By James (Jay) Brower, CPA

As chair of PICPA’s State Taxation Steering Committee, I was contacted several weeks ago by Peter Calcara, vice president of PICPA’s government relations team, to see if I could provide testimony to the Pennsylvania House Finance Committee on PICPA-sponsored legislation, HB 1994 and its companion bill in the Senate, SB 1051.

I did not hesitate. Advocating for the profession, our clients, and the taxpayers of Pennsylvania is at the core of the PICPA’s mission, and I was glad to do it.

Both pieces of legislation (which have since become law this fall) proposed three things:

• Institutes an optional “settlement conference process” for appeals brought to the Board of Finance and Revenue (BF&R).
• Allows medical marijuana dispensaries to deduct their operating expenses for Pennsylvania corporate net income tax purposes, which would otherwise be barred under Section 280E of the federal tax code.
• Allows individual taxpayers to submit a petition for reassessment within 90 days of the assessment mailing date to the Board of Appeals. This is a 30-day increase from the existing 60-day window. The legislation will also allow an extension of up to 30 days to submit a petition for reassessment if the taxpayer can show cause.

On the day that I provided testimony, the Finance Committee first heard from Amy Gill of the Department of Revenue and then Christoper Craig, general counsel of the Treasurer’s office. My testimony specifically focused on the first bullet point above: the settlement conference process at the BF&R.

Most tax appeals in Pennsylvania that are administered by the Department of Revenue have four levels of appeal:

• The Board of Appeals (a division within the Department of Revenue)
• The BF&R, a three-member panel that officially falls under the state Treasurer’s supervision, but has two members appointed by the governor and confirmed by the Senate
• The Commonwealth Court
• The Pennsylvania Supreme Court

As most tax practitioners know, many tax issues are not “black and white.” They exist in the gray areas of the law, and legitimate controversies can exist between taxpayers and the Department of Revenue. This is an expensive proposition since it involves engaging legal counsel to negotiate a settlement of the issues with either the Department of Revenue’s lawyers or the Office of the Attorney General. It is also a time-consuming process that can take years to complete, clogging up the court’s docket in the process.

Under the settlement conference process, a taxpayer who is appealing a decision of the Board of Appeals to the BF&R may request to have their case handled by a “settlement officer.” It’s important to point out that this is an optional course of action, and both the taxpayer and Department of Revenue have to agree to it. If the Department of Revenue consents to this process, the case is “diverted” from the BF&R to a settlement officer, whose job is to listen to both sides and work with them within a limited time period to propose a mutually agreed-upon settlement. While the settlement officer can propose a settlement to the parties, it is nonbinding. If both sides cannot work out their differences during the process, the case is transferred back to the BF&R to render a decision. All communications made during the settlement conference are kept confidential and may not be raised in a later judicial proceeding.

If both sides come to an agreement during the settlement conference process, the parties will communicate this to the BF&R, which will approve the settlement, provided it is not otherwise contrary to law.

Other states employ similar processes in administering their tax laws. The PICPA hopes that this process will assist smaller taxpayers with resolving their differences with the Department of Revenue in an expeditious manner without having to go to court.

As alluded to in the opening, both bills received overwhelming support in the legislature, and SB 1051 became law when Gov. Josh Shapiro signed it on Oct. 29 (now Act 123 of 2024).

I was honored to be a part of this process. It illustrates how CPAs and the PICPA – with hard work and engagement – can influence the legislature for fair tax practices that benefit the citizens of Pennsylvania. A special thanks go to Peter Calcara, the PICPA’s government relations team, and my fellow members of the State Taxation Steering Committee who provided valuable guidance and insight into bringing this legislation forward.

James Brower, CPA, is managing director of CBIZ Inc. in Philadelphia and 2024-2025 chair of the PICPA State Taxation Steering Committee. He can be reached at jbrower@markspaneth.com.

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^{Statements of fact and opinion are the authors’ responsibility alone and do not imply an opinion on the part of the PICPA's officers or members. The information contained herein does not constitute accounting, legal, or professional advice. For actionable advice, you must engage or consult with a qualified professional.}