Q&A with Pennsylvania Department of Revenue

2017

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

Would the DOR consider posting a comprehensive, searchable database of redacted Office of Chief Counsel rulings for tax issues on the Department's website?
How can a LLC or S Corp. that was only subject to CS/FFT for tax years beginning prior to 1/1/16 be removed from the tax rolls in instances where the entity did not complete RCT101, SectionE?
How does the Board of Appeals determine whether to abate a penalty under 72 Pa.C.S. § 9706?
Scenario: A non-U.S. corporation makes sales into Pennsylvania

Corporate Tax

How should a corporate taxpayer apply the IPA/COP method to source goodwill from the sale of a business?
How should a corporate taxpayer apply the IPA/COP method to source receipts/gain from the sale of a patent, trademark or similar intangible for CNIT purposes?
Should a corporate taxpayer apply the income producing activity/cost of performance (IPA/COP) method to source royalties or other receipts from the licensing of marketing and non-marketing intangibles for CNIT purposes?
May a corporate taxpayer rely upon the MTC’s Section 17 regulation for purposes of sourcing receipts from services until the DOR issues market-based sourcing regulations for CNIT purposes?
How should a taxpayer handle a notice of assessment for a year in which the appeal deadline has passed regarding the former Capital Stock/Foreign Franchise Tax (CSFT)?
Scenario: The REIT may have PA modifications to federal taxable income

Personal Income Tax

Recently, the DOR indicated that services like CCH, RIA, LEXIS, and Bloomberg constitute taxable sales of software and/or taxable sales of digital products. What is the basis for the DOR’s change of position?
In 2016, a question was posed asking DOR’s position regarding the PIT treatment of an IRC sec. 351 transaction with boot. The Department never provided an answer. What is the DOR’s position on this issue?
For PIT purposes, are federal income tax principles “acceptable by standards of the accounting profession” ?
What are the PA PIT tax consequences of a conversion of a PA S Corporation to a limited partnership, and would the transaction be subject to tax?
How does PA apply the income producing activity/cost of performance method for PIT purposes? For example, does the DOR’s application of the IPA/COP method in Information Notice Corporation Taxes 2014-01 also apply for PIT purposes?
PA-40 Schedule OC credits seem to be a continual issue that causes refunds to be delayed and/or billings to be issued. Is there not a better way than to send credit award letters and allocation schedules to the Bureau of Corporation Accounting Division?
Are the Schedule C reviews being handled by RSI (Revenue Solutions Inc.) and if they are, couldn’t improved analytics be utilized to more accurately reflect Schedule C’s that may actually need to be reviewed?
In the event the DOR does not accept the Schedule C as filed, and denies some expenses resulting in a change in taxable income, will that information be shared with the IRS and local taxing authorities?
What procedure is next after the second Schedule C Review notice? Will it be another request for information, a billing notice, or something else?
Is there a threshold for the number of Schedule C expenses that can be reviewed?
If a Schedule C review is conducted and accepted for the 2016 year, can we expect that subsequent years will not be subject to review? Why would the DOR continually ask for data that has already been substantiated?
How will DOR procedures change in the future to ensure that taxpayer responses are processed in a timely manner?

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Q&A with Pennsylvania Department of Revenue

2017

Administrative

Would the DOR consider posting a comprehensive, searchable database of redacted Office of Chief Counsel rulings for tax issues on the Department's website?

How can a LLC or S Corp. that was only subject to CS/FFT for tax years beginning prior to 1/1/16 be removed from the tax rolls in instances where the entity did not complete RCT101, SectionE?

How does the Board of Appeals determine whether to abate a penalty under 72 Pa.C.S. § 9706?

Scenario: A non-U.S. corporation makes sales into Pennsylvania

Corporate Tax

How should a corporate taxpayer apply the IPA/COP method to source goodwill from the sale of a business?

How should a corporate taxpayer apply the IPA/COP method to source receipts/gain from the sale of a patent, trademark or similar intangible for CNIT purposes?

Should a corporate taxpayer apply the income producing activity/cost of performance (IPA/COP) method to source royalties or other receipts from the licensing of marketing and non-marketing intangibles for CNIT purposes?

May a corporate taxpayer rely upon the MTC’s Section 17 regulation for purposes of sourcing receipts from services until the DOR issues market-based sourcing regulations for CNIT purposes?

How should a taxpayer handle a notice of assessment for a year in which the appeal deadline has passed regarding the former Capital Stock/Foreign Franchise Tax (CSFT)?

Scenario: The REIT may have PA modifications to federal taxable income

Personal Income Tax

Recently, the DOR indicated that services like CCH, RIA, LEXIS, and Bloomberg constitute taxable sales of software and/or taxable sales of digital products. What is the basis for the DOR’s change of position?

In 2016, a question was posed asking DOR’s position regarding the PIT treatment of an IRC sec. 351 transaction with boot. The Department never provided an answer. What is the DOR’s position on this issue?

For PIT purposes, are federal income tax principles “acceptable by standards of the accounting profession” ?

What are the PA PIT tax consequences of a conversion of a PA S Corporation to a limited partnership, and would the transaction be subject to tax?

How does PA apply the income producing activity/cost of performance method for PIT purposes? For example, does the DOR’s application of the IPA/COP method in Information Notice Corporation Taxes 2014-01 also apply for PIT purposes?

PA-40 Schedule OC credits seem to be a continual issue that causes refunds to be delayed and/or billings to be issued. Is there not a better way than to send credit award letters and allocation schedules to the Bureau of Corporation Accounting Division?

Are the Schedule C reviews being handled by RSI (Revenue Solutions Inc.) and if they are, couldn’t improved analytics be utilized to more accurately reflect Schedule C’s that may actually need to be reviewed?

In the event the DOR does not accept the Schedule C as filed, and denies some expenses resulting in a change in taxable income, will that information be shared with the IRS and local taxing authorities?

What procedure is next after the second Schedule C Review notice? Will it be another request for information, a billing notice, or something else?

Is there a threshold for the number of Schedule C expenses that can be reviewed?

If a Schedule C review is conducted and accepted for the 2016 year, can we expect that subsequent years will not be subject to review? Why would the DOR continually ask for data that has already been substantiated?

How will DOR procedures change in the future to ensure that taxpayer responses are processed in a timely manner?