Regular Session 2019-2020 House Bill 0926 P.N. 1058

PRINTER'S NO. 1058

THE GENERAL ASSEMBLY OF PENNSYLVANIA

HOUSE BILL

No.

926

Session of

2019

INTRODUCED BY GREINER, DUNBAR, RYAN, PICKETT, MILLARD,

ZIMMERMAN, MENTZER, BERNSTINE, LAWRENCE, COX, PEIFER, FEE AND

SANCHEZ, MARCH 25, 2019

REFERRED TO COMMITTEE ON FINANCE, MARCH 25, 2019

AN ACT

Amending the act of March 4, 1971 (P.L.6, No.2), entitled "An

act relating to tax reform and State taxation by codifying

and enumerating certain subjects of taxation and imposing

taxes thereon; providing procedures for the payment,

collection, administration and enforcement thereof; providing

for tax credits in certain cases; conferring powers and

imposing duties upon the Department of Revenue, certain

employers, fiduciaries, individuals, persons, corporations

and other entities; prescribing crimes, offenses and

penalties," in personal income tax, further providing for tax

withheld, for withholding tax requirement for nonemployer

payors, for information statement for nonemployer payors, for

information statement for payees, for time for filing payors'

returns, for payment of taxes withheld for nonemployer payors

and for liability for withheld taxes, repealing provisions

relating to payor's liability for withheld taxes, further

providing for bulk and auction sales and transfers and

notice, repealing provisions relating to payor's failure to

withhold, providing for annual withholding return, repealing

provisions relating to withholding on income and to annual

withholding statement and further providing for interest and

for additions, penalties and fees.

The General Assembly of the Commonwealth of Pennsylvania

hereby enacts as follows:

Section 1. Sections 312, 316.2, 317.1, 317.2, 318.1, 319.1

and 320 of the act of March 4, 1971 (P.L.6, No.2), known as the

Tax Reform Code of 1971, are amended to read:

Section 312. Tax Withheld.--The amount withheld under

[section] sections 316.1 and 316.2 shall be allowed to the

taxpayer from whose income the tax was withheld as a credit

against the tax imposed on him by this article.

Section 316.2. Withholding Tax Requirement for Nonemployer

Payors and Lessees.--(a) To the extent not already required to

withhold tax on payments under section 316.1, a person that[:]

makes the following types of payments, who also is required to

issue, or voluntarily issues Federal form 1099-MISC for such

payments, shall deduct and withhold from the payments an amount

equal to the amount of the payment required to be reported on

the Federal form 1099-MISC multiplied by the tax rate specified

under section 302(b):

(1) [makes] payments totaling five thousand dollars ($5,000)

or more of income from sources within this Commonwealth

described in section 303(a)(1) or (2) during the calendar year

to either a nonresident individual or an entity that is

classified as a disregarded entity under section 307.21 that

[has] is owned by a nonresident [member; and

(2) is required under section 335(f)(1) to file a copy of

form 1099-MISC with the department regarding the payments;

shall deduct and withhold from the payments an amount equal to

the net amount of the payments multiplied by the tax rate

specified under section 302(b).] individual; or

(3) lease payments totaling five thousand dollars ($5,000)

or more for Pennsylvania real estate to a nonresident lessor,

either directly or indirectly through a management company or

other agent authorized to receive the lease payments on behalf

of the nonresident lessor.

(b) Withholding of tax by [payors] a payor or lessee is

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optional and at the discretion of the payor or lessee with

respect to [payees who receive payments of less than $5,000

annually from the payor.] payments of income from sources within

this Commonwealth of less than five thousand dollars ($5,000)

annually.

(b.1) If at the time of payment a payor or lessee cannot

reasonably expect total payments of income from sources within

this Commonwealth to a payee or lessor to be at least five

thousand dollars ($5,000) during the calendar year, the payor or

lessee shall begin to withhold tax once the payor or lessee

reasonably expects that total payments of income from sources

within this Commonwealth to the payee will be at least five

thousand dollars ($5,000) for the calendar year. The payor or

lessee shall not be required to withhold tax on payments made

prior to that time.

(b.2) A management company or other person that collects

lease payments for a lessor may withhold and remit the tax on

behalf of the lessee. A management company or other person that

withholds tax on behalf of the lessee becomes jointly and

severally liable with the lessee for the tax. A lessee is not

relieved from liability for withholding tax if the management

company or other person fails to withhold and remit the tax.

