PRINTER'S NO. 972
THE GENERAL ASSEMBLY OF PENNSYLVANIA
HOUSE BILL
No.
866
Session of
2017
INTRODUCED BY DUNBAR, O'NEILL, ENGLISH, GROVE, A. HARRIS, HELM,
LAWRENCE, MILLARD, ORTITAY, PEIFER, PICKETT, REESE AND RYAN,
MARCH 16, 2017
REFERRED TO COMMITTEE ON FINANCE, MARCH 16, 2017
AN ACT
Amending the act of December 31, 1965 (P.L.1257, No.511),
entitled "An act empowering cities of the second class,
cities of the second class A, cities of the third class,
boroughs, towns, townships of the first class, townships of
the second class, school districts of the second class,
school districts of the third class and school districts of
the fourth class including independent school districts, to
levy, assess, collect or to provide for the levying,
assessment and collection of certain taxes subject to maximum
limitations for general revenue purposes; authorizing the
establishment of bureaus and the appointment and compensation
of officers, agencies and employes to assess and collect such
taxes; providing for joint collection of certain taxes,
prescribing certain definitions and other provisions for
taxes levied and assessed upon earned income, providing for
annual audits and for collection of delinquent taxes, and
permitting and requiring penalties to be imposed and
enforced, including penalties for disclosure of confidential
information, providing an appeal from the ordinance or
resolution levying such taxes to the court of quarter
sessions and to the Supreme Court and Superior Court," in
local taxes, further providing for definitions, for payroll
tax, for payment of tax to other political subdivisions or
states as credit or deduction and withholding tax, for
limitation on assessment and for tax limitations; in
consolidated collection of local income taxes, further
providing for definitions, for declaration and payment of
income taxes, for tax collection committees, for powers and
duties of Department of Community and Economic Development,
for powers and duties of tax officer and for withholding and
remittance; and, in collection of delinquent taxes, further
providing for penalties and for costs of collection of
delinquent per capita, occupation, occupational privilege,
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emergency and municipal services, local services and income
taxes.
The General Assembly of the Commonwealth of Pennsylvania
hereby enacts as follows:
Section 1. Section 301(a) of the act of December 31, 1965
(P.L.1257, No.511), known as The Local Tax Enabling Act, is
amended by adding definitions to read:
Section 301. Definitions.--(a) The following words and
phrases when used in this chapter shall have the meanings given
to them in this section unless the context clearly indicates
otherwise:
"Contingent fee audit" means an audit of a taxpayer's books
and records for which the collection fee is based on a
percentage of tax assessed or collected, or both.
* * *
"Private collection agency" means a business entity or person
appointed to audit taxpayers and collect delinquent taxes.
* * *
Section 2. Sections 303(g), 317 and 319 of the act are
amended to read:
Section 303. Payroll Tax.--* * *
(g) A city of the second class may bring suit for the
recovery of taxes due and unpaid under this section. Any suit
brought to recover the tax imposed by this section shall be
commenced within three years after such tax is due or within
three years after the declaration or return has been filed,
whichever is later: Provided, however, That this limitation
shall not prevent the institution of a suit for the collection
of any tax due or determined to be due in the following cases:
(1) Where no declaration or return was filed by any person
although a declaration or return was required to be filed by him
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under provisions of this section, there shall be no limitation.
(2) Where an examination of the declaration or return filed
by any person or of other evidence relating to such declaration
or return in the possession of the city of the second class
reveals a fraudulent evasion of taxes, there shall be no
limitation.
(3) In the case of substantial understatement of tax
liability of twenty-five percent or more and no fraud, suit
shall be begun within six years.
(4) This section shall not be construed to limit the
governing body from recovering delinquent taxes by any other
means provided by law, with the exception of contingent fee
audits by a private collection agency, which shall be
prohibited.
* * *
Section 317. Payment of Tax to Other Political Subdivisions
or States as Credit or Deduction; Withholding Tax.--(a) Payment
of any tax to any political subdivision pursuant to an ordinance
or resolution passed or adopted prior to the effective date of
this act shall be credited to and allowed as a deduction from
the liability of taxpayers for any like tax respectively on
salaries, wages, commissions, other compensation or on net
profits of businesses, professions or other activities and for
any income tax imposed by any other political subdivision of
this Commonwealth under the authority of this [chapter] act.
