thank you for joining us the following presentation is from a webinar titled 2015 Pennsylvania tax update and budget summary originally produced on July thirtieth 2015 the presenters are Jason screen neck and Michael levy both from a Conley and asbury enjoy the presentation and visit us online at WWE may c pas com for more information about our future events and upcoming webinars good afternoon my name is Jason screen a canned principal here with Macaulay and asbury Mikey B and I’m senior tax manager here at Colleen Asbury thanks for joining us this afternoon the thought process was we’re going to go in great detail with regards to the recently passed budget here in Pennsylvania unfortunately we do not have that so Mike and I were waiting waiting and waiting and as of half an hour ago we still don’t have a budget so we’re going to bring up current news events today yeah I go yeah I got a couple Jason maybe the Iran nuclear deal or how about Tom Brady’s suspension I think those would all be great subjects but I don’t think that that would qualify for cpe so unfortunately you’ve got to listen to us talk kind of talk about where we’re at with what was originally proposed under governor of wolfs budget earlier this year some other proposals that were sent out and kind of taking a look as to where we stand now after that we’re going to take a look at the 2015 corporate tax year in review kind of take enough it’s actually 1415 year in review take a look back over the past year from the department of revenue in Pennsylvania their perspective of hot and current topics and then we’ll follow it up with another Department of Revenue hit is Pennsylvania top ten i TS filing tips the IT s is is refers to the integrated taxing system so we’ll get into a little bit more detail of them so we’ll start off with the next slide so the budget where do we stand now well governor wolf when he initially put his budget out he basically put everything on the table sales and use tax income tax property tax anything you could think of was proposed I thought its kind of be unique way to start the bargaining unfortunately the legislators kind of are taking the polar opposite they don’t want any kind of tax reform and that’s kind of how we started out the budget process and usually when you have that wide of a gap you have some negotiations coming closer together closer and closer to the due date of the budget Pennsylvania’s budget was due on june thirtieth were in July and we don’t have it so we are definitely past due don’t see any any end in sight especially since the General Assembly right now is on vacation to the end of the end of august so we’re near nowhere near a budget but taking a look back when’s the last time this has happened has not happened under Corbett’s era that was for sure he corporate made sure he ran under a budget he wanted autonomy budget every year which was great for me great for us because we had something to talk about in these webinars under rundell that seemed to be every year it was overdue right about now no one’s really feeling the pinch too much some of my friends over at the State the Department of Revenue and some of the legislators and folks and Treasury they’re being inconvenience right now some of those folks are having business expenses that they can’t run through there actually have to eat it personally until the budget gets passed and then then hopefully they’ll get reimbursed for those monies yeah but this last much past August into September then you kind of look at you know furloughs employees not getting paid and nothing good with regards of that yeah and that’s been the fear in the past with when the budget hasn’t passes paychecks were withheld double they were paid and it puts people in a short term crunch definitely no one no one gets too concerned until the paycheck stop coming and then people start worrying you’ll see at the 2014-15 mean that was this this past year the budget was twenty nine point four billion you will see the total budget 71.8 billion but the only thing we really discussed and what you hear on the news is the general fund so this year the original budget proposed by Governor wolf was a twenty nine point nine billion dollars which was just under two percent increase from last year what I’ve been seeing now it’s it’s kind of bumping up over thirty billion dollars so we’ll kind of see where that

lands one thing that we’ve been talking about last couple years is the structural deficit Pennsylvania has been running a structural deficit now for last several years when this was proposed the perceived structural deficit was about 2.3 billion dollars recently the estimates put it more right around 1.3 billion dollars that related to the economics the past year better better revenue from tax reporting a little bit of that and I think it was a little bit of Pennsylvania being ultra conservative in the past there are estimates were were a little higher and they were never able to meet those estimates so I think this past year they wanted to be a little more conservative make sure that they weren’t going to get hit up with a under under revenues under what their estimates were so I think they became a little more conservative so that greatly helped the reduce the budget deficit you’ll see in our discussions later on where those additional revenues what period those revenues were coming in that were higher than estimates alright um okay we’ll go on to the next slide here you’ll see these are the highlights of the initial proposed budget first and foremost got everyone’s all the individualist attention of these Pennsylvania individual his attentions was the increased personal income tax Pennsylvania currently has a three-point oh seven percent tax rate the proposed budget put that tax rate at three point seven percent and some of the discussions was you know three-point-seven percent when you look at across the country three points right around the average it’s not you know doesn’t it’s not