Legislative Update

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  • Week Ending Sept. 28, 2018

    by PICPA Government Relations | Sep 28, 2018

    Tax Foundation Releases 2019 State Business Tax Climate Index 

    The Tax Foundation released its 2019 State Business Tax Climate Index. The index enables business leaders, government policymakers, and taxpayers to gauge how their states’ tax systems compare. While there are many ways to show how much is collected in taxes by state governments, this index is designed to show how well states structure their tax systems and to provide a road map for improvement.

    Pennsylvania’s overall rank is in the middle of the pack at 34. Its best rankings come in the areas of individual income tax (18) and sales tax (21). Areas where the state could use improvement are property tax (34), corporate tax (43), and unemployment insurance tax (46).

    The top states in this year’s index are Wyoming, Alaska, South Dakota, Florida, and Montana.

    The bottom five states are Iowa, Arkansas, Connecticut, New York, California, and New Jersey.

    The Tax Foundation is an independent tax policy research organization. Since 1937, its research, analysis, and engaged experts have informed smarter tax policy at the federal, state, and local levels.


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    State Agency Issues Comments on Overtime Proposal

    The Independent Regulatory Review Agency (IRRC) recently published comments in response to a proposed regulation by the state Department of Labor and Industry that updates the executive, administrative, and professional exemptions from the minimum wage and overtime requirements of the Minimum Wage Act of 1968. The proposed rulemaking was published June 23, 2018, in the Pennsylvania Bulletin.

    IRRC is the state agency designed to provide oversight and review of all proposed and existing rules and regulations. It also acts as a clearinghouse for complaints, comments, and other input regarding existing, proposed, final-form, and final-omitted regulations.

    Regulatory review in Pennsylvania is a two-stage process. The submission of comments on regulation concludes IRRC’s formal role at the proposed stage. The promulgating agency is then required to respond to all comments received on the proposed regulation when submitting the final regulation with or without changes to IRRC and the legislative standing committees.


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    Joint Committee Hearing on Act 47 Exit Strategy

    The House Finance, Local Government, and Urban Affairs committees, chaired respectively by Reps. Bernie O’Neill (R-Bucks), Kate Harper (R-Montgomery), and Mark Keller (R-Perry/Cumberland), held a joint public hearing on legislation that would allow Harrisburg to exit Act 47 status and retain taxes implemented by the act.

    House Bill 2557, sponsored by Rep. Greg Rothman (R-Cumberland), updates the way municipalities that have been under state receivership exit Act 47. The bill states that there will be a prohibition on imposing a tax or fee on the earned income of nonresidents.

    In October 2011, the City of Harrisburg filed for Chapter 9 bankruptcy. At the time, Harrisburg compiled more than $600 million in debt. Shortly thereafter, Harrisburg entered receivership, and the Harrisburg Strong Plan was confirmed by Commonwealth Court in September 2013. The city has since experienced operating budget surpluses, two fully funded pensions systems, and a third pension system that is over 80 percent funded.

    Testimony was presented by Rothman, as well as the Local Government Commission; Eric Papenfuse, mayor of Harrisburg; David Black, president and CEO of the Harrisburg Regional Chamber and Capital Region Economic Development Corporation; Brad Jones, president and CEO of Harristown Enterprises Inc. and an HDID member; and Marita J. Kelley, recovery coordinator for the City of Harrisburg, Pennsylvania Department of Economic Development.


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    Bill to Reestablish Uniformity in Workplace Policy Approved by Committee

    Legislation by Rep. Seth Grove (R-York) to reestablish statewide uniformity in workplace policies was approved by the House Labor and Industry Committee.

    House Bill 861 would preempt local governments from passing labor policies that impact private businesses and their employees. Grove argues that current polices often lead to confusion for employers who have businesses across Pennsylvania and are also often in conflict with established state law. Additionally, these local mandates raise the cost of compliance inside the municipality.

    House Bill 861 now goes to the full House for consideration. 


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    House Committee Approves Bill to Protect Taxpayer Dollars

    To ensure taxpayers dollars are protected from high-risk investments, the House Finance Committee approved legislation by Rep. Aaron Kaufer (R-Luzerne).

    House Bill 2511 ensures that the state will remain good stewards of the people’s money while allowing taxpayer funds held by the state Treasury to grow through low-risk investments. Specifically, the legislation extends the authorization of the state treasurer to invest or reinvest money held by the Treasury by two years to Dec. 31, 2021. The current law was set to expire on Dec. 31, 2019.

    The bill now goes to the full House for consideration.


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    Legislation Introduced to Legalize Adult Use of Cannabis

    State Rep. Jake Wheatley (D-Allegheny) introduced comprehensive legislation regarding the recreational use and possession of cannabis among adults 21 or older.

    House Bill 2600 would legalize the possession of cannabis products, such as edibles, and up to six cannabis plants, but not more than three mature plants that are flowering. The bill does not make it legal to use cannabis publicly, nor to drive under its influence. The bill would address the release, expungement, and reinstatement of individuals who have been jailed or have criminal records due to cannabis-related crimes.

    If the measure is passed, it would also impose a tax that could generate an estimated $500 million annually, based on the Pennsylvania auditor general’s report, Wheatley said. There would be exemption to growers who partner with existing state farmers that convert to cannabis.

    The state’s medical marijuana program was signed into law in April 2016.


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    Pension Management and Asset Investment Commission Meets

    The Public Pension Management and Asset Investment Review Commission convened a second informational hearing in Harrisburg to examine the need for improvements in transparency around investment expenses and returns of Pennsylvania’s two statewide pension systems. The hearing focused on an analysis of the pension plans across a variety of areas including asset allocation, fees and costs, performance, and processes.

    The commission heard testimony from Dr. Ludovic Phalippou, assistant professor of finance, University of Oxford. Phalippou conducted an internal analysis of the fees and performance of the private equity funds held by the State Employees' Retirement System (SERS) and Public School Employees’ Retirement System (PSERS). His preliminary results conclude that over the life of the two pension systems more than $12 billion has been spent on fees, much of which has gone unreported to Pennsylvanians. The pension systems have reported $2.2 billion in fees over the past 10 years, but Phalippou estimates $6 billion was actually spent with $3.8 billion in unreported fees.

    The commission was established in 2017 under the broader pension reforms of Act 5 of 2017 to conduct a comprehensive review of PSERS and SERS investment management.

    The next hearing will take place in October, which will identify cost savings opportunities for the pension funds.


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    Congress Examines IRS’s Taxpayer Authentication Process

    The U.S. House Oversight Subcommittee, chaired by Rep. Lynn Jenkins (R-Kan.), held a hearing this week titled the IRS Taxpayer Authentication: Strengthening Security While Ensuring Access.

    The hearing focused on how the IRS verifies the identity of taxpayers through a process called “authentication” before allowing them to use the IRS’s online tools and applications. Authentication is an important protection of taxpayer information because it provides the IRS with a reasonable assurance that it is interacting with the correct taxpayer.

    Unfortunately, the IRS’s online tools and applications have experienced a number of breaches and cyberattacks throughout the years, leading to taxpayers having their identities compromised and hundreds of millions of dollars in fraudulent tax refunds being issued. The breaches and cyberattacks have also raised concerns about how well the IRS authenticates the identity of taxpayers online.


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Contact Government Relations

Peter Calcara | 717-232-1821
Alexandra Fabian | 717-232-1821
Annette Knapp | 717-232-1821

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2018 Q&A with the DOR

The PICPA met with the Pennsylvania Department of Revenue on Oct. 24, 2018. View the full transcript or the recording.

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