(b) Payment of any tax on salaries, wages, commissions,
other compensation or on net profits of business, professions or
other activities to a political subdivision by residents thereof
pursuant to an ordinance or resolution passed or adopted under
the authority of this [chapter] act shall be credited to and
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allowed as a deduction from the liability of such persons for
any other like tax respectively on salaries, wages, commissions,
other compensation or on net profits of businesses, professions
or other activities imposed by any other political subdivision
of this Commonwealth under the authority of this [chapter] act.
(c) Payment of any tax on income to any political
subdivision by residents thereof pursuant to an ordinance or
resolution passed or adopted under the authority of this
[chapter] act shall, to the extent that such income includes
salaries, wages, commissions, other compensation or net profits
of businesses, professions or other activities, but in such
proportion as hereinafter set forth, be credited to and allowed
as a deduction from the liability of such persons for any other
tax on salaries, wages, commissions, other compensation or on
net profits of businesses, professions, or other activities
imposed by any other political subdivision of this Commonwealth
under the authority of this chapter.
(d) Payment of any tax on income to any state or to any
political subdivision thereof by residents thereof, pursuant to
any State or local law, [may, at the discretion of the
Pennsylvania political subdivision imposing such tax] shall, to
the extent that such income includes salaries, wages,
commissions, or other compensation or net profits of businesses,
professions or other activities but in such proportions as
hereinafter set forth, be credited to and allowed as a deduction
from the liability of such person for any other tax on salaries,
wages, commissions, other compensation or net profits of
businesses, professions or other activities imposed by any
political subdivision of this Commonwealth under the authority
of this [chapter,] act if residents of the political subdivision
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in Pennsylvania receive credits and deductions of a similar kind
to a like degree from the tax on income imposed by the other
state or political subdivision thereof.
(e) Payment of any tax on income to any State other than
Pennsylvania or to any political subdivision located outside the
boundaries of this Commonwealth, by residents of a political
subdivision located in Pennsylvania shall, to the extent that
such income includes salaries, wages, commissions, or other
compensation or net profits of businesses, professions or other
activities but in such proportions as hereinafter set forth, be
credited to and allowed as a deduction from the liability of
such person for any other tax on salaries, wages, commissions,
other compensation or net profits of businesses, professions or
other activities imposed by any political subdivision of this
Commonwealth under the authority of this [chapter.] act .
(f) Where a credit or a deduction is allowable in any of the
several cases hereinabove provided, it shall be allowed in
proportion to the concurrent periods for which taxes are imposed
by the other state or respective political subdivisions, but not
in excess of the amount previously paid for a concurrent period.
(g) No credit or deduction shall be allowed against any tax
on earned income imposed under authority of this [chapter] act
to the extent of the amount of credit or deduction taken for the
same period by the taxpayer against any income tax imposed by
the Commonwealth of Pennsylvania under section 314 of the act of
March 4, 1971 (P.L.6, No.2) known as the "Tax Reform Code of
1971," on account of taxes imposed on income by other states or
by their political subdivisions.
Section 319. Limitation on Assessment.--No assessment may be
made of any earned income tax imposed under this [chapter] act
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more than five years after the date on which such tax should
have been [paid] filed, including extended due dates, except
where a fraudulent return [or no return] has been filed.
Section 3. Section 320 of the act is amended by adding a
subsection to read:
Section 320. Tax Limitations.--* * *
(c) Domicile.--An individual who does not meet the domicile
requirements for the purpose of determining and paying the tax
provided under Article III of the act of March 4, 1971 (P.L.6,
No.2), known as the "Tax Reform Code of 1971," shall be deemed
to not meet the domicile requirements for local tax purposes.
Section 4. The definitions of "nonresident," "nonresident
tax" and "taxpayer" in section 501 of the act are amended and
the definition of "earned income" is amended by adding a
paragraph to read:
Section 501. Definitions.
The following words and phrases when used in this chapter
shall have the meanings given to them in this section unless the
context clearly indicates otherwise:
* * *
"Earned income." The compensation as required to be reported
to or as determined by the Department of Revenue under section
303 of the act of March 4, 1971 (P.L.6, No.2), known as the Tax
Reform Code of 1971, and rules and regulations promulgated under
that section subject to the following:
* * *
(3) For purposes of collection of earned income and net
profits taxes under this chapter and for crediting purposes
under section 317, the term shall include all taxes on earned
income or net profits whether authorized by this act or any
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other law of this Commonwealth unless the law expressly
provides otherwise.
* * *
"Nonresident." A person or business domiciled outside the
political subdivision levying the tax and performing services
within the political subdivision levying the tax for at least 90
or more consecutive days.
"Nonresident tax." An income tax levied by a municipality on
a nonresident who has performed services within the political
subdivision levying the tax for at least 90 or more consecutive
days.
