Q&A with Pennsylvania Department of Revenue

2016

The PICPA State and Federal Taxation committees meet with the Pennsylvania Department of Revenue annually to discuss issues affecting both practitioners and their clients. Topics covered include personal income tax and corporate tax, sales and use tax, and administrative issues.

Administrative

With the due date of the federal returns changing for many corporations to Oct. 15, does the Department intend to change the due date of the R&D credit application to Oct. 15?
Scenario: A Pennsylvania Limited Partnership (LP) has sold its last piece of real estate and has decided not to continue this business entity
Has the Department considered including a longer look back period on the e-SOA for sales and employer taxes?
Is the department considering making “What’s my Revenue ID?” a function on its website?

Personal Income Tax

Scenario: Reporting income earned outside of the U.S. on a joint return
Scenario: Unreimbursed expense claims
Scenario: Claiming resident credits on trusts
Is a grantor trust that owns an interest in an S-Corporation able to claim a resident credit on income taxes paid by the S-Corporation to states where the S-Corporation is taxed as a C-Corporation?
In an IRC sec. 351 transaction in which one of the contributing shareholders receives boot, would the shareholder recognize gain to the extent of the boot received (federal rules), or would all gain would be recognized?
What is the authority to not allow the foreign tax credit on wages for foreign jurisdictions?

Sales and Use Tax

What is the time span for the Department to complete an audit after receipt of information?
Scenario: An IT provider bills a client via a flat, lump-sum, recurring monthly charge, of which the largest portion relates to the value of the services provided by the vendor’s employees
Scenario: Claiming a refund for the sales tax paid on the purchase of wine which is then resold

Corporate Tax

Scenario: Applying the add-back provision
As a follow-up to Corporation Tax Information Notice 2016-1, does the Department of Revenue plan to provide additional guidance related to part III?
When a personal income tax return is audited, (unreimbursed business expenses), does the Department respond to the taxpayer/practitioner indicating that the information has been received?
Scenario: A federal bonus depreciation adjustment was partially disallowed for a prior year during an IRS audit of a corporation
Scenario: A return is filed prior to the due date (or prior to the extended due date) and a mistake is discovered
If a corporation having unrecovered bonus depreciation for CNIT purposes merges or liquidates into a bank subject to Bank Shares Tax, what happens to the corporation’s remaining unrecovered bonus balance?
Scenario: Transaction involving a consumer or recipient who is different than the paying customer
Have there been any internal discussions surrounding the proposed Section 385 regulations and how they may apply to a separate filing jurisdiction such as Pennsylvania? If the regulations are passed, would the Department provide formal guidance?
Scenario: Apportioning a taxable loss to Pa.
Scenario: Interest received from a partnership in a corporation’s sales factor
In determining a corporation’s sales factor, is it acceptable to use PJM’s ISO load factor as a means of sourcing receipts to Pa. from spot sales of electricity on the PJM network? The BF&R granted PSEG Energy Resources & Trade LLC relief on the issue.
Scenario: Corporation recently learned that it was subject to a CNI tax in 2013 and 2014

Specialty Taxes

Why is filed inheritance tax return response from the Department taking so long (4 - 6 months) now? In the past written response was received in about 30 days.
Can insolvent insurance companies participate in amnesty, similar to bankrupt entities?

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Q&A with Pennsylvania Department of Revenue

2016

Administrative

With the due date of the federal returns changing for many corporations to Oct. 15, does the Department intend to change the due date of the R&D credit application to Oct. 15?

Scenario: A Pennsylvania Limited Partnership (LP) has sold its last piece of real estate and has decided not to continue this business entity

Has the Department considered including a longer look back period on the e-SOA for sales and employer taxes?

Is the department considering making “What’s my Revenue ID?” a function on its website?

Personal Income Tax

Scenario: Reporting income earned outside of the U.S. on a joint return

Scenario: Unreimbursed expense claims

Scenario: Claiming resident credits on trusts

Is a grantor trust that owns an interest in an S-Corporation able to claim a resident credit on income taxes paid by the S-Corporation to states where the S-Corporation is taxed as a C-Corporation?

In an IRC sec. 351 transaction in which one of the contributing shareholders receives boot, would the shareholder recognize gain to the extent of the boot received (federal rules), or would all gain would be recognized?

What is the authority to not allow the foreign tax credit on wages for foreign jurisdictions?

Sales and Use Tax

What is the time span for the Department to complete an audit after receipt of information?

Scenario: An IT provider bills a client via a flat, lump-sum, recurring monthly charge, of which the largest portion relates to the value of the services provided by the vendor’s employees

Scenario: Claiming a refund for the sales tax paid on the purchase of wine which is then resold

Corporate Tax

Scenario: Applying the add-back provision

As a follow-up to Corporation Tax Information Notice 2016-1, does the Department of Revenue plan to provide additional guidance related to part III?

When a personal income tax return is audited, (unreimbursed business expenses), does the Department respond to the taxpayer/practitioner indicating that the information has been received?

Scenario: A federal bonus depreciation adjustment was partially disallowed for a prior year during an IRS audit of a corporation

Scenario: A return is filed prior to the due date (or prior to the extended due date) and a mistake is discovered

If a corporation having unrecovered bonus depreciation for CNIT purposes merges or liquidates into a bank subject to Bank Shares Tax, what happens to the corporation’s remaining unrecovered bonus balance?

Scenario: Transaction involving a consumer or recipient who is different than the paying customer

Have there been any internal discussions surrounding the proposed Section 385 regulations and how they may apply to a separate filing jurisdiction such as Pennsylvania? If the regulations are passed, would the Department provide formal guidance?

Scenario: Apportioning a taxable loss to Pa.

Scenario: Interest received from a partnership in a corporation’s sales factor

In determining a corporation’s sales factor, is it acceptable to use PJM’s ISO load factor as a means of sourcing receipts to Pa. from spot sales of electricity on the PJM network? The BF&R granted PSEG Energy Resources & Trade LLC relief on the issue.

Scenario: Corporation recently learned that it was subject to a CNI tax in 2013 and 2014

Specialty Taxes

Why is filed inheritance tax return response from the Department taking so long (4 - 6 months) now? In the past written response was received in about 30 days.

Can insolvent insurance companies participate in amnesty, similar to bankrupt entities?