The Coming Week in the State House
State House lawmakers are back at work in Harrisburg on April 9 after a brief break. There are a number of committee meetings scheduled for the week. The state Senate is not in session.
The PICPA will testify April 9 before the state House Finance Subcommittee on Tax Modernization and Reform at its third public hearing. Drew VandenBrul, CPA, a member of the PICPA Committee on State Taxation and managing director with Grant Thornton’s state and local tax practice in Philadelphia, will discuss Pennsylvania’s corporate tax structure and how it compares to other states.
Also, the House Education Committee has scheduled a meeting on Monday to vote on several bills, including House Bill 2064, sponsored by PICPA member Rep. Frank Ryan, CPA (R-Lebanon), which requires the governing body of each school district to calculate the amount of unfunded pension and other postemployment benefit obligations per $100,000 of assessed residential property within the school district, and House Resolution 431, sponsored by Rep. Kristin Phillips-Hill (R-York), which urges the auditor general to conduct an audit of the Department of Education’s administration of the Educational Technology Fund.
On Tuesday, the Finance Committee will hold an informational meeting on the Keystone Scholars Program, and the House Judiciary Committee begins two days of public hearings on gun laws and violence.
Here’s a complete listing of House committee meetings for the week.
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A Close-Up on the CPA-PAC
The PICPA Government Relations Team works tirelessly on behalf of our members, and the CPA-PAC is the driving force behind PICPA’s advocacy efforts. You’ll notice that on the PICPA membership renewal invoices there is an option to contribute to the CPA-PAC.
This is a critical election year: all 203 state House seats, half of the state Senate seats, and the governor are up for reelection. Among this group are our seven CPA legislators who have done a tremendous part in promoting and protecting the CPA profession.
Your colleagues in the law and banking professions raise more than twice the amount of funding to back candidates who support their issues. Our ability to be heard among many competing voices depends upon participation from our members. Last year less than 3 percent of PICPA members contributed to the CPA-PAC.
All PICPA members should consider the important role they can play in protecting the future of the CPA profession. In this chaotic political environment, nothing is guaranteed! Supporting the CPA-PAC ensures professional stability for CPAs in Pennsylvania. The established levels of giving are available here.
To learn more about the CPA-PAC and recent legislative victories, check out a recent CPA Now blog post by Alexandra Fabian, PICPA's manager of government relations, or consider making a contribution now.
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DOR Modernization Project Moving Forward
The Pennsylvania Department of Revenue (DOR) is moving forward with the final phase of a multiyear modernization of several tax systems.
The project will enable the department to update the system it uses for personal income tax, inheritance tax, realty transfer tax, pass-through entity processing, property tax/rent rebates, taxes related to the international fuel tax agreement (IFTA), and motor fuel and liquid fuel taxes. This phase of DOR’s modernization project will impact about 6.7 million taxpayers, or 52 percent of Pennsylvania’s population.
The project is necessary because many of the information systems in use at the department are more than 20 years old and address only specific tax types, and cannot provide a holistic view of a taxpayer’s account, explains C. Daniel Hassell, secretary of revenue.
Furthermore, the project will increase efficiency, reduce risk of system failure, facilitate improved tax collection, reduce administrative costs, and allow the department to respond more quickly to changing tax laws while improving overall taxpayer service.
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IRS Issues Additional Guidance on Transition Tax on Foreign Earnings
The U.S. Treasury Department and the IRS provided additional guidance (Notice 2018-26) for computing the “transition tax” on the untaxed foreign earnings of foreign subsidiaries of U.S. companies under the Tax Cuts and Jobs Act (Tax Act) enacted on Dec. 22, 2017.
The notice describes regulations that the Treasury Department and the IRS intend to issue, including rules to prevent the avoidance of Section 965, rules and procedures relating to certain special elections under Section 965, and guidance on the reporting and payment of the transition tax. It also provides relief to taxpayers from certain estimated tax requirements and penalties arising from the enactment of the transition tax and the change to existing stock attribution rules in the Tax Act.
Notice 2018-26 will be published in IRB 2018-16 on April 16, 2018. The Treasury Department and the IRS provided prior guidance on the transition tax in Notice 2018-07, Notice 2018-13, and Revenue Procedure 2018-17.
