PICPA Hosts Annual Q&A with Department of Revenue
The PICPA State Taxation Committee hosted the Pennsylvania Department of Revenue (DOR) on Oct. 24 for its annual questions and answers program. This year’s session was expanded to include updates from the department and webcasting it live. A recording is available here.
Jeffrey Spengler, CPA, chair of the committee and a tax partner with Baker Tilly in Pittsburgh, welcomed attendees and thanked the department for its willingness to work with the PICPA on issues that impact practitioners and taxpayers.
Revenue Secretary C. Daniel Hassell announced changes to the department’s senior leadership team. Radee Skipworth, deputy secretary for taxation, will replace the recently departed Suzanne Leighton, CPA, as deputy secretary for compliance and collections. Skipworth will be replaced by Donald Bianchi, CPA. Bianchi will serve as acting deputy secretary for taxation.
In his presentation, Bianchi announced the creation of the department’s customer experience center. The center will focus on improving customer service, as well as hiring, training, and retaining highly qualified individuals as it continually works to improve public confidence.
Meggan Swisher, business program director, provided an update on the department’s tax system modernization project. The new system will be known as the Pennsylvania Tax Hub (PaTH). Enhancing e-services for taxpayers and practitioners in the personal income tax area is the last tax section to be transitioned. Its go-live date is November 2020.
Several other DOR members spoke as well: Amy Gill, deputy secretary of tax policy, provided an update on the marketplace sales law; Dave Braden, assistant to the director, bureau of individual taxes, covered changes to tax forms and instructions; and Frank Tobias, CPA, corporate tax manager, discussed the impact of the federal Tax Cuts and Jobs Act on Pennsylvania corporate taxes.
DOR responses to PICPA-member-submitted questions will be posted on PICPA’s website.
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Withholding of Tax Regulation Approved
The Independent Regulatory Review Commission (IRRC) gave final approval to the Department of Revenue proposed amendments to its Withholding of Tax regulation at its Oct. 18, 2018, meeting. The PICPA supported the final form.
The regulation requires employers that file 10 or more withholding statements to transmit the data electronically to the department. In addition, the rulemaking deletes obsolete language and references to specific tax forms.
The regulation will become effective upon publication in the Pennsylvania Bulletin, and its provisions will be applicable to annual withholding reconciliations statements that are required to be filed after the effective date of the regulation.
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Revenue Department Clarifies Use Tax on Utilities
In response to questions raised by the PICPA and others about a change for paying use tax on utilities, the Pennsylvania Department of Revenue has developed an online process for practitioners to report use tax on utilities for their clients.
According to the guidance, taxpayers may now report and pay use tax on utility bills online. The department invites taxpayers looking to report use tax on utilities to contact the Bureau of Enforcement Planning, Analysis & Discovery’s (EPAD) call center to request a use tax notice. EPAD staff will then generate a notice, which will include key points of reference (revenue identification numbers and notice numbers). This document will give taxpayers the ability to pay online. The number to call is (717) 214-7287, option 1.
Furthermore, a taxpayer with an active sales tax number should use its regular sales tax filing for use tax on utilities. Taxpayers are not required to separately register for use tax on utilities. The department will not penalize individuals who continue to use Line 25 to pay use tax on utilities, but we will continue to encourage taxpayers and practitioners to use our updated process.
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Peifer’s Business One-Stop Shop Bill Now Law
Rep. Mike Peifer’s (R-Pike) Pennsylvania Business One-Stop Shop Act is now law. House Bill 1284, now Act 107 of 2018, codifies the initiative designed to help entrepreneurs in all stages of starting and running a business.
The One-Stop Shop was developed to address areas of need for entrepreneurs and small-business owners across the commonwealth and to assist with planning a business, registration and permitting, hiring employees, and funding and technical assistance. It consolidates information from many agencies into one easy-to-use website.
