On July 11, S.B. 1073 (Browne, R-Lehigh) became law without the Governor’s signature. S.B. 1073 is the 2016-2017 General Appropriations (GA) Bill; it reads like a ledger and simply directs funds to different agencies and offices. While technically this means that Pennsylvania had a more-or-less  on-time budget this year, legislation to raise revenue to fund the GA bill and to direct how the funds are to be spent lagged behind the GA bill by about a week.

While the GA bill distributes funds to different branches of government and state agencies, the “code bills” provide directives on how the money is to be spent. Most years, the GA bill is accompanied by bills to amend the Human Services Code, the Public School Code and the Fiscal Code. Some years, though not as often, bills amending the Tax Reform Code are necessary to raise revenue to fund the budget. This is one of those years.

Today, the Senate and the House convened a conference committee to consider H.B. 1198 (Prime Sponsor Withdrew), which, as amended and adopted by the conference committee, includes comprehensive amendments to the Tax Reform Code of 1971. The committee report was adopted by the Senate 28-22 and by the House 116-75. The amendments to the Tax Reform Code are expected to raise approximately half of the $1.3 billon in new revenue needed to balance this year’s budget, by:

  • Imposing the sales and use tax on digital downloads of books and music, as well as satellite radio and streaming of video and audio. This is estimated to raise $46.9 million.
  • Imposing the personal income tax on lottery winnings (only cash prizes). This is estimated to raise $15.8 million.
  • Increasing the bank shares tax from .89 to .95 percent annually and makes corrective changes to the formula. This is estimated to raise $23.5 million.
  • Increasing the cigarette tax from $1.60 to $2.60 per pack ($431.1 million estimated to be raised); taxing e-cigarettes at a rate of 40 percent of the wholesale price ($13.3 million estimated revenue raised); taxing smokeless tobacco at a rate of $.55 per ounce ($48.2 million estimated revenue raised); and taxing roll-your-own cigarettes at $.56 per ounce ($3.1 million estimated revenue raised).
  • Capping the sales tax vendor discount at $25 per month or $300 per year, expected to raise $55.5 million.
  • Imposing an additional two percent tax on table games, expected to raise $16.8 million.
  • Allowing tax amnesty for the 2016-2017 fiscal year, expected to raise $100 million.

The remaining revenue is expected to come from liquor reforms, fund transfers, and, eventually, internet gaming.

The bill also:

  • Extends the Film Production Tax Credit to include tax credits for expenses related to concert rehearsals and tours, as well as video game production, and rebrands the program as the “Entertainment Production Tax Credit”;
  • Establishes the “Coal Refuse Energy and Reclamation” Tax Credit;
  • Establishes the “Waterfront Development” Tax Credit;
  • Allows a tax credit of $2,500 per job filled by a veteran under the job creation tax credit;
  • Establishes a manufacturing tax credit and a “Rural Jobs and Investment” Tax Credit;
  • Extends the “Neighborhood Assistance” Tax Credit to business firms that contribute to organizations engaged in providing affordable housing, domestic violence or veterans’ housing assistance;
  • Provides for up to 12 new Keystone Opportunity Zones;
  • Establishes a tax credit for the development of mixed use properties; and
  • Establishes the Computer Data Center Equipment Incentive Program.

To read the bill in its entirety, go to: http://www.legis.state.pa.us/cfdocs/billInfo/billInfo.cfm?sYear=2015&sInd=0&body=H&type=B&bn=1198