Streamlined Earned Income Tax Collection Now Law – CPA Statute on Governor’s Desk

Senate Bill 1063 – Earned Income Tax Collection Reform

Pennsylvania Governor Edward G. Rendell, signed Senate Bill 1063 into law Wednesday, July 2 in favor of a more streamlined local income tax collection system. The bill will create a more effective and cost-efficient tax collection system, and proponents believe this law could generate millions of dollars of uncollected revenues for school districts and municipalities.

Senate Bill 1063, sponsored by Sens. Jane Earll (R – Erie) and Pat Browne, CPA (R – Lehigh), was heavily supported by organizations across Pennsylvania, including the Pennsylvania Institute of Certified Public Accountants (PICPA). Proponents view this as an important step in making Pennsylvania a more business-friendly environment.  According to Eric Wallace, CPA, PICPA President, “In offering a new, consolidated approach to earned income tax (EIT) collection, the bill will streamline processes and reduce paperwork for employers, provide accountability and oversight to ensure that tax revenue for every employee in Pennsylvania is withheld and promptly remitted to the proper municipalities and school districts.”

Pennsylvania is unrivaled in the number of jurisdictions levying local taxes – almost 2,900 - more than all other states combined.  About 560 local tax collectors are used to collect and distribute over $1.9 billion in annual revenue.  A recent Pennsylvania Economy League review estimated that as much as $237 million in earned income tax (EIT) is gone uncollected annually by municipalities and school districts. 

Bill 1063 includes a number of improvements to the current system that will alleviate such issues:

• Consolidating the EIT collection system into 69 independent tax collection districts roughly congruent with Pennsylvania’s counties, but not a function or department of county government
• Requiring that employers withhold all local income taxes imposed on the compensation of their employees and remit those taxes to only one collector, even if an employer operates in multiple counties
• Providing for more accountability, transparency, oversight, and enforcement

The bill will allow full implementation to start in 2012 with 2011 being a transition year.

Senate Bill 838 heads to the Governor’s Desk for Signing

Senate Bill 838 legislation amending and revising the Pennsylvania CPA Law, was unanimously reported June 25 by the House Professional Licensure Committee.  Passage of this legislation is necessary in order for Pennsylvania licensed CPAs to be on equal footing with CPAs in other states.

If enacted, SB 838 will allow for seamless practice mobility, require 150-hours of education prior to licensure, and allow for simple majority firm ownership by non-CPAs.  The bill is now waiting for the governor’s signature, which is expected the third week in July.