Senate Passes Series of “Code” Bills Needed to Fund FY 2017-18 Budget, After House Effort Fails
The Senate resumed session on July 26 and 27. They addressed five budget implementation and revenue raising code bills, which direct and fund how the spending law passed in June will be driven out.
Here is a breakdown of the highlights of each of the bills of interest to the construction industry, as provided by Republican committee summaries and fiscal notes:
TAX REFORM CODE
House Bill 542 introduced by Rep. Curtis Thomas (D-Philadelphia), legislation that was originally intended to require remote vendors to provide information about Pennsylvania’s sales and use tax to buyers.
The key provisions related to the $1.7965 billion revenue package included in the bill after the Senate Appropriations Committee amended the legislation were included in an omnibus amendment sponsored by Sen. Pat Browne (R-Lehigh).
Sales and Use Tax Changes
Provides an exclusion for technical support services by amending the definition of “tangible personal property” to exclude services that provide advice or guidance concerning otherwise taxable digital or electronic tangible person property including help desk support or call center support.
Imposes the sales tax on marketplace providers — otherwise known as internet sellers — by requiring them to collect the sales to on each separate sale that they facilitate for a marketplace provider. Essentially, this requires Amazon, eBay, or similar services to collect the sales tax on behalf of a vendor selling products on their services. Over $40 million is booked in revenue from this change. Changes also require that if federal law regarding the issue of remote sellers—the underlying subject of the original legislation—is not enacted by the end of next year, the IFO and Department of Revenue are to study addressing the legal and fiscal implications of mandating notice requirements for these sellers.
Corporate Net Income Tax
In anticipation of a state Supreme Court decision, the legislation alters the cap on the net operating loss deductions from the greater of $5 million or 30 percent of taxable income to a cap based on the amount of taxable income of 35 percent for 2018 and 40 percent for 2019. Should the court decide to maintain the current net operating loss rules, the changes will not go into effect.
The legislation also provides for a Manufacturing Innovation and Reinvestment Deduction Program within the corporate net income tax that allows manufacturers making qualified capital investments in excess of $100 million to claim a deduction against their taxable income under the corporate net income tax.
Gross Receipts Tax
Imposes a GRT on the retail sales of natural gas at a rate of 57 mills effective August 1, 2017, with exemptions for sales made to electric generation companies for the purpose of generating electricity, sales of LP gas, and sales for resale.
Increases the telecom and electric GRT from 50 mills to 60 mills for telecom and from 59 mills to 65 mills for electric, effective August 1, 2017.
Of the $405 million booked from these changes, $40 million will be evenly split between the Low-Income Home Energy Assistance Program (LIHEAP) and a Natural Gas Optimization Program to provide competitive grants to natural gas distribution companies to expand the natural gas industry.
Electric Grid Virtual Financial Transactions Tax
Places a new tax at the rate of five percent on the gross transaction amount of electric grid virtual financial transactions in the electricity markets administered by the regional transmission organization—the so-called PJM tax, but does not book any revenue for the plan in the current fiscal year.
Unconventional Gas Well Fee
The legislation imposes a new tax at a rate ranging from 1.5 cents to 3.5 cents per thousand cubic feet of natural gas on each producer subject to the local impact fee, subject to the impact fee rate schedule, which is based on the average annual price of natural gas. For 2017-2018 the rate is set at two cents per thousand cubic feet of natural gas and is expected to bring in $80 million. Money from the tax will be used to ensure that the current impact fee is maintained at no less than $200 million per year.
Makes substantial regulatory changes with regard to the Department of Environmental Protection’s issuance of permits to unconventional natural gas drillers, earth disturbance permits, and any general air quality permit by requiring review within their statutory or regulatory timeframes. If the department does not meet their timeframe and has not denied the permit, the permit shall be deemed approved. Time used to correct department-identified permit deficiencies shall be tolled in terms of the review time.
The legislation also creates the Air Quality Permit Advisory Committee to review and approve or disapprove new general air quality permits developed by the department that impact only the unconventional natural gas industry. Guidance in the legislation says the new general permits shall not apply to temporary activities on site and a natural gas well site which has commenced production prior to the date the new permits are approved by the committee and published in the PA Bulletin.