an outlier it’s not way above any of the other states but i think mike wants to talk about why that really isn’t a good indicator as to where we stand on a national level yeah i mean you look at three point seven percent and currently what it is just over three percent that is pretty low if you compare it to some other surrounding states and even across the the whole United States but the way Pennsylvania personal income tax works it’s very different than the way federal income tax works and a lot of states do piggyback off federal to some extent Pennsylvania you have eight different income tax buckets for instance compensation would be a different bucket than interests and that’s a different bucket than escorting chrome federal it’s just different lines so what happens in Pennsylvania is you can’t cross you take you can’t take a loss from one bucket and net that against the income from another bucket so for instance if you had compensation and you also had income for a minute or excuse me a loss from an S corp you’re not able to take that loss from that s corp and use it against the income from that from the compensation that you received from that s corp likewise you may know that you file your jointly with a spouse in Pennsylvania and you think it might be a joint return but in reality that’s not really how it works you can’t take a loss from a spouse and apply that against income from for the other spouse it’s just simply a convenience of being able to report that on on the same form but the calculations are all done separately and then carryover losses aren’t allowed at Pennsylvania as well which is also a issue for a number of tax payers and no deductions that’s a big thing no itemized deductions very few deductions you know I can think of the 529 plan as being one of the deductions that Pennsylvania has but very few that federal and other states to allow so that 37 rates actually is much higher if you’ve probably calculated a lot of the things that aren’t allowed in Pennsylvania that other states do allow exactly and that’s kind of where we wanted to point out that we’re comparing apples are changes with regards to rates most of the time with Pennsylvania in the other states the next portion is a corporate income tax rate reduction Pennsylvania has a nine point nine nine percent it is very important to Pennsylvania that they keep it under 10 so it’s 9.99 Pennsylvania has a hard time with regards to attracting business having business expand here in Pennsylvania when I talked to some folks outside Pennsylvania various conferences across the country we discussed Pennsylvania and talked about you know why aren’t you here why don’t you come into Pennsylvania and the first thing off their tongue is your corporate net income tax rates way too high Pennsylvania has the highest flat corporate tax rate in the country there’s only one other state out there Iowa that has a higher tax rate but they have a graduated rate so there are highest tax rates higher than Pennsylvania’s nine point nine percent so what Pennsylvania is proposing to do while Gummer woofs budget proposed to do is to reduce that rate to a five point

nine nine percent effective 2016 and 24.99 percent effective 11 of 2018 and the thought processes there is make Pennsylvania more attractive to work you know have businesses relocate here have businesses expand here keep businesses here that are already here so that was the main factor with regards to the rate reduction there especially when you have a budget deficit and you’re talking about rate reductions the thought process is let’s make more and better jobs here in Pennsylvania increase the sales and use tax for those people spending the dollars increase the personal income tax for the higher and new wages and that might offset some of the reduction the corporate income tax rate yeah I think another bring see corpse a little closer to what s corpse are paying in in Pennsylvania S corp capaces their income on to the individual and at a three percent or what could be a three point seven percent rate big difference to compare to the ten percent rate that corporate corporate c corporations are paying and you look at states rounding Pennsylvania they ask personal income tax and the sea corporates tend to be much closer in line with each other that’s a great point great point another way that they’re going about reducing the tax rate and making sure that it kind of makes sense from a revenue standpoint is also initiating combined reporting here in Pennsylvania basically Pennsylvania is a separate company reporting state for income tax purposes each company’s looked at separately first off to determine if they have a filing requirement and secondly to calculate the tax in the past and currently there’s being a separate company reporting state there are some planning opportunities that you can do some of them you know it’s some of them have a bad stigma associated with it the one being the Delaware investment holding company yeah you hear horror stories about how much money Pennsylvania is losing out to these Delaware holding companies I don’t think that’s the case anymore 2015 um a lot of the states out there have done away with the benefits of running a Delaware investment holding company Pennsylvania also that two years ago they enacted legislation and with regards to an ad back I’m not sure if you want to kind of talk about the ad back a little bit okay well basically the ad back is the intercompany expenses associated with intangibles Pennsylvania’s requiring effective this year 1 10 2015 requiring companies to add back intercompany expenses and intangibles that do not have a valid business purpose and are not made at arm’s length so that’s that’s trying to clean up the the stigma of the the rogue tax preparer out there creating these these rogue entities to get away with not paying tax here in Pennsylvania it’s not as common it’s not as prevalent as it was in the past when i first started my career do