The Pennsylvania State Tax Equalization Board (“STEB”) has released the Common Level Ratio (“CLR”) real estate valuation factors for 2019. The common level ratio is the ratio of assessed value to market value used to value properties in a particular county for property tax purposes, and is used for purposes of appealing property tax assessments effective for tax year 2021. Click here 2019 STEB Ratios (A7555681) to see the 2019 CLR list. To determine if your property is currently over-assessed – take the properties current assessed value and divide it by the CLR listed for your county. This will give you your property’s current implied fair market value. If you know that your property’s current fair market value is for example $100,000 (based on a recent appraisal value) and the current implied fair market value is $200,000, then your property is over-assessed and an annual assessment appeal should be filed to lower your assessed value and consequently your real estate taxes. If you have any questions regarding the CLR and how to determine if your property is over-assessed, please call Paul Morcom (717-237-5364) to discuss.
The annual assessment appeal deadline of August 1, 2020 for assessed values effective for tax year January 1, 2021 is quickly approaching for the following Pennsylvania Counties:
Adams, Bucks, Butler, Cambria, Chester, Dauphin, Erie, Fayette, Franklin, Indiana, Lancaster, Lawrence, Lehigh, Luzerne, Monroe, Montgomery, Northampton and York.
The annual assessment appeal deadline of September 1, 2020 for assessed values effective for tax year January 1, 2021 is on the horizon for the following Pennsylvania Counties:
Armstrong, Beaver, Bedford, Blair, Bradford, Cameron, Carbon, Centre, Clarion, Clearfield, Clinton, Columbia, Crawford, Cumberland, Elk, Forest, Fulton, Greene, Huntington, Jefferson, Juniata, Lackawanna, Lebanon, Lycoming, McKean, Mercer, Mifflin, Montour, Northumberland, Perry, Pike, Potter, Schuylkill, Snyder, Somerset, Sullivan, Susquehanna, Tioga, Union, Venango, Warren, Washington, Wayne and Westmoreland.
There are a few oddball counties that have to be different and thus the annual assessment appeal deadline for Berks County is August 15, 2020 and Wyoming County is August 31, 2020. Philadelphia County is not a specific date, but instead the annual appeal deadline is the first Monday in October, which is the 5th this year. Allegheny County is the only county that has a deadline, March 31, that is actually during the year that you are appealing. Thus, the appeal deadline for assessed values effective for tax year January 1, 2021 in Allegheny County is March 31, 2021.
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 own or lease commercial or industrial properties in Pennsylvania, please make sure that you are aware of these appeal deadlines. Additionally, if you are not sure if you should file an appeal on your property, please contact Paul Morcom at 717-237-5364 to determine if an appeal is warranted for tax year 2021.
The Pennsylvania Department of Revenue has announced additional relief from tax enforcement and collection activities due to the COVID-19 pandemic. A complete list of newly announced relief for taxpayers is available at https://www.revenue.pa.gov/Pages/Relief-For-Taxpayers.aspx. Some of the highlights are summarized below.
Pause Payments for Existing Payment Plans
Taxpayers with existing installment payment agreements may request that payments be suspended without canceling the agreement by emailing a request to RA-RV-CEC-DPP@pa.gov. The department will not default any payment plans during this limited timeframe, even if new delinquencies or non-filed periods arise. However, interest will continue to accrue on any unpaid tax balances.
Flexible Terms for New Payment Plans
The Department will revise general payment plan guidelines to permit greater flexibility on payment amounts and the duration of installment payment agreements. Taxpayers will have the ability to request payment plans for outstanding liabilities without the Department imposing a lien. Also, the Department will not require financial disclosure documentation for payment plans that are under $12,000 and can be resolved within 12 months.
Collections and Enforcement Activities
Certain automatic enforcement actions will be temporarily reduced or suspended. There will be a significant reduction in the number of tax liens filed by the Department and license inspections, revocations and citations will be limited. In addition, no wage garnishment or bank attachment actions will be taken for new tax debts, and tax clearances and compliance checks will be conducted consistently with the more lenient debt collection/resolution approach.