More information regarding the Tax Cuts and Jobs Act can be found at the IRS’s Tax Reform page.
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IFO Monthly Trends Report for March
The March 2018 state General Fund revenues of $4.32 billion reflect a decrease of $97 million (-2.2 percent) compared with the same month in the prior year, according to the March edition of the Monthly Trends Report prepared by the Independent Fiscal Office (IFO).
Through March, General Fund revenues are $498 million above estimate. This overage is primarily driven by the receipt of $248 million from the lease of the Pennsylvania Farm Show Complex and other miscellaneous transfers, $90 million from new mini-casino licenses, and earlier-than-expected receipts from the state store fund ($85 million).
Other revenue highlights:
- Tax revenue decreased by 2.0 percent for the month.
- Corporate net income tax decreased by 6.8 percent for the month.
- Nonmotor sales tax increased by 5.2 percent for the month, bringing the three-month average growth rate (after adjustments for various transfers) to 3.4 percent and the 12-month average growth rate to 4.2 percent.
- Motor vehicle sales tax declined by 5.6 percent for the month, bringing the three-month average growth rate to -3.7 percent and the 12-month average growth rate to 0.2 percent.
- Personal income tax withholding decreased by 8.4 percent for the month. Adjusted for due dates, the three- and 12-month average growth rates were 4.3 percent and 4.0 percent, respectively.
- Realty transfer tax increased by 20.6 percent for the month, bringing the three-month average growth rate to 11.4 percent and the 12-month average growth rate to 9.5 percent.
- Cigarette tax revenue decreased by 13.9 percent for the month.
- Nontax revenue decreased by 23.3 percent for the month.
The report compares fiscal year 2017-2018 revenues to the IFO’s official estimate originally released in June and updated in December to reflect the impact of tax law changes that were enacted with the state budget.
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House Hearings Examine Distracted Driving, Local Radar
The state House Transportation Committee held two-days of public hearings to tackle the growing problem of distracted drivers and the merits of local radar use.
According to testimony and information provided at the hearing, distracted driving is becoming a serious problem on Pennsylvania’s roadways. Information provided to lawmakers by the Administrative Office of Pennsylvania Courts shows police statewide wrote 5,054 distracted driving citations compared with 3,336 in 2016, a 52 percent increase – the highest increase year-over-year since 2013.
The committee has two bills pending that would address the issue. House Bills 892 and 1684 would create an additional summary offense of distracted driving in cases where a driver is found to be driving carelessly and would provide for a wide ban on motorists using hand-held mobile telephones while a vehicle is in motion, respectively.
The committee also heard testimony on whether to give local law enforcement the authority to use radar. House Bill 2148, which would allow municipal police to use radar under strict conditions, is currently pending in the committee along with Senate Bill 251, which passed the Senate last year. That bill would permit all municipal police to use radar for speed enforcement.
The committee plans to consider legislation addressing both issues in the near future.
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REAL ID Online Preverification Available for Eligible Customers
The Pennsylvania Department of Transportation (PennDOT) opened online application for REAL ID preverification for customers who are interested in obtaining a REAL ID and received their first driver’s license or photo ID card after September 2003.
PennDOT has begun sending postcards to eligible customers inviting them to visit PennDOT’s Driver and Vehicle Services website to request that PennDOT confirm their documents are on file. PennDOT customers without internet access may call a customer call center at (717) 412-5300 for assistance with preverification.
PennDOT may already have electronic documents on file for about 35 percent of its total customers – those who received their first Pennsylvania driver’s license or ID card after September 2003.
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Senate Finance Committee to Hold Hearing on IRS Challenges
The U.S. Senate Finance Committee will hold a hearing April 12 on how the IRS plans to address future challenges and to prepare for the 2018 filing season.
“The hearing will focus on making certain the agency is well staffed and has the technology it needs to serve taxpayers, reduce fraud, and keep taxpayer information secure,” said Senate Finance Chair Orrin Hatch (R-Utah).
Last week, the U.S. House Ways and Means Oversight Subcommittee released draft legislation to overhaul IRS operations and modernize the agency’s information technology, infrastructure, and service. The draft bill proposes adopting a new process for resolving tax disputes, revamping the agency’s customer service strategy, and enhancing cybersecurity and identity theft prevention.
The PICPA Federal Taxation Committee will be reviewing the legislation.
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