Act 32 of 2008 resulted from a study initiated in 2004 by the Department of Community and Economic Development (DCED). This article is intended to provide you with a brief summary of the 68 page legislation and how it impacts your District.
Act 32 reduces the 560 Earned Income Tax (EIT) collection entities across the Commonwealth to 69 Tax Collection Districts (TCD). TCDs are ordinarily coterminous with county boundaries, except Allegheny County will be served by four TCDs. School Districts that overlap county boundaries will be included in the TCD where the majority of its population lives. Each TCD will be governed by a Tax Collection Committee (TCC). Each School District and Municipality within the TCC that levies an EIT will appoint a voting delegate and each that does not levy an EIT will appoint a non-voting delegate. TCC delegates vote on committee actions and ultimately select the tax officer (collector) for the TCD. TCCs will be subject to the Right to Know Law, the Sunshine Act and the Ethics Act. Therefore, meetings of the TCCs are open to the public; minutes and other documents are public records; and individual delegates will be required to file a Financial Interest Statement each year. DCED will furnish TCCs with sample bylaws and procedures, sample RFPs for selection of a TCD tax officer and other supporting information.
At the first meeting of the TCC, the chair of the county commissioners (or the county CEO in home rule counties) will serve as chair. Delegates will elect a chair and a vice chair from their voting delegates, as well as a secretary who need not be a voting delegate. Also at this first meeting, delegate votes will be weighted. Weight will initially be calculated by DCED based on two factors, the proportional amount of EIT revenues and population of the taxing jurisdiction each delegate represents in relation to that of the entire TCD. The purpose of the weighting is to ensure a fair voting system based on each taxing jurisdiction’s revenue interest. However, after the first meeting, the TCC can opt to switch to a different method of voting, such as one vote per delegate.
TCCs will be responsible for the appointment and oversight of the tax officer, as well as setting the tax officer’s bond. TCCs will have the authority to create a tax bureau, hire a director and staff and set their compensation. TCCs will retain legal counsel and auditors and may acquire or lease property for the purpose of housing and running the tax bureau. They will be authorized to enter into joint tax collection arrangements with other TCCs, and will arrange for tax officers to be audited at least once annually. The audits must be provided to every political subdivision within the TCD. The annual budget of the TCD will be paid by the member taxing jurisdictions, prorated according to their shares of EIT revenue. If a TCC fails to appoint a tax officer by September 15, 2010, one will be appointed by the County Court of Common Pleas.
Each TCC has until June 1, 2010 to set up an appeals board, which will consist of at least three delegates. Appeal boards may also be created jointly with another TCC. Taxpayers and employers, as well as taxing jurisdictions, will be able to appeal decisions of the tax officer regarding assessments, collection, refund, withholding or distribution of taxes.
Act 32 requires mediation to resolve disputes that involve a difference in tax revenues of more than ten percent from one year to the next. (Disputes over amounts less than ten percent may go to voluntary mediation.) When there is such a dispute, the taxing jurisdiction must provide notice to DCED and the TCC of the intent to pursue mediation. The taxing jurisdiction, DCED and the tax officer must submit a brief statement of the issues to the mediator within 20 days of the notice. DCED then has 30 days to determine if the dispute qualifies for mandatory mediation. Mediation will then begin and must be completed within 30 days, unless all parties agree to an extension. If settlement is reached, it will be binding. The mediation process is exempt from the Right to Know Law, but the resulting settlement agreement will be a public record. Mediation costs will be shared by all parties to the dispute.
A substantial amount of additional information is contained in the Act and has been reviewed by our attorneys who are prepared to respond to any questions your School District or the newly created TCCs may have. To fulfill the Act’s requirements, click here for the Timeline for Act 32 Compliance.