Tax change affects Pennsylvania military personnel

CARLISLE, Pa. — When Senate Bill 1063 was passed by the state legislature in 2008, the focus was on making local tax collection a uniform process across all of Pennsylvania's counties.

When the bill, now called Act 32, went into effect for the 2012 tax year, however, it did more than require a county-wide local earned income tax collection. A re-write to a line in the 1965 Local Tax Enabling Act now means active military personnel stationed in Pennsylvania must pay local taxes — something they hadn't done previously.

That came as a surprise for Dan Barney, a volunteer VITA tax preparer at the Carlisle Barracks tax office.

“We didn’t know about it here at the tax office until February,” Barney said. “Everyone was pretty dumbfounded to find out they’d have to pay taxes.”

Act 32 took effect in 2012, so this is the first year many active military are seeing a change in procedure as they prepare to pay their 2012 taxes.

The local tax would only apply to the money earned by active military personnel who are Pennsylvania residents when they were stationed in Pennsylvania.

If an active military person is a Pennsylvania resident but stationed outside of Pennsylvania, such as Fort Benning, then the local earned income tax wouldn’t be collected.

It’s a change for state military personnel, which includes the Pennsylvania National Guard.

Susan Pinty, director of the Cumberland County Tax Bureau, said the change was communicated via email at the federal level. She said her office has a copy of the notification and has only taken a few calls about the matter.

“We haven’t had any problem with it,” Pinty said.

Barney isn’t as optimistic the tax season will go so smoothly.

“People get notifications (from the tax bureau) because they filed the previous year. None of the military paid local taxes last year. This year is the first year it applies,” Barney said, noting that many people he’s talked to on post have not heard about the change in local taxes. “They also don’t take (local taxes) out of pay.”

The change in local earned income taxes for military is something Sen. Lisa Baker’s office is looking to overturn.

Sen. Pat Vance, R-31, voted to approve what would become Act 32 in June 2008, but she noted that the change in taxes for military was largely unknown by most of the Pennsylvania lawmakers in office at the time. State Rep. Glen Grell, R-87; Rep. Rob Kauffman, R-89; former Rep. Jerry Nailor, R-88; and former Rep. William Ian Gabig, R-199, all voted in favor of the bill.

“I think we absolutely did not realize that changed,” Vance said.

Vance said it’s a change that she thinks can be rectified, and Sen. Baker, R-20/Luzerne County, is trying to get the legislation passed.

However, the legislation has had some hiccups.

Diane McNaughton, executive director of the Senate Veterans Affairs and Emergency Preparedness Committee in Baker’s office, said Baker introduced Senate Bill 382 in 2011 to change only the part of Act 32 that affected the military. The bill said the local earned income tax would not apply to wages or compensation paid to those on active military service, regardless of whether it is earned inside or outside of the Commonwealth.

Baker’s legislation was backed by a number of sponsors in the Senate and was passed by the Finance Committee, but it stalled in the Appropriations Committee, McNaughton said.

Had the bill been passed, it would have applied to income taxes levied and collected after Dec. 31, 2011, which would have eased some of the headaches military personnel now have.

Though the bill did not make it, McNaughton said Baker has plans to reintroduce the bill this session. Having talked to the Pennsylvania National Guard Associations, McNaughton said Baker’s office isn’t the only one making this a priority.

“They’re making this a legislative priority for them,” she said, adding that National Guardsmen will attend a special National Guard Day in April at the Capitol. “They’ll talk to legislators and ask them to move on the bill.”

McNaughton said they are still working on a draft and did not have an exact date on when the bill may be re-introduced to the state Senate.
 

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