Governor Rendell Signs Tax Collection System Reforms Into Law

Governor Edward G. Rendell today signed into law a new, more efficient tax collection system that could yield more than $200 million for municipalities and school systems and improve Pennsylvania's business climate through the standardization, coordination and accountability it provides.

Improvements Good for PA Communities, Business Climate, Governor Says

HARRISBURG, Pa., July 2 /PRNewswire-USNewswire/ -- Governor Edward G. Rendell today signed into law a new, more efficient tax collection system that could yield more than $200 million for municipalities and school systems and improve Pennsylvania's business climate through the standardization, coordination and accountability it provides.

"Today marks the culmination of a tremendous grassroots effort by the business community, local government and professional associations and, ultimately, the legislature," said Governor Rendell in signing Senate Bill 1063. "This fixes what is now, probably, the most complex and confusing local taxing environment in the nation, with more local earned income tax collectors -- 560 -- and more local taxing jurisdictions -- nearly 2,900 -- than all other states combined."

According to the Pennsylvania Economy League, Pennsylvania's fractured and inefficient system left some $237 million uncollected each year, which would be enough to hire 3,000 more teachers and 3,000 more police officers, or lower property taxes.

"The severe fragmentation and complexity also contributed to the perception that Pennsylvania is a difficult state in which to do business and it hindered our ability to attract and keep jobs," Governor Rendell said. "The lack of standardization, coordination, reporting, and accountability among and between jurisdictions and collectors was a cumbersome burden for companies doing business - or that wanted to do business -- in multiple Pennsylvania jurisdictions. A streamlined tax collection system will reduce administrative costs and headaches."

The legislation was a direct result of a 2004 report published by the Department of Community and Economic Development, which documented the fragmentation, complexity and inefficiency of the earned income collection system.

Under SB 1063, Pennsylvania's number of earned income tax collectors will be reduced from 560 to 69 -- roughly congruent with counties, but not a function of county government.

In addition, the legislation includes a number of important improvements:

-- Establishing uniform withholding, remittance, and distribution requirements.

-- Requiring that employers withhold all local income taxes imposed on the compensation of their employees and remit those taxes to only one collector, even if an employer operates in multiple counties.

-- Instituting a continually updated, comprehensive tax register, maximum twice-yearly rate changes, a uniform definition of taxable income and a system of appeals.

-- Strengthening reporting requirements so that each tax dollar is tracked from the time it is withheld until it is received by the appropriate taxing jurisdiction.

-- Requiring that the commonwealth issue one set of rules & regulations that apply to all collectors, taxpayers, and employers.

-- Requiring that DCED develop uniform forms, notices, reports, returns, schedules, and codes for school districts, municipalities, and tax collection districts.

-- Requiring that tax collectors keep a record of all public monies received and distributed, and submit monthly reports to each taxing jurisdiction and the tax collection district that must be reconciled with other records in an annual audit.

-- Providing for more accountability, transparency, oversight, and enforcement

The Rendell administration is committed to creating a first-rate public education system, protecting our most vulnerable citizens and continuing economic investment to support our communities and businesses. To find out more about Governor Rendell's initiatives and to sign up for his weekly newsletter, visit http://www.governor.state.pa.us.