Primary Election Results Set the Table for November
On Tuesday, May 15, registered voters in Pennsylvania had the opportunity to pick candidates for their respective parties for the general election ballot in November. Candidates were selected for U.S. Senate, U.S. House, governor, lieutenant governor, and the state Senate and House.
In the race for U.S. Senate, incumbent Robert Casey (D), who was unopposed in the primary, will face U.S. Rep. Lou Barletta (R), who bested state Rep. Jim Christiana (R-Beaver) for the GOP nod. In a race closely followed by the PICPA, U.S. Rep. Brian Fitzpatrick, CPA, won his Republican primary. He will face Democrat Scott Wallace in the Bucks County swing district.
In the hotly contested race for the Republican nomination for governor, state Sen. Scott Wagner (R-York) defeated Paul Mango and Laura Ellsworth. Wagner will face incumbent Tom Wolf (D), who was unopposed, in November. Lieutenant Governor Mike Stack (D) lost his reelection bid to John Fetterman, the Democrat mayor of Braddock, in a hotly contested race.
Among the state legislative races, three incumbent House members were defeated: Rep. Dom Costa (D-Allegheny), Rep. Paul Costa (D-Allegheny), and Rep. Emilio Vazquez (D-Philadelphia). In the state Senate, Sen. Randy Vulakovich (R-Allegheny) was the only incumbent defeated.
Tuesday’s vote also included three special elections for open state House seats in Bradford, Bucks, and Washington counties. In the 68th Legislative District (Bradford, Potter and Tioga), Clint Owlett (R) won the special election to replace former Rep. Matt Baker. In Washington County’s 48th Legislative District, Republican Tim O'Neal took the seat that was vacated by the resignation of former Rep. Brandon Neuman (D-Washington). In Bucks County’s 178th Legislative District, Democrat Hele Tai held off a strong challenge from Republican Wendi Thomas. Tai’s margin of victory was a mere 96 votes.
The PICPA issued a primary election guide that provided an overview of the key races. It has been updated to reflect the results of the May 15 primary.
For complete statewide results visit www.electionreturns.pa.gov.
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Don’t Sit on the Political Sidelines: Attend PICPA Day on the Hill
Each year in June, CPAs from across Pennsylvania come together in Harrisburg to partake in the PICPA’s premier legislative event, Day on the Hill.
R. Charles Waring, CPA, a director with PwC and a member of the CPA-PAC Board, provides first-hand insight on the event and his perspective on why you should consider attending. View his blog post here.
Event 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.
A draft agenda for Day on the Hill is available here. Also, consider registering for the networking reception that will take place on June 11, the evening before Day on the Hill.
Event participants will earn three CPE credits.
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State Lawmakers Return to Session
State lawmakers return to session following the primary elections. Except for a short break for the Memorial Day holiday, the General Assembly is in its stretch run to the June 30 budget deadline.
With lawmakers back in Harrisburg, PICPA is renewing its call for the General Assembly to immediately pass either House Bill 2017 or Senate Bill 1056. Both bills address the state’s corporate net income tax law regarding bonus depreciation, reversing the Department of Revenue’s Pennsylvania Corporate Tax Bulletin 2017-02, which disallows all depreciation on certain property.
In other legislative action, the Senate State Government Committee meets to consider Senate Bills 22 and 1037, which create an independent citizens commission for redistricting and reforms to the civil service commission, respectively.
On May 22, the House Judiciary Committee will hold a public hearing on the state’s firearm laws and public safety; the Senate Education Committee will meet to consider Senate Bill 1032 (fiscal note requirement) and Senate Resolution 322 (extending Keystone Exam moratorium and directing review of assessment and accountability systems); and the House Education Committee will convene an informational meeting on House Bill 1745 (Fostering Independence through Education Act).
The House Finance Committee will meet May 23 to consider House Bill 2167, which amends the Fiscal Code to provide a new definition for “lost contact” so that shares of stock reported to Treasury are only those that have truly been abandoned and unclaimed, not merely held in a passive investment account.
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Department Clarifies Position on Net Operating Loss Deduction
On May 10, the Pennsylvania Department of Revenue issued Corporate Tax Bulletin 2018-02. The bulletin addresses the Pennsylvania Supreme Court decision in Nextel Communications of the Mid-Atlantic Inc. v. Commonwealth of Pennsylvania (6 EAP 2016).