Changes require DEP to review its current backlog for all permits under their oversight and implement a program where a third-party licensed professional can review permits.
Economic Development Zones
Makes technical and editorial changes relative to CRIZ, NIZ, and Keystone Opportunity Zones.
Administration and Enforcement
Shortens the tax appeal period from 90 to 60 days and implements a process whereby appeals maybe categorized as either a summary or standard claim, which affects how an appeal can be further appealed.
Tobacco Settlement Securitization
Authorizes the Commonwealth Financing Authority to issue bonds in the amount of $1.3 billion by using a portion of the annual payments received through the Tobacco Master Settlement Agreement. These funds are to be deposited into the General Fund and debt service is required to start within two years. Payments may be made either out of General Funds or the Tobacco Settlement Fund.
PUBLIC SCHOOL CODE
The legislation used for the Public School Code is House Bill 178, sponsored by Rep. Gary Day (R-Berks). The bill was originally allowed for a yearly security drill instead of the annual fire drill in schools.
An omnibus amendment by Sen. Pat Browne (R-Lehigh) incorporating the following changes was adopted after an amendment offered by Sen. Scott Wagner (R-York) that would have lowered state public school funding based upon excessive school district budget surpluses failed.
Financial Watch School Districts
Essentially applying to the Erie School District, this part of the legislation allows for the appointment of a financial administrator in a school district identified for financial watch that receives educational access program funding and for how to craft and implement a financial improvement plan.
Extends the PLANCON moratorium for another year.
The legislation used for the Fiscal Code was House Bill 453, sponsored by Rep. Frank Ryan (R-Lebanon) and was originally meant to require agencies to respond within 120 days of publication to audit findings by the Office of Auditor General, a changed carried over the amended legislation authored by Sen. Pat Browne (R-Lehigh).
That language also makes the following changes of interest:
Provides $25 million for water and sewer projects across Pennsylvania; requires repayment of the $165 million transfer for the Workers’ Compensation Security Fund by July 1, 2019; provides $65 million for the use in the Natural Gas Infrastructure Development Fund; provides more money for the First Chance Trust Fund; requires a report on the PLANCON debt service; allows the PennDOT secretary to waive the requirement for local matching funds for multimodal projects; extends the PLANCON advisory committee’s report deadline to October 31, 2017.
House Bill 118 was used as the vehicle for the Administrative Code. The legislation, sponsored by Rep. Aaron Kaufer (R-Luzerne), was originally designed to require the development of strategies to combat the opioid epidemic.
An omnibus amendments sponsored by Sen. Pat Browne (R-Lehigh) made the following changes:
Department of Revenue employees with access to federal tax information must provide a criminal history record and fingerprints; the Pennsylvania State Police is authorized to increase the fee for criminal background checks through publication in the Pennsylvania Bulletin; transfers $200 million from the Joint Underwriting Association to the General Fund and addresses past legal challenges; requires Environmental Quality Board rulemaking that would utilize federal discharge limits for manganese or sources that are more than five miles from a drinking water source; extends the sunset date for the recycling fee to 2023; extends the expiration of permits issued to water treatment facilities that exclusively treat water from conventional oil and gas well development; establishes alternate contracting procedures for construction and renovation of county jails.
According to a memo sent to rank-and-file House Republicans by the caucus’s leadership team after the votes, it does not appear that the chamber will be moving quickly toward a consideration of the proposal, although members were told that they should expect to return to session before the end of August.
PLANCON Moratorium and Advisory Committee Extended
The roughly $300 million dollar line item in the state budget to reimburse school districts for approved construction projects was omitted from the recently enacted state spending plan (the revenue on how to pay for that plan is still a work in progress). This is the second consecutive year that the PLANCON line item has been unfunded. It should be noted however that in 2016 the Legislature did approve up to $2.5 billion in bond funds to pay off past projects and those already in the pipeline for approval. The bonding was a welcome development for school districts that had grown nervous about the process that can take years for payment to arrive. But that came with a moratorium on new project applications being accepted. This year’s spending budget continues the moratorium and no new funding.