During this limited period, the Department will generally abate penalties provided that taxpayers have remitted all outstanding trust fund taxes that they have collected.
Desk Review and Field Audit
During this period, the Department, through its Bureau of Desk Review & Analysis and Bureau of Audits, will not initiate new desk reviews or field audits in most cases. There may be exceptions if it is deemed necessary to protect the Commonwealth’s interest in preserving the applicable statute of limitations or as it relates to refund claims..
The Bureau of Audits will continue to work with taxpayers to complete audit work that is in process through correspondence where possible and avoid in-person meetings until at least July 15, 2020. The Department of Revenue will continue to take the steps necessary to protect applicable statutes of limitations. In instances where statute expirations might be jeopardized during this period, taxpayers are encouraged to cooperate in extending such statutes and the Department will also be flexible with taxpayers in granting requests to provide more time.
Audit Penalty Abatement and Interest Relief
The Department will broaden existing audit penalty abatement parameters for audits that are completed during the remainder of 2020. Additionally, to take into account the impact of halting field work, currently in-progress sales tax, fuels tax, and IFTA audits that are completed and assessed prior to December 31, 2020 will include up to 90 days of interest relief to address delays in fieldwork.
Sales Tax Prepayments
The PA Department of Revenue has announced that businesses that collect Pennsylvania sales tax will not have to make accelerated sales tax prepayments in April, May or June. Businesses that normally have a monthly prepayment requirement will not be charged penalties for missing the prepayment deadline during this three-month period.
Under this new scenario, the Department is asking businesses to simply remit the sales tax that they collected during the prior month. The due dates to remit sales tax will be April 20, May 20 and June 22, which follows the standard due dates for monthly filers who have no prepayment requirement.
Tax Impact of Employees Temporarily Working from Home
As reflected in Q&A’s available in its Online Customer Service Center, the Department of Revenue has indicated that, when making Corporate Net Income Tax and Sales Tax nexus determinations, it will not consider employees that are temporarily required to telework due to COVID-19. That is, the presence of employees temporarily working at home in Pennsylvania due to the pandemic will not create nexus for businesses that otherwise do not have nexus with Pennsylvania.
The Department also provided information regarding the tax treatment of those employees temporarily working at home in other states. If an employee who normally works from home in Pennsylvania and receives Pennsylvania-sourced compensation works from home in another state temporarily due to the COVID-19 pandemic, the Department will not consider that as a change to the sourcing of the employee’s compensation. That is, according to the Department, the employee’s income would remain Pennsylvania-sourced income for all tax purposes, including PA-40 reporting, employer withholding tax and three-factor business income apportionment purposes for S corporations, partnerships and individuals.
In response to the COVID-19 coronavirus emergency, the City of Philadelphia Department of Revenue has issued the following:
REAL ESTATE TAX:
The deadline to pay 2020 Real Estate Tax has been extended an additional 30 days. The due date for 2020 Real Estate Tax is now April 30, 2020.
Additionally, the Department has extended the deadline to apply for an installment payment plan for 2020 Real Estate Tax. All senior citizens over the age of 65, and eligible low-income homeowners can apply for this installment plan by April 30, 2020. For more information about applying for a Real Estate Tax Installment Plan, please visit: http://www.phila.gov/real-estate-relief.
BUSINESS INCOME & RECEIPTS TAX (BIRT) and NET PROFITS TAX (NPT):
The deadline for filing and paying BIRT and NPT has been extended to July 15, 2020 to coincide with the IRS extensions granted to businesses. This extension policy includes estimated payments and requires no additional action from businesses.