you believe the ad back has adequately addressed I think it has I think that it’s going to get rid of all of the sham transactions that are out there these shell corporations which have no business purpose they have no there’s no meat to this this entity they basically running out out of a corporate desk you know they just have a file cabinet and that’s all they have you know there’s always entities out there that are running intercompany transactions that have a true and valid business purpose and it just makes sense from a business perspective to run these intercompany transactions for various purposes another thing that scares the heck out of me with combined reporting and we’ll talk about the integrated taxing system down the road but to change the taxpayers tax practitioners I think everyone’s familiar with combined reporting it should be no hard task to get everyone up to speed on trading new forms and whatnot I think that the task would be to get the Department of Revenue up to speed not from a knowledge standpoint not from the individuals but from their computer systems switching from a whole new taxing regime and changing it from the Pennsylvania computers system they have now and what they’re running with and what we’ll be discussing later I could see being being very detrimental so that that’s kind of talking about how PA is trying to attract business with the governor’s proposal for corporate net income tax and I mike has a great point on the next

next topic well the state’s looking to reduce or actually make the limitation harder for to be able to use net operating losses from previous years and this is really going the opposite way of where we had been coming they had been reducing the limitations the past few years it used to be three years ago where you can only use three million or the greater of that or twelve and a half percent of your taxable income in the pre in the current year then they gradually got up to twenty percent or five million and we were going the right way because not many states limit how you can use your nol from a previous year and part of the way of being able to pay for a reduced rate corporate tax rate for C corpse is to put more restrictions on the utilization of the nol and you know it really does kill startups and that’s where you’re going incur a lot of n wells in your first four years if they’re not able to utilize these then the three or four years following there when they have these losses it what they want not be around to be able to utilize them in 15 or 20 years and and just companies that are having bad revenue years they they’re unable to use them right away because of these restrictions yeah so it’s kind of counterintuitive to the rate reduction you know the rate reductions looking to attract business and then the nol restrictions is kind of putting another handcuff on businesses here in PA so it’s kind of interesting another item that I’m sure most people have heard out there is increasing the sales and use tax rate under governor whoops proposal the sales tax rate for Pennsylvania which is currently six percent one percent for Allegheny County so it’d be seven percent in Allegheny and Philadelphia which is currently at eight percent so they have a two percent additional tax rate in Philadelphia governor wolf is talking about increasing the tax from that six to a six point six percent statewide and allegheny county would still have that additional one percent but Philadelphia they would be willing to cap their as a eight percent yes essentially they would lower that one to one point four percent additional compared to the two percent yep now so I understand why they’re talking about doing that you know the revenues that they’re looking to cut this structural deficit in addition to funding some other programs that were involved in the budget it makes sense with regards to the increase the tax rate one thing that I’m pretty opposed against is the next slot the next item which is us and the increase of the sales and use tax base so i think the rates i mean i think people can probably get over that aspect of it that doesn’t scare as many people as increasing the base what they’re proposing is increasing the what was taxable to a lot of services that are currently not taxable as well as a few other products that are there currently are exemptions for in pennsylvania i just want to read off a couple things on the list of proposed services that the the pennsylvania would start taxing transportation services real estate brokerage services legal services one we really don’t like accounting services waste collection services spectator sports another one i went personally like and some some property to that currently there are exemptions for or exclusions candy and gum would be taxable personal hygiene products would be taxable non-prescription drugs would become taxable there i mean there are still a few things that would stay exempt kind of the big three in pennsylvania food clothing and prescription drugs and then course purchases from nonprofits but you can see where when you start increasing taxes on services that weren’t previously taxable it’s it’s going to hurt a lot of difference a lot of different purchases now to avoid what commonly here as tax pyramiding basically a business performing a service for another business who then sells at retail to another company you can see where sales tax key it’s stacked on pretty quickly so there will be four services certain services that they’re proposing like the accounting and legal services a business-to-business exemption which obviously would be in favor for but if you look at something like accounting services if you’re paying tax on your tax prep fees your of course paying taxes on for income taxes and then you’re getting taxed for sales tax on the preparation fees so it’s not not quite double taxation but in some ways it oh yeah exactly yeah putting a tax on a federal state and local quirements something that’s required by

