Public Charities Proposals Go to Governor’s Desk
By a vote of 49-0, the state Senate passed two bills sponsored by Rep. Keith Greiner (R-Lancaster), CPA and PICPA member, and backed by the PICPA that would provide nonprofit organizations with a clear financial reporting standard that is aligned with federal requirements. The measures were also unanimously approved by the House in June.
“As a certified public accountant, I recognize the need for continuity in the way charitable organizations are measured and monitored,” Greiner said. “My legislation is an attempt to align state guidelines with requirements set forth by the federal government for audits of state and local governments and nonprofit organizations.”
Under current Pennsylvania law, once a charitable organization reaches annual contributions of $300,000 or more, it must file an audited financial statement prepared by an independent CPA. House Bill 1420 raises the threshold of annual contributions for those organizations to $750,000 before it triggers the need for an audit by a CPA. Those receiving annual contributions of at least $250,000, but less than $750,000, will be required to have a review or audit; and those with annual contributions of at least $100,000, but less than $250,000, will be required to have a compilation, review, or audit. A compilation, review, or audit will be optional for any charitable organization that receives annual contributions of less than $100,000.
“The existing thresholds are extremely low in today’s marketplace,” Greiner said.
Greiner’s second bill, House Bill 1421, clarifies that any state registration form filed for charitable purposes will be timely filed if postmarked on or before the renewal date. Currently, registration statements are only considered timely filed if they are received before the renewal date. This bill also provides for a uniform 15-day review period for the Department of State’s Bureau of Corporations and Charitable Organizations.
Both bills await the governor’s signature to become law.
Back to Top ^
PICPA Testifies on DOR Collection Activities
The state House Finance Committee held a public hearing to discuss problems with the Department of Revenue (DOR) tax collection process relative to Schedule C and Unreimbursed Expenses (UE). Cheri Freeh, CPA, CGMA, provided testimony on behalf of the PICPA.
In her testimony, Freeh noted that “how the Department chose to review Schedule C filings has created a lot of anger, consternation, and resentment in the tax practitioner community. CPAs, tax practitioners, and, most importantly, taxpayers are angry!”
While the DOR did provide notice of its new review process, many tax practitioners were caught off guard by the multitude of notices that taxpayers began receiving earlier this year and the sheer volume of information requested, Freeh told lawmakers.
Freeh also stressed the residual impact of DOR’s collection activities on taxpayers at the local level. The DOR shares with Pennsylvania’s local tax collectors the data from taxpayers’ returns, which is then compared to the returns filed with local governments.
“When a discrepancy surfaces, taxpayers will receive a notice from the local collector asking for an explanation or simply assessing the taxpayer with additional tax owed,” Freeh explained. “If the Department changes a taxpayer’s Schedule C profit incorrectly and the taxpayer chooses to pay the tax rather than hire a representative and dispute the assessment, then this will flow down to local tax collection.”
Testimony was also provided by representatives from DOR, small businesses, and other tax practitioners. The members of the House Finance Committee are committed to working with the PICPA and all stakeholders to resolving collection issues with DOR, and indicated that it intends to introduce a package of bills to address this issue sometime in 2018.
Back to Top ^
Court Overturns Mission Funding Alpha Case
On Nov. 22, 2017, the Pennsylvania Supreme Court overturned the Commonwealth Court’s decision in Mission Funding Alpha. The Supreme Court held that the request for refund was untimely, and that payment triggers the running of the statute of limitations regardless of whether a tax report has been filed establishing the amount of tax due. This goes against the position argued by the PICPA.
The court held that the statute of limitations for a refund of the corporate net income tax and capital stock/franchise tax begins to run at the time a payment is made, and not at the time an annual report is filed. In this case, where estimated payments were made, the deadline to request a refund is three years from the date the tax was initially due. Unfortunately, the deadline for requesting a refund will not have a clear rule since payments may be made at various times.
Justice Kevin Dougherty wrote the opinion for the majority, with Justice Christine Donohue filing a concurring opinion and Justice Phyllis Mundy filing a dissenting opinion. Only six justices participated in the decision, with Justice Debra Todd recusing herself.
The PICPA filed an amicus brief on behalf of the taxpayer, arguing that the time period should not begin to run until the annual report is filed and the funds are actually applied to a tax liability. This would be consistent with neighboring jurisdictions and the IRS.
Back to Top ^
House Approves State Budget Reforms
The Pennsylvania House this week approved legislation to change budget-making in Harrisburg, and to bring transparency and spending limits to the state budget process, according to House Republican leadership.
The package of six bills – House Bills 1940 through 1945 – requires transparency through an official estimate of how much money the state will have, more information about the balances in taxpayer-supported special funds used to provide grants and subsidies, and the creation of monetary reserves during revenue shortfalls.
