Department Launches 1099-MISC Withholding Website
The Department of Revenue, working with members of the PICPA Committee on State Taxation, launched online guidance to help taxpayers understand a recent law change that requires withholding at a rate of 3.07 percent on Pennsylvania source income payments made to nonresidents that exceed $5,000 in a calendar year. The guidance includes an overview of key terms, a detailed explanation of Pennsylvania source income rules, and directions on what the law requires. Click here to read the online guidance.
Act 43 of 2017 created a withholding obligation for certain payors of $5,000 or more in Pennsylvania-source income and lessees of Pennsylvania real estate to nonresidents. It also expanded the requirements with respect to when a copy of federal Form 1099-MISC is required to be filed with the department. Withholding is optional for payors or lessees paying less than $5,000 annually. However, if the total amount of payments that will be made during the year is uncertain, the department encourages taxpayers to withhold and remit income tax from all payments made.
In February, at the urging of the PICPA, the department agreed to a delay in implementation of new 1099-MISC withholding requirements until July 1, 2018.
“We recognize that there are legitimate concerns about the timing of the legislation adopting the 1099-MISC withholding requirements,” wrote Revenue Secretary Daniel Hassell to the PICPA.
The PICPA and the department will continue working over the summer to provide additional guidance on the issue and on House Bill 2413, sponsored by Rep. Keith Greiner (R-Lancaster), to clarify certain aspects of the law. The bill is pending in the House Finance Committee.
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PICPA Committee Submits Comments on Tax Guidance to IRS
The PICPA submitted a letter to the IRS recommending priorities for guidance that the IRS should issue under its 2018-2019 IRS Priority Guidance Plan. In late April, the IRS in Notice 2018-43 asked the public to comment on items of tax guidance, including regulations, revenue rulings, revenue procedures, notices, and other guidance that should be priorities during the period of July 1, 2018, to June 30, 2019.
The comments, which echo guidance outlined in a letter that the AICPA sent to the IRS on Jan. 29, 2018, were prepared by the PICPA Federal Taxation Committee. The purpose of the PICPA’s letter was to …
- Support the AICPA’s TCJA (Tax Cuts and Jobs Act) guidance requests – including the Jan. 29, 2018, correspondence.
- Identify a “Top 5” of TCJA issues deemed critical to the business practitioner community.
- Suggest a systematic framework for providing specific, complete, organized, and accessible TCJA guidance.
“The benefits to immediate guidance are measurable and attainable for the IRS, and can generate substantial financial savings,” said Sean Brennan, CPA, chair of the PICPA Federal Taxation Committee. Brennan’s hope is that the IRS will consider providing PICPA an opportunity to discuss the submitted suggestions.
The letter is available here.
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State Budget Finalized
Gov. Tom Wolf signed into law Senate Bill 1056, the last remaining piece of the 2018-2019 fiscal year state budget, on June 28. The PICPA-championed bill decouples Pennsylvania’s corporate net income tax from the federal bonus depreciation provided in the federal Tax Cuts and Jobs Act of 2017.
Specifically, the legislation, now Act 72 of 2018, disallows the federal bonus depreciation deduction from taxable income provided in Section 168(k) of the IRC, and provides an additional deduction equal to the depreciation as determined in accordance with Section 167 (Depreciation) and Section 168 (Accelerated Cost Recovery System) of the IRC. The bill applies to tax years beginning on or after Jan. 1, 2017, and applies to property placed into service after Sept. 27, 2017.
Here is the complete package of fiscal year 2018-2019 budget bills:
Join Peter Calcara, PICPA vice president of government relations, for a webinar on July 11 where he will discuss the new $32.7 billion spending plan and what it could mean to taxpayers and practitioners.
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Keystone Scholars Program Now Law
Pennsylvania’s first universal children’s savings account program is now reality. The Keystone Scholars program, championed by state Treasurer Joe Torsella and supported by the PICPA as part of the recently enacted state budget agreement, establishes a $100 scholarship grant at birth for every child born in Pennsylvania to be invested for higher education expenses.
The scholarship grant will grow through investment, not taxpayer funds. Families have until their child turns 29 years old to use the funds. The scholarship grant – and any additional college savings each family saves by opening a PA 529 account – can be used for any qualified higher education expense at an approved institution of higher education, including trade schools, vocational programs, community colleges, and universities in or outside Pennsylvania.
For more information on the Keystone Scholars program visit www.pa529.com/keystone.
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Bill to Seal Certain Criminal Records Signed into Law
Legislation sponsored by Rep. Sheryl Delozier (R-Cumberland) to seal low-level criminal records after 10 years if there is no subsequent criminal arrest has been signed into law.
Act 56 of 2018 builds upon Act 5 of 2016 by automatically sealing records of second- and third-degree misdemeanor criminal convictions after 10 years without a subsequent arrest, prosecution, or conviction. Act 5 of 2016 allows for the sealing if a petition is filed by the accused. This new law does not apply to violent offenses related to endangerment of a person, against a family member, firearms or other dangerous article, sexual offenses and registration, cruelty to animals, or corruption of minors.
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Clean Energy, Job Creation Law Signed
Legislation establishing Pennsylvania’s Property Assessed Clean Energy (PACE) program was signed into law by Gov. Wolf. The program provides a financing mechanism that enables low-cost, long-term funding for energy efficiency, renewable energy, and water conservation upgrades to commercial, agricultural, or industrial properties.
Under Senate Bill 234, now Act 30 of 2018, sponsored by Sens. John Blake (D-Lackawanna) and Guy Reschenthaler (R-Allegheny), a local government would be able to choose to participate in or develop a PACE financing program. PACE financing would not require public funds. Participating local communities would be tasked with collecting assessments on improved properties and remit them for payment to local lenders on debt incurred to pay for energy-efficiency and clean energy technology upgrades.
Presently, the upfront cost of installing energy-efficient or clean energy technology can be prohibitive.
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Mobile Telecommunications Protected from Double Taxation
Legislation to ensure mobile telecommunication consumers are not subject to double taxation has been signed into law by Gov. Wolf.
House Bill 994, sponsored by Rep. Seth Grove (R-York), would exclude the sales of telephones, telephone handsets, modems, tablets, and related accessories from being subject to the gross receipts tax.
Pennsylvania last updated the definition of mobile telecommunication in 2002. In the 15 years since, communications technology has advanced but the state’s definition had remained unchanged.
Now Act 52 of 2018, Grove’s bill modifies the definition of mobile telecommunications to mirror the definition used under the sales and use tax, creating uniformity in our tax code and clarifying the code. This bill provides a clear definition of what is subject to the gross receipts tax and what is subject to the sales and use tax.
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Findings of School Safety Task Force Released
The Pennsylvania School Safety Task Force released its initial findings and the common themes that will be addressed in its upcoming report. The report comes on the heels of state lawmakers passing a state budget that includes $60 million for a school safety fund to strengthen security and mental health services in schools.
The task force held a series of six regional roundtables at schools from April through June to listen to students, parents, school officials, school nurses and other health care professionals, law enforcement, education organizations, and community members about their ideas to improve safety and security.
Based on the expertise and opinions shared during the regional roundtables and hundreds of comments provided through an online feedback form, the task force identified multiple themes, including recommendations, barriers, and opportunities. Some common themes on strengthening school security heard by the task force include the following:
- Improved communication and information sharing
- Enhanced social and emotional learning
- Increased access to mental health services, including more health professionals in schools
- Building community connections
- Effectively integrating law enforcement and school resource officers
- Providing guidance on establishing priorities for schools
- Providing schools with more resources
The task force plans to release its final report before the start of the 2018-2019 school year.
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