law just does not seem patently fair so I’ll step off my soap box for that but I just I just don’t agree with that up next is property tax relief take a step back to last year Pennsylvania some of the proposed legislation out there was how spell 1776 and a lot of my family and friends out there were very very excited about that because they basically said we’re getting rid of property tax well that’s great however did it really get rid of property tax under the proposal they would have pretty much done the same things with increasing sales tax rate increasing the personal income tax rate and their thought process was that they were going to reduce property taxes well let’s pump the brakes on that we’re not going to be reducing property taxes for any school that has outstanding debt they can still this you know have their property tax so I’m not sure about most you but I know the score districts around me pretty much all have debt so that pretty much means that you’re still going to have a property tax for those school districts in addition the proposal was sent to the independent fiscal office for them is you know run the numbers see you know the increased revenues doesn’t make sense to reduce the property tax by that much and the answer was a resounding no the increased revenues from the sales tax and P I t know where came near offsetting the reduced revenues associated with getting rid of the property tax and another thing that kind of scared me with regards to that is that you’re taking the property tax monies coming into the individual of the local Ocala tease and you’re moving that along to the state so Pennsylvania gets the monies and then they have to trickle it down to the localities where as how it is now property tax is going straight to the localities they have a little more authority to get the money a little more streamlined process of getting that money so that was last year what governor wolf proposed was a basically what people heard was decreased property tax by 50% there’s a little footnote there no one I’m that I know and no one in my family was going to get that in Crete that fifty percent reduction because these were specifically for localities that were distressed so folks that lived in the City of Harrisburg or maybe up in Scranton he specifically targeted distressed localities to get this tax break once again at nets just didn’t seem fair to me there’s another couple proposals out there but one that kind of made sense to me was kind of taking the property tax rebate program and expanding it so individuals with lower income that could use the property in rent rebate more would get a larger portion of that and older Pennsylvanians that are having a hard time keeping up with the increased property taxes having a hard time staying in their homes trying to target them a little bit more in addition to having a broad-based reduction in property tax across the board that that seems a lot more fair to me seems to make a lot more sense and the one proposal is very interesting because it was tied directly to the revenues associated with the sales tax increase in the p.i t increase so in periods in which the economy was doing well and Pennsylvania was receiving more revenues for those two programs for the sales and use tax and P I T increases they would directly offset additional property tax reductions so that that benefit right there is kind of nice I really wanted to make sure that the localities and kind of get handcuffed a little bit where they can’t just increase the rates fine we’re going to reduce the assessment or you know vice versa we’re going to give you a reduced assessment well fine will increase the rate well no no we’ll switch that we’re going to reduce the rate well then we’ll just increase the assessment you know there’s there’s opportunities for the local jurisdictions to play with the numbers I just want to make sure that that’s covered in any property tax reform so all for property tax reform done in the right way yeah and I really the big fear in all this is that Pennsylvanians are going to have a cost of living increase because of the personal income tax because of the sales and use tax rates going up but not many people are going to be able to experience the property tax relief associated with it and that’s kind of a message to get out there that it’s going to be a lot of bad and the goods not going to outweigh that necessarily yeah current proposal the one thing that scared the heck out of me is I was in one of the legislators

office kind of talking about this last year and they were talking about the proposal and he informed me that everyone’s a winner and you can’t have that with taxes you know you’re gonna people coming out ahead you’re gonna have people coming out you know behind you’re never going to have something where everyone’s a winner so that kind of put a slant of my eye that I I didn’t think that this was going to work some other budget items that were thrown out there was increased cigarette tax no one really ever has issues with regards to taxing the sin taxes cigarette alcohol gambling you know people’s voices they have no problems taxing that and the new bancshares tax rate we’re talking about increasing the bank shares tax rate and Jason one that’s not on there because it’s not really a budget proposal but it was actually emphasized in the governor’s speech back in i believe a march we propose it was cap stock is definitely set to go away in 2015 it’s finally its lowest rate of 0 point four five mils and if you watched the wolf’s a presentation that was the only thing that i think both sides actually agreed on and God sitteth ovation besides stood up and applauded of that so it’s it’s they’ve been talking about that for years I just a hundred percent done my I’m gonna say 99.8 I think that’s pretty high I’m yeah I was gambling man I would take those odds I felt for that two years ago I said in a presentation I’d talked about capital stock is dead