PROPOSED RULEMAKING
DEPARTMENT OF REVENUE
[ 61 PA. CODE CH. 5 ]
Payment Methods for Obligations Due the Commonwealth
[54 Pa.B. 2996]
[Saturday, May 25, 2024]The Department of Revenue (Department) and the Treasury Department (Treasury), under the authority contained in section 9 of The Fiscal Code (