PA Department of Revenue Reverses Pro-Business Policy on Capital Investments

From PA Chamber of Business & Industry

Late last month, the state Department of Revenue quietly made a significant change to employers’ tax filings regarding capital investments. This action is in response to the 100 percent bonus appreciation deduction that will be allowed under the federal Tax Cuts and Jobs Act. The decision reverses a Corbett-era policy that allowed for this deduction at the state level. It requires taxpayers who take advantage of capital investments – primarily for the purchase of new equipment to expand or improve production at their facilities – to reflect those purchases when filing their income taxes.

The history of the agency’s changes regarding depreciation dates back to 2002, when in the wake of a Congressionally-approved “bonus” depreciation of 30 percent, the General Assembly enacted legislation to allow the same level of depreciation, but spread it out over multiple years to deflect a hit to the state General Fund. With that move to decouple the state’s depreciation policy from the federal policy, the legislature was clear about its intent – it would help businesses take advantage of the change. Fast forward to 2011, when the Corbett administration’s Revenue Department allowed state policy to mirror federal approval of a 100 percent bonus deprecation.  The new policy strips all that away and then some: it allows no depreciation until the asset is disposed of or sold.

State Rep. Frank Ryan, R-Lebanon, has since announced his plans to introduce legislation that would reverse the Revenue Department’s action in order to help business owners take full advantage of the bonus depreciation benefits enumerated under the new federal tax reform law. In a co-sponsorship memo that was circulated early last week, Rep. Ryan decried the department’s actions. “Under [Revenue Corporate Tax Bulletin] 2017-2, in the best case scenario, a taxpayer gets no deduction until the asset is sold or disposed of. If the taxpayer has equipment that may be used indefinitely, it could effectively get no depreciation write-off in Pennsylvania. This draconian pronouncement essentially tells business owners ‘thanks, but no thanks, Pennsylvania is closed for business,” Ryan wrote. The legislation to reverse these provisions will be introduced in the near future.

Governor Wolf Declares Heroin and Opioid Epidemic a Statewide Disaster Emergency

On Wednesday, Jan. 10, Governor Tom Wolf  signed a statewide disaster declaration related to the heroin and opioid epidemic to enhance state response, increase access to treatment, and save lives. The declaration will utilize a command center at the Pennsylvania Emergency Management Agency to track progress and enhance coordination of health and public safety agencies.

Among the declaration’s specifics are 13 key initiatives that are the culmination of a collaboration between all state agencies, with focus on the departments of Health, Drug and Alcohol Programs, the Pennsylvania Emergency Management Agency, the Pennsylvania Commission on Crime and Delinquency, and the Pennsylvania State Police. Details are available here.

In October, President Trump directed the Department of Health and Human Services to declare the opioid crisis a public health emergency.

Substance abuse is a significant issue for local employers in hiring and retaining employees. To help deal with the crisis locally, the Chamber is a part of the Columbia-Montour Opioid Coalition, organized by the United Way of Columbia and Montour County. The Coalition meets monthly to share information and find solutions in the areas of prevention, treatment, and enforcement.  

Increase to Business Mileage Reimbursement in 2018

From ChamberChoice

The business mileage reimbursement rate is used by some employers for computing employee reimbursement amounts when an employee operates a motor vehicle not owned by the employer for the employer’s business purposes. The Internal Revenue Service (IRS) is responsible for establishing the standard mileage rate.

Recently, the IRS provided that beginning on Jan. 1, 2018, for all miles of business use, the standard mileage rate for transportation or travel expenses is 54.5 cents per mile (up slightly from 53.5 cents in 2017), according to IRS Notice 2018-03.

There are other reasons for which an individual can be reimbursed for mileage such as when rendering gratuitous services to a charitable organization. If an individual or employer has questions about the reimbursement of mileage, or use of a personal vehicle, the advice of tax counsel should be sought.

Executive Order Supports Broadband Infrastructure Expansion With Focus on Rural America

In an effort to support the expansion of broadband internet service in rural America, President Trump signed an executive order on Jan. 8 that streamlines the application process for locating wireless facilities on Federal property. The order sets guidelines and timelines for processing applications from private entities. It is hoped that other benefits will be realized from this policy “to use all viable tools to accelerate the deployment and adoption of affordable, reliable, modern high-speed broadband connectivity in rural America.” (Read the full executive order)

The Columbia Montour Chamber continues to advocate for the expansion of broadband in rural areas to support economic growth. In November, the Chamber sent a letter to the Federal Communications Commission supporting a petition by the Pennsylvania Public Utility Commission (PUC) to keep $140 million for broadband expansion in Pennsylvania. While federal funds have traditionally only been available to regulated telecommunications companies such as Verizon, the PUC and Chamber are seeking greater flexibility to work with other potential providers.

Workers’ Compensation Costs to Increase Following Approval of Mid-Year Cost Hike Filing

From PA Chamber of Business & Industry

On Dec. 27, the Pennsylvania Department of Insurance announced its approval of the Pennsylvania Compensation Rating Bureau’s unprecedented mid-year loss cost increase filing, with a Feb. 1 effective date. The filing was prompted by the state Supreme Court’s decision last year in the Protz v. Workers’ Compensation Appeals Board case, which threw out Impairment Rating Evaluations. IREs, a feature of the workers’ compensation process since 1996, are conducted by physicians designated by the Department of Labor & Industry who utilize guidelines from the American Medical Association to assess an injured employee’s level of impairment in order to determine their disability status.  The Court’s holding was essentially based on a technicality and led to an overall change in loss costs of +6.06 percent.

At the time the decision was handed down, the PA Chamber warned its members that workers’ compensation cost hikes in 2018 would be a likely result. In fact, in September the PCRB testified to the House Labor and Industry Committee that the overall impact on employers that carry workers’ comp insurance policies is expected to be at least $165 million – and that total doesn’t even account for employers who self-insure, meaning that the impact will likely be far greater.

Legislation has since been introduced to address the decision and stave off cost increases. In a statement issued following the Dept. of Insurance’s approval of the rate hike, PA Chamber President Gene Barr issued a statement that called for the timely approval of the bills to help mitigate the impact of the increases. “The PCRB’s filing and the Department of Insurance’s subsequent approval clearly demonstrate the need for swift legislative action,” Barr said. “The PA Chamber is strongly urging the General Assembly to act on H.B. 1840 or companion legislation in the Senate, S.B. 963 – legislation to reinstate the impairment rating evaluation process with the Supreme Court’s concerns addressed.”