corporate tax update recent developments in pa taxes · 2020-05-15 · • wayfair supreme court...

RECENT DEVELOPMENTS IN PA TAXES

Presented By:

JASON SKRINAK, CPAState and Local Tax Practice Leader

Corporate Tax Update

• Pennsylvania Budget Review and What to Expect Going Forward

• Corporate Tax Updates

• Sales Tax Updates

• Federal Tax Reform Impact on Pennsylvania

• Tax Foundation – Pennsylvania Report

• Wayfair Supreme Court Decision

Agenda

• Passed on time!

• Combined reporting and severance tax proposed, did not make the budget

• Increased education and healthcare spending

• Expands the Education Improvement Tax Credit by $25 million

2018-2019 Pennsylvania Budget

• Combined reporting?

• Review credit programs

• Review overall tax landscape• Personal income tax

• Corporate net income tax

• Sales and use tax

2019-2020 Budget Forecast

• Pennsylvania Research and Development applications required to be filed online

• Final phase of Modernization Project – Personal Income Tax, Pass-Through Entity Processing, Property Tax Rebate, etc.

• Electronic correspondence available in E-Tides

PA Department of Revenue Updates

• New Modernization Project kick-off, May 2018 – goal to improve customer service• Phase 1 – Motor & Alternative Fuels Tax, International Fuels

Tax (IFTA)

• Phase 2 – Realty Transfer and Inheritance Tax

• Phase 3 – Personal Income Tax, Property Tax/Rent Rebate and Pass-Through Entity

• Pennsylvania bonus depreciation – Corporate Tax Bulletin 2018-03

• 1099 non-resident withholding updates• Originally effective 1/1/18, now 7/1/18

• Withholding exemption form – Rev-1832

PA Department of Revenue Updates (continued)

• Increased audit activity• Restaurants, bars, pubs and other eateries

• Vehicle sales tax enforcement

• Desk audits – 1099-K credit sales vs. cash sales reported

• Computer software and services policy• Digital goods deemed taxable tangible personal property

• Information retrieval services taxable

• Maintenance, updates and support to digital goods are taxable – Act 84

• Letter Ruling SUT-17-001, issued 2/2017 and revised 4/2017

Pennsylvania Sales Tax Updates

• Pennsylvania does not automatically conform to IRC for individual taxes

• Pennsylvania conforms to IRC for corporate taxes unless they specifically decouple from certain provisions

• Corporate Net Operating Loss – Pennsylvania does not conform (Nextel Case)• Prior capped amount or percentage of taxable income

• Current, Nextel Decisions – Percentage of Net Income

• Net Interest Expense – Pennsylvania has not decoupled from federal treatment. Issues for intercompany debt.

Federal Tax Reform Impact on PA

• 100% Bonus Depreciation• Pennsylvania prior policy to accept bonus depreciation

• New policy to not allow any depreciation on bonus assets until disposed

• Act 72 – decouples from federal bonus but allows MACRS depreciation

• Repatriation Transition Tax (RTT)• Pennsylvania Information Notice 2018-01, dated April 20, 2018

• RTT income subject to Pennsylvania corporate net income tax

• RTT deduction included in calculation

• Net RTT income treated as dividend received deduction

• No portion of RTT is included in sales factor

Federal Tax Reform Impact on PA (continued)

• Personal Income Tax• The Good

• Low tax rate

• Imposed on broad-based income

• The Bad• Rate difference between corporate and personal

• Retirement income carve-out

• Various classes of income

• Corporate Income Tax• The Good • The Bad

• Tax rate (2nd highest)• NOL limitations (1 of 2 states)

• Corporate credits

Tax Foundation – Pennsylvania Tax Study

• Sales and use tax nexus case – decided June 21, 2018• Provides economic nexus standard

• $100,000 and/or 200 separate transactions

• Impact on business• States starting to implement Wayfair standard going forward

• Physical presence standard for prior periods

• Registration and sales tax compliance going forward

South Dakota v. Wayfair

QUESTIONS?

FOCUSED.ON YOU.JASON SKRINAKjskrinak@rklcpa.com | RKLcpa.com