Fall 2008
By Peter N. Calcara and Ellisith B. Henry
As the clock was winding down for the General Assembly to craft a spending plan for the Commonwealth’s coming fiscal year, PICPA was able to achieve two major legislative victories this past July: enactment of earned income tax collection reform and important CPA Law amendments.
Earned Income Tax Collection
More than four years of PICPA members’ grassroots lobbying culminated in Gov. Rendell’s July 2 signing of Senate Bill 1063, creating a new, more efficient tax collection system that could yield more than $200 million for municipalities and school systems and improve Pennsylvania’s business climate through tax standardization, coordination, and accountability.
At the bill-signing ceremony, attended by PICPA member Cheri H. Freeh, chair of the PICPA Local Tax Reform Subcommittee, Gov. Rendell acknowledged the efforts of PICPA and other stakeholders in the long battle to reform. "Today marks the culmination of a tremendous grassroots effort by the business community, local government, and professional associations and, ultimately, the legislature," said Gov. Rendell in signing the bill. "This fixes what is now, probably, the most complex and confusing local taxing environment in the nation, with more local earned income tax collectors - 560 - and more local taxing jurisdictions - nearly 2,900 - than all other states combined."
"The passage of Senate Bill 1063 will bring a significant amount of improvement to the way earned income taxes are collected in Pennsylvania," said Freeh. "Of course, there will always be suggestions to make the system even better, but this legislation is definitely a step in the right direction. A very large step."
PICPA members are no strangers to the problems that plague the system because of their unique position in the process. Many have been motivated to lobby state legislators to change the local EIT collection system for the last several years. In fact, it was the top legislative issue at the June 10 PICPA Day on the Hill event.
"CPAs routinely struggle with the arcane and cumbersome approach to EIT collection," said Freeh. "The enactment of Senate Bill 1063 is fantastic news to PICPA and its members. Consolidated EIT collection brings Pennsylvania into the 21st century. These reforms signify new opportunities for Pennsylvania’s competitiveness."
Now titled Act 32 of 2008, the new law requires the Commonwealth’s Department of Community and Economic Development (DCED) to issue a single set of rules and regulations that apply to all collectors, taxpayers, and employers. DCED also will develop uniform notices, forms, reports, returns, schedules, and codes to be used by municipalities, school districts, and tax collection districts. Employers are required to withhold local income taxes and remit them to one collector, even if an employer operates in multiple counties, and the law strengthens reporting requirements so that each earned income tax dollar is tracked from the time it is withheld until it is disbursed.
Lastly, but not least, Pennsylvania’s number of earned income tax collectors will be reduced from 560 to 69 - roughly congruent with Pennsylvania’s counties, although not a function of county government.
Senate Bill 1063 requires DCED to promulgate temporary regulations establishing uniform forms, reports, and returns for taxes levied prior to Jan. 1, 2010. The bill provides for full implementation of the new collection system on Jan. 1, 2012. At that point, tax collectors would be required to follow the new distribution and recordkeeping requirements.
PICPA thanks our many legislative partners, without whom this bill would not have been enacted: Sens. Pat Browne, CPA, and Jane Earll, and Reps. Gordon Denlinger, CPA, Dave Levdansky, and Steve Nickol.
CPA Law
Gov. Rendell signed Senate Bill 838 into law July 10, amending and modernizing Pennsylvania’s CPA Law. As a result, Pennsylvania CPAs will have greater mobility across state lines, allowing them to seamlessly serve clients conducting business in multiple jurisdictions. Not one negative vote was cast against the bill, now Act 73 of 2008, as it moved through the legislative process. The mobility provisions of Act 73 went into effect Sept. 8, 2008; education and experience changes will be effective in 2012.
"Passing this law aligns Pennsylvania CPAs with a national effort to not only increase our ability to serve our clients practicing in multiple states, but also to better protect the public interest by providing the State Board of Accountancy with stronger enforcement authority," says Eric Wallace, PICPA president.
Sen. Jake Corman (R-Centre), prime sponsor of Senate Bill 838, said, "This legislation is an important part of making Pennsylvania competitive in the global marketplace."
The CPA Law was last amended in 1996, years before the boom in Internet usage, which has dramatically changed the business world. Today, electronic filing and online commerce are the norm, and many companies have effectively become borderless because of the ease of conducting business over the Internet.
Senate Bill 838 was imperative for Pennsylvania-licensed CPAs to remain competitive with CPAs in other states, according to the National Association of State Boards of Accountancy. The law provides interstate practice mobility under "substantial equivalency," meaning that the education, examination, and experience requirements of another state are comparable to the requirements in the CPA Law. As a result, Pennsylvania CPAs will be able to provide services in all other states that embrace substantial equivalency, with no additional fees or restrictive paperwork.
To reach substantial equivalency standards, Pennsylvania increased the minimum amount of education required to obtain a CPA certificate and license from 120 to 150 hours, which is already the standard in 43 other states. It is important to note, however, that CPA candidates may still sit for the exam with only 120 hours. CPAs currently licensed in Pennsylvania will be grandfathered into the new policy, and will not need additional education to practice in other states.
Act 73 also increases the ownership share that non-CPAs may hold in accounting firms. Previously, an accounting firm must have been at least two-thirds owned by CPAs. The new law changes that to a simple majority, or 51 percent.
Along with Sen. Corman, PICPA acknowledges and thanks the following legislators who helped make passage of this legislation possible: Sens. Pat Browne, CPA, and Tommy Tomlinson, as well as Reps. Bill Adolph, Craig Dally, Gordon Denlinger, CPA, John Maher, CPA, Mike Peifer, CPA, and Mike Sturla.
Make Change Happen
Senate Bills 838 and 1063 were passed as a result of the work and dedication of PICPA members. Through testimony, letter-writing, phone calls, legislative visits, and donations to the CPA-PAC, our members made a profound change on the business climate in Pennsylvania.
Now is your chance to get involved by joining PICPA’s advocacy efforts. We are already working on legislative fixes to problems regarding the levying of the local Business Privilege Tax and the definition of net profits. In addition, PICPA will be working with legislators to develop a PA-40X form for amended tax returns and to defeat the sales tax on professional services issue that resurfaces again and again.
Go to PICPA’s Web site to sign up to be a Key Person or make an investment in CPA-PAC. Together, we can make a difference.
Peter N. Calcara is PICPA vice president of government relations. He can be reached at pcalcara@picpa.org.
Ellisith B. Henry is PICPA manager of government relations. She can be reached at ehenry@picpa.org.
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