Please join the McNees SALT Group on October 20, 2017 at the Hollywood Casino in Grantville, Pennsylvania for “A Day on Sales and Use Tax for Pennsylvania Businesses.”  Full Agenda Here  The seminar, which will begin at 8:30 a.m. with breakfast and conclude at 4:25 p.m., will feature two distinguished guest speakers, Lauren A. Zaccarelli, Chair of the Department of Revenue Board of Appeals, and Karen M. Gard, Acting Chief Deputy Attorney General, Tax Litigation Unit.  The price of the seminar, which includes, breakfast, lunch, cocktail hour, electronic course manual and CPE credits is only $99!

Please REGISTER NOW 

McNees State and Local Tax team members Randy L. Varner and Paul R. Morcom will be presenters for the Pennsylvania Bar Institute’s seminar, “Local, State and Federal Taxes Affecting Real Estate Transactions.”  This seminar will be held on September 8th in Mechanicsburg with simulcast locations across the Commonwealth.  The seminar will also be presented in Philadelphia on September 27th.  For more information go to http://catalog.pbi.org/store/seminar/seminar.php?seminar=96602.  Randy and Paul are co-authors of the Pennsylvania Bar Institute treatise, “Assessment Law and Procedure in Pennsylvania,” the leading authority on Pennsylvania property tax law for over 20 years.

 

 

The annual assessment appeal deadline of September 1, 2017 is quickly approaching for the following Pennsylvania Counties:

Armstrong                               Lebanon

Beaver                                     Lycoming

Bedford                                  McKean

Blair                                        Mercer

Bradford                                 Mifflin

Cameron                                  Montour

Carbon                                    Northumberland

Centre                                     Perry

Clarion                                    Pike

Clearfield                                Potter

Clinton                                    Schuylkill

Columbia                                 Snyder

Crawford                                Somerset

Cumberland                            Sullivan

Elk                                           Susquehanna

Forest                                      Tioga

Fulton                                      Union

Greene                                     Venango

Huntingdon                             Warren

Jefferson                                 Washington

Juniata                                     Wayne

Lackawanna                            Westmoreland

Each county has its own separate set of local rules pertaining to assessment appeals that need to be navigated in order to successfully file an annual assessment appeal.  If you have commercial or industrial properties in any of these counties that you feel are over assessed, please contact Paul Morcom (717-237-5364) or Randy Varner (717-237-5464) to help you timely appeal those properties.

On July 27, 2017, the Pennsylvania Senate passed a revenue plan that includes a new 2% natural gas severance tax and the requirement that online marketplaces such as Amazon and eBay collect sales tax on sales they conduct on behalf of vendors.  This plan contained in HB 542 was the result of a deal between GOP members of the Senate and Governor Wolf.  The measure now goes to the House where the fate is uncertain. We will continue to monitor this development.

In Green Acres Contracting Company, Inc. v. Commonwealth, 81 F.R. 2013 (6/13/2017), the Commonwealth Court, en banc, reversed a decision issued by a three-judge panel of the court in August 2016 regarding the scope of the term “guardrails” in the statutory definition of exempt “building machinery and equipment” (“BME”).  The panel had determined that nuts, bolts, washers and guardrail blocks used to attach guardrail panels to guardrail posts did not qualify as tax-exempt BME, and that the exemption was limited to nuts, bolts and washers used to connect horizontal guardrail panels.  In responding to Exceptions filed by the taxpayer, the court ruled that these items are exempt BME when transferred pursuant to a contract performed for a tax-exempt entity.  The rationale in the court’s recent decision was that the term “guardrails” refers to the entire guardrail system installed along a road or highway.  Since “guardrail posts” are the only guardrail components carved out from the statutory exemption for “guardrails,” only the posts are ineligible for exemption as BME.  The Commonwealth filed a Notice of Appeal with the Pennsylvania Supreme Court on July 11.

The sales tax statute does not specifically include “guardrail systems” in the definition of BME.  Rather, the statute specifically provides that “guardrails” are BME (presumably as a traffic control system or part thereof) and specifically excludes “guardrail posts” from the BME exemption.  The panel had interpreted this to mean that the exemption for “guardrails” applies only to the “horizontal rail itself,” including fasteners connecting horizontal guardrail panels to each other.   Since the taxpayer was unable to quantify the amount or percentage of nuts, bolts and washers used to connect guardrail panels, as opposed to those used to attach panels to posts, the panel had denied the taxpayer’s refund claim.

The Commonwealth took the position that all nuts, bolts, washers and guardrail blocks should be excluded from the statutory exemption for “guardrails.”  Significantly, even the panel that initially considered the case agreed that, while fittings “do not become exempt simply because they are used in installing equipment defined as BME or are used in conjunction with BME,” there was no legislative intent to “break down the internal components of equipment [such as guardrail] expressly defined as BME and designate some of those internal components as taxable.”

