Bill Simplifies Tax Reporting for Estates and Revocable Trusts
State Rep. Keith Greiner, CPA (R-Lancaster), introduced legislation that would give the executor of an estate and the trustee of a qualified revocable trust the option to treat the trust as part of the estate for all taxable years after a decedent’s death, rather than as two separate entities. Greiner, a PICPA member, worked with the PICPA on this legislation.
Currently, the state Tax Reform Code requires a decedent’s estate and revocable trust to file a separate Form PA-41 to report income earned by each during the year. Federal law allows the estate of a decedent with a revocable trust to elect to file a single annual income tax return that reports income earned by both the estate and the trust on federal Form 1041.
House Bill 706 is pending before the House Finance Committee.
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PICPA Prepares Issue Brief on Combined Reporting
As part of his 2019-2020 fiscal year budget, Gov. Tom Wolf proposed mandatory unitary combined reporting for the corporate net income (CNI) tax. The change would be effective for tax years beginning in 2020, and would coincide with annual decreases in the tax rate from its current 9.99 percent to 5.99 percent in 2024 and thereafter.
In response to the governor’s proposal, the PICPA Committee on State Taxation prepared an issue brief on the topic. Like consolidated financial statements or federal income tax reporting, combined reporting requires members of a commonly controlled group to participate in one return if a unitary relationship exists. Combined reporting is mandatory in 28 of 46 state-level jurisdictions with an income tax. The issue brief is intended to be informational only, and it does not espouse a position for or against such a change.
The issue of combined reporting in Pennsylvania surfaced as a legislative matter in 2004, when then-Gov. Ed Rendell appointed a business tax reform commission to study the state’s economic competitiveness. Since then, combined reporting has been frequently reintroduced and debated.
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House and Senate Budget Hearings Conclude
The state House and Senate appropriations committees convened their final week of budget hearings. State lawmakers have spent much of the past three weeks reviewing and studying Gov. Wolf’s $34.1 billion spending plan for the fiscal year that begins July 1, 2019.
On Monday and Tuesday, the House Appropriations Committee heard from the Department of Education, the Department of Environmental Protection, the Department of Agriculture, and the state’s public pension systems. On Wednesday, the last day of hearings for the House Appropriations Committee, lawmakers heard from the state budget secretary, the Department of Military and Veterans Affairs, and the Department of Aging.
On Monday, Tuesday, and Wednesday, the Senate Appropriations Committee heard from the Department of Drug and Alcohol, Life Sciences Greenhouses/Life Sciences PA, the Department of Conservation and Natural Resources, the Department of Education, the Department of Aging, the Department of Military and Veterans Affairs, the Department of Agriculture, and Ben Franklin Technology Partners. Thursday was the committee’s last day of hearings, which featured the Pennsylvania Gaming Control Board, the Department of Community and Economic Development, and the state budget secretary.
Hearings wrapped up on a bleak note: Stan Saylor (R-York), House Appropriations Committee majority chair, said more budget details would be needed if the Pennsylvania budget is to get done on time this year. Some House lawmakers were left with unanswered questions about many of Wolf’s proposals, which prompted Saylor to urge Budget Secretary Jen Swails and the Wolf administration to produce more details.
“One of the most frequent answers the committee heard was ‘We’ll get back to you’ or ‘We are still working on this proposal.’ There were even several times that the committee got conflicting answers from various secretaries on aspects of the governor’s budget proposal. Governing is about more than putting a couple proposals on a piece of paper in order to check a political box with those who supported us. Sadly, I think that is partly what we have seen with this proposal,” Saylor said.
The governor’s proposal is a starting point, and now state lawmakers must work with the administration to craft a budget document that meets the commonwealth’s needs in a fiscally responsible manner.
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DOR Announces Transformation of Business Tax Bureaus
The Pennsylvania Department of Revenue recently announced a transformation strategy designed to realign staff in the department’s business tax bureaus. The goal is to better align staff around department functions and help deliver improved customer service, key components in DOR’s strategic plan.
As part of the plan, the Bureau of Business Trust Fund Taxes (BTFT) and the Bureau of Corporation Taxes (BCT) will become three bureaus: the Bureau of Business Tax Returns Processing, the Bureau of Business Taxpayer Accounting, and the Bureau of Taxation Support. The Tax Registration Office (TRO) will be rebranded as the Bureau of Taxpayer Management.
The transformation will take place through most of 2019, with the new bureaus scheduled to officially launch in summer 2019. Below are brief descriptions of the bureaus:
Bureau of Business Tax Returns Processing – This bureau aligns the core process of returns processing, and will be organized to efficiently process returns that suspend and require a person to review the returns. Many types of errors (math and data capture errors) are common across all tax types, while other types require expertise in a specific tax type and form.
Bureau of Business Taxpayer Accounting – This bureau aligns the core process of taxpayer accounting, and will be organized to efficiently and accurately apply payments to taxpayer accounts, correct misapplied payments posted to the system, apply and track taxpayer credits, process refund requests, and manage taxpayer accounts.