At the same time the bonding was enacted, a PLANCON Advisory Committee was created to study and make recommendations about the future of continued state support for local school construction. Your organization’s lobbyist, John Wanner, was appointed as a member of the task force as the only industry representative. The other 15 members are all Senators and Representatives plus 2 school district representatives. The Committee was supposed to finish its work in May but budget negotiations sidetracked the groups progress. A new deadline to deliver a final report of September is in the works. It is part of the yet to be enacted school code bill which normally accompanies the state budget. Additional public hearings were anticipated to happen this Summer but the budget standoff has delayed those as well. The process will undoubtedly get back on track eventually but don’t expect to see state money for local school projects in the Commonwealth’s 2017-2018 budget.
State Registration Board for Professional Engineers, Land Surveyors and Geologists Jul 12 Meeting Highlights
The State Registration Board for Professional Engineers, Land Surveyors and Geologists met on July 12 in Harrisburg. Following are the highlights.
Board President Theodore Tesler, PG, welcomed Board members and guests, and thanked them for their service. He acknowledged the guests and invited them to share any concerns. John Wanner, CAE, reported that HB 1106, which updates definitions in the Registration law for Engineering and Land Surveying, had passed the House, after an amendment was adopted to address concerns raised by the PA Rural Electric Association. Wanner said other entities may emerge with concerns, now that the bill is in the Senate, and those issues will be dealt with going forward as they arise. President Tesler had no further report. Discussion was raised about the Surveyors Exam. PLS members Brinkash and Garlitz expressed support for the content.
Board members then discussed the Department of Environmental Protection is demanding changes to Marcellus Shale plans. Brinkash noted the same problem exists with county mappers. These instances may be in conflict with the Registration Law.
BPOA Commissioner Ian Harlow did not attend the meeting.
Board Administrator Robin Shearer reported that renewal notices would be going out shortly.
Board Counsel Juan Ruiz reported on SB 354, which provides for expungement of disciplinary actions.
Regulatory Counsel Tom Blackburn was not able to attend.
Next meeting is September 13, in Harrisburg. Future 2017 meetings: November 8. The Board announced 2018 meeting dates: January 10, March 14, May 9, July 11, September 12, and November 14.
The following bills of interest to PSPE have been introduced and/or acted upon in the past month.
Bidding / Contracting
HB 566 RE: Prompt Pay (by Rep. James Santora, et al)
Amends the Contractor and Subcontractor Payment Act further providing for owner’s payment obligations and for contractors’ and subcontractors’ payment obligations. If payment is not received by a contractor or subcontractor as required, the contractor shall have the right to suspend performance of any work, without penalty, until payment is received in full. Stipulates that the provisions of the act cannot be waived in a contract. Requires a written explanation of a good-faith reason to be given when the payment is retained for a deficiency item. Provides that a contractor or subcontractor to facilitate the release of retainage on its contract before final completion of the project by posting a maintenance bond with approved surety for 120 percent of the amount of retainage being held; and provides that if the withholding of retainage is longer than 30 days after the acceptance of the work, a written explanation must be provided.
Received in the Senate and referred to Senate Labor and Industry Committee, 7/6/2017
Budget Related Bills
HB 218 RE: General Appropriation Act of 2017 (by Rep. Stan Saylor, et al)
Provides from the General Fund for the expenses of the Executive and Judicial Departments, the State Government Support Agencies and the General Assembly of the Commonwealth, the public debt and the public schools for the fiscal year July 1, 2017, to June 30, 2018.
Became law without Governor’s signature, 7/11/2017 (Act No. 1A of 2017)
HB 785 RE: Capital Facilities Debt Enabling Act Bonds (by Rep. Stan Saylor, et al)
Amends the Capital Facilities Debt Enabling Act adding language providing retirements of principal for funding bonds under section 312 relating to funding bonds shall be regular and substantial if made in annual or semiannual amounts whether by stated serial maturities or by mandatory sinking fund retirements computed in accordance with either a level annual debt service plan as nearly as may be or upon the equal annual maturities plan. Also adds language providing that beginning July 1, 2018, and each July 1 thereafter until the sum of the outstanding obligations for redevelopment assistance capital projects equals $2.95 billion, the maximum amount of outstanding obligations for redevelopment assistance projects shall be decreased by $50 million per year for a period of five years and specifies the principal amount of additional debt that may be incurred during fiscal year 2017 to 2018 for capital projects. Further provides for limitation on additional capital project releases financed by debt and for carry forward. Adds a chapter relating to capital budgets for particular fiscal years. Amendments to section 307 (c) relating to terms and conditions; section 317 relating to appropriation for and limitation on capital projects; and section 318 relating to administration of redevelopment assistance capital projects shall take effect in 60 days. The remainder is effective immediately.