(b.3) If a management company or other person is entitled to

receive compensation from a lease payment and withholds the

compensation, the management company or other person shall remit

to the lessor with the balance of the payment any tax required

to be withheld under this section. If, after deducting the

compensation and other amounts, no portion of the payment is

remitted to the lessor, the management company or other person

must remit to the lessor within thirty (30) days of receipt of

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the payment from the lessee any tax required to be withheld on

the compensation in accordance with this section. The lessor

shall be required to remit and report the tax in accordance with

sections 318.1 and 319.1.

(b.4) If a payment to a payee is attributable to business

engaged in, or services performed both within and without this

Commonwealth, the payee shall determine the portion of the

payment constituting income from sources within this

Commonwealth in accordance with the regulations and provide this

information to the payor.

(b.5) (1) A payor or lessee shall not be required to

withhold under this section if the payee or lessee provides a

certification that:

(i) the payee or lessor is a Pennsylvania resident; or

(ii) the payee or lessor is not subject to tax under this

article.

(2) The certification may be on a form prescribed by the

department or a substitute form as long as the form contains the

information necessary for the payor or lessee to determine

whether withholding is required and the payee or lessor signs

the form.

(b.6) If a payee or lessor fails to provide the required

information in subsection (b.5) or a payee fails to provide the

required information in subsection (b.4), the payor or lessee

may withhold tax on one hundred per cent of each payment until

the payee or lessor provides the required information. The payor

or lessee will not be required to adjust the tax withheld on any

payment made prior to receipt of the required information.

(b.7) A payor or lessee that in good faith relies upon

information that a payee or lessor provides under subsections

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(b.4) and (b.5) will not be liable for any tax under section

320, interest and penalty under this article if the department

subsequently determines that the payee or lessor was subject to

withholding under this section, or the portion of a payment

constituting income from sources within this Commonwealth that

the payee provides to the payor is not correct.

[to a payee if the payor is] or lessee who is:

(1) The United States or an agency or instrumentality

thereof; [or]

(2) The Commonwealth or an agency, instrumentality or

political subdivision thereof[.]; or

(3) A lessee under a residential lease.

(d) The department may prescribe regulations to implement

and clarify the withholding requirement [set forth in] of this

section.

(e) For purposes of this section, the term or phrase:

(1) "Lessor" means an individual, estate or trust.

(2) "Lease payment" includes, but is not limited to, rents,

royalties, bonus payments, damage payments, delay rents and

other payments made pursuant to a lease, other than compensation

derived from intangible property having a taxable or business

situs in this Commonwealth. Classification as a "lease payment"

under this section is solely for the purpose of establishing

withholding requirements and is not relevant for determining

the proper income classification of the lease payment.

Section 317.1. [Information Statement for Nonemployer

Payors.--Every payor required to deduct and withhold tax under

section 316.2 shall furnish to a payee to whom the payor has

paid income from sources within this Commonwealth during the

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calendar year a copy of form 1099-MISC required under section

335(f)(1). The copy of form 1099-MISC required by this section

for each calendar year shall be forwarded to the payee on or

before March 1 of the year succeeding the calendar year.]

Information Statement.--(a) Every person required or who

volunteers to deduct and withhold tax under section 316.2 shall

furnish to a payee or lessor to whom the person has paid income

during the calendar year and the department a copy of the

Federal form 1099-MISC reporting the payment. A copy of the

Federal form 1099-MISC must be provided to the payee or lessor

and department in all instances where tax is withheld. The copy

of Federal form 1099-MISC required by this section for each

calendar year shall be forwarded to the payee or lessor and the

department on or before the date the person is required to

furnish the form for Federal income tax purposes. The form shall

include the amount of the payment subject to withholding under

this part and the amount of Pennsylvania tax withheld in

accordance with section 316.2.

(b) A person that files a corrected Federal form 1099-MISC

for Federal income tax purposes shall file a corrected Federal

form 1099-MISC with the department if there would be a change in

income from sources within this Commonwealth of a payee or

lessor, or if a person erroneously reports income from sources

within this Commonwealth or the amount of tax withheld.

with the department.

Section 317.2. Information Statement for Payees or

Lessors.--Every payee or lessor receiving a copy of Federal form

1099-MISC from a payor under section 317.1 shall file a

[duplicate of such information return with the payee's] copy

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with the payee's or lessor's State income tax return.

Section 318.1. Time for Filing [Payors'] Nonemployer and

Lessee Withholding Returns.--Every [payor] person required or

who volunteers to deduct and withhold tax under section 316.2

shall file a quarterly withholding return with the department on

or before the last day of April, July, October and January for

each three-month period ending the last day of March, June,

September and December. The quarterly returns shall be filed

with the department [in the manner prescribed by regulation.]

beginning with the quarter in which the tax is required to be

remitted under section 319.1.