The Wage Tax policy has not changed. Schedules to withhold and remit the tax to the City remain the same. The Department of Revenue published the following guidance to ensure employees that are no forced to work from home understand the Wage Tax standard:
The City of Philadelphia uses a “requirement of employment” standard that applies to all non-residents whose base of operation is the employer’s location within Philadelphia. Under this standard, a non-resident employee is not subject to the Wage Tax when the employer requires him or her to perform a job outside of Philadelphia (i.e. their home). A non-resident who works from home for the sake of convenience is not exempt from the Wage Tax- even with his or her employer’s authorization. On the other hand, if a Philadelphia employer requires a non-resident to perform duties outside the city, he or she is exempt from the Wage Tax for the days spent fulfilling that work. Non-resident employees who mistakenly had Wage Tax withheld during the time they were required to perform their duties from home in 2020, will have the opportunity to file for a refund with a Wage Tax reconciliation form in 2021. The City of Philadelphia requires an employer to withhold and remit Wage Tax for all its Philadelphia residents, regardless of where they perform their duties.
SCHOOL INCOME TAX (SIT):
The payment and filing deadline for the 2019 School Income Tax (SIT) remains April 15, 2020. Taxpayers who cannot meet this deadline should use an extension payment coupon to submit a payment equal to the previous year’s liability by April 15, 2020. Taxpayers have until July 15, 2020 to file a return and pay any difference in tax owed. Taxpayers who overpay in April should indicate on their 2019 SIT return how the Department of Revenue should apply their overpayment. Payments received after July 15, 2010 will accrue interest and penalty from April 15, 2020. A payment coupon was mailed to taxpayers along with their return. Taxpayers who need a payment coupon should visit the Department’s efile/epay website, www.phila.gov/pay.
USE & OCCUPANCY TAX:
Businesses ordered to close beginning March 17, 2020 as a result of safety measures enacted by the Mayor of Philadelphia are not subject to the Use & Occupancy Tax while occupancy of their place of business is prohibited. Businesses that are ordered to close by order of the Mayor beginning March 17, 2020, are not considered to “occupy” the space. The due dates to pay the tax remain the same. Businesses deemed essential, whether they choose to operate or not, are subject to Use & Occupancy Tax. Businesses continuing operations, businesses that have employees on-site, or businesses that maintained employee occupancy to their place of business throughout the Mayor’s order, are also subject to Use & Occupancy Tax. Landlords should file and remit the Use & Occupancy Tax collected from the tenants of the property still using their space for business purposes.
When filing, taxpayers should use “Line 3-Non-taxable Exempt Amount” of the filing form to indicate the portion of their property that was not occupied through the closure order.
Landlords who do not remit the tax, but have collected it through regular rent collection, must refund applicable portions of the tax to tenants.
Once the order to close non-essential businesses is lifted, all property legally available for business purposes, that has not been vacated, is subject to Use & Occupancy Tax.
ABATEMENT OF INTEREST AND PENALTIES:
The City of Philadelphia has enacted an emergency regulation (Special Regulation of the City of Philadelphia Department of Revenue and Law Department for Waiver of Interest and Penalties for Late Filing and Payment Due to COVID-19 emergency) to provide for the abatement of interest and penalties on real estate tax, business income and receipts tax (BIRT), net profits tax (NPT) and school income tax (SIT) paid by the extended deadlines provided by various emergency orders signed by the Mayor. The regulation abates interest and penalties on the following:
- tax year 2020 real estate taxes paid no later than April 30, 2020;
- 2019 BIRT and 2019 NPT taxes, and 2020 estimated BIRT and NPT taxes filed and paid no later than July 15, 2020; and
- 2019 school income taxes where the taxpayer pays amount equal to the amount due for 2018 by April 15, 2020 and files a 2019 return and pays any balance due by July 15, 2020.
For any questions related to the City of Philadelphia Department of Revenue’s tax guidance in response to COVID-19, please contact Paul Morcom, Esquire at 717-237-5364 or Sharon Paxton, Esquire at 717-237-5393.
The Department of Revenue has announced that the stimulus checks, otherwise known as economic impact payments, being distributed by the Federal government are not subject to Pennsylvania personal income tax. Rather, the payments being distributed as part of the Federal economic stimulus legislation that was signed into law in March in response to the COVID-19 pandemic, will be considered a rebate that is non-taxable in Pennsylvania.