week later they not only put it back on track for that current year but they said we’re gonna have it next year too so I’m not going to hold my breath they’ve been phasing out the phase-out of the original phase out of the capital stock form franchise tax for a long time but we’ll see what happens so other items that we’re hearing back and forth you know cause of concerns bargaining chips what have you is the state pension reform talked about the 1.3 billion dollar deficit that we’re currently facing a lot of that has to do with the current year portion of the unfunded liabilities for the pension funds for peacers and serves basically the teachers and state workers they are currently under a defined benefit plan and we probably won’t be in as much of a mess if in the the good days in which the economy was doing really well if they would have kept up with putting money into these in these funds the way they were supposed to do however you know we’re experiencing between five to ten percent annual increases to our economy and the thought process was let’s spend the money now we’re getting these rates of returns we’ll keep doing this in the future we’ll keep getting these you know hi single to double-digit rates of returns there should be no problem catching that that fun back up well that’s fine if you can keep the economy growing like that but it didn’t happen you know hit a dip hit a recession and the monies that were not put back in the system we’re feeling the pain now so that’s one bargaining chip that I think is going to going to happen there’s going to be some additional reforms to the pension reform liquor sales reform they’re getting better here in Pennsylvania I know there’s a my local supermarket so I take my kids go shopping and after they were done opening everything they could possibly open throwing anything sugary into the cart and they’re done screaming and yelling I stopped by right next to the checkout at the supermarket that you can buy six pack and I really need that six pack that grocery store experience it’s great I live pretty close to hersheypark so you get a lot of tourists coming in and i love it i see they’re confused looks coming out of you know or local convenience store the turkey hill or sheets and i could tell the out-of-towners because they look so confused and then they asked me where can i get a six-pack or can i get a you know case of beer work i get a bottle of wine that’s a well it depends on what you want you know if you want the bottle of wine you have to go to the liquor store if you want a six-pack you have to go to a bar if you want a case of beer you have to go to the distributorship so I think Penn liquor sales reform is going to be changing a little bit i’m not sure how much the reform will go but i think it’s one thing that will see a little bit of movement on one thing is severance or drillers tax that’s not going away i think that will have something on that original proposal was

a five percent severance tax pretty much any state that has severance and drilling extraction in their state has a severance tax so it’d be just a matter of getting pennsylvania lined up with the other states and the drillers in the they’re not paying any other tax here in PA so i think that they should be tell your your your kind of setting me up Jason on that one cuz that you know no matter what you however you do the severance tax a one just misconception that’s out there is that these drillers don’t pay any taxes and that’s just not true they’re just they’re here just like any other business they’re paying you know if there’s sort of flow through there praying personal income taxes and withholding wages they’re also paying C Corp or cap stock taxes if they’re if they’re a corporation and they also pay a one-time extraction fee currently as well so they are they are paying taxes again I think that doesn’t matter how you view it if the severance tax is good or bad but that is that is definitely misconception you see on some of these commercials all right some of the other high topics we’ve seen out there combined reporting talked about that earlier i’m not really sure it has the legs especially when we start talking about the integrated taxing system we’ll see where that goes one thing i wanted to throw out there was the vendor discount for sales and use taxes this was the big item last year for the honor and privilege of collecting and remitting sales tax pennsylvania provided that the taxpayer is entitled to a one percent discount on the taxes collected and paid if there was timely collected and timely paid to PA very generous a lot of other states have a vendor’s discounts but it’s limited so pennsylvania was looking to limit this last year and the limit was pretty small as you know maybe a couple hundred bucks per return filed so nowhere near the discount some of the large retailers were getting in the past the large retailers didn’t like that idea and they definitely reached out to the earth or local congressmen and talk to him so that that went away rather quickly last year haven’t heard anything about that this year but who knows I think there’s going to be a lot of wheeling and dealing here once they get back to Harrisburg but uh that might be something that pops up again tax on smokeless tobacco sales tax on smokeless tobacco another syntax it just makes sense especially if you’re taxing cigarettes already online gaming there they dip there when I say they Pennsylvania dip their toe in the water with regards to gambling when they started having casinos here and they did rather well as you can tell by going to Atlantic City and a lot of the hotels and casinos out there aren’t doing as well as when booked as before Pennsylvania started their own casino business I think the next step is Pennsylvania sees that online gaming there’s a lot of online gambling out there there’s a lot of money associated with that so the legalization of that here in Pennsylvania would provide the opportunity