On July 26, 2016, Pennsylvania’s Department of Revenue (DOR) issued a summary of the recently enacted 2016–2017 budget. Below are highlights of the numerous tax changes. Should you have questions or require additional information regarding this Tax Alert, please contact our State and Local Tax team, Tom Corrie at 212-842-7019 or Alan Goldenberg at 212-897-6421, or your Friedman tax professional.
The Amnesty Program
Any tax administered by the DOR that is delinquent as of December 31, 2015, will be eligible for the tax amnesty program, which will go into effect for a 60-day period beginning on a date to be established by the Governor. Under the amnesty program, all penalties and half of all interest on eligible taxes that are delinquent will be waived for taxpayers who file tax amnesty returns and pay the delinquent taxes and interest.
A taxpayer with “unknown” liabilities —meaning a taxpayer with liabilities for which no return has been filed and no payment has been made and who has not been contacted by the DOR concerning the unfiled returns or unpaid tax — who participates in the amnesty program will not only be eligible for the waiver of penalties and half interest, but will also be exempt from any taxes of the same type that were due prior to January 1, 2011.
A taxpayer with liabilities known to the DOR may participate in the amnesty program and get the benefit of the waiver of all penalties and half the interest, but must file or amend all unfiled or deficient tax returns.
It is expected that the DOR will soon publish guidelines for the program, including a description of its objectives, the amnesty period dates, a sample tax return, and estimates for amnesty revenue, as the program must end by June 30, 2017.
Sales and Use Tax
Beginning on August 1, 2016, Pennsylvania sales and use tax is extended to cover items delivered to a customer electronically, digitally or by streaming. This includes music, video such as movies and streaming services, e-books and any otherwise taxable printed matter, apps and in-app purchases, ringtones, online games, as well as any updates to these items.
For sales tax returns for periods ending after August 1, 2016, the sales tax vendor discount is capped at the lesser of one percent of the amount of sales tax collected or $25 on a monthly return, $75 on a quarterly return or $150 on a semi-annual return.
For tax years beginning after December 31, 2015, the deadline for filing Pennsylvania corporate tax reports (RCT-101) is 30 days or less after the federal tax return due date.
Beginning with amended reports filed after December 31, 2016, new procedures will be implemented for corporations filing amended corporate tax reports. Taxpayers will have three years from the due date of the original report to file an amended report. The DOR will have one year from the date the amended report is filed to notify the taxpayer if the changes are accepted. If the taxpayer is not notified within one year, the report is deemed accepted.
The budget amends many of Pennsylvania’s tax credit programs, including the Keystone Opportunity Zone, Keystone Opportunity Expansion Zone, and Keystone Opportunity Improvement Zone Credits, and the former Film Tax Credit, now renamed the Entertainment Production Tax Credit. In addition, several new tax credits have been enacted, including a Coal Refuse Energy and Reclamation Credit, and a Manufacturing and Investment Tax Credit, which is available after June 30, 2017. It should be noted that most of the credits require the approval of the Department of Community and Economic Development.