Nov. 8
Tuesday, Nov. 8, is Election Day! Polls are open from 7:00 a.m. to 8:00 p.m. Verify your polling place for in-person voting before you head out. Voters who have chosen to vote via mail-in or civilian absentee ballot must have those ballots back to their county board of elections no later than 8:00 p.m. on Election Day. More information about voting is available at www.vote.pa.gov.

Gov. Wolf Signs CPA Law Amendments, Other PICPA-Backed Bills

Gov. Tom Wolf on Nov. 3 signed into law legislation championed by the PICPA that updates the Pennsylvania CPA Law. House Bill 1328, now Act 110 of 2022, was sponsored by Rep. Keith Greiner, CPA (R-Lancaster).

Act 110 directs the State Board of Accountancy to adopt a nationally recognized code of professional conduct, permits an applicant for licensure to sit for the CPA Exam upon completing 120 semester credits and no degree, and expands the scope of classes students can take toward earning an accounting degree to include economics and technology.

Act 110 also makes much-need revisions and updates to peer review standards, including the following:

  • Specifies that firms requiring a peer review will need to be enrolled in a board-approved peer review program
  • Eliminates the peer review exception that allows firms with two or fewer licensees to have a five-year peer review cycle rather than a three-year cycle
  • Streamlines the peer review submission requirements to allow board access
  • Makes conforming changes to comply with current peer review standards

Wolf also signed three other bills advanced by the PICPA. House Bill 324, now Act 103, extends the ability of businesses operating in Philadelphia to carry forward net operating losses (NOLs) from three years to 20 years. Act 103 is effective immediately and will apply to NOLs generated in tax years beginning in and after 2022. House Bill 324 was sponsored by Rep. Martina White (R-Philadelphia).

House Bill 1059, now Act 108 of 2022, provides a phase-in schedule for increasing the threshold that requires quarterly estimated personal income tax (PIT) payments, from $8,000 to $9,500 in tax year 2024; $11,000 in tax year 2025; $14,000 in tax year 2026; $17,000 in tax year 2027; and $20,000 in tax year 2028. The legislation also creates and expands tax credit programs to support targeted investments in key industries. Rep. Dave Hickernell (R-Lancaster) sponsored House Bill 1059.

Legislation that updates and modernizes the Pennsylvania Business Corporation Law was signed into law by Wolf on Nov. 3. House Bill 2057, now Act 122 of 2022, sponsored by Rep. Brad Roae (R-Crawford), adopts model legislation based on the Delaware General Corporation Law and the Model Business Corporation Act, the two leading sources of corporation law developments around the country. It also replaces a cumbersome filing with the Department of State every 10 years with a simplified annual report that is consistent with every other state.

In total, Wolf signed 66 bills into law on Nov. 3.


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DOR Outlines Notice of Waived Penalty Process

The Pennsylvania Department of Revenue (DOR) has implemented a process to automatically abate and notify taxpayers of three commonly assessed penalties in certain situations.

A Notice of Waived Penalty will be issued to taxpayers who are first-time recipients of a penalty for one of the following:

  • Bad payment fee
  • Electronic funds transfer (EFT) penalty
  • Late filing penalty

Taxpayers will automatically be granted relief if they never received a bad payment fee, late filing penalty, underpayment penalty, or estimated underpayment penalty in the past. Those who receive this notice do not need to take any further action: it is designed as an informational notice to inform customers that the penalty has been abated and how to avoid the situation from happening in the future.

If taxpayers receive a notice assessing a penalty, they may choose to appeal the assessment to the Board of Appeals (BOA). If the appeal is filed timely (within 60 days of the notice mailing date), the BOA will determine if they qualify for abatement of any penalties under existing Pennsylvania tax laws. Taxpayers are strongly encouraged to file all appeals electronically through the BOA’s website, as this will provide them with a confirmation number and assure the appeal was received.


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PICPA Adds Voice to Highlight Success of Bipartisan Tax Reform

The PICPA joined other business groups, state lawmakers from the Lehigh Valley, and representatives from the Wolf administration this week to highlight how Pennsylvania’s recently enacted state tax reform package will improve the state’s competitiveness and lay the foundation for continued bipartisan success, private sector investment, and economic growth. Martin Levin, CPA, a past president of the PICPA and senior partner with RLB in Allentown, represented the PICPA.

Levin noted that while Act 53 of 2022 (enacted as part of the fiscal year 2022-2023 budget) includes a reduction to the state’s corporate net income tax rate from 9.99% to 4.99%, it also includes important provisions that will provide relief for small businesses in Pennsylvania.