In the bulletin, the department announces that it will not apply the Nextel decision to taxable years beginning prior to Jan. 1, 2017. The department will determine the corporate net income tax liability of taxpayers for taxable years beginning after Dec. 31, 2006, through Dec. 31, 2016, by allowing taxpayers the greater of the flat dollar cap or the percentage cap as authorized by statute prior to the issuance of the decision in Nextel.
For taxable years beginning prior to Jan. 1, 2007, the department will determine the corporate net income tax liability of taxpayers by applying the flat dollar cap as authorized by statute prior to the issuance of the decision in Nextel.
In the Nextel decision, the court found that the $3 million cap on the net operating loss deduction violated the Uniformity Clause of the Pennsylvania Constitution, while leaving in place the limitation on the deduction at 12.5 percent of taxable income.
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U.S. Supreme Court Clears Way for Sports Betting in State’s Casinos
A ruling by the U.S. Supreme Court will clear the way for Pennsylvania’s casinos to offer sports betting. Gov. Tom Wolf signed gaming legislation last year so that the state would be competitively positioned to offer sports betting had it become legal.
The Supreme Court’s decision struck down a 1992 federal law that barred state-authorized sports betting, with a few exceptions. New Jersey challenged the law, arguing that Congress overstepped its authority in enacting it. The high court agreed, holding that Congress has the authority to regulate sports gambling directly, but if it elects not to do so, each state is free to act on its own.
Act 42 of 2017 gives the Pennsylvania Gaming Control Board the authority to establish standards and procedures to govern sports wagering in the state. A licensed casino would be able to apply for a sports wagering license to conduct sports wagering at the casino, a nonprimary location, or online. A sports wagering license fee is $10 million, with a renewal fee of $250,000. The tax rate is 34 percent, with a local share of 2 percent: 1 percent to the host county and 1 percent to the host municipality.
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PICPA Committee Reviews New Tax Bills
Several new Pennsylvania tax bills have been introduced recently, and the PICPA Committee on State Taxation will be reviewing these proposals at its June 20 meeting.
Senate Bill 1161, introduced by Sen. Jake Corman (R-Centre), seeks to strengthen the Pennsylvania 529 Tuition Account Program (TAP) by limiting college savings state tax incentives solely to Pennsylvania’s plan. SB 1161 is pending in the Senate Finance Committee.
Rep. Mary Jo Daley (D-Montgomery) introduced House Bill 2424. The bill would lower the corporate net income tax rate from 9.99 percent to 7.99 percent by 2023, but would require the use of combined reporting by multistate corporations that conduct business in Pennsylvania. PICPA’s issue brief on combined reporting
provides an informative overview on the issue.
State Rep. Brian Ellis (R-Butler) is preparing to introduce legislation to prevent local taxing jurisdictions from imposing a per capita tax on businesses in Pennsylvania. Ellis cites Seattle’s new per capita tax plan on businesses as rationale for his legislation. Once the bill is formally introduced it will be referred to a committee of the House.
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AICPA Recommends Changes to IRS Form 990
The American Institute of CPAs (AICPA) has recommended more than 30 changes to the IRS regarding the 2018 Form 990, Return of Organization Exempt from Income Tax, and its related instructions.
In a May 7 letter, the AICPA indicated the importance and urgency of each of its recommendations. Eighteen of the 33 recommendations were ranked “high” for both importance and urgency. Here are a few of them:
- Delete the terms and associated definitions that have changed under new tax law from the glossary in the instructions to Form 990 and in all parts of the form and related schedules. Terms include “endowment,” “permanent (true) endowment,” “SFAS 116,” “SFAS 117,” “temporarily restricted endowment,” and “FIN 48.”
- Update the glossary to define the terms used in Accounting Standards Update (ASU) 2016-14, Presentation of Financial Statements of Not-for-Profit Entities, issued by the Financial Accounting Standards Board (FASB) as defined in the FASB Accounting Standards Codification Master Glossary.
- Update the trigger question for Schedule D to reflect the changed classification of net assets under FASB ASC 958, while still recognizing that the focus of the question is on reporting for donor-restricted and board-designated or quasi-endowments.
- Align the trigger questions in Form 990, Part IV and Part X, so that they agree with the definition of “interested parties” in the Schedule L instructions.
- Update the net assets or fund balances portion of the balance sheet to reflect ASU 2016-14.
- Update the question and instructions related to the Office of Management and Budget/Uniform Guidance rules, and update the instructions to reflect the new single audit threshold of $750,000.
- Update the instructions for Schedule I, Part II, Line 1, so they are consistent with the instructions for the trigger question in Form 990, Part IV, Line 21.
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