Reported as amended from Senate Appropriations Committee, and read first time, 7/8/2017
Read second time, 7/9/2017
Read third time, and passed Senate, 7/10/2017 (48-0)
Received as amended in House and rereferred to House Rules Committee, 7/10/2017
SB 651 RE: Capital Budget Project Itemization Act of 2017-2018 (by Sen. Pat Browne, et al)
provides for the capital budget for fiscal year 2017-2018; itemizing public improvement projects, furniture and equipment projects, transportation assistance projects, redevelopment assistance, flood control projects, Keystone Recreation, Park and Conservation Fund projects, Environmental Stewardship Fund projects, State forestry bridge projects, park and forest management projects, State ATV/ Snowmobile Fund projects, Pennsylvania Fish and Boat Commission projects, Oil and Gas Lease Fund projects and Motor License Fund projects to be constructed, acquired or assisted by the Department of General Services, the Department of Conservation and Natural Resources, the Department of Environmental Protection, the Department of Transportation or the Pennsylvania Fish and Boat Commission, together with their estimated financial costs; authorizing the incurring of debt without the approval of the electors for the purpose of financing the projects to be constructed, acquired or assisted by the Department of General Services, the Department of Environmental Protection, the Department of Transportation or the Pennsylvania Fish and Boat Commission; authorizing the use of current revenue for the purpose of financing the projects to be constructed, acquired or assisted by the Department of Conservation and Natural Resources or the Department of Transportation stating the estimated useful life of the projects; making a related repeal; and making appropriations.
Reported as amended from House Appropriations Committee, 7/10/2017
SB 697 RE: Capital Budget Act of 2017-2018 (by Sen. Patrick Browne, et al)
Appropriates $1,615,000,000 for the capital budget for the fiscal year 2017-2018. Effective July 1, 2017, or immediately, whichever is later.
Read third time, and passed the Senate, 7/8/2017 (49-0)
Received in the House and referred to House Appropriations Committee, 7/11/2017
Environmental Building Standards
HB 176 RE: Agricultural Buildings (by Rep. Tina Pickett, et al)
Amends the PA Construction Code Act, in preliminary provisions, further providing for definitions and for application. Defines “agricultural commodity” and “producer.” Excludes from the act no more than one structure per parcel of land which is used for the direct, seasonal sale of agricultural commodities which is open on at least 25 percent of the perimeter of the structure when in operation, operated by a producer whose products make up not less than 50 percent of the agricultural commodities being sold, if not located on the producer’s property the structure is erected for less than 180 days of a calendar year, and the structure has an area of not more than 1,000 square feet. Also excludes structures used to load, unload or sort livestock at livestock auction facilities.
Reported as committed from Senate Labor and Industry Committee, and read first time, 7/8/2017
Amended on Senate floor, and read second time, 7/9/2017
Read third time, and passed Senate, 7/10/2017 (48-0)
Received as amended in House and rereferred House Rules Committee, 7/10/2017
HR 284 RE: MS4 Program (by Rep. Dan Moul, et al)
A Resolution urging the Congress of the United States to repeal the Environmental Protection Agency’s MS4 program.
Laid on the table, removed from the table, 7/8/2017
SB 144 RE: Alternative Systems (by Sen. Gene Yaw, et al)
Amends Pennsylvania Sewage Facilities Act authorizing the inclusion of alternative systems in the site planning process. Requires that within 180 days of the effective date, the department, in consultation with the Sewage Advisory Committee, shall develop standards upon which every alternate sewage system shall be based. Requires the department to review data for each individual and community onlot sewage system classified as an alternate system, and if it determines there is sufficient data to reclassify an alternate system as conventional, shall do so. Similarly the department may undertake a rulemaking to remove a system’s classification as an alternate system if warranted.