for Pennsylvania tax it got a comment Jason that liquor sales reform is the best thing you’ve said today so I don’t know if that says anything about our presentation or so up next is taking a look at the corporate tax in your review and like I said earlier this is pulled from the department pennsylvania department or revenues we get a twice a month well i’m sorry once every two months we get an update from them just got one this morning from them and they provide a lot of good information it’s quick easy and hits the topics pretty well so the one from this time last year that came out was the budget summary that was passed under Governor Corbett talking about Governor Corbett when he originally Imran and then well under his original platform he said that there was going to be no new or increased Pennsylvania taxes I didn’t quite understand how he could do that he did it though the budgets were passed without raising Pennsylvania taxes although some could say that the impact fee was a tax fee and tax or separate two different words so technically I guess it wasn’t attacks semantics but some of the things that government Corbett did last budget was some one time fixes he took some monies from some funds some grant funds that were out there that weren’t being used too much

and moved it over into the general fund there was a bank shares tax effects that are sick new casinos so they got some license fees here on PA but the one thing I thought was interesting that Mike’s been discussed briefly is the changes that you made to the abandoned unclaimed property right you was able to get as you said a one-time bump up depend on in unclaimed property without raising any type of tax or rates with that basically he took everything that was a dormancy period reporting requirement of five years and changed that to three years and dormancy period is a basically an owner who has a business that has property that belongs to someone else and am unable to track down the owner the rightful owner to it after five years of that property being doormat they have to remit that to the state so by changing that requirement for reporting requirement from five years to three years that was able revenue was able to collect a little more funds one time or initially at least one important thing to know about that that did not apply to payroll checks that remained was and is still two years dormancy period for reporting that stuff the next item under that was tips to avoid corporate tax processing errors we discussed that little further or later on in our presentation and when I was talking about the general fund that I’m sorry the corporate deficit that we’re talking about we’re reducing from about 2.3 to 1.3 billion last year the general fund total twenty eight point six billion and it was about five hundred million dollars under estimate so that’s where I was talking about them being a little more conservative going forward I think with regards to their estimates the next month or two months would be august/september of 14 Department of Revenue expanses the property tax rebate program in the past you would have to be alive for the entire year in order to be able to be eligible for property tax rebate they change that so if you’re alive during the year past you would still be eligible for a portion of your property tax well you want to be eligible for it you’re not around anymore your spouse or the trust filing on your behalf would be be able to get that rebate on your behalf there’s a debut of the new department of revenue website my class at maybe I don’t like change he asked me this morning you also don’t like computers I don’t like computers I don’t like technology it’s not so much I don’t like it it does not like me so Mike was talking about there’s nothing really changed with the website well I still like the old one better so I’m getting more and more used to the new website and I can find the information very easily it’s actually a great source for us we go to the website all the time there’s a lot of good information out there yeah i think the Department of Revenue you know we do a lot of state research across for many different states and I would say our Pennsylvania one is one of the best ones and I probably the best feature is that they’re very responsive on their QA in their own website so nope she had a formal ruling we need to go and get a private letter ruling but those can take a while so for something that’s kind of a one-off question there you can get a pretty decent response from them and it’s usually in a few days yeah definitely agree the one thing I laugh about is the Philadelphia cigarette tax so Philadelphia now charges two dollars per pack of cigarettes and that was affected the end of 2014 and they basically estimated the revenues by taking the amount of cigarettes sold last year and adding two dollars to each pack sold unfortunately some people did not realize that you can leave the city of Philadelphia to buy cigarettes so I’d be very curious to see what the their estimates worked versus what the actual revenues received work and yeah right across the river is Delaware no sales tax so and this kind of shows you the general fund was four billion dollars collected which was slightly under what they’re expecting to collect but uh nothing to be too concerned about next month our october november property tax rebate deadline approaching was to by the end of the year the business tax transitions to the integrated taxing system mike says I’m I don’t like technology so when I first started working with the Department of Revenue and you know about 20 years ago started talking to him and they kept talking about cobalt cobalt and I had no idea what the heckler talking about until they told me that’s the computer system they’re running on them oh okay and kept hearing horror stories and then

