NOTICES
INDEPENDENT REGULATORY REVIEW COMMISSION
Actions Taken by the Commission
[26 Pa.B. 548] The Independent Regulatory Review Commission met publicly at 11 a.m., Thursday, January 18, 1996, and took the following actions:
Regulation Approved:
Department of Revenue #15-346: Personal Income Tax; Exempt and Nonexempt Income (amends 61 Pa. Code Chapter 103 and deletes Chapter 125)
Department of Public Welfare #14-412: Long-Term Structured Residences (amends 55 Pa. Code by adding Chapter 5320)
_____Commissioners Present: Robert J. Harbison, III, Vice-Chairperson; Thomas P. Comerford, Jr.; John F. Mizner; Irvin G. Zimmerman
Public meeting held
January 18, 1996Department of Revenue--Personal Income Tax; Exempt and Nonexempt Income; Doc. No. 15-346
Order On July 13, 1994, the Independent Regulatory Review Commission (Commission) received this proposed regulation from the Department of Revenue (Revenue). This rulemaking would amend 61 Pa. Code Chapter 103 (Imposition and Determination of Tax), Chapter 117 (Return and Payment of Tax) and delete Chapter 125 (Personal Income Tax Pronouncements--Statement of Policy). Revenue also seeks to add a new Chapter 108 (Distributions). The authority for this regulation is set forth in section 7354 of the Tax Reform Code of 1971, as amended (72 P. S. § 7354), relating to personal income tax. The proposed rulemaking was published in the Pennsylvania Bulletin on July 23, 1994, with a 30-day public comment period. The final-form regulation was submitted to the Commission on December 20, 1995.
Revenue states that these amendments are necessary to implement Act 68 of 1993, which makes taxable those gains derived from dispositions of Federal, State and local obligations issued on or after February 1, 1994, and exempts from taxation exempt-interest dividends of investment companies. It also provides the circumstances under which information returns will be required from investment companies, Subchapter S corporations and certain other organizations.
Lastly, this rulemaking will supersede and delete as unnecessary current provisions in sections 125.11--125.15 relating to ''Income Tax Pronouncements--Statement of Policy.'' These provisions relate to: gains or losses on the sale, exchange or other disposition of obligations otherwise exempt from tax; interest; distribution by corporations; distributions by business trusts; and distributions by investment companies. This Statement of Policy was published in the Pennsylvania Bulletin on May 6, 1994.
Revenue has added a new subsection (i) to section 103.13 (relating to net gains or income from disposition of property), which sets forth the determination of net gains or income with respect to obligations issued on or after February 1, 1994. A new subparagraph (j) details adjustments to basis. Paragraph (l) deals with adjustments to the basis of a debt instrument in the hands of the holder for taxable years beginning on or after January 1, 1993. Paragraph (2) describes adjustments to the basis for an obligation issued by the Commonwealth, a public authority, commission, board or other agency created by the Commonwealth, a political subdivision of the Commonwealth or a public authority created by the latter, or an obligation exempt from tax under the laws of the United States in the hands of the holder.
Section 103.16 (relating to interest) is being amended to indicate that any payment for the use of money, whether or nor paid specifically as interest, is taxable as ''interest.'' In addition, for taxable years beginning on or after January 1, 1993, ''interest'' shall also include any excess of a publicly offered obligation's stated redemption price at maturity over the first price at which a substantial amount of the obligations included in the issue are sold to the public. A new subsection (f) details the procedure for calculation of unstated or imputed interest for taxable years beginning on or after January 1, 1993.
Revenue has also added a new Chapter 108 relating to distributions. In summary, section 108.1 explains that corporate dividend distributions paid out of profits are subject to tax and other payments to shareholders will reduce the basis of the taxpayer's holdings. Section 108.2 states that distributions made by business trusts are treated the same as distributions by a corporation to its stockholders. Section 108.3 defines what investment companies are, indicates that their distributions are taxed the same as corporations, and requires each investment company to create an accumulated income account for each taxable year beginning on or after January 1, 1993. In summary, an accumulated income account reflects retained taxable earnings not distributed to shareholders.
Section 117.18 (relating to return of information as to payment in excess of $10) of the final-form regulation would provide that any person (that is, investment companies, corporations, associations and business trusts) making distributions to taxpayers in excess of $10 shall provide annually to Revenue an information return showing its distributions (to recipients or beneficial interests) of dividends and other taxable or nontaxable shares of stock. Information returns are to be filed with Revenue on or before February 28 of each year for distributions made to any taxpayer in the preceding calendar year.
There were four comment letters submitted on the proposed version of this rulemaking. Commentators were The Vanguard Group of Investment Companies, SEI Corporation and the Philadelphia-based law firms of Dechert, Price and Rhoads, and Stradley, Ronan, Stevens and Young (Stradley, Ronan), respectively. The only objection to the final-form regulation was received from the Stradley, Ronan firm. They were concerned about the clarity of certain provisions. At the public meeting (after having conferred with Revenue's officials before the public meeting), they withdrew their objections.
