Regular Session 2019-2020 House Bill 0034 P.N. 0048

PRINTER'S NO. 48

THE GENERAL ASSEMBLY OF PENNSYLVANIA

HOUSE BILL

No.

Session of

2019

INTRODUCED BY RYAN, DIAMOND, GROVE, IRVIN, KEEFER, LAWRENCE,

MILLARD AND JONES, JANUARY 28, 2019

REFERRED TO COMMITTEE ON FINANCE, JANUARY 28, 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, repealing provisions

relating to definitions, to withholding tax requirement for

nonemployer payors, to information statement for nonemployer

payors, to information statement for payees, to time for

filing payors' returns, to payment of taxes withheld for

nonemployer payors, to payor's liability for withheld taxes,

to payor's failure to withhold, to amount of withholding tax,

to treatment of nonresident partners, members or

shareholders, to withholding on income and to annual

withholding statement and further providing for requirements

concerning returns, notices, records and statements and for

additions, penalties and fees.

The General Assembly of the Commonwealth of Pennsylvania

hereby enacts as follows:

Section 1. Sections 316, 316.2, 317.1, 317.2, 318.1, 319.1,

320.1, 321.2, 324.1(c), 324.2(b) and (c), 324.4 and 324.5 of the

act of March 4, 1971 (P.L.6, No.2), known as the Tax Reform Code

of 1971, are repealed:

[Section 316. Definitions.--The following words, terms and

phrases, when used in this part, shall have the meanings

ascribed to them in this section, except where the context

clearly indicates a different meaning:

"Payee." The person receiving the payments subject to

withholding under this part.

"Payments." The term does not include a partner or

shareholder's distributive share of income from a partnership or

Pennsylvania S corporation.

"Payor." The person required to withhold under this part.

Section 316.2. Withholding Tax Requirement for Nonemployer

Payors.--(a) To the extent not already required to withhold tax

on payments under section 316.1, a person that:

(1) makes payments of income from sources within this

Commonwealth described in section 303(a)(1) or (2) to either a

nonresident individual or an entity that is disregarded under

section 307.21 that has 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).

(b) Withholding of tax by payors is optional and at the

discretion of the payor with respect to payees who receive

payments of less than $5,000 annually from the payor.

to a payee if the payor is:

(1) The United States or an agency or instrumentality

thereof; or

(2) The Commonwealth or an agency, instrumentality or

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political subdivision thereof.

(d) The department may prescribe regulations to implement

and clarify the withholding requirement set forth in this

section.

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

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.

Section 317.2. Information Statement for Payees.--Every

payee receiving a copy of form 1099-MISC from a payor under

section 317.1 shall file a duplicate of such information return

with the payee's State income tax return.

Section 318.1. Time for Filing Payors' Returns.--Every payor

required to deduct and withhold tax under section 316.2 shall

file a quarterly withholding return 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.

Section 319.1. Payment of Taxes Withheld for Nonemployer

Payors.--Every payor 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 320.1. Payor's Liability for Withheld Taxes.--Every

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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 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

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

Section 324.1. Amount of Withholding Tax.--* * *

[(c) There shall not be taken into account any share of

income of nonresident partner, member or shareholder from

sources within this Commonwealth to the extent that the amount

was subject to withholding under section 324.4 and to the extent

withholding actually occurred under section 324.4 by the time

withholding is required to be made by the partnership,

association or Pennsylvania S corporation under section 324.]

Section 324.2. Treatment of Nonresident Partners, Members or

Shareholders.--* * *

[(b) Each nonresident lessor shall be allowed a credit for

the nonresident lessor's share of the withholding tax paid by

the lessee under section 324.4.

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nonresident lessor's taxable year in which the lessee withheld

tax.

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

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

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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 2. Sections 335(f) and 352(f), (h) and (j) of the

act, amended October 30, 2017 (P.L.672, No.43), are amended to

read:

Section 335. Requirements Concerning Returns, Notices,

Records and Statements.--* * *

(f) The following apply:

(1) Any person who:

[(i) makes payments of Pennsylvania source income that fall

within any of the eight classes of income enumerated in section

303(a);

(ii) makes such payments to an individual, an entity treated

as a partnership for tax purposes or a single member limited

liability company; and

(iii) is required to make a form 1099-MISC return to the

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Secretary of the Treasury of the United States with respect to

such payments, shall file a copy of such form 1099-MISC with the

department and send a copy of such form 1099-MISC to the payee

by March 1 of each year or, if filed electronically, by March 31

of each year. If the form 1099-MISC filed by a payor with the

Secretary of the Treasury of the United States is not completed

in such a manner that State income and State tax withheld

information, currently boxes 16 through 18 on Federal form 1099-

MISC, is reflected thereon, the payor shall update the copies of

form 1099-MISC to be provided pursuant to this section to

reflect such information prior to filing it with the department

and sending it to the payee.]

(i) makes payments of income from sources within this

Commonwealth;

(ii) makes payments of nonemploye compensation or payments

under an oil and gas lease under subparagraph (i) to a resident

or nonresident individual, an entity treated as a partnership

for tax purposes or a single member limited liability company;

and

(iii) is required to make a form 1099-MISC return to the

Secretary of the Treasury of the United States with respect to

the payments shall file a copy of form 1099-MISC with the

department and send a copy of form 1099-MISC to the payee by the

Federal filing deadline each year.

(2) If the payor is required to perform electronic filing

for Pennsylvania employer withholding purposes, the form 1099-

MISC shall be filed electronically with the department.

[(3) As used in this subsection, the following words and

phrases shall have the meanings given to them in this paragraph

unless the context clearly indicates otherwise:

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"Payee." The person receiving the payments subject to

withholding under this subsection.

"Payments." The term does not include a partner or

shareholder's distributive share of income from a partnership or

Pennsylvania S corporation.

"Payor." The person required to withhold under this

subsection.]

* * *

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 form 1099-MISC

with the department under the provisions of section 335(f) who

wilfully furnishes a false or fraudulent form or who wilfully

fails to file the form in the manner, at the time and showing

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the information required under section 335(f) 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) to furnish a copy of form 1099-MISC to a payee who

wilfully furnishes a false or fraudulent form or who wilfully

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

the information required by section 335(f) 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 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 and the

regulations prescribed under section 324.5 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 any amount of tax required to be withheld by an

employer 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

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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 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 3. The amendment or repeal of sections 316, 316.2,

317.1, 317.2, 318.1, 319.1, 320.1, 321.2, 324.1(c), 324.2(b) and

(c), 324.4, 324.5, 335(f) and 352(f), (h) and (j) of the act

shall apply retroactively to December 30, 2018.

Section 4. This act shall take effect in 60 days.

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