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Measure and Manage Sales and Use Taxes.

Do you know how much sales and use tax your business paid last year? If you don’t measure it, you can’t manage it. Van Allen LLC can help you measure and manage your sales and use taxes to boost your profit margins. Contact us to see how we can help you.
Prosecute Tax Appeals at Commonwealth Court.

Did you know that Van Allen LLC has over 100 Commonwealth Court tax appeals at any one time that we are vigorously prosecuting? If you have an unfavorable decision from the Board of Finance and Revenue, contact us to see if it makes sense to appeal to Commonwealth Court.
Reduce Property Tax Liabilities.

Do you know the present value of Property tax savings? Property tax appeals do not simply provide direct savings for the tax year(s) at issue, they also provide those benefits going forward. The general rule is that the present value of tax year’s savings may be 10 times those savings. In other words, $10,000 of annual savings may be worth $100,000 of value to your business. Contact us to see if a property tax appeal for your business is appropriate.
Enhance Profit Margins Through Efficient, Value-Driven Representation.

Value. Van Allen LLC routinely provides great value to our clients by keeping our fees in proportion to the amount at controversy and in relief. As a result, we constantly build value for our clients. Contact us to see if we can build value, and profits, for your business.

PENNSYLVANIA STATE TAX UPDATE

HB 465, signed by Senate on July 3, 2013, House on July 8, 2013 and by Governor Corbett on July 9, 2013, is the omnibus tax bill with regard to fiscal year 2013-2014 budget implementation. The legislation amends the Tax Code as follows: Click here to read more.

Sales and Use Tax

Provides an exclusion from the sales and use tax for aircraft parts, services to aircrafts and aircraft components. 72 P.S. § 7204(69). This section is effective 90 days after signed into law.
Shortens the appeal period for a sales tax license refusal, suspension or revocation from 90 to 30 days. 72 P.S. § 7208(b.1).
Repeals the call center tax credit. 72 P.S. § 7206(b).

Corporate Net Income Tax

Provides for the closing of the so called “Delaware Loophole” by requiring companies to addback intangible expenses and costs including the interest expense associated with the intangible expense and cost accrued or incurred directly or indirectly in connection with transactions with an affiliated entity. The adjustment does not apply to a transaction that did not have as the principal purpose the avoidance of tax and was done at arm’s length rates and terms. 72 P.S. § 7401(3)1.(t)(1). This section is effective for tax years after December 31, 2014.
Provides for market-based sourcing for the sales apportionment factor with regard to the sales of services. Such sales will be sourced to where the benefit is being derived by the customer. 72 P.S. § 7401(3)2.(a)(16.1). This section is effective for tax years after December 31, 2013.
Increases the cap of the net operating loss deduction as follows:

Tax Year 2014 – greater of $4 million or 25% of taxable income.

Tax Year 2015 – greater of $5 million or 30% of taxable income.

72 P.S. § 7401(3)4.(c)(1)(A)(V).

Establishes a new apportionment formula for providers of satellite television services based on the value of equipment used in generating, processing or transmitting satellite television services inside Pennsylvania over value of such equipment located everywhere. 72 P.S. 7401(3)2.(e). This section is effective for tax years after December 31, 2013.
Creates a non-filing penalty of $500, plus 1% for every dollar of tax greater than $25,000, for C-corporations that do not file a return. 72 P.S. § 7403(d). This section is effective for tax years after December 31, 2013.

Capital Stock/Franchise Tax

Modifies the phase-out of the capital stock/franchise tax by extending the tax for two more tax years. Thus instead of the tax going away after 2013, the tax is extended to 2015. The 2014 tax rate is .67 mills and the 2015 tax rate is .45 mills. 72 P.S. § 7602(h).

Bank Shares Tax

Removes the use of a six-year moving average valuation calculation and replaces it with a one-year valuation formula. 72 P.S. § 7701.1(a).
Adjusts the rate and base of taxation from 1.25% of total equity capital to 0.89% of total bank equity capital. 72 P.S. § 7701(b).
Eliminates the payroll and deposits factors for apportionment thereby apportioning the taxable value of shares by only a receipts factor. 72 P.S. § 7701.4(1)(ii).
Redefines the term “doing business in this Commonwealth,” “receipts factor” and “institution” to include out-of-state banks doing business in PA in the tax base. 72 P.S. § 7701.5.
Repeals the current provision requiring a special appeals process for Bank Shares tax and includes the tax in the newly reformed appeals process.

These changes are effective January 1, 2014.

Inheritance Tax

Excludes the transfer of all business assets, including real estate, between members of the same family, provided that after the transfer the qualified family-owned business interest continues to be owned by a qualified transferee for a minimum of 7 years after the decedent’s date of death. 72 P.S. § 9111(t).
Applies to the estates of decedents who die on or after July 1, 2013.

Philadelphia Sales and Use Tax

Extends the authorization of the 1% Philadelphia sales and use tax scheduled to expire after June 30, 2014. 72 P.S. § 7201-B.