I finally asked us a wall why is it so bad it’s so bad because it’s so old and no one’s around anymore to fix the system once it’s broke so a couple years ago there is a big push to get revenue some money to upgrade their systems it’s very well needed two years ago they started off with the sales and use tax system they’re upgrading that last year they did corporate taxes and then this year they were supposed to start personal income tax well sales and use tax came through there’s a lot of griping a lot of delays but you kind of expect that when you’re going to a new system things will be better for corporate tax while they implemented corporate tax things are much better with regards to corporate tax we have a story in our office that one of our clients has a million dollars of credits on their account I don’t think that’s do them and I’m having a hard time explaining that I don’t think it’s really ours I think there’s there’s something out there that’s it’s being double counted maybe you gave us an extra million from someone else’s account but I’d be more than happy to cash the check for our client if we can get reassurances from revenue that they will never ask for that back still waiting for that phone call back from revenue but I doubt I’m going to hear from them so all the issues we had with sales and use tax and corporate tax who we were telling revenue and I think revenue finally saw the light of day that if you do this to the individuals if you start messing with the individuals monies they’re going to be coming after you with pitchforks and torches coming down to revenue that you don’t mess with the individual this morning they can accept it if you’re messing with the corporate dollars but don’t mess with my money so hopefully we’ll get the tax folks kind of steering the ship as opposed to the the third party that came in from an IT perspective and was towing the tax folks what they needed and the taxpayers kind of got left with what the IT folks said they needed so it’s not really working out very well I know we have some Department of Revenue personnel listening in also some practitioners from other firms and yeah i’m talking with department of revenue people and they know the system’s bad and it’s not their fault so always just go straight yeah I encourage you to not take your frustration out on on them because they are really trying to do their best yeah to go for more information correct all right still got a lot of slides here so we’re gonna start going through some of these little more quicker December 14 January 15 came out with bonus depreciation clarification Mike I don’t think it was much nothing nothing really new i think that the confusing thing is that see corpse and and pass Randy’s have different rules see corpse have kind of a strange calculation of three-sevenths add back it’s on the form ravick 799 so there’s just some tips on how to properly count for that for see corpse and the big thing that always take away from that and the clarification is that the calculation will never add up correctly so whenever the assets done being depreciated for federal purposes you can have a one-time catch up for for pennsylvania and some people forget that that’s Jake’s place for life right exactly you see us and use tax desk audit was announced that’s being handled by Pennsylvania’s passed through Department there’s not much information out there I just kind of been be aware that it’s out there running exists I think that what they’re basically looking at our past filers that stopped filing for some reason they’re looking to see why or businesses that they usually expect to receive sales and use tax returns and they’re not getting them from these entities so I think that’s going to be the first you know kind of kind of sweep try to get the low-hanging fruit on that one general fund you’ll see that the for this period we are 103 million dollars over estimates so that kind of where we’re building up to that that that reduction of the deficit for this year next up we have februari march talked about governor Wolf’s proposed budget announcement we went over that Pennsylvania joins the multi state tax commission the multi state tax commission is a group of states there’s 24 other states that are involved in the joint audit program MTC the multi state tax commission offers two joint auto programs one for corporate and one for sales and use tax pennsylvania joined up for corporate tax purposes so the MTC is basically made up of these various states entering in choosing entities in which they want to audit so they choose the the taxpayer to audit and then they

have their MTC audit or go out and audit these taxpayers on behalf of the various states so it’s basically you know 12 to 24 state audit all in one shot the one thing to be aware of is you’re not going to get 12 to 24 autos assessments or at one time there would stagger that but MTC works with the taxpayer comes up with an audit provides it to the various states and then it’s in the state’s hands whether they want to issue an assessment based upon the auto findings or if they just want to just kind of ignore it or maybe they want to do their own audit which is not a good gadhada it’s not a wise thing to do it’s kind of recreating the overall expense you know the daughter was already done once by the MTC if you go back and redo an audit you’re wasting the taxpayers time and you’re just to placate affair I actually have an article out there on the CPA journal with regard to the multi state tax commission if you want some additional information on that department of revenue eliminates billing notices I think Pennsylvania had way too many notices going out and confusing people so reduce in one of the notices I think it’s a good idea you see the budget was 377 point six million dollars over estimates for the for the year up to this period so next month April May additional electronic filing and payment options more money towards property tax rebate and you’ll see here we’re almost up to five hundred seventy million dollars over the estimate from prior year so that’s kind of where you saw the