The proposed amendments will generate some additional paperwork for certain personal holding companies, foreign corporations, non-Pennsylvania Subchapter S corporations, and investment companies and the investors of such organizations, where there are differences for resident taxpayers (in order to accurately report personal income) between Federal income tax and the Pennsylvania Personal Income Tax Act. Revenue has mitigated some of the increased paperwork impacts, however, by amending section 117.18(c)(1) of the final-form regulation in response to commentators' comments. Under that provisions, payer entities have the option of using their own current forms to provide the required information, so long as certain specified items of information are included. Revenue states that additional accounting procedures will be required of those entities that are mandated to make information returns under this regulation.
There will also be additional administrative costs for the Commonwealth in developing and providing the new Pennsylvania Form 99-DIV ''Information Return for Recipients of Dividends and Distributions'' to Pennsylvania taxpayers. This rulemaking will not impose any costs upon political subdivisions of the Commonwealth.
Revenue made a number of revisions to the regulation in response to commentators' comments on the proposed version of this rulemaking. Section 117.18 has also been further amended in several respects. A new Pennsylvania Form 1099 entitled ''Information Return for Recipients of Dividends and Distributions'' may be used to provide the Pennsylvania tax information, instead of Revenue trying to require use of the Federal Form 1099 DIV. Section 117.18(c)(1) will give payer entities the flexibility to use their own information forms, as previously noted, provided the forms set forth: (1) the payer's name, address and Federal tax identification number; (2) the recipient's name; address and Federal tax identification number; and (3) the amount of dividends, nontaxable distributions and Pennsylvania exempt-interest dividends paid.
Section 117.18 of the final-form regulation includes some new provisions to give payer entities some additional latitude in informational reporting. Subsection (c)(2) provides that where a regulated investment company furnishes Federal Form 1099 DIV to a recipient (for Federal tax purposes), a Pennsylvania information return may be made by separate statement showing the ratio of Pennsylvania exempt-interest dividends paid to total ordinary dividends reported on the Federal form. Subsection (c)(3) provides that where a regulated investment company is not required to furnish a Federal Form 1099 DIV to a recipient, a Pennsylvania information return may be made by separate statement showing the amount of dividends, nontaxable distributions, and Pennsylvania exempt-interest dividends paid.
A new subsection (E) will allow certain entities, including corporations, to rely on their own business records in determining the identity and place of residence of recipients. This new provision is responsive to our comment that investment companies, and the like should not be held responsible for providing these forms to investors who have reported an address outside of Pennsylvania, but who have an obligation to pay Pennsylvania taxes.
We also recommended that the regulation provide a specific effective date for compliance with this regulation. While Revenue has not specified an overall compliance date, it does provide (in new section 117.18(d)) that extensions of time (to provide the Pennsylvania information return form) may be granted by Revenue ''on or before February 28 of each calendar year beginning on or after January 1, 1997.'' This is a reasonable lead time for all parties to come into compliance with this new regulation. Revenue notes that this amended provision also addresses questions regarding who must be furnished an information return.
We have reviewed this regulation and find it to be in the public interest. The amendments will help facilitate the implementation of Act 68 of 1993, and clarify the information reporting requirements of exempt and nonexempt personal income tax.
Therefore, It Is Ordered That:
1. Regulation No. 15-346 from the Department of Revenue, as submitted to the Commission on December 20, 1995, is approved; and
2. The Commission will transmit a copy of this Order to the Legislative Reference Bureau.
Commissioners Present: Robert J. Harbison, III, Vice Chairperson; Thomas P. Comerford, Jr., Recused; John F. Mizner; Irvin G. Zimmerman
Public meeting held
January 18, 1996Department of Public Welfare--Long-Term Structured Residences; Doc. No. 14-412
Order On November 30, 1993, the Independent Regulatory Review Commission (Commission) received this proposed regulation from the Department of Public Welfare (Department). This rulemaking would amend 55 Pa. Code by adding Chapter 5320. The authority for this regulation is the Public Welfare Code (62 P. S. § 1021). The proposed regulation was published in the December 11, 1993 Pennsylvania Bullletin with a 30-day public comment period. The final-form regulation was submitted to the Commission on October 27, 1995.
At its November 16, 1995 public meeting, the Commission voted to disapprove the final-form regulation. On November 27, 1995, the Department notified the Commission of its intent to revise and resubmit the regulation. On December 27, 1995, the revised final-form regulation was submitted to the Commission.
The Department proposes to add Chapter 5320, relating to licensure requirements for Long Term Structured Residences (LTSRs). LTSRs, which have been in existence since 1990, provide an alternative to inpatient hospitalization for individuals with mental health problems which require inpatient psychiatric care for an extended period of time. This regulation establishes minimum standards for operation of LTSRs which are defined as highly structured therapeutic residential treatment facilities for adults.
LTSRs are operated by providers who contract with the County Administrator's Office. LTSRs must be included in the county plan to obtain licensure. Providers are required to establish written policies and records for operation, maintenance, safety, program goals, protection of resident rights and resident care.