Section 319.1. Payment of Taxes Withheld for Nonemployer

Payors and Lessees.--Every [payor] person withholding tax under

section 316.2 shall pay over to the department or to a

depository designated by the department the tax required to be

deducted and withheld under section 316.2. The time for paying

over the withheld tax shall be as set forth in section 319(1),

(2), (3) and (4).

Section 320. Liability for Withheld Taxes.--[Every] Except

as otherwise provided in this part, every person required to

deduct and withhold tax or who voluntarily deducts and withholds

tax under [section] sections 316.1 and 316.2 is hereby made

liable for such tax. For purposes of assessment and collection,

any amount required to be withheld and paid over to the

department and any additions to tax penalties and interest with

respect thereto, shall be considered the tax of the person. All

taxes deducted and withheld pursuant to [section 316.1 or under

color of section 316.1] sections 316.1 and 316.2 shall

constitute a trust fund for the Commonwealth and shall be

enforceable against such person, his representative or any other

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person receiving any part of such fund.

Section 2. Section 320.1 of the act is repealed:

[Section 320.1. Payor's Liability for Withheld Taxes.--Every

payor required to deduct and withhold tax under section 316.2 is

hereby made liable for such tax. For purposes of assessment and

collection, any amount required to be withheld and paid over to

the department and any additions to tax, penalties and interest

with respect thereto shall be considered the tax of the payor.

All taxes deducted and withheld from payees pursuant to section

316.2 or under color of section 316.2 shall constitute a trust

fund for the Commonwealth and shall be enforceable against such

payor, his representative or any other person receiving any part

of such fund.]

Section 3. Section 321.1 of the act is amended to read:

Section 321.1. Bulk and Auction Sales and Transfers,

Notice.--(a) [An employer] A person that is liable for filing

returns in accordance with the provisions of this part and

either sells or causes to be sold at auction, or sells or

transfers in bulk, fifty-one per cent or more of any stock of

goods, wares or merchandise of any kind, fixtures, machinery,

equipment, buildings or real estate held by or on behalf of the

employer shall be subject to the provisions of section 1403 of

"The Fiscal Code."

Section 4. Section 321.2 of the act is repealed:

[Section 321.2. Payor's Failure to Withhold.--If a payor

fails to deduct and withhold tax as prescribed under section

316.2 and thereafter the tax which may be credited is paid, the

tax which was required to be deducted and withheld shall not be

collected from the payor, but the payor shall not be relieved of

the liability for any penalty, interest or additions to the tax

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imposed with respect to such failure to deduct and withhold.]

Section 5. The act is amended by adding a section to read:

Section 323.1. Annual Withholding Return.--Any person

required or who volunteers to withhold tax under this part shall

file an annual withholding return at such time and in such

manner as the department may prescribe showing the total

payments subject to withholding and the total amount of tax

deducted, withheld and remitted.

Section 6. Sections 324.4 and 324.5 of the act are repealed:

[Section 324.4. Withholding on Income.--(a) Every lessee of

Pennsylvania real estate who makes a lease payment in the course

of a trade or business to a nonresident lessor shall withhold

Pennsylvania personal income tax on rental payments to such

nonresident lessor.

(b) Every lessee shall withhold from each payment made to a

lessor an amount equal to the net amount payable to the lessor

multiplied by the tax rate specified under section 302(b).

(d) The withholding of tax under this section is optional

and at the discretion of the lessee with respect to payments to

a lessor who receives less than $5,000 annually on a lease.

(e) For purposes of this section, the term or phrase:

(1) "Lessor" shall include an individual, estate or trust.

(2) "Lease payment" shall include, but not be limited to,

rents, royalties, bonus payments, damage payments, delay rents

and other payments made pursuant to a lease, other than

compensation derived from intangible property having a taxable

or business situs in this Commonwealth. Classification as a

"lease payment" under this section is solely for the purposes of

establishing withholding requirements and shall not be relevant

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for a determination as to the proper income classification of

any such lease payment.

(3) "In the course of a trade or business" shall include any

person or business entity making lease payments to a nonresident

or agent of a nonresident who collects rent or lease payments on

behalf of a nonresident owner other than a tenant of residential

property.

Section 324.5. Annual Withholding Statement.--(a) Every

lessee shall furnish to each lessor an annual statement at such

time and in such manner as may be prescribed by the department

showing the total payments made by the lessee to the lessor

during the preceding taxable year and showing the amount of the

tax deducted and withheld from the payments under section 324.4.

