Governor Wolf signed House Bill 542 into law on October 30, 2017. This legislation makes various changes and additions to the Pennsylvania tax code.
A few of the tax highlights from the bill are as follows:
- NOL Flat Dollar Cap Eliminated
- The legislation eliminates the $5 million flat dollar cap on PA CNI NOL deductions for tax years starting after December 31, 2017. The NOL deduction will be limited to 35% of taxable income for tax years starting after December 31, 2017 and 40% for tax years starting after December 31, 2018. However, this change will be effective only after the Department of Revenue files a notice of the Nextel Communications court decision in the Pennsylvania Bulletin. Therefore, these provisions have a contingent effective date.
- New 1099-MISC Withholding Requirements
- Entities filing Form 1099-MISC who pay at least $5,000 annually as rent or nonemployee compensation to a nonresident individual or pass-through entity with a nonresident member must now withhold PA income tax from such payments.
- ABLE Contribution Deduction
- Effective October 30, 2017, contributions made to an Achieving a Better Life Experience (ABLE) account are allowed as a deduction from PA personal taxable income
- Distributions from an ABLE account are exempt from PA personal income tax
- Sales Tax – Help Desk Support
- Effective October 30, 2017, support for canned software will continue to be taxed as tangible personal property; however, help desk or call center support will be excluded if separately invoiced.
- Sales Tax Collection & Reporting Obligations on Platforms (Marketplace Sales)
- PA will become the fourth state to impose tax collection or reporting obligations on platforms (e.g. ebay.com, Amazon.com) and individuals who sell through platforms
- Effective February 1, 2018, remote sellers, marketplace facilitators or referrers with aggregate sales of $10,000 or more in the prior calendar year must file an election to either collect and remit sales tax or comply with notice and reporting requirements
- Manufacturing Innovation and Reinvestment Deduction
- The legislation add a new deduction for PA CNI purposes. Manufacturers that make a capital investment in excess of $100 million for the creation of new or refurbished manufacturing capacity are eligible for a deduction against PA CNI.
- The deduction is 5% of the private capital investment utilized in the creation or renovation of a manufacturing facility per tax year for five years
- Taxpayers must advise the Department of Community and Economic Development of the start date of any project and seek preapproval
- Tax Appeal – Shortened Timeframe
- The time period for appealing a Notice of Assessment to the Department’s Board of Appeals is being reduced from 90 days to 60 days after the mailing date of the notice of assessment. The period for appealing a decision from the Board of Appeals to the Board of Finance and Revenue is also reduced to 60 days.
- This is effective for petitions filed with the Department on or after December 29, 2017
Please contact us if you have any questions related to the changes and additions to the Pennsylvania tax code from House Bill 542.
ABOUT THE AUTHOR
Matt is a Senior Tax Manager with Brown Schultz Sheridan & Fritz and a key member of the Firm’s Tax Department. Matt has over ten years of experience servicing closely held and family-owned businesses in numerous industries, including manufacturing, distribution and construction/real estate.