Late Session Win for PICPA with Tax Appeal Reform

With the clock winding down on the 2023-2024 session of the Pennsylvania General Assembly, the PICPA scored an unexpected legislative win. With a strong bipartisan push led by the PICPA, lawmakers approved a bill that will improve Pennsylvania’s tax appeal process. Gov. Josh Shapiro signed the bill into law on Oct. 29. Sponsored by Sen. Scott Hutchinson (R-Venango) and championed by Treasurer Stacy Garrity and Rep. Tim Briggs (D-Montgomery), Senate Bill 1051 passed both the state House and Senate on Oct. 9.

“The PICPA extends its gratitude to Treasurer Garrity, Sen. Hutchinson, Rep. Briggs, and the members of the PICPA State Taxation Steering Committee for their bipartisan leadership on this important legislation,” said Jennifer Cryder, CPA, PICPA’s CEO, after the vote. “The PICPA believes this legislation will foster a more flexible, efficient, and equitable process for resolving tax disputes.”

The passage of this legislation was unexpected, as lawmakers typically avoid considering bills related to tax policy outside of the normal state budget framework. And, with less than 30 days until the Nov. 5 elections, bringing up tax legislation in the fall is usually seen as risky. Yet, despite these challenges, the PICPA successfully navigated the process to secure a win for Pennsylvania taxpayers.

Senate Bill 1051, now Act 123 of 2024, creates a voluntary settlement conference process available to both parties once an appeal is filed with the Board of Finance and Revenue (BF&R), an independent administrative tax board within the Pennsylvania Treasury Department. It is the second and final administrative appeal level before a case is appealed to Commonwealth Court. According to the BF&R, each year it receives about 4,000 appeals. The Treasury estimates that up to 500 appeals annually may be resolved under this process. The voluntary settlement conference will be in addition to the existing compromise process.

Under Senate Bill 1051 either party may request, or the BF&R may refer, a settlement conference before an impartial and unconflicted settlement officer. The settlement officer’s role will be to facilitate a settlement between the parties. The BF&R will select the settlement officer, who must be an attorney or CPA with substantial knowledge of Pennsylvania tax law and may not be an employee of the Department of Revenue, BF&R, or the Treasurer, other than in the capacity as a settlement officer.

Senate Bill 1051 establishes a strict timeframe for requesting a settlement conference, objecting to participate in a settlement conference, referring a case to a settlement conference, scheduling and having a confidential settlement conference, and either reaching and reporting a settlement or scheduling a hearing if a settlement is not reached. The timeframe ensures that this process does not result in undue delays in resolving tax appeals at the BF&R.

The legislation increases the period that a taxpayer may appeal a personal income tax (PIT) assessment to the Board of Appeals and to the BF&R from 60 to 90 days. The taxpayer may be granted an additional 30 days to file an appeal upon showing cause. The extension of the appeal period should benefit individuals and small businesses representing themselves as they are more prone to file late appeals under the current 60-day appeal period.

Senate Bill 1051 codifies the standard for determining the timely filing of a petition for reassessment with the Board of Appeals – defined as either actual receipt or a U.S. Postal Service postmark – which also applies to a petition for refunds. This expansion provides consistency and avoids ambiguity for taxpayers seeking refunds.

The new law eliminates a trap for the unwary taxpayer who submits a petition using a delivery service. A petition sent using a delivery service had been deemed filed upon actual receipt. Now, in determining whether a petition is filed timely with the Board of Appeals or BF&R when a taxpayer uses a delivery service (as designated under IRC Section 7502(f)(2)), Senate Bill 1051 provides that the postmark date “shall include any date recorded or marked as described under IRC Section 7502 (f)(2)(C) relating to timely mailing treated as timely filing and paying.”

Senate Bill 1051 also amends the definition of “taxable income” for corporate net income tax purposes to permit a “medical marijuana organization” with a dispensary permit to deduct ordinary and necessary expenses paid or incurred during the taxable year that are ordinarily deductible for federal income tax purposes under IRC Section 162 if no deduction was taken for income tax purposes.

Finally, the legislation authorizes the Department of Revenue to enter into written closing agreements with “any person relating to the liability of the person, or of the person or estate for whom the person acts, in respect of any tax administered by the Department for any taxable period.” The provision is modeled after IRC Section 7121.

The voluntary settlement conference process and the other administrative and procedural adjustments in the new law provide meaningful changes to Pennsylvania’s tax appeals process. The legislation reflects PICPA’s ongoing commitment and effort to improve Pennsylvania’s tax system, providing clearer processes and more opportunities to engage with the state’s tax authorities efficiently. Businesses and individuals alike should take note of these changes to ensure compliance and make the most of new opportunities.

Peter N. Calcara is PICPA's vice president of government relations. He can be reached at pcalcara@picpa.org.