Read second time and rereferred to House Appropriations Committee, 7/7/2017
Reported as committed from House Appropriations Committee, read third time, and passed House, 7/8/2017
Received as amended in Senate and rereferred to Senate Rules and Executive Nominations Committee, 7/8/2017
Re-reported on concurrence as committed from Senate Rules and Executive Nominations, 7/9/2017
Senate concurred in House amendments, 7/10/2017 (48-1)
Signed in the Senate and in the House, 7/10/2017
Approved by the Governor, 7/20/2017. Act No. 26 of 2017)
HB 1269 RE: Extension for Construct of Infrastructure (by Rep. Tom Quigley, et al)
Amending Title 53 (Municipalities Generally), in municipal authorities, further providing for purposes and powers adding that the facilities have not been placed into service within seven years, or, for an authority which provides service to five or more municipalities, the facilities have not been placed into service within 20 years (increased from 15), after adoption of a resolution which imposes tapping fees which are based upon facilities to be constructed or acquired in the future. Any refund of fees held for 20 years (increased form 15) shall include interest for the period the money was held.
Approved by the Governor, 7/7/2017. Act No. 19 of 2017)
HB 409 RE: UCC Council (by Rep. Eli Evankovich, et al)
Amends the Pennsylvania Construction Code Act, in preliminary provisions, further providing for definitions and for Uniform Construction Code Review and Advisory Council and providing for review of updated sections and adoption of updated sections into Uniform Construction Code; requires council members to be Pennsylvania residents; regulations promulgated as a result of council decisions shall remain in effect until September 30, 2018, and afterwards supersede any previous inconsistent council decisions or departmental regulations; in Uniform Construction Code, further providing for revised or successor codes; in adoption and enforcement by municipalities, further providing for administration and enforcement; in training and certification of inspectors, further providing for education and training programs by establishing a $4 fee on each construction or building permit issued, with 47.5 percent of the fee going to both the Municipal Code Official Training Account and Construction Contractor Training Account, and five percent to the Review and Advisory Council Administration Account; no money from the fee shall be transmitted to DCED for administrative expenses; and, in exemptions, applicability and penalties, further providing for applicability to certain buildings.
Reported as committed from Senate Appropriations Committee, 7/8/2017
HB 1469 RE: Training of Inspectors (by Rep. Doyle Heffley, et al)
(PN 2186) Amends the Pennsylvania Construction Code Act, in adoption and enforcement by municipalities, further providing for administration and enforcement by third party agencies by establishing duties for the municipality related to notification of applicants if the municipality contracts with one or more third party agencies for the administration and enforcement of the act. Also requires the Department of Labor and Industry to have a complaint form on its website. In training and certification of inspectors, further provides for training of inspectors by establishing the department shall accept and review a complaint submitted by a building permit applicant about a code administrator and the secretary shall have the discretion to enforce remedial actions if necessary. Also allows municipalities to utilize and enter into contracts with third-party agencies to perform plan review and inspection services and supplement the municipal code enforcement program’s plan review and inspection services.
Received in the Senate and referred to Senate Labor and Industry Committee, 7/6/2017
SB 692 RE: Permit-Exempt Septic System inspection Fees (by Sen. John Blake, et al)
Amends the Pennsylvania Sewage Facilities Act further providing for permits by establishing the local agency may charge a fee, not to exceed $100 (changed from $25), to verify the system is located in accordance with the siting requirements.
Laid on the table (Pursuant to Senate Rule 9), 7/10/2017
HB 1681 RE: Maintenance Work (by Rep. Ron Marsico, et al)
Amends the Pennsylvania Prevailing Wage Act by adding that “public work,” when applied to locally funded road projects, includes projects that utilize a combination of maintenance, rehabilitation, and reconstruction on existing alignment in which non-maintenance items exceed 15 percent of the total projection cost. Further provides for a definition of “locally funded” and adds language to the definition of “maintenance work”.
Introduced and referred to House Labor and Industry Committee 7/22/2017
Copies of all bills of interest can be accessed via the Internet at: http://www.legis.state.pa.us/cfdocs/legis/home/session.cfm
Senate Passes Series of “Code” Bills Needed to Fund FY 2017-18 Budget, After House Effort Fails