They’re Off and Running….

 

On January 28-30, 2019 both the House and Senate were back to kick off the 2019/2020 legislative session and wasted no time to introduce bills, which are of interest to tax practitioners. I’ve grouped the legislation by type for ease of reference. As in the movie Groundhog Day, some legislation is back for a second or third round.

Corporate Net Income Tax (CNI)

The House introduced bills to reduce the CNI to:

5.99% (HB70; Rothman); and 3.07% (HB72; Rothman)

 

The Senate joined in with proposals to reduce the CNI:

to 6.99% by reductions of .5%/yr. through 2024 (SB32; Brooks)

 

Also, of note is the resurrection of last session’s trio of bills to conform PA law to the IRC: like-kind exchange bill (HB105; Cox), which will parallel IRC §1031. The Senate companion bill is SB 201 (DiSanto). The NOL bill (SB 202; J. Ward); and Section 179 bill (SB 203; Hutchinson)

 

Deferral of capital gains on sale of stock of a business to an ESOP (IRC §1042)(SB 179; Browne)

Deferral of capital gains on investments in QOZ (SB 180; Browne)

 

Personal Income Tax

Impacts on PIT may be the result of bills which:

— authorize per diems to support necessary, ordinary and reasonable   business expense (HB 69; Ryan)

—repeal the 1099-MISC non-resident withholding requirement (HB34; Ryan)

—impose a statute of limitations of 10 years (HB17; Ryan)

— increase the poverty tax exemption by an annual index (HB123; D. Miller) and Senate companion increases the exemption to $10,500 and $34,00 (SB 220; Hughes)

— authorize a delinquent income tax grace period (HB25; Snyder)

—-establish a first responders’ tax credit; (HB 208; Deasy)

 

Other tax credits under consideration will be:

— educational investments in economically depressed areas (HB 42; Snyder)

—pediatric cancer research (HB174; Caltagirone)

— REAP credit eligibility clarification to include “individuals filing jointly”  (HB 241; Pickett)

—film tax credit carry forward, carry back and assignment among a consolidated group (SB225; Killion)

—increases cap on Manufacturing Tax Credit from $4mm-12.5mm (SB 266; Hughes)

—50% of toll expenses (HB 329; Warren)

—Adoption ($1,000) and foster care ($500) (HB296; Toohil)

 

Inheritance Tax

The House will consider bills designed to:

—eliminate the inheritance tax in full (HB77; Rothman)

—eliminate the inheritance tax for children age 21 and under (HB262; Metzgar)

And on the Senate side:

—phase out over 8 years the inheritance tax for siblings (SB27; Brooks)

—reduce inheritance tax on non-sibling relatives and phase out to 0 by 7/1/29 (SB28; Brooks)

Sales and Use Tax

            Both the House and the Senate are attempting to provide some relief for  firefighters:

—exclusion for purchase of firefighting equipment from firefighters’ own DiSanto (SB121)  

funds (HB209; Deasy) with a similar bill authorizing a tax credit of up to $500 (HB 376; Owlettt)

—exemptions on sales of prepared foods by volunteer fire companies (SB 83; Martin)

Solar energy use encouraged via exemption from sales tax (SB 148; Hughes)

—exemption for equipment for the visually impaired (SB 175; Browne)

And the House is looking out for banks in clarifying the application of sales  and use tax on canned and customized software for financial institutions(HB 19; Sankey)

—exemption clarification for traffic signals to include foundations, posts and mast arms ((HB 304; Toohil)

Home safety and school safety are the focuses of a sales tax exemption and a news sales tax imposition:

—exemptions on gun safe and vault purchases (SB103; Hutchinson)

—imposes a new 10% sales tax on video games with adult only or mature ratings (HB109; Quinn)

Realty Transfer Tax

            —exemption for children or surviving spouse if family home is sold within 5  yrs. of death (HB269; Driscoll)

 

 

Property Tax

— imposes real estate tax on PASSHE, state-related colleges, community colleges and independent colleges (HB191; Cruz)

—Authorizes local taxation of natural gas hazardous liquids pipelines (SB 264; Dinniman)

—Requires school boards to calculate and disclose unfunded pension liability

—property tax clean up legislation (HB 330; Emrick)

Tax Increment Financing

            —Includes wage tax revenue (SB 171; Browne) and state and local sales tax  (SB 172; Brown) in tax increment.

 

Property Tax and Rent Rebate Program

Amends the Taxpayer Relief Act of 2006 to:

—increase the income cap from $35,000 to $40,000

—prohibit assignment of rent rebates to a landlord (HB207; Deasy).

—exclude Medicare Part B payments from income(SB 272; J. Ward)

 

State Long-Term Leases

—requires legislative approval of state long-term leases which appear to have been used to circumvent legislative or voter approval of state  debt issuances. (HB 363; Lawrence)

Collection of Delinquent Taxes

—creates independent authority to act as clearinghouse for all state and local delinquent taxes

Constitutional Amendments

            —limits growth in state spending to the lower of two indices: avg. change in personal income for the 3 preceding calendar yrs. OR the avg. inflation rate plus the avg. percentage change in the state population over the  preceding 3 yrs. (SB116; Bartolotta)

—requires a 2/3 vote of the legislature to increase taxes. (SB121; DiSanto)

—exempts 100% disabled vets without the “injury due to war service” (HB 287; Simmons)

— eliminates all property taxes as of 7-1-26 (HB 382; Diamond)

 

Fasten your seat belts and call the State and Local Tax group or the Government Relations practice group at McNees Wallace & Nurick LLC for more information.