Legislative Update - Week Ending Jan. 27, 2023

Legislative Update - Week Ending Jan. 27, 2023

Jan 27, 2023


House Recessed Until Feb. 27, Speaker Rozzi on Listening Tour

House Speaker Mark Rozzi (D-Berks) this week gaveled the chamber into recess until Feb. 27, effectively ending any chance constitutional amendments will appear on the May primary ballot.

Speaker Rozzi is currently on a statewide listening tour to meet with the public and good government groups to address partisan gridlock. The first two sessions were held in Pittsburgh and Philadelphia. Other event dates, including Northeastern Pennsylvania, will be announced soon.

Democrats briefly held a 102 seat majority after the November election, but control of the House was temporarily thwarted by a series of events, including the death of an incumbent and two resignations because seat holders had been elected to higher offices. This led to disagreement on who controlled the chamber: Rozzi was a compromise candidate supported by Republicans and Democrats.

Since Rozzi was elected speaker on Jan. 3, the Pennsylvania House has been in a state of gridlock as Democrat and Republican leaders have been unable to come to an agreement on the session’s operating rules. Without operating rules, legislators cannot proceed with the business of considering legislation.

While the House currently has no formal committees and legislation has not been officially introduced, House Republican leaders this week announced their caucus’s committee chairs for the 2022-2023 legislative session.


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Shapiro Creates New Office to Streamline Business Development

Gov. Josh Shapiro signed an executive order establishing the Pennsylvania Office of Transformation and Opportunity within the Governor’s Office and the Economic Development Strategy Group.

The Office of Transformation and Opportunity will help devise an overall growth strategy and implement economic development projects. The office will coordinate with Pennsylvania’s various agencies, expediting permit reviews and ensuring speedy business reviews and approvals of key incentive programs. Shapiro named Ben Kirshner to the role of chief transformation and opportunity officer.

The Economic Development Strategy Group will directly advise the governor on economic development projects and processes to attract and retain employers, recruit innovation leaders, and create good-paying jobs in Pennsylvania, particularly in underserved communities.

Shapiro also recently announced the nomination of Acting Attorney General Michelle Henry to serve as attorney general. Henry had served with Shapiro when he was attorney general as his first deputy attorney general. She was a prosecutor in the Bucks County district attorney's office for more than 20 years.


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Revenue Department myPATH, PA-100 Guidance

The Pennsylvania Department of Revenue (DOR) has provided the PICPA with guidance related to myPATH and its online business registration process.

In Common myPATH Withholding Concerns, the DOR provides guidance to help alleviate concerns that it has been receiving from practitioners trying to take care of their withholding requirements. According to the DOR, there have been several issues with filing a PA W-3, REV-1667, and W2/1099 uploads.

The online PA-100 has been replaced by the Pennsylvania Online Business Tax Registration, which is available via myPATH. This feature is designed for businesses that need to register for all business tax accounts and licenses, as well as motor fuels related accounts, that are administered by the DOR.


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Combined Reporting, Corp. Tax Rate Cut Bill Introduced

Legislation to accelerate the currently scheduled cuts in Pennsylvania’s corporate net income tax (CNIT) was introduced in the state Senate. The legislation also proposes closing the “Delaware loophole.”

Senate Bill 161, introduced by Sen. Christine Tartaglione (D-Philadelphia), would lower the corporate income tax rate to 6.99% in 2026 and thereafter. Under Act 53 of 2022, the CNIT dropped from 9.99% to 8.99% effective Jan. 1, 2023, then will drop 0.5% per year through 2031.

In addition, Senate Bill 161 would require corporations filing in the state to report combined unitary business income beginning in 2023. The bill would also require water's-edge apportionment for members of a unitary business with two or more corporations.

See PICPA’s Issue Brief on Combined Reporting.


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Fiscal Office’s Five-Year Economic, Demographic Outlook

The Independent Fiscal Office (IFO) this week appeared before Republican members of the state House Appropriations Committee to discuss its economic and budget outlook for fiscal years 2022-2023 through 2027-2028. IFO is required to provide an assessment of the state’s current fiscal condition and a projection of what the fiscal condition will be over the next five years.

Matthew Knittel, IFO director, told lawmakers that the state is emerging from pandemic-related challenges, but Pennsylvania’s changing demographics, particularly the age of the workforce, presents a new hurdle. Knittle noted that shifts in the demography are affecting Pennsylvania’s spending and available workforce. Read Knittel’s “The Demographic Squeeze Has Arrived in Pennsylvania” in PICPA’s CPA Now blog.

From fiscal years 2023-2024 to 2027-2028, IFO projects General Fund revenues will increase at an average rate of 2.6% per annum, or 3.1% excluding the CNIT rate cut and new/expanded tax credits enacted with the fiscal year 2022-2023 state budget.

Fiscal year 2022-2023 General Fund expenditures are projected to increase by 8.7%, largely due to increased levels of education spending and the assumed expiration of federal COVID-relief funds for state Medicaid programs by December 2022. For fiscal years 2023-2024 to 2027-2028, expenditures will expand at an average rate of 3.3% per annum. When combined with the projected available revenue, the operating deficit is expected to be roughly $3.0 billion in fiscal year 2025-2026 and future years.

Knittel told legislators that Pennsylvania has a shortage of about 120,000 workers due to demographic shifts and COVID-related factors. The population is greying, with a sizable increase in the age 80-plus group. Deaths are exceeding the number of births in Pennsylvania, offsetting net movement into the state. 


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House Policy Committees Up and Running

The state House Democratic and Republican policy committees did not let the stalemate in the House stop them from jumping into the new session.

The House Democratic Policy Committee, chaired by Rep. Ryan Bizzarro (D-Erie), traveled to Pittsburgh for two hearings. The first was on the health care staffing crisis. The following day, its Subcommittee on Labor, Energy, and Development convened a hearing to discuss the effects of worker misclassification. Committee members will hear from the Pennsylvania attorney general’s office and union leaders to gather feedback on what can be done in Harrisburg to address the issue.

The House Republican Policy Committee, chaired by Rep. Joshua Kail (R-Beaver/Washington) set its priorities and vision for the new legislative session and announced 13 deputy chairs for the 2023-2024 legislative session.

These two committees conduct hearings and roundtable discussions about important statewide and regional issues that matter most to Pennsylvania citizens; gather testimony and information from key stakeholders; and work within their respective caucus to develop policies to address those issues.


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State Senate Special Election Next Week

Political attention has been focused on the three upcoming special elections for state House seats that will determine control of that chamber, but next week all eyes will be on a contest to see who will represent citizens in the state Senate’s 27th district.

The special election, to be held Tuesday, Jan. 31, pits current Republican state Rep. Lynda Schlegel Culver against Democrat Patricia Lawton to fill the seat vacated by former Sen. John Gordner (R-Columbia), who resigned last November to become counsel to Senate President Pro Tempore Kim Ward. Republicans currently hold a 27-22 majority in the 50-seat chamber.

Culver is serving her seventh term representing the 108th district, having first been elected in 2010. She earned a Bachelor of Arts degree in political science with a concentration in public administration from Bloomsburg University.

Lawton is a speech pathologist from Columbia County. She is working on her dissertation for a PhD in administration and leadership studies through Indiana University of Pennsylvania.

The district encompasses parts of Luzerne County and all of Columbia, Montour, Northumberland, and Snyder counties. With Republicans holding a nearly 2-to-1 voter registration edge, Culver is expected to win.


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