* * *
"Taxpayer." A person or business required under this act to
file a return of an income tax or to pay an income tax. The term
includes a person or business that filed a return of taxable
income during the prior year but that had no taxable income
during the current year and was required by the tax collector to
file a final return indicating why the person or business no
longer has taxable income. The term does not include a person or
business with no taxable income, which person or business shall
not be required to file a return of income or to pay an income
tax under this act.
* * *
Section 5. Section 502(c) of the act is amended by adding a
paragraph to read:
Section 502. Declaration and payment of income taxes.
* * *
(c) Declaration and payment.--Except as provided in
subsection (a)(2), taxpayers shall declare and pay income taxes
as follows:
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* * *
(5) Every taxpayer subject to the declaration and
payment provisions under this section shall be deemed to have
met the requirements and therefore not be subject to a
penalty so long as one of the following safe harbor
exceptions is met:
(i) Make four equal, timely estimated payments equal
to 100% of the prior year's tax less any earned income
tax withheld for the current year.
(ii) Make four equal, timely estimated payments
equal to 90% of the current year's tax less any earned
income tax withheld for the current year.
* * *
Section 6. Section 505(a.1)(7) and (h)(1) and (2) of the act
are amended and the section is amended by adding a subsection to
read:
Section 505. Tax collection committees.
* * *
(a.1) Duties.--A tax collection committee has the following
duties:
* * *
(7) To adopt, amend and repeal policies and procedures
consistent with the regulations under section 508 for the
administration of income taxes within the tax collection
district. The procedures shall supersede any contrary
resolutions or ordinances adopted by a political subdivision
and no additional forms, policies or procedures may be
adopted other than those promulgated by the department unless
permitted by the department under subsection (a.3). This
authority shall not be construed to permit a tax collection
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committee to change the rate or subject of any tax.
* * *
(a.3) Form.--Beginning January 1, 2020, in administering
this act, no political subdivision, tax collection committee or
tax officer may use any form other than that which is
promulgated by the department unless, for religious reasons, the
department expressly grants an exception to this requirement .
* * *
(h) Audits of taxes received and disbursed.--
(1) By the end of each calendar year, the tax collection
committee shall provide for at least one examination for each
calendar year of the books, accounts, financial statements,
compliance reports and records of the tax officer by a
certified public accountant or public accountant approved by
the tax collection committee. The examination shall be
conducted on a calendar year basis. An examination conducted
on any other basis shall not be accepted by the department,
and failure to comply with this requirement shall be
considered noncompliance with this act resulting in the
imposition of penalties under section 510. The examination
shall include an audit of all records relating to the cash
basis receipt and disbursement of all public money by the tax
officer, a reconciliation of the monthly reports required by
section 509(b), an analysis of the bond amount under section
509(d) and an analysis of the collection fees charged to the
tax collection committee. In the case of a private agency,
the examination shall not include payroll and other
proprietary information. The examination shall be conducted
according to generally accepted governmental auditing
standards.
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(2) The certified public accountant or public accountant
shall issue a report, on a calendar year basis and in a
format prescribed by the department, to the tax collection
committee, which shall include an auditor's opinion letter, a
financial statement for the year ending December 31, a
reconciliation of the monthly reports required by section
509(b) with the receipts and disbursements on a calendar year
basis, a summary of collection fees charged to the tax
collection committee on a calendar year basis, a report on
the tax officer's compliance with this act, a list of any
findings of noncompliance with this act and a copy of a
management letter if one is issued by the auditor. If there
are findings of noncompliance, a copy of the report shall be
filed with the Department of the Auditor General and the
department. A copy of the report shall be filed with all
political subdivisions within the tax collection district and
the department on or before September 1 of the succeeding
year. The department may make available on its Internet
website summary data from the reports filed under this
subsection. The department may reject any report which is not
in the proper format and does not meet the requirements of
this paragraph. Failure to correct the submission within 30
days of the rejection shall constitute noncompliance with
this act and result in the imposition of penalties under
section 510.
* * *
Section 7. Section 508 of the act is amended by adding a
subsection to read:
Section 508. Powers and duties of the department.
* * *
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(g) Oversight.--The department shall oversee all tax
collection committees, tax collectors and tax collection
offices. In exercising this duty the department shall:
(1) Provide the public with a method to report tax
collection issues.
(2) Ensure that all ordinances, rules, regulations and
forms adopted in the collection of the earned income and net
profits taxes are those promulgated by the department.
Section 8. Section 509(b) of the act is amended to read:
Section 509. Powers and duties of tax officer.