The Department has also clarified that the stimulus checks will not be considered as income for applicants of the Property Tax/Rent Rebate Program. Further, the deadline for older adults and Pennsylvania residents with disabilities to apply for rebates on rent and property taxes paid in 2019 has been extended from June 30 to December 31, 2020.
The Department of Revenue’s offices and customer service call centers are currently closed as the commonwealth takes steps to help slow the spread of COVID-19 in Pennsylvania. As a result, the Department of Revenue is extending all business tax licenses and certifications that are set to expire until further communication is received from the department.
This extension applies to:
· Sales, Use and Hotel Occupancy tax licenses
· Public Transportation Assistance (PTA) Fund taxes and fees
· Small Games of Chance Manufacturer Certificates
· Sales Tax Exemption Certificates
· If you need documentation of the sales tax exemption extension, please use the department’s Online Customer Service Center to submit a question. If your religious organization’s sales tax exemption certificate is due to expire on March 31, 2020, the Department of Revenue is issuing an extension letter. If documentation is needed, religious organizations are encouraged to contact their parent institutions to obtain the extension letter.
The Online Customer Service Center, available at https://revenue-pa.custhelp.com/, can be used to electronically submit a question to a department representative. The department representative will be able to respond through a secure, electronic process that is similar to receiving an email. Additionally, the Online Customer Service Center includes thousands of answers to common tax-related questions.
For more alerts from the Department of Revenue during the COVID-19 pandemic, check out the department’s COVID-19 information page.
Board of Finance and Revenue
patreasury.gov/bfr | Board of Finance & Revenue | 717-787-2974 | Joe Torsella, State Treasurer
On March 21, 2020, the Pennsylvania Department of Revenue announced that the deadline for taxpayers to file their 2019 Personal Income Tax Returns is extended to July 15, 2020. This means taxpayers will have an additional 90 days to file from the original deadline of April 15. The Internal Revenue Service also extended the federal filing deadline to July 15, 2020.
The Department of Revenue will also waive penalties and interest on 2019 personal income tax payments through the new deadline of July 15, 2020. This extension applies to both final 2019 tax returns and payments, and estimated payments for the first and second quarters of 2020.
For any questions related to Pennsylvania state and local tax issues, please contact Paul Morcom, 717-237-5364 (firstname.lastname@example.org) or Sharon Paxton, 717-237-5393 (email@example.com).
On January 31, 2020, the Pennsylvania Department of Revenue (“Revenue”) issued Letter Ruling No. SUT-20-001, which concluded that the taxability of a membership fee in a professional association depends upon what a member receives in exchange for the membership. If the member does not receive any taxable tangible personal property or taxable services in exchange for the fee, then the fee is not taxable. However, if a member receives taxable tangible personal property or taxable services in exchange for the membership fee, then the fee is taxable. Revenue notes that a membership fee in and of itself is not taxable because it is not an enumerated taxable service. However, if the membership fee includes the transfer of taxable tangible personal property, in addition to nontaxable services, the entire charge for the membership fee is subject to tax if it is not separately stated from the taxable tangible personal property under Downs Racing, LP v. Commonwealth, 196 A.3d 603, 611 (Pa. 2018). In the fact pattern contained in the Letter Ruling, Revenue determined that the membership fees were subject to Pennsylvania sales tax on members located in Pennsylvania because the members received taxable tangible personal property (published guide, tools and templates, on demand webinars, and publications) along with nontaxable services (networking opportunities, discounts on certifications, and certification tracking). Additionally, Revenue nixed application of the “essence of transaction test,” by pointing out that the Pennsylvania Supreme Court has never endorsed that test.
This Letter Ruling has the potential to cause a host of problems for professional associations that charge membership fees. If you are a professional association charging membership fees, it is in your best interest to determine what is included with your paid membership and whether or not any of those membership benefits are taxable. However, if they are taxable, how do you quantify the separate value for taxability purposes? If you haven’t been separately stating taxable and nontaxable membership fees, what is your potential audit risk?
If you have questions about the Letter Ruling or any state tax matter, please feel free to contact a member of the McNees State and Local Tax team.