Legislative Update

Get the latest news on Pennsylvania government and the issues affecting the CPA profession through Legislative Update.

  • Week Ending April 13, 2018

    by PICPA Government Relations | Apr 13, 2018


    PICPA Testifies Before State Tax Reform Panel 

    The PICPA appeared before the House Finance Subcommittee on Tax Modernization and Reform on April 9, 2018, to provide insight on how Pennsylvania’s corporate net income tax compares in rate and administration to surrounding states and the nation. Drew VandenBrul, CPA, a member of the PICPA Committee on State Taxation and managing director in Grant Thornton’s state and local tax practice in Philadelphia, represented the PICPA.

    VandenBrul highlighted the importance of the Guiding Principles of Good Tax Policy, particularly the principle of certainty. “To be certain, the tax base, apportionment, and tax rate must be determinable. The Principle of Certainty is tied to the use of estimated payments and safe harbors that taxpayers use to prepay their tax liabilities,” he told members of the subcommittee.

    Working from a chart comparing key corporate net income tax aspects of Pennsylvania and its immediate surrounding states, VandenBrul noted the similarities and differences in how the tax is reported (filing methodology), modifications to federal taxable income (bonus depreciation and intercompany expense disallowance), apportionment (factor weighting and sourcing of service receipts), and net operating loss carryovers and limitations.

    Another important aspect when discussing corporate taxes is how a state’s tax laws conform with the U.S. Internal Revenue Code (IRC), VandenBrul told lawmakers. Pennsylvania is what would be considered a rolling conformity state.

    “As a state that conforms to the current IRC, Pennsylvania will be affected by the corporate net income tax provisions of the federal Tax Cuts and Jobs Act enacted in December 2017,” said VandenBrul. “This federal tax reform legislation adds complexity and uncertainty to tax codes at both the federal and state levels. We encourage the General Assembly to consider the need for appropriate legislative action to provide taxpayers with as much certainty as possible so that they may properly file tax returns and report the financial statement impacts.”

    VandenBrul concluded by discussing a few factors unique to Pennsylvania. These factors are often highlighted as potentially unfriendly to business development and growth in Pennsylvania. In particular, the net operating loss limitations and the treatment of federal bonus depreciation have created significant uncertainty for Pennsylvania taxpayers. He noted that businesses cannot wait until a full budget agreement is in place to address the depreciation issue.

    "Pennsylvania has taken numerous steps to improve its corporate net income tax structure, including elimination of the capital stock/franchise tax and enactment of single sales factor apportionment. These have moved Pennsylvania more in line with other states, including its neighbors,” he said. “Addressing tax rate, net operating losses, and bonus depreciation represent opportunities to further improve the tax structure and provide certainty to taxpayers regarding administration of the tax.”

     

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    Tax Code Measures Approved by State House

    State House lawmakers this week gave approval to a series of proposals amending the state Tax Reform Code. The measures are designed to streamline the code and benefit small businesses.

    House Bill 331, sponsored by Rep. Steve Bloom (R-Cumberland), makes changes to the state personal income tax for small businesses, aligning Pennsylvania with federal rules for “like-kind” exchanges under the Internal Revenue Code (IRC).

    House Bill 333, sponsored by Rep. Eric Nelson (R-Westmoreland), would allow Pennsylvania businesses to take the full deduction for qualifying equipment under the personal income tax that is permitted by IRC Section 179.

    The House also approved House Bill 994, sponsored by Rep. Seth Grove (R-York). The bill would exclude the sales of telephones, telephone handsets, modems, tablets, and related accessories – including cases, chargers, holsters, clips, hands-free devices, screen protectors, and batteries – from the gross receipts tax.

    All three bills now go to the Senate for consideration.

     

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    Registration Open for PICPA Day on the Hill

    Join your colleagues from across Pennsylvania for the PICPA’s premier legislative event, Day on the Hill. This year it will be held on June 12 in Harrisburg.

    Highlights include a preview of the 2018 Pennsylvania elections and what they could mean for your business and clients, an insider's view on the latest budget and tax proposals from state legislators, valuable interactions with PICPA committee representatives and the PICPA government relations team, and a presentation from the Pennsylvania Department of Revenue. Participants in the event will earn three CPE credits.

    A draft agenda is available here. Register today for both the networking reception, which will take place on June 11, and Day on the Hill the following day.