LTSRs are staffed by direct care staff and support staff and an interdisciplinary team of three mental health professionals who must be involved in the development, implementation and review of residents' treatment plans. A mental health professional must be on site for at least 8 hours a day. A minimum of two direct-care staff persons must be on duty within the LTSR when 10-16 residents are on the premises and a third direct-care staff person must be available on-call; a minimum of two direct care staff must be awake and on duty when fewer than 10 residents are on the premises.
Admission criteria for residents include a physical examination, psychiatric evaluation and certification that the applicant does not require a level of care more restrictive than a LTSR. Admission of a resident requires approval by the County Administrator and assessment of the resident's needs by the referring agency and by the LTSR interdisciplinary team. Reassessment of each resident is required at least annually. Resident care and protection are addressed through requirements for access by community legal services, advocacy groups, and mental health consumer and family organizations, a resident/provider contract; a therapeutic treatment plan for each resident with periodic review and reexamination; written procedures for administration of medication; a prohibition against restraints or seclusion of residents; and training residents in tasks of daily living, personal care and management of financial affairs.
This proposal contains a provision that allows the waiver of standards which the Department may, within its discretion, grant when the health, safety and welfare of the residents and the quality of service provided to residents are not affected.
On this proposed rulemaking, the Department received comments from Supportive Services, Inc., four employes of the Mental Health Association LTSR in Bentleyville, the Disabilities Law Project, West Haven LTSR, the Allegheny County Mental Health/Mental Retardation Drug and Alcohol Program and a staff person in the Department's Office of Mental Health.
In response to Comments from the Commission and other commentators, the Department made a number of revisions to the final-form rulemaking. Those revisions included changes in definitions, community service organization access to the facility on a case-by-case basis, clarification of services and items included in the per diem cost of care, medication administration policy, modification of staffing requirements on evening shifts, and numerous other clarifying changes. Additionally, the Department responded to the concerns of commentators with justification for the educational requirements of program directors and mental health professionals.
We have reviewed the revised final-form regulation and find it to be in the public interest. The Department responded to the Commission's November Disapproval Order by making additional revisions to address three areas of concern. First, the Appendix, titled ''Long Term Residences and Community Support Program Principles (Principles),'' outlined LTSR program philosophy and provided guidelines for operation of an LTSR. Our Disapproval Order and earlier Comments both recommended the removal of the Appendix from the rulemaking because we believed it was unenforceable. We also stated that if the Department desired to publish the Principles, they should do so as a Statement of Policy. In the revised final-form rulemaking, the Department responded by converting the Appendix to a new Subchapter L titled ''Statement of Policy--Community Support Program Principles.'' We find this to be an appropriate solution.
A second concern with the initial final-form rulemaking was the lack of clarify in the provision for imposition of sanctions added to section 5320.11 of the final-form regulation. In response, the Department has addressed two separate concerns with the sanctions provision raised in our Disapproval Order. First, the sanction provisions are now correctly cited. Second, the sanction language has been appropriately relocated at § 5320.12. This rulemaking now contains an effective sanction provision.
A third area of concern addressed to our satisfaction is the correction of citations in the final-form rulemaking. The previous final-form had incorrect citations at § 5320.25(8), § 5320.42(7) and § 5320.83(b). The correct citations are in the revised final-form rulemaking.
The final area of concern addressed in our Disapproval Order is the separate orientation requirements for part-time direct care staff and full-time direct care staff. In the revised rulemaking, the Department continues to require full-time direct care staff, defined as working 30 hours per week or more, to receive a minimum of 20 hours of orientation. By contrast, part-time direct care staff are required to receive only a minimum of 10 hours of orientation and training.
Our Disapproval Order questioned how part-time direct care staff could receive sufficient orientation in 10 hours, if full-time direct care staff must have 20 hours for orientation. Because we believe that staffing standards raise important safety concerns for residents, we requested that before the Department resubmit this rulemaking, it survey the existing LTSRs to determine existing part-time and full-time staff scheduling.
The Department provided survey results which indicated that 12 of the existing 15 LTSRs always have full-time direct-care staff on site and select part-time workers from among those who have received more than the minimum 10 hours of orientation. In its response document, the Department provided further justification, explaining that many part-time employes come from agencies or background where they have previously received training. For these reasons, we are satisfied with the proposed orientation requirements.
Therefore, It Is Ordered that:
1. Regulation No. 14-412 from the Department of Public Welfare, as submitted to the Commission on December 27, 1995, is approved;
2. The Commission's bar to final publication of Regulation No. 14-412 issued under section 6(b) of the Regulatory Review Act (71 P. S. § 745-6(b)) is hereby resincded; and
3. The Commission will transmit a copy of this Order to the Legislative Reference Bureau.
JOHN R. MCGINLEY, Jr.,
Chairperson
[Pa.B. Doc. No. 96-158. Filed for public inspection February 2, 1996, 9:00 a.m.]
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