This webinar will be presented by Jason Skrinak (Principal) and Mike Eby (Manager) of McKonly & Asbury’s State and Local Tax group. Jason and Mike will provide a look at proposals for the Pennsylvania budget and possible outcomes. They will also review recent Pennsylvania tax updates including the Department of Revenue computer modernization project as well as the current practices at the Board of Finance and Revenue.

1. 07/30/15

3. 07/30/15

4. TAX
UPDATE AND
BUDGET
SUMMARY
Presented by:
Jason Skrinak, Principal
Michael Eby, Senior Manager

5. AGENDA
• 2015-16 Governor Wolf’s Proposed Budget
• 2015 Corporate Tax Year in Review
• Pennsylvania Top Ten ITS Filing Tips
• Questions

6. 2015-16 STATE BUDGET

7. PENNSYLVANIA PROPOSED STATE BUDGET
Although “state budget” is often used to refer to the General Fund,
the overall state budget is much larger.
FY 2014-15 (current)
TOTAL: $71.8 billion
• $29.4 billion: General Fund
• $24.2 billion: Fed. Funds
• $18.2 billion: Other Funds
FY 2015-16
TOTAL: $78.6 billion (+9.5%)
• $29.9 billion: General Fund (+1.7%)
• $27.9 billion: Fed. Funds (+15.3%)
• $20.8 billion: Other Funds (+14.3%)
– (“Other funds” include the Motor License Fund, the Lottery Fund, the Tobacco Settlement Fund, and the Property Tax Relief Fund.)

8. PROPOSED BUDGET HIGHLIGHTS
• Increase Personal Income Tax
• Corporate Net Income Tax Rate Reduction
• Combined Reporting
• Net Operating Loss Limitations
• Increase Sales and Use Tax Rate
• Increase Sales and Use tax Base
• Property Tax Relief
• Increase Cigarette Tax
• New Bank Shares Tax Rate

9. ITEMS OF ISSUE
• State Pension Reform – PSERS & SERS
‒Municipal Pension Reform
• Liquor Sales Reform
• Severance or Drillers Tax
• Combined Reporting
• Vendors Discount
• Smokeless Tobacco
• On-line Gaming

10. 2015 CORPORATE TAX YEAR IN REVIEW

11. DEPARTMENT OF REVENUE UPDATES
June/July 2014
• Budget summary
• Tips to avoid corporate tax processing errors
• General Fund FY 2013-2014 totaled $28.6B, $508.8M under estimate (-
1.7%)

12. DEPARTMENT OF REVENUE UPDATES
August/September 2014
• Expansion of Property Tax Rebate Program
• Debut of a new Department of Revenue website
• Philadelphia Cigarette Tax
• General Fund totaled $4B, $10.7M under estimate (-.3%)

13. DEPARTMENT OF REVENUE UPDATES
October/November 2014
• Property Tax Rebate deadline approaching
• Business Tax transition to the Integrated Taxing System
• General Fund FY 2014-2015 totaled $8.9B, $103.4M over estimate (1.2%)

14. DEPARTMENT OF REVENUE UPDATES
December 2014/January 2015
• Bonus depreciation clarification
• Sales and use tax desk audit announced
• General Fund FY 2014-2015 totaled $8.9B, $103.4M over estimate (2.1%)

15. DEPARTMENT OF REVENUE UPDATES
February/March 2015
• Governor Wolf’s proposed budget announced
• Pennsylvania joins Multistate Tax Commission
• Department of Revenue eliminated billing notices
• General Fund FY 2014-2015 totaled $17.4B, $377.6M over estimate
(2.2%)

16. DEPARTMENT OF REVENUE UPDATES
April/May 2015
• Additional electronic filing and payment options available to taxpayers
• Budget Secretary certifies more than $783M for statewide property tax
relief
• General Fund FY 2014-2015 totaled $25.7B, $569.1M over estimate (2.3%)

17. DEPARTMENT OF REVENUE – INFORMATIONAL
NOTICES
Bank Shares Tax Notice (2015-01)
• Bank Shares Tax Receipts Factor
Corporation Tax Bulletin (2014-04)
• The Application and Sale of Restricted Tax Credit