     

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    School Property Tax Repeal Plan Is Back

    Rep. Jim Cox (R-Berks) has introduced the Property Tax Independence Act. House Bill 76 has several provisions, but among its key points is an increase in the sales tax to 7 percent and an increase in the personal income tax rate to 4.97 percent (from 3.09 percent). In addition to the rate increases, the bill would significantly expand the sales tax base to include many services not currently subject to the tax.

    In addition, the Property Tax Independence Act permits local school boards to enact a local earned income tax or local personal income tax for major projects, such as new school construction. Enactment of either of those local taxes would be subject to a direct taxpayer referendum.

    The bill has been referred to the House Finance Committee.

    The PICPA opposes this legislation.

     

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    Committee Approves First-Time Home Buyers Tax Credit

    The state House Urban Affairs Committee approved a bill that would give first-time home buyers a tax deduction for money saved toward the purchase of a home.

    House Bill 1981, sponsored by Rep. Ryan Bizzarro (D-Erie), would establish the First-Time Home Buyer Savings Account Act, permitting eligible Pennsylvanians to open special saving accounts and take state tax deductions for savings toward expenses such as a down payment and closing costs.

    The bill would apply both to first-time home buyers and those who have not owned or purchased a home within the three years leading up to the purchase. Account holders would be permitted to contribute a total of $50,000 over a 10-year period. Annual contributions would be capped at $5,000 for single taxpayers and $10,000 for those filing a joint return.

    The bill now goes before the full House for a vote.

     

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    Bill Allowing Carryover of Education Credits Passes House

    The state House approved legislation championed by Rep. Harry Readshaw (D-Allegheny) that would permit the carryover of continuing education credits for professionals licensed under the Bureau of Professional and Occupational Affairs (BPOA).

    Under House Bill 1343, professionals required to maintain continuing education credits would be able to accrue excess credits, but the carryover is only valid for one biennial renewal term. The BPOA provides administrative and legal support to 29 professional and occupational licensing boards and commissions, including the licensing of accountants, physicians, engineers, and real estate agents.

    The bill now goes to the Senate for consideration.

     

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    Medicaid Work Requirement Bill Clears House Committee

    As part of an ongoing effort to help contain costs to Pennsylvania’s welfare programs, the state House Health Committee advanced two pieces of legislation to bring further accountability to the system.

    House Bill 1618, sponsored by Rep. Justin Walsh (R-Westmoreland), would require any welfare assistance not used within six months to be forfeited back to the government, and House Bill 2138, sponsored by Rep. Matthew D. Dowling (R-Fayette/Somerset), instructs the state Department of Human Services to craft a waiver seeking authority from the federal government to implement Medicaid work requirements.

    The bills are now before the full House for consideration.

     

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    New Report Looks at State Corporate Tax Rate

    In response to a legislative request, the Independent Fiscal Office (IFO) has published a report on Pennsylvania’s corporate net income tax (CNIT). The report contains an analysis of state CNIT rates, their impact on revenues, and a proposal to reduce to the Pennsylvania CNIT rate.

    The analysis has a narrow and limited scope. It only attempts to provide data and discussion that are responsive to the request, as well as general information that may be pertinent and useful to policymakers as they contemplate changes to the Pennsylvania CNIT rate.

    The study was requested by Reps. Jason Ortitay (R-Allegheny) and Martina White (R-Philadelphia).

     

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    U.S. House Panel Approves Bipartisan IRS Reforms

    The U.S. House Ways and Means Committee approved a package of bipartisan bills aimed at reforming the IRS. The bills, which passed the committee by voice vote, make changes aimed at improving the IRS’s taxpayer services, cybersecurity, enforcement, and appeals.

    The bills make several changes in the area of taxpayer services, including proposals designed to help low-income taxpayers. They would continue the IRS’s “free file” program, which allows low- and middle-income taxpayers to get free tax-preparation software, and would make permanent the Volunteer Income Tax Assistance program, in which the IRS partners with nonprofits to help low-income people and those who speak limited English with their taxes.

    The package also includes bills focused on improving the IRS’s ability to protect taxpayers from identity thieves and cybercriminals. Additionally, the package includes provisions to bolster taxpayer rights during the IRS enforcement process — including setting an income level for the agency’s controversial private debt collection program — and to create an independent appeals office.

    Sean Brennan, CPA, chair of the PICPA Federal Taxation Committee, submitted comments on the discussion draft last week. The U.S. Senate Finance Committee held a hearing to discuss IRS plans to address future challenges and prepare for the 2018 filing season.

     

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Contact Government Relations

governmentrelations@picpa.org
Peter Calcara | 717-232-1821
Alexandra Fabian | 717-232-1821
Annette Knapp | 717-232-1821

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