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Ensuring Equal Tax Treatment of All Air Freight Companies
An amendment to the state Tax Reform Code that further defines taxable income as it relates to the corporate net income tax (CNIT) and the apportionment of income for corporations transacting business in more than one state was signed into law by Gov. Wolf on Oct. 24, 2018.
Senate Bill 627, sponsored by Sen. Tom Killion (R-Delaware), adds “qualified air freight forwarding company” as one of the types of transportation companies that shall apportion its business income using a special apportionment formula. Current law provides that railroad, truck, bus, or airline companies shall apportion business income by a fraction, the numerator of which is the taxpayer’s total revenue miles within the state during the tax period and the denominator of which is the taxpayer’s total revenue miles everywhere during the tax period.
The legislation further provides that a qualified air freight forwarding company shall allocate nonbusiness income as provided under existing law for railroad, truck, bus, and airline companies.
Act 131 takes effect immediately, and applies to taxable years beginning after Dec. 31, 2016.
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Distressed Neighborhoods Assistance Program Gets Boost
Legislation authored by Rep. Bernie O'Neill (R-Bucks), chair of the state House Finance Committee, which expands a revitalization of distressed neighborhoods program, is now law.
House Bill 645, now Act 100 of 2018, will increase funding for the Neighborhood Assistance Program (NAP) from $18 million to $36 million. This would be the first time allocated funding for the program has been increased since its inception. Created in 1967, the NAP is a tax-credit program that incentivizes businesses to invest in affordable housing programs, community services, crime prevention, education, job training, or neighborhood assistance.
A recent report from the state's Independent Fiscal Office indicated that in fiscal year 2015-2016, the NAP's $17.9 million in tax credits resulted in an economic impact of $138.1 million.
Included under the NAP umbrella are several other neighborhood assistance programs: the Special Priorities Program, Neighborhood Partnership Program, Charitable Food Program, and the Enterprise Zone Program.
Act 100 will make additional funding available to all programs that fall under the NAP.
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Alternatives to Keystone Exam Graduation Requirements Enacted
Legislation providing students with alternatives to Keystone Exams to fulfill high school graduation requirements received final legislative approval. The new law will provide students who do not score proficient on Keystone Exams with alternative pathways to demonstrate their readiness to graduate from high school.
Senate Bill 1095, sponsored by Sen. Tom McGarrigle (R-Delaware), requires students to meet or exceed local grade requirements in core subjects. Under the new law, now Act 158 of 2018, students would have to meet one of the following requirements to graduate:
- Meet or exceed a composite score across Keystone Exams in algebra I, biology, and literature, and demonstrate at least “basic” performance on each of the three exams.
- Meet or exceed local grade requirements in subjects tested by the Keystone Exams, and complete a subject-specific advanced placement, international baccalaureate, or armed services vocational aptitude test, gain acceptance in a registered apprenticeship program, or attain a career readiness certificate.
- Meet or exceed local grade requirements in subjects tested by the Keystone Exams, and present at least three pieces of evidence from the student’s career portfolio, which is required for federal accountability under Every Student Succeeds Act.
The Keystone Exam graduation requirement has been delayed until the 2020-2021 school year. The alternate graduation options McGarrigle’s legislation proposes would take effect when the Keystone Exam delay expires.
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Bill Closes Sales Tax Loophole with Online Travel Companies
Legislation closing a loophole in the collection of the state sales tax from online travel companies has been signed into law.
House Bill 1511, sponsored by Rep. Marguerite Quinn (R-Bucks), would apply state sales tax to the full price paid by the consumer at point of sale for booking the hotel room, inclusive of any additional fees or markups that an online travel company charges a customer for booking the hotel room.
Online travel companies, such as Orbitz, Travelocity, and Expedia, contract with hotels to purchase rooms at a mutually agreed upon wholesale price. These rooms are then resold online to the consumer.
Traditionally, when a hotel room is sold to a consumer, the hotel collects and remits the state sales tax on the full retail rate charged for the room. Currently, online travel companies collect and remit the sales tax on the room rental rate they negotiated with the hotel, not the full rate that the consumer pays.