A proposed state constitutional amendment to limit state spending, House Bill 110, would impose a cap based on recent increases in the Consumer Price Index and state population growth. An amendment must be approved in two consecutive legislative sessions and then by the state’s voters.
Earlier this year, legislation requiring performance-based budgeting was enacted – Act 48 of 2017 – to provide the General Assembly with information needed about the outcomes of state programs. This information will help legislators decide which programs to fund and which to shut down.
The bills head to the Senate for consideration.
Back to Top ^
Board Clarifies Tax Appeals Filing Deadline
The state Board of Finance and Revenue has provided clarification regarding the reduced time for tax appeals because of the enactment of Act 43 of 2017. Appeals originally filed at the Board of Appeals after Dec. 29, 2017, must be filed with the Board of Finance and Revenue no later than 60 days after the mailing date of the decision and order from the Board of Appeals, rather than the current 90 days.
This change does not apply to appeals of tax types that have specific appeal periods established in a statute outside of the general administrative tax appeal statute. Examples of tax appeals that have not been affected by this change to the law include, but are not limited to, malt beverage tax, property tax/rent rebate, liquid fuels appealed directly to the Board of Finance and Revenue, and amended corporate tax reports pursuant to the appeal statute.
Taxpayers are responsible for consulting the appropriate statute to determine the applicable deadline for their tax appeal.
Taxpayers are urged to contact the Board of Finance and Revenue at (717) 787-2974 or e-mail email@example.com with any questions.
Back to Top ^
Natural Gas Production Report
The Independent Fiscal Office recently released its third quarter Natural Gas Production Report.
Using data compiled by the Department of Environmental Protection (DEP), the report details the volume of gas produced and the number of producing and nonproducing wells. In addition, the report shows the top 10 counties by volume of production. For the third quarter of 2017 compared with the same quarter in 2016:
- The volume of natural gas produced increased by 4.8 percent.
- The number of producing wells increased by 9.3 percent.
- The number of nonproducing wells increased by 3.8 percent.
Other trends include the following:
- The number of new wells spud decreased by 6.8 percent from the prior quarter.
- Production gains were driven by wells spud in 2015 and 2016. These wells comprised 32.1 percent of production in the third quarter of 2017. Wells spud in 2014 or earlier recorded production declines.
- The 10 highest producing counties accounted for 92.3 percent of horizontal well production and 86.5 percent of producing wells. All counties except for Greene, Lycoming and Fayette registered production gains.
Back to Top ^
Lewis to Retire from State Legislature
Rep. Harry Lewis Jr. (R-Chester) announced that his second term in office, which will end with the 2017-2018 session, will be his final one as a member of the Pennsylvania House of Representatives. His retirement follows 56 years of public service.
Before beginning his time in the House in 2014, Lewis had a steadfast presence in his local community. During his career as an educator, he worked at the Coatesville Area Senior High School as principal, assistant principal, special education teacher, and physical education teacher.
Lewis becomes the third state legislator to announce that he will not be seeking re-election next year. The other two are Rep. John Taylor (R-Philadelphia) and Rep. Eli Evankovich (R-Westmoreland).
Back to Top ^
PennDOT Advises Customers of REAL ID Preparations
The Pennsylvania Department of Transportation (PennDOT) is reminding customers that there are steps that they can take now to help prepare for when REAL ID-compliant driver’s licenses and ID cards are available to customers who want them in spring 2019.
A federally accepted form of identification (whether it's the forthcoming Pennsylvania REAL ID www.dmv.pa.gov driver's license or ID card, a U.S. passport/passport card, a military ID, etc.) must be used as identification to board a commercial flight or visit a secure federal building on and after Oct. 1, 2020.
If a customer decides that he or she does want a REAL ID, federal regulations require that PennDOT must verify the following documents:
- Proof of identity (original or certified copy of a birth certificate with a raised seal or valid U.S. passport)
- Proof of Social Security number (Social Security card)
- Proof of all legal name changes (marriage license or court order issued by your county's family court)
- Two proofs of current, physical Pennsylvania address (current, unexpired Pennsylvania license or ID, and a no more than 90-day-old bank statement or utility bill with the same name and address)
Beginning in March 2018, customers will be able to visit PennDOT’s Driver and Vehicle Services website (or call PennDOT’s call center or visit an authorized agent for assistance) to request that PennDOT confirm the customer’s required documents are on file.
Customers will pay a one-time fee of $30, plus a renewal fee (current renewal fee is $30.50 for a four-year noncommercial driver’s license or a photo ID). Pennsylvania is currently under an enforcement extension from the Department of Homeland Security until Oct. 10, 2018, and will continue to apply for extensions until becoming fully compliant with the REAL ID Act.
Back to Top ^