Personal Income Tax

Aligns Pennsylvania with Federal rules allowing start-up businesses to deduct $5,000 from taxable income in the year a business is established. 72 P.S. § 7303(a)(2).
Permits the expensing of intangible drilling costs as ordinary and necessary business expenses similar to Federal IRC § 263(c) rules. 72 P.S. § 7303(a)(2)(a.8).
Extends the Personal Income Tax checkoffs through tax year 2017 for contributions to the Wildlife Resource Conservation, Organ and Tissue Donor Awareness and Military Family Relief Assistance. 72 P.S. § 7315.9(c).
Adds two new checkoffs for contributions to the Children’s Trust Fund and American Red Cross. 72 P.S. §§ 7315.10 and 7315.11.
Allows the Department of Revenue to impose fines and penalties for not paying, underpaying or failing to file an employer withholding return or report. 72 P.S. § 7352.2.
Authorizes the Department of Revenue to improve income tax compliance and administrative efficiencies for S-corporations, LLCs and partnerships by: authorizing the assessment of tax at the entity level in certain instances; requiring partnerships to maintain an accurate list of partners and addresses; requiring estates and trusts to withhold tax on PA source income from non-residents; requiring non-resident estates and trusts to file PA returns if they have PA beneficiaries or PA source income; and clarifying the mandatory filing of the pass-through information return (PA-20S/PA 65) and RK-1 and NRK-1s. 72 P.S. §§ 7306 and 7307.

These changes are effective for tax years beginning after December 31, 2013.

Realty Transfer Tax

Eliminates the realty transfer tax 89/11 loophole which presently imposes tax if at least 90% of ownership of an acquired company is transferred within 3 years. In an 89/11 transaction, the buyer acquires 89% of the real estate company along with an option to purchase the remaining 11% after 3 years, thereby avoiding paying the state and local realty transfer tax. 72 P.S. § 8101-C.
Provides an exemption from realty transfer tax of transfers of real estate for no or nominal consideration from Commonwealth or any of its instrumentalities, agencies or political subdivisions to a volunteer emergency medical services agency, volunteer fire company or volunteer rescue company, or a transfer between two or more volunteer emergency medical services agency, volunteer fire company or volunteer rescue companies. 72 P.S. § 8102-C(23).

These changes shall take effect January 1, 2014.

Various Tax Credits

Makes changes and clarifications to the Film Tax Credit. 72 P.S. § 8702-D.
Makes clarification to Educational Opportunity Scholarship Tax Credit. 72 P.S. § 8705-D.
Repeals Coal Waste Removal and UltraClean Fuels Tax Credit, which expired January 1, 2013 and was never utilized. 72 P.S. § 8801-A.
Creates a tax credit for mobile telecommunications industry equal to 5% of the cost of investment in qualified broadband equipment located in Pennsylvania for tax year 2014 through 2023. The credit is capped at $5 million per year. 72 P.S. § 8801-E.
Clarifies current policy for Job Creation Tax Credit allowing the Department of Community and Economic Development to award the total amount of the tax credit authorized for a multiple year tax credit in the first year in which the new job is created and the tax credit is earned. 72 P.S. § 8804-B(d)(2).
Creates a new Innovate in PA Tax Credit program. 72 P.S. § 8801-F.

These changes shall take effect immediately.

Zones

Codifies the Neighborhood Improvement Zone and Keystone Special Development Zone Programs contained in the Fiscal Code into the Tax Reform Code. 72 P.S. §§ 8901-B and 8901-C.

Board of Finance and Revenue Reform

The Board of Finance and Revenue (“Board”) is reorganized to consist of only three full-time members, the State Treasurer or the State Treasurer designee and two members nominated by the Governor and approved by the Senate. 72 P.S. § 9703.1(a).
The Board members can be either an attorney in good standing before the Supreme Court of Pennsylvania or a certified public accountant in good standing before the State Board of Accountancy and have at least ten years of experience in a position requiring substantial knowledge of Pennsylvania tax law. 72 P.S. § 9703.1(c).
Appearances in tax appeal proceedings conducted by the Board may be by the taxpayer or by an attorney, accountant or other representative provided that the representation does not constitute the unauthorized practice of law as administered by the Pennsylvania Supreme Court. 72 P.S. § 9704(d.1).
The petitioner and the Department of Revenue shall be entitled to present oral and documentary evidence in support of their positions. 72 P.S. § 9704(d.2).
The Department of Revenue shall have the right to be represented in all tax appeal proceedings before the Board. 72 P.S. § 9704(d.1)(2).
The members or staff of the Board shall not participate in any ex parte communications with the petitioner or the department or their representatives regarding the merits of the tax appeal pending before the Board. 72 P.S. § 9704(d.3).
The Board has the ability to compromise settlements of issues on appeal. 72 P.S. § 9704(d.7).
The Board shall issue a decision and order in writing, which is approved by a majority of the Board. 72 P.S. § 9704(e).
Upon request the Board may extend the time period for the Board to dispose of the petition for one additional six-month period. 72 P.S. § 9704(f)(1).
The Board shall publish each decision, along with any dissenting opinion. Prior to publication of decision, the Board shall edit the decision to redact certain information such as trade secrets, social security numbers, home addresses, etc. 72 P.S. § 9704(h).
Appeals from a Board decision shall be to the Commonwealth Court and shall be de novo. 72 P.S. § 9704(i).

These changes are effective for all petitions filed with the Board on or after April 1, 2014, or for all petitions filed with the Board prior to April 1, 2014, that have not been the subject of a final and irrevocable decision by the Board as of April 1, 2014.

Please contact the attorneys at Van Allen LLC if you have any questions or would like to understand how any of these tax changes may apply to your business.