Presentation in Lehigh Valley touting Pa. business tax cuts“Beginning in tax years after Dec. 31, 2022, business property placed into service may be treated as an immediately deductible expense to the extent allowable under Section 179 of the Internal Revenue Code (IRC), which currently has a $1 million annual limit,” Levin told the group. “Pennsylvania law had capped this deduction at just $25,000 annually. Additionally, Pennsylvania will follow all future federal changes to Section 179 limitations automatically.”

Another important change concerns like-kind exchanges. IRC Section 1031 permits taxpayers to defer the recognition of gain on qualifying real estate transactions, whereby the taxpayer can defer the payment of tax and roll the profit on a real estate transaction into the acquisition of new property acquired in the same deal. In the past, such deferrals were not recognized for Pennsylvania tax purposes.

“These changes will create a more competitive business climate within our Commonwealth and help propel sustainable economic growth, attract new investments, and create jobs,” Sen. Pat Browne, CPA (R-Lehigh), said. 


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Multistate Tax Collaboration Holds Meeting

Members of the PICPA State Taxation Steering Committee and their colleagues at the New Jersey Society of CPAs (NJCPA) and the New York State Society of CPAs (NYSSCPA) held another meeting as part of an ongoing effort to work collaboratively to uncover and resolve potential cross-state tax issues.

Thirty-one representatives from the PICPA, NJCPA, and NYSSCPA registered for the virtual meeting. Topics of discussion included business alternative income tax/pass-through entity tax proposals, corporate tax reform, the upcoming elections, recent legislative happenings, tax reform regulations, and relevant court cases. The group is tentatively scheduled to meet again in February.

If you are interested in participating in future discussions, please reach out to Alex Fabian at afabian@picpa.org


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October State Revenue Collections Remain Strong

Pennsylvania collected $3.1 billion in General Fund revenue in October, which was $188.8 million, or 6.4%, more than anticipated, according to the state Department of Revenue. Fiscal year-to-date General Fund collections total $12.9 billion, which is $385.1 million, or 3.1%, above estimate.

The Independent Fiscal Office October Monthly Revenue Update shows that actual collections were $276.8 million above IFO projections. The report also compares collections to the prior year. October 2022 General Fund revenues of $3.12 billion reflect an increase of $310.8 million (11.0%) compared to the same month in the prior year.

Sales tax receipts totaled $1.3 billion for October, $94.2 million above estimate. Year-to-date sales tax collections total $4.8 billion, which is $137.3 million, or 2.9%, more than anticipated.

Personal income tax (PIT) revenue in October was $1.3 billion, $68.7 million above estimate. This brings year-to-date PIT collections to $5.0 billion, which is $0.5 million above estimate.

October corporate tax revenue of $183.4 million was $17.4 million above estimate. Year-to-date corporate tax collections total $1.5 billion, which is $214.6 million, or 16.1%, above estimate.

In addition to the General Fund collections, the Motor License Fund received $217.6 million for the month, $0.7 million below estimate. Fiscal year-to-date collections for the fund – which includes gas and diesel taxes as well as other license, fine, and fee revenues – total $951.1 million, which is $8.9 million, or 0.9%, above estimate.


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Undated Ballots Not to Be Counted, Says Pa. Supreme Court

On Nov. 1, Pennsylvania’s highest court ordered counties to refrain from counting undated or incorrectly dated mail-in ballots and absentee ballots. The unanimous decision of the Pennsylvania Supreme Court in Ball v. Chapman also directs county election officials to segregate and preserve those ballots.

The justices split 3-3, however, on whether making the envelope dates mandatory under state law would violate provisions of the U.S. Civil Rights Act of 1964, which states that immaterial errors or omissions should not be used to prevent voting. Acting Secretary of State Leigh Chapman said after the decision that, at this point, voters who have asked for a mail-in ballot should plan on hand-delivering them to ensure that they arrive on time.

Pennsylvania counties have reported receiving more than 850,000 completed mail-in ballots from the roughly 1.4 million that voters have requested them. About 70% of requests have come from Democrats and about 20% from Republicans.


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Pa. Unemployment Low, Staffing Still an Issue

An Independent Fiscal Office (IFO) brief examines the factors behind the lowest Pennsylvania unemployment rate since data were first published in 1976. This brief updates an original release in July 2022 (updated August 2022) to include data from more recent months and new demographics data from the IFO’s Demographic Outlook (published October 2022).

For the past year, IFO notes, many employers have noted ongoing challenges hiring and retaining staff due to labor market conditions that remain very tight. For Pennsylvania, the latest data (September 2022) show an unemployment rate of 4.1% and 263,560 unemployed residents seeking work. The unemployment rate is now at its lowest on record (first published in 1976).

IFO’s updated brief also displays recent and projected demographic trends that suggest the state labor market will remain extraordinarily tight through 2025.


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