reduction in the budget deficit so up next this past year actually had to corporate notices 14 bancshares tax kind of took a look out there I didn’t see anyone out there in the banking industry if anyone has questions on that please reach out to me and then a corporate tax bulletin on the application and sales of restrictive tax credits yeah and this is a really good bulletin it’s essentially just an update to the bullet and I came out 2011 03 so really not make changes in that other than there’s at least one new cred historic preservation tice created this provides different treatments and there’s different restrictions for each restricted cred depending on if it’s en AP or the rd or the reef cred so that’s just a really good guide on knowing how those credits can be utilized and sold and good news we are halfway done with our presentation I’m just kidding we got a pen people leave we got a couple more minutes left here and we haven’t gotten any questions so we’re just going to keep rolling right through here and Mike’s going to give just a couple updates with regards to the Department of Revenue’s top ten filing tips yeah we’re going to go really really quick through this lets jason said first ones kind of pretty obvious you would think based on the heading of use the correct form if you dig down deep it basically RCT 10 ones used to be a year by year form but now they are the specific year would not be filled in and be filled in by the taxpayer software and that allows for changes for fiscal year taxpayers depending on what the year is if they’re and the rates have changed for cap stocks that allows that to the properly count for that properly submitting amended returns it’s important if you’re doing amended return don’t just submit the section that you’re amending but actually submit the entire return again along including the section that you’re amending including any boxes that were checked originally want to make sure it’s scrubbed down and completed just like the original exactly exactly don’t don’t use a letters when there should be in cells that are actually should be numbers for instance if you have a Porsche mint if you put none in Pennsylvania or not apical the department revenues system is going to actually kick that out and say it’s a hundred percent so you could get a pretty large tax bill when you really should have had no tax bill you know and 0 over 0 is one hundred percent yes so it’s 0 / 10 for Pennsylvania just make sure jason said use your checkboxes appropriately both on amended and original returns if you’re a holding company make sure you check that box or if you use that ten percent rate it will kick that out and not allow that provide all information about the taxpayer correctly including the corporate tax ID ein anything with the address also for

the capital stock tax make sure that the history of earnings which is the top calculation top part of that calculation is accurately represents the history of the of the earning book earnings of the company don’t make changes to that history from year to year because that will automatically trigger and notice with the department revenue don’t have gaps in between the years what you need to report is through your most recent five years and if it goes you have a couple short years in error that would make it go over five years then it would be your most complete period up until five years hopefully you’ll have to worry about this after the next year and then make sure you claim bonus depreciation properly as we talked about before the Rev 799 so somewhat of a complicated complication but that’s one that department revenue will send notice is out for we talked about a Porsche mints and jason said 200 yeah don’t don’t do that make sure that the denominator actually adds up to what the the number on the federal return would be just given doubt if you have a partnership activity if you have a partner that partnership that owns another partnership make sure you take that partnership share of assets and payroll and include that in the Porsche meant for the the owning the owning partnership I’m impressed Mike Lee we actually got over 50 minutes of information about the budget without having a budget just think what we could do if we actually had a budget yeah probably to make it a two hour see what’s on it will send it back to Tyler and I we do have looks like one or two questions here and then he’ll throw it back to us alright so we’re kind of over our time slot here but we did have one major concern that I kind of want to throw out there on the question was whether with the reforms to the sales and use tax base does that have any implications with regards to manufacturing or processing exemption yeah and that currently under the proposed budget that is not on the table for removal so I’d be protected and I you don’t really see that coming back on no I think they’re pretty much safe because that’s one area that Pennsylvania well any state is trying to increase the manufacturing jobs and their in their state it’s a good job it’s a well-paying job so that that’s one thing that I don’t see changing anytime soon right same with processors as well and or purchases made certain purchases made by government entities and and nonprofits and then we’ve got another question about Tom Barry suspension but that was really weird we are not experts on that as long as he’s out for the season opener against the Steelers I’m all for it well thank you everyone for taking the time out of your day to join us and we look forward to talking to you soon if anyone has questions or concerns or contact informations right there please feel free to reach out to us thanks Lex thanks everyone thank you once again for joining us for this presentation produced by McConnell and asbury we hope you join us and participate in our upcoming events you can stay up to date with news and learn more about our upcoming events by visiting us at ww ma c pas com thanks again and have a great day