The court relied on relevant dictionary definitions and an evaluation of common usage of the term “guardrails,” including Federal and state publications, as support for its conclusion that the term “guardrails” in the sales tax statute refers to the entire guardrail system.  Assuming the court’s recent decision is upheld on appeal, the rationale should benefit taxpayers claiming an exemption for components of other types of BME.

 

 

 

 

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The annual assessment appeal deadline of August 1, 2017 is quickly approaching for the following Pennsylvania Counties:

Adams, Bucks, Butler, Cambria, Chester, Dauphin, Delaware, Erie, Fayette, Franklin, Indiana, Lawrence, Lehigh, Luzerne, Monroe, Montgomery, Northampton and York.

Each county has its own separate set of local rules pertaining to assessment appeals that need to be navigated in order to successfully file an annual assessment appeal.  If you have commercial or industrial properties in any of these counties that you feel are over assessed, please contact Paul Morcom or Randy Varner to help you timely appeal those properties.

The Pennsylvania Supreme Court in Valley Forge Towers Apts. N, LP v. Upper Merion Area School District, 49 MAP 2016, held that the taxpayer’s complaint set forth a valid claim that Upper Merion Area School District’s appeal policy of appealing only the real estate assessments of commercial properties violates the Uniformity Clause of the Pennsylvania Constitution.

The case reversed lower court dismissals of taxpayer’s complaint and remanded the matter back to the Montgomery County Court of Common Pleas for further proceedings. The Court found “that a taxing authority is not permitted to implement a program of only appealing the assessment of one sub-classification of properties, where that sub-classification is drawn according to property type – that is, its use as commercial, apartment complex, single family residential, industrial, or the like.”

The Court noted that the Commonwealth Court has been misconstruing the two main principles articulated in Downingtown and Clifton, which are as follows:

  1. All property in a taxing district is a single class, and as a consequence, the Uniformity Clause does not permit the government, including taxing authorities, to treat different property sub-classifications in a disparate manner.
  2. This prohibition applies to any intentional or systematic enforcement of the tax laws, and is not limited to wrongful conduct.

This case is significant for taxpayer’s because it now gives them an avenue to attack school district appeals on Uniformity grounds based on the school district’s appeal policy. If it can be shown through discovery that the school district intentionally or systematically appeals only a subclass of properties then the school district appeal may be dismissed before the taxpayer has to hand over requested discovery from the school district, which may include confidential or proprietary information that the school district could use to try and increase the properties assessed value.

The Valley Forge Towers decision is a big win for taxpayers, but the battle is still far from over. There are many questions still left unanswered by the Court’s decision that still need to be answered.

If your property is appealed by a school district, please contact either Paul R. Morcom, or any member of McNees’ state and local tax group to make sure all of your rights as a property owner are protected.

On October 20, 2017, the McNees State and Local Tax team will present a full-day seminar on Pennsylvania Sales and Use Tax.  Always a popular offering, this seminar will offer CPE credits and will be held at the Hollywood Casino in Grantville, Pa.  Don’t gamble with your knowledge of Pennsylvania tax; rather, let the McNees team present the hottest information and answer any questions you may have.  More specific details will follow.  For now, however, reserve October 20, 2017 on your calendar.  See you at the casino!

Those who pay property tax in Pennsylvania have an annual opportunity to appeal the assessed value of property. Deadlines for these appeals vary by county, but most are either August 1st or September 1st, so now is the time to analyze your assessment to determine whether you may be able to have it lowered to reduce your tax burden.

In order to properly analyze your assessment, you must have an idea of what your property is actually worth. That is, what is the price that you would be able to sell it to a willing buyer? Once you have made that determination, you must then go to your assessed value and apply your county’s applicable common level ratio to determine the “implied market value.” If the “implied market value” from your assessment is higher than what you believe your property is worth, your assessment is likely too high which results in you paying more property tax than is warranted.

In this economy, many property owners are experiencing issues that result in a lowering of property values. For instance, landlords may be experiencing higher than normal vacancy rates, for prolonged periods of time, which will affect the value of property. Those who own factories may be facing factors relating to obsolescence. Property owners may own property in blighted areas that have seen dramatic decreases in property values since the last revaluation. Regardless of context, all property owners should examine assessment annually to make sure they are in line with fair market value.