(b) Every lessee shall file with the department an annual

statement at such time and in such manner as may be prescribed

by the department showing the total payments made to each lessor

subject to withholding during the preceding taxable year or any

portion of the preceding taxable year and the total amount of

tax deducted and withheld under section 324.4.

statement furnished by the lessee under this section with the

lessor's State income tax return.]

Section 7. Sections 351(b) and 352(f), (h) and (j) of the

act are amended to read:

Section 351. Interest.--* * *

(b) [If] Except as otherwise provided in Part VII, if any

amount of tax required to be withheld by an employer and paid to

the department under Part VII of this article is not paid by the

due date prescribed under section 319 or 319.1, interest on the

amount at the rate established under section 806 of "The Fiscal

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Code" shall be paid from that date for the period of

underpayment.

Section 352. Additions, Penalties and Fees.--* * *

(f) (1) Any person required under the provisions of section

317 to furnish a statement to an employe who wilfully furnishes

a false or fraudulent statement, or who wilfully fails to

furnish a statement in the manner, at the time, and showing the

information required under section 317 and the regulations

prescribed thereunder, shall, for each such failure, be subject

to a penalty of fifty dollars ($50) for each employe.

(2) Any person required to furnish an information return who

furnishes a false or fraudulent return or who fails to file or

provide an information return shall be subject to a penalty of

two hundred fifty dollars ($250).

(3) Every partnership, estate, trust or Pennsylvania S

corporation required to file a return with the department under

the provisions of section 330.1 or 335(c) who furnishes a false

or fraudulent return or who fails to file the return in the

manner and at the time required under section 330.1 or 335(c)

shall be subject to a penalty of $250 for each failure.

(4) Any person required to file a copy of Federal form 1099-

MISC with the department under the provisions of section

[335(f)] 317.1 who wilfully furnishes a false or fraudulent form

or who wilfully fails to file the form in the manner, at the

time and showing the information required under section [335(f)]

317.1 shall, for each such failure, be subject to a penalty of

fifty dollars ($50).

(5) Any person required under the provisions of section

[335(f)] 317.1 to furnish a copy of Federal form 1099-MISC to a

payee who wilfully furnishes a false or fraudulent form or who

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wilfully fails to furnish a form in the manner, at the time and

showing the information required by section [335(f)] 317.1

shall, for each such failure, be subject to a penalty of fifty

dollars ($50).

(6) Any person required to file an annual statement with the

department under the provisions of section [324.5] 323.1 who

wilfully furnishes a false or fraudulent statement or who

wilfully fails to file the statement in the manner, at the time

and showing the information required under section [324.5] 323.1

and the regulations prescribed under section [324.5] 323.1

shall, for each such failure, be subject to a penalty of fifty

dollars ($50).

[(7) Any person required under the provisions of section

324.5 to furnish an annual statement to a lessor who wilfully

furnishes a false or fraudulent statement or who wilfully fails

to furnish a statement in the manner, at the time and showing

the information required by section 324.5 and the regulations

prescribed under section 324.5 shall, for each such failure, be

subject to a penalty of fifty dollars ($50).]

(h) [If] Except as otherwise provided in Part VII, if any

amount of tax required to be withheld by [an employer] a person

and paid over to the department under section 319 or 319.1 is

not paid on or before the due date prescribed for filing the

quarterly return under section 318 or 318.1, determined without

regard to an extension of time for filing, there shall be added

to the tax and paid to the department each month five per cent

of such underpayment for each month or fraction thereof from the

due date, for the period from the due date to the date paid; but

the underpayment shall, for purposes of computing the addition

for any month, be reduced by the amount of any part of the tax

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which is paid by the beginning of that month. The total of such

additions shall not exceed fifty per cent of the amount of tax

required to be shown on the return reduced by the amount of any

part of the tax which is paid by the return due date and by the

amount of any credit against the tax which may be claimed on the

return.

* * *

(j) If any amount of tax required to be withheld by a

partnership, association[,] or Pennsylvania S corporation [or

lessee] and paid over to the department under section 324 [or

324.4] is not paid on or before the date prescribed therefor,

there shall be added to the tax and paid to the department each

month five per cent of such underpayment for each month or

fraction thereof from the due date, for the period from the due

date to the date paid; but the underpayment shall, for purposes

of computing the addition for any month, be reduced by the

amount of any part of the tax which is paid by the beginning of

that month. The total of such additions shall not exceed fifty

per cent of the amount of such tax.

Section 8. This act shall take effect immediately.

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