Act 109 of 2018 will take effect in 90 days.
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Wolf Acts on Over 70 Bills
Before the General Assembly recessed last week for the Nov. 6 General Elections, state lawmakers sent Gov. Wolf more than 70 bills. Included among that total were those bills discussed above (Act 100, Act 107, Act 109, and Act 131). Other bills that may be of interest to PICPA members include the following:
- House Bill 99 (Act 99) - Allows boroughs to make contracts or purchases without requiring advertising, bidding or price quotations in situations deemed emergencies.
- House Bill 1840 (Act 111) - Re-establishes a provision in the Pennsylvania Workers’ Compensation Act authorizing Impairment Rating Evaluations (IREs) for claimants and makes additional changes to address the 2017 state Supreme Court’s ruling in Protz v. WCAB with a reduction (to 35 percent) of the impairment threshold; and increases the burial benefit in the act from $3,000 to $7,000.
- House Bill 1885 (Act 113) - Amends the Decedents, Estates, and Fiduciaries Code to allow the Register of Wills to require a personal representative to post additional security without court approval.
- House Bill 2124 (Act 121) - Requires institutions of higher education to send annual letters to students with information regarding their education loan debt.
- House Bill 2557 (Act 124) - Allows the City of Harrisburg to keep its existing taxing authority with conditions after exiting Act 47, the state program for distressed municipalities, with that taxing authority lasting five years after the city exits Act 47.
- Senate Bill 676 (Act 132) - Amends the Workers’ Compensation Act to provide for the solvency of the Uninsured Employers Guaranty Fund.
- Senate Bills 771, 772, and 773 (Acts 135, 136, and 137 respectively) - Amend the Borough Code and Third Class City Code, the First Class Township Code, and Act 253 of 1929 (relating to Incorporated Towns) to provide for concise publication of annual financial reporting information in a newspaper of general circulation.
- Senate Bill 1007 (Act 155) - Amends the Consolidated County Assessment Law to provide for increased training and qualifications of assessment appeal board and auxiliary appeal board members, to make changes to the assessment appeal process, and to provide for certain notifications to property owners and penalties.
The complete list of all 70 bills can be found in this release from the governor’s office. To research a specific bill, go to the General Assembly’s website and type in the bill number.
Wolf vetoed House Bill 83, House Bill 2157, and Senate Bill 1172, and said the following in veto messages on the bills:
House Bill 83 - “This legislation restricts the state’s flexibility to restructure outstanding debt to reduce future liabilities for citizens of the commonwealth,” said Wolf. “Maximizing the commonwealth’s ability to secure the least costly interest rate and repayment terms is essential to enable the commonwealth to reduce annual debt service payments whenever possible to enable savings to fund other essential commonwealth programs.”
House Bill 2157 - “This legislation renders certain agricultural education programs ineligible for state and federal funding. Specifically, the Pennsylvania Department of Education is the single state agency that is federally authorized to approve these programs,” said Wolf. “Last year, my administration distributed approximately $57 million in state Career and Technical Education funding to schools across the commonwealth. By removing program approval authority from the department, this bill would impair those schools’ ability to receive this funding and would eliminate funding for agricultural education programs approved under this bill’s provisions. In addition, the bill would require schools that currently receive Federal Perkins funding for Agriculture Education programs to forego such funds, costing those schools $6,345,299.”
Senate Bill 1172 - “This legislation alters the existing standard in determining price gouging and permits pre-established increased costs during emergencies. Further, the legislation encourages the prices of consumer goods and services to be increased prior to a state of disaster emergency being declared. This legislation undermines the purpose of the act by reducing the standard for determining an unconscionable excessive price and shortens the period of this prohibition,” said Wolf. “Rather than burdening consumers, I look forward to continuing to work with the General Assembly to protect the citizens of the commonwealth during a public emergency.”
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