MCNEES ATTORNEYS VARNER AND MORCOM AUTHOR 2016 EDITION OF ASSESSMENT LAW & PROCEDURE IN PENNSYLVANIA

McNees Wallce & Nurick attorneys Randy L. Varner and Paul Morcom are the proud authors of the 2016 edition of Assessment Law & Procedure in Pennsylvania, published by the Pennsylvania Bar Institute. The treatise is a comprehensive manual that incorporates years of practical experience by McNees attorneys in this specialized area of the law.   Designed to provide the reader with a guide through each step of the assessment and appeal process, Assessment Law & Procedure in Pennsylvania also provides detailed discussions of the relevant case law and statutory provisions that provide the framework for Pennsylvania assessment law. Originally circulated informally, the first edition was published in 1994 by the Pennsylvania Bar Institute and quickly became the “assessment bible” for counsel, assessment appeal board members, assessors and appraisers.

WE CAN HELP

The property tax assessment and appeal process can be confusing and intimidating and directly affects the bottom line of your business. We can help you analyze the assessment on your property and, if necessary, handle an appeal. Feel free to contact us for any questions related to the assessment and appeal process.

In Sales & Use Tax Bulletin 2017-01 (April 10, 2017), the Pennsylvania Department of Revenue announced major changes in its procedures for the handling of sales and use tax refund petitions. The Bulletin provides that “large” refund requests may be addressed through the field audit process. This will be accomplished by allowing the Board of Appeals to “dispose of” a refund petition by issuing a decision and order requiring a field audit. The Department will have discretion as to whether to conduct a field audit in a particular case, but noted that “in general, refund petitions requesting in excess of $100,000, or multiple petitions in one year exceeding that threshold in the aggregate, are more likely to be referred for a field audit.”

The Board of Appeals also has introduced two new appeal schedules for Sales and Use Tax refund petitions, as well as detailed “supporting documentation” requirements for Sales and Use Tax appeals, which are available on the Board’s website. First, the existing REV-39 Appeal Schedule form has been revised to require more information, and the Board has stated a preference that the schedule be submitted in an electronic format for ease of processing. In addition to detailed transaction information for each contested transaction, the instructions for the updated REV-39 form purport to require submission of proof of tax payment “for every transaction in which the refund of tax is requested.” Historically, the Board had required the submission of detailed proof of payment information only for a sample of the transactions included in a refund claim, unless the taxpayer was unable to provide satisfactory proof of payment for the selected sample transactions. The instructions further state that the “[f]ailure to provide any of the information requested . . . may result in the dismissal of [a] petition.”

Second, the Board has introduced a new Summary Appeal Schedule, which must be submitted with petitions seeking a refund of $100,000 or more, other than refund requests for sales tax attributed to bad debts. For purposes of determining whether a petitioner has requested a refund of $100,000 or more, the Board may consider all petitions filed within one year as a single refund request. The Summary Appeal Schedule “may be filed to determine if the Department intends to refer the refund request for a field audit review prior to submission of all of the evidence supporting the claim.” The Schedule requires a list of the substantive issues (e.g., resale exclusion, computer services, direct use in manufacturing, etc.), the estimated number of transactions per issue, the estimated dollar amount per issue, and the calendar year in which the disputed transactions occurred. The total dollar amount in the Summary Appeal Schedule must match the total refund amount requested in the petition. Otherwise, a complete appeal schedule will be requested by the Board.

If a taxpayer is referred for a field audit, the Department will consider both underpayments and overpayments of tax through the audit process. The audit conducted by the Department “will encompass at least the same periods within the 3-year refund window, and may extend to additional periods if the taxpayer agrees to a waiver of the statute of limitations on assessments.” The Bulletin lists the use of a “stratified random sample of liabilities and overpayments . . . to limit the number of transactions required to be reviewed at all appellate levels” as one of the advantages of addressing refund requests through a field audit. Other stated advantages include potential reductions in the amount of interest and penalty due on audited underpayments and the fact that “[c]onsolidating the liability and overpayment issues into a field audit would allow the appellate process to handle both issues simultaneously.”

The Bulletin clarifies that a taxpayer may file a subsequent refund petition pursuant to 72 P.S. § 10003.1(b) after completion of the field audit to contest any “refunds not granted in the audit.” The Bulletin appears to contemplate that such a petition would cover only the specific refund transactions that were reviewed in the audit, as opposed to all refund transactions originally identified by the taxpayer. That is, in the case of a test audit for expense purchases, only tax overpayments on transactions that were selected as part of the test sample would be included in the subsequent refund claim.

Various issues will need to be addressed as the Department moves forward with the new procedures. For example, does the Board of Appeals have statutory authority to “dispose of” a refund petition without considering the merits of the claim? And, can a taxpayer seek refunds or credits for tax paid on transactions that were not included in a test sample, but were included in the sampled population, when a refund claim is filed after a field audit, on the basis that the test audit did not adequately capture tax overpayments made by the taxpayer?