Bureau of Taxation Support – This bureau is designed to provide information and support to senior management of the business tax organizations. It will also manage special projects (i.e., tax code changes, restricted credit calculations, etc.) and monitor performance across related business processes.
Bureau of Taxpayer Management – This bureau will continue to perform the functions of the current Taxpayer Registration Office, including registering business taxpayers across all tax types and maintaining the taxpayers’ accounts over the lifetime of their businesses. The Taxpayer Registration Office will continue to streamline current processes so resources can be reallocated, and will begin to take on additional duties that fall within the taxpayer management purview.
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State Revenue Collections Slower in February
Pennsylvania collected $2 billion in General Fund revenue in February, which was $2.5 million, or 0.1 percent, less than anticipated. Fiscal year-to-date General Fund collections total $20.2 billion, which is $287.4 million, or 1.4 percent, above estimate. According to the Independent Fiscal Office Monthly Trends Report, February’s revenues reflect a decrease of $1.54 billion (-43.0 percent) compared with the same month in the prior year.
Sales tax receipts totaled $760.3 million for February, $11.2 million above estimate. Year-to-date sales tax collections total $7.4 billion, which is $211.6 million, or 2.9 percent, more than anticipated.
Personal income tax (PIT) revenue in February was $888.7 million, $18.3 million below estimate. This brings year-to-date PIT collections to $8.3 billion, which is $368 million, or 4.3 percent, below estimate.
February corporation tax revenue of $116.4 million was $38.5 million above estimate. Year-to-date corporation tax collections total $1.9 billion, which is $339.9 million, or 21.6 percent, above estimate.
Nontax revenue totaled $30.7 million for the month, $20.7 million below estimate, bringing the year-to-date total to $405 million, which is $136.8 million, or 51 percent, above estimate.
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Treasurer Torsella Authorizes $650 Million Short-Term Loan
Pennsylvania Treasurer Joe Torsella announced the authorization of an $800 million line of credit from Treasury’s short-term investment pool (STIP) to the General Fund, expiring within 23 days, to ensure adequate liquidity in the General Fund and the ability of the commonwealth to meet its expenditure needs. A draw of $650 million on the line of credit was made last Thursday.
“This line of credit represents a normal and short-term cash flow need related to typical seasonal patterns in revenue collection, and is the only short-term borrowing expected in this fiscal year,” Torsella said.
The line of credit is set to a variable interest rate equal to the Securities Industry Financial Markets Association (SIFMA) seven-day municipal swap rate. The current SIFMA municipal swap rate is 1.75 percent.
The General Fund balance started Fiscal Year 2018-2019 at $3.14 billion. Current projections show that the balance will drop to $2.18 billion to close out the current fiscal year (a reduction of more than $960 million). Projections may change, but if realized this would be a 10-year historical low in the ending balance of the General Fund.
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Candidates Selected for 12th Congressional District Race
Candidates for the special election in Pennsylvania’s 12th Congressional District are set. The winner of the special election will fill the remainder of Rep. Tom Marino’s (R) term. Marino resigned for health reasons shortly after his reelection last November.
State Rep. Fred Keller (R) will face Marc Friedenberg (D) in a May 21 contest. Keller, 53, beat several other candidates for the Republican nomination. He was first elected to the state House in 2011. Friedenberg, 35, is a lawyer and Penn State information technology instructor who lost November's election to Marino.
The northern Pennsylvania district covers all or parts of 15 counties.
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DiGirolamo Announces Bid for Bucks County Commissioner
State Rep. Gene DiGirolamo (R-Bucks) announced that he is running for Bucks County Commissioner. DiGirolamo, who is in his 13th term in the state House, is chair of the House Human Services Committee.
During the past 24 years in Harrisburg, DiGirolamo has been an advocate for drug and alcohol rehabilitation and funding, individuals with special needs, and the improvement of student athletics statewide.
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REAL ID Now Available to Pennsylvania Residents
The Pennsylvania Department of Transportation (PennDOT) announced that optional REAL ID-compliant driver’s licenses and photo ID cards are now available for Pennsylvania residents who want one.
A federally accepted form of identification (such as REAL ID, a valid passport, or military ID) must be used as identification to board a commercial flight or visit a secure federal building that requires ID at the door on and after Oct. 1, 2020. There is no requirement that any resident obtain a REAL ID, and PennDOT will continue to offer standard-issue driver’s licenses and photo IDs.
Federal REAL ID regulations require PennDOT to verify a customer’s identity, Social Security number, Pennsylvania residency, and name changes (if applicable), even if a customer already has a Pennsylvania driver’s license or ID card. Information about document requirements, including a printable document checklist, can be found on the Document Check page of the PennDOT Driver and Vehicle Services website.
More information about REAL ID in Pennsylvania, including frequently asked questions, can be found at www.penndot.gov/REALID.
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