18. PENNSYLVANIA DEPARTMENT OF
REVENUE TOP TEN INTEGRATED
TAX SYSTEM FILING TIPS

19. TOP 10 ITS FILING TIPS
1. Use the correct form.
• All corporate tax reports for tax years beginning after Jan. 1, 2000, must be filed using the
non-year specific form.
2. Properly submit amended returns.
• If an amended return must be filed, taxpayers must complete the non-year specific RCT-101.
All sections of the return, regardless of what items are being amended, must be completed.
The amended report check box under Step B, Page 1 of the RCT-101 must also be checked.
3. Use only numbers in numeric fields.
• Use of “NA” in an apportionment field will cause the integrated tax system to calculate a
100% apportionment factor.

20. TOP 10 ITS FILING TIPS
4. Use checkboxes appropriately.
• Checkbox indicators on the return:
• If the corporation has an extension of time to file its federal income tax return, or if
the income of the entity is included on the income tax return of another business or
individual with an extension of time to file the federal income tax return, “Federal
Extension Granted” must be checked.
• If checking “Holding Company,” do not use three-factor apportionment.
• If checking “Investment in LLC” or “Family Farm,” do not complete Section A.
• If checking “Solicitation Only,” “Single-Member LLC,” “Multi-Member LLC,” or “PA S
Corporation,” do not complete Section C, Corporate Net Income Tax, on Page 3.

21. TOP 10 ITS FILING TIPS
5. Provide all demographic Information.
• “Corp Tax Account ID,” “Federal EIN,” “Business Activity Code,” “Corporation Name,”
Address Lines, “City,” “State,” and “ZIP” must be completed in Step C on Page 1 of the
RCT-101. Indicate a change of corporate address under Step B, Page 1 of the RCT-101.
6. Complete history of earnings correctly.
• History of earnings for capital stock/foreign franchise tax must be in order, starting
with the oldest year on Year 1. If only one year is applicable, the first year should be
entered on the Current Year line. There should be no gaps in the history of earnings
period begin and period ending dates, and the most recent consecutive five years
must be provided.

22. TOP 10 ITS FILING TIPS
7. Claim bonus depreciation properly.
• If taking a deduction for bonus depreciation, Section B1, Current Year Federal
Depreciation of 168K Property, must be completed on Page 3. Also, Schedule C-3 (REV-
799) must be filled out and included with the RCT-101.
8. Calculate apportionment appropriately.
• When claiming three-factor apportionment, the denominator of each factor must
equal the property, payroll, and sales reported on the federal income tax return
regardless of the activity in Pennsylvania.
‒ NOTE: The integrated tax system considers a factor of 0/0 = 1.000000 and 0/1 = 0.000000.
‒ The numerators and denominators must be entered on Schedule A-1 and Schedule C-1.

23. TOP 10 ITS FILING TIPS
9. Report foreign corporations’ lack of activity.
• A foreign corporation with no property, payroll, or sales anywhere must complete Schedule A-1
and/or C-1 on Page 4 of the RCT-101, using zero as the numerator and one as the denominator.
10. Account for partnership activity.
• If a corporation owns underlying partnerships, the corporation’s share of the partnerships’
property, payroll, and sales factors must be included in the property, payroll, and sales of the
corporation.
BONUS: Apply electronic payments properly.
• In order to ensure proper application of tax payments, follow the detailed instructions regarding
ACH debit and credit electronic funds transfer. Visit www.etides.state.pa.us, selecting
“Instructions” under the “Options” category, then “Payment Methods” under the Electronic Funds
Transfer (EFT) header.

24. Jason Skrinak, CPA
Principal, State and Local Tax
jskrinak@macpas.com
(717) 972-5828
QUESTIONS?
Michael Eby, CPA
Senior Tax Manager
meby@macpas.com
(717) 972-5800

25. 07/30/15

26. 07/30/15

27. 07/30/15

28. Jason Skrinak, CPA
Principal, State and Local Tax
jskrinak@macpas.com
(717) 972-5828
QUESTIONS?
Michael Eby, CPA
Senior Tax Manager
meby@macpas.com
(717) 972-5800