Below is an overview of the significant tax changes recently enacted by Pennsylvania. The legislation includes the provision of a tax amnesty period, changes to the apportionment of business income and net operating loss deduction, acceleration of the payment of withholding tax and sales and use tax, and changes to the capital stock/foreign franchise tax rates, as well as an electronic filing mandate.
Tax Amnesty
Pennsylvania will have a tax amnesty period from April 26, 2010 to June 18, 2010. During this period the Department of Revenue will waive all penalties and half of the interest on eligible taxes that are delinquent as of June 30, 2009. Any tax administered by the Department of Revenue is eligible under the amnesty program. The following tax liabilities are eligible under the Tax Amnesty Program:
- 1) Tax liabilities due within five years prior to June 30, 2009 for which either no return was filed, no payment was made, and the taxpayer has not been contacted by the Department of Revenue regarding the unfiled return or unpaid tax;
- 2) Tax liabilities due within five years prior to June 30, 2009 where a return was filed but the tax was underreported and the taxpayer has not been contacted by the Department of Revenue regarding the underreported tax.
Corporate Net Income Apportionment
The following changes were made to the Corporate Net Income (CNI) apportionment factors for tax years beginning after December 31, 2008:
|
Tax years beginning after 12/31/08 |
Tax years beginning before 12/31/08 | |
| Property Factor |
8.5 |
15 |
| Payroll Factor |
8.5 |
15 |
| Sales Factor |
83 |
70 |
For tax years beginning after December 31, 2009 the following apportionment factors apply:
| Property Factor |
5 |
| Payroll Factor |
5 |
| Sales Factor |
90 |
Net Operating Loss Deduction
For tax years beginning after December 31, 2008 the net operating loss deduction limit is increased to the lesser of 15% of taxable income, $3 million, or the amount of net loss that may be carried over. For tax years beginning after December 31, 2009 the net operating loss deduction limit is increased to the lesser of 20% of taxable income, $3 million, or the amount of net loss that may be carried over. The net operating loss deduction limit for tax years beginning after December 31, 2006 but before December 31, 2008 was the lesser of $3 million or 12.5% of taxable income, or the amount of net loss that may be carried over.
Withholding Tax and Sales and Use Tax
Effective October 9, 2009 the due date for filing and payment of employer withholding tax to Pennsylvania will be based upon the employer’s estimate of their annual withholding instead of their quarterly withholdings. Therefore, an employer will pay the Pennsylvania withholding tax as follows:
|
Annual Income Tax Withheld |
Filing and Payment Due Date |
|
Less than $1,200 |
On or before the last day for filing a quarterly return |
|
Greater than $1,200 and less than $4,000 |
Monthly, on or before the 15th of the month succeeding the months of January to November and on or before the 31st day of January following the month of December |
|
Greater than $4,000 and less than $20,000 |
Semi-monthly, within 3 banking days after the close of the semi-monthly period |
|
Greater than $20,000 |
The Wednesday after the payday if the payday falls on Wednesday, Thursday, or Friday; or on the Friday after the payday if the payday falls on a Saturday, Sunday, Monday, or Tuesday. |
Also effective October 9, 2009, licensees whose total sales tax for the third quarter of 2008 is $25,000 or more must file and pay sales and use tax semi-monthly instead of monthly. The due date to file and pay the sales tax for sales tax collected from the first through the 15th of the month is the 25th of the month. The due date to file and pay the sales tax for sales tax collected from the 16th through the end of the month is the 10th of the following month. Taxpayers whose sales tax was at least $600 but less than $25,000 for the third quarter of 2008 will continue to file and pay sales and use tax monthly. A taxpayer who is required to file semi-monthly will not be required to file monthly. In addition, the sale or use of helicopters and helicopter parts is exempt from Pennsylvania sales and use tax.
Capital Stock/Foreign Franchise Tax Rate
The capital stock valuation deduction was increased from $150,000 to $160,000. In addition, the following changes were made to the Capital Stock/Foreign Franchise Tax Rate:
|
Prior to Change |
After Change |
|
| Tax years beginning on or after January 1, 2008 but on or before December 31, 2008 |
2.89 |
2.89 |
| Tax years beginning on or after January 1, 2009 but on or before December 31, 2009 |
1.89 |
2.89 |
| Tax years beginning on or after January 1, 2010 but on or before December 31, 2010 |
.89 |
2.89 |
| Tax years beginning on or after January 1, 2011 but on or before December 31, 2011 |
N/A |
2.89 |
| Tax years beginning on or after January 1, 2012 but on or before December 31, 2012 |
N/A |
1.89 |
| Tax years beginning on or after January 1, 2013 but on or before December 31, 2013 |
N/A |
.89 |
Electronic Filing Mandate
Drucker & Scaccetti will be required to file all Pennsylvania returns electronically. The Department of Revenue may waive the requirement to file electronically if either filing electronically causes an undue hardship or the preparer or taxpayer requests a waiver in writing that clearly states why filing electronically causes an undue hardship.
We hope this information is helpful. If you would like more details about this or any other aspect of the new law, please call our offices at (215) 665-3960 and ask to speak to one of our shareholders or email us at info@taxwarriors.com .