March 3, 2015

More Details On The Tax Changes Proposed By Gov. Wolf

Here are some additional details on Gov. Wolf’s tax changes proposed in his FY 2015-16 budget--

Personal Income Tax: Effective July 1, 2015, the PIT rate of 3.07% is proposed to be increased to 3.7%. Effective July 1, 2015, a claimant’s eligibility income limit to qualify for 100% tax forgiveness under the special tax provisions for poverty is proposed to be increased from $6,500 to $8,700. A qualifying family of four with two claimants and two dependents will owe no tax on taxable income up to $36,400.  Effective July 1, 2015, Pennsylvania lottery winnings are proposed to be taxed at a rate of 3.7%.

Sales Tax: Effective January 1, 2016, the SUT rate is proposed to be increased from 6.0% to 6.6% and the base expanded to include services and some products currently exempted. The proposed tax would be effective January 1, 2016. In addition, the one percent discount for the timely remittance of sales tax collected by licensed vendors would be capped at $25 for Monthly Filers, $75 for Quarterly Filers, and $150 for Semi-Annual Filers. Beginning in fiscal year 2015-16, an amount certified annually by the Secretary of the Budget is transferred to a restricted account to pay state contributions for school employee retirement obligations.
These items would now be taxable under the Governor’s proposal: General Items: Candy & Gum, Personal Hygiene Products, Newspapers, Magazines, Non-Prescription Drugs, Caskets & Burial Vaults, Flags, Textbooks, Catalogs & Direct Mail Advertising;  Services: Transportation, Motion Picture and Video Industries, Other Financial Investment Activities, Real Estate Agent and Broker Services, Legal Services, Accounting Services, Specialized Design Services, Scientific Research and Development Services, Advertising Services, Other Professional Services, Employment Services, Business Support Services, Travel Arrangement Services, Other Support Services, Waste Collection, Higher Education, Home Health Care Services, Other Ambulatory Health Care Services, Nursing and Residential Care Facilities, Social Assistance (including Child Day Care), Performing Arts, Spectator Sports, Museums, Historical Sites, and Similar Institutions, Amusement and Recreation Industries, Recreational Vehicle Parks and Recreational Camps, Personal Care Services, Death Care Services, Drycleaning and Laundry Services, Other Personal Services; Other Items: Airline Catering, Commission, Horses, Construction of Memorials, Uniform Commercial Code Filing Fees, Investment Metal Bullion & Investment Coins, Cable Television.

Corporate Net Income Tax: Effective January 1, 2016, the CNIT rate is proposed to be reduced from 9.99% to 5.99% accompanied by Mandatory Combined Reporting and a reduction in the Net Operating Loss carry- forward limit from the greater of $5 million or 30% of current year income to the greater of $3 million or 12.5% of current year income. The CNIT rate is proposed to be reduced to 5.49% in tax year 2017 and 4.99% in tax year 2018.

Capital Stock and Franchise Tax: ends after January 1, 2016. 

New Natural Gas Severance Tax: Effective January 1, 2016, a severance tax of 5% plus 4.7 cents per thousand cubic feet of volume (mcf) is proposed on natural gas extraction yielding $165.7 million in first year. The proposed tax would be effective January 1, 2016. Beginning in fiscal year 2015-16, a total of $10 million is transferred to support additional environmental enforcement ($5 million to the Well Plugging Account and $5 million to the Department of Environmental Protection as an augmentation to the Environmental Protection Operations appropriation). Beginning in fiscal year 2016-17 and thereafter, a total of $225 million is transferred to the Unconventional Gas Well Fund to replace current unconventional gas well impact fees. Beginning in 2016-17 and thereafter, an annual amount is transferred for debt service payments to support the $675 million economic growth bonds.

Bank Shares Tax: The Bank Shares Tax rate is proposed to be increased from 0.89% to 1.25% effective beginning tax year 2014, and the tax base is proposed to be clarified, to achieve the revenue neutrality intended with the enactment of Act 52 of 2013.

Cigarette Tax: Effective October 1, 2015, an increase in the Cigarette Tax rate equivalent to $0.05 per cigarette ($1.00 per pack of 20 cigarettes) is proposed. 

Taxing Other Tobacco Products: Effective October 1, 2015, a 40% tax on the wholesale price of other tobacco products is proposed, including smokeless tobacco, large cigars, loose tobacco, and e-cigarettes.

Click Here to read the full budget address.  Click Here for FY 2015-16 Budget documents.  Please visit the PA Capitol Digest Blog for ongoing updates ahead of our weekly Digest.