* * *
(b) Monthly reports.--
(1) The tax officer shall, within 20 days after the end
of each month, provide a written report, on forms prescribed
by the department, to the secretary of the tax collection
committee and to the secretary of each political subdivision
in the tax collection district for which taxes were collected
during the previous month.
(2) The report shall include a breakdown of all income
taxes, income generated from investments under subsection (a)
(6), penalties, costs and other money received, collected,
expended and distributed for each political subdivision
served by the tax officer and of all money distributed to tax
officers for other tax collection districts.
(3) The report shall also include a calendar year-to-
date total column of all the items enumerated in paragraph
(2).
(4) In addition to the duty imposed under paragraph (1),
a copy of the December monthly report shall be filed with the
department.
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* * *
Section 9. Section 512(a)(3) and (7) of the act, amended
November 4, 2016 (P.L.1154, No.150), are amended to read:
Section 512. Withholding and remittance.
(a) General rule.--For taxable years commencing on and after
January 1, 2012, or earlier taxable years if specified by a tax
collection district, income taxes shall be withheld, remitted
and reported as follows:
* * *
(3) Every employer having an office, factory, workshop,
branch, warehouse or other place of business within a tax
collection district that employs one or more persons, other
than domestic servants, for a salary, wage, commission or
other compensation, shall, at the time of payment, deduct
from the compensation due each employee employed at such
place of business the greater of the employee's resident tax
or the employee's nonresident tax as released in the official
register under section 511. In the case of employees with
temporary job assignments, the employer shall withhold and
remit the following taxes:
(i) Employees working for less than 90 consecutive
days at a job location, the greater of the employee's
resident tax or the employee's nonresident tax based on
the location of the permanent home office of the
employer.
(ii) Employees working for 90 or more consecutive
days at a job location, the greater of the employee's
resident tax or the employee's nonresident tax based on
the job location.
(iii) Employees working in the City of Philadelphia
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shall be exempt from the provisions of this section to
the extent they are subject to the act of August 5, 1932
(Sp.Sess., P.L.45, No.45), referred to as the Sterling
Act.
* * *
(7) On or before February 28 of the succeeding year,
every employer shall file with the tax officer where income
taxes have been deducted and remitted pursuant to paragraph
(3):
(i) An annual return showing, for the period
beginning January 1 of the current year and ending
December 31 of the current year, the total amount of
compensation paid, the total amount of income tax
deducted, the total amount of income tax paid to the tax
officer and any other information prescribed by the
department.
(ii) An individual withholding statement, which may
be integrated with the Federal Wage and Tax Statement
(Form W-2), for each employee employed during all or any
part of the period beginning January 1 of the current
year and ending December 31 of the current year, setting
forth the address and Social Security number, the amount
of compensation paid to the employee during the period,
the amount of income tax deducted, [the amount of income
tax paid to the tax officer,] the numerical code
prescribed by the department representing the [tax
collection district where the payments required by
paragraphs (4) and (5) were remitted] political
subdivision of the employee's work location and, in the
case where an employer has made an election under
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paragraph (5) to file with a single tax officer , the two-
digit code representing the tax collection district to
whose tax officer the withheld taxes were remitted in the
format of xxxxxx-xx and any other information required by
the department. Every employer shall furnish one copy of
the individual withholding statement to the employee for
whom it is filed.
* * *
Section 10. Section 706 of the act is amended to read:
Section 706. Penalties.--(a) Except as otherwise provided
in the case of any tax levied and assessed upon income, any such
political subdivision shall have power to prescribe and enforce
reasonable penalties for the nonpayment, within the time fixed
for their payment, of taxes imposed under authority of this act
[and for the violations of the provisions of ordinances or
resolutions passed under authority of this act].
(b) If for any reason any tax levied and assessed upon
income by any such political subdivision is not paid when due,
interest and penalties as provided in section 509(i) shall be
added and collected. When suit is brought for the recovery of
any such tax, the person liable therefor shall, in addition, be
liable for the costs of collection and the interest and
penalties herein imposed.
(c) In addition to any other power provided by this act, a
tax collector or officer may abate any penalty imposed under any
provision of this act.
Section 11. Section 707 of the act is amended by adding a
subsection to read:
Section 707. Costs of Collection of Delinquent Per Capita,
Occupation, Occupational Privilege, Emergency and Municipal
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Services, Local Services and Income Taxes.--* * *
(d) A contingent fee audit may not be conducted in the
collection of delinquent taxes.
Section 12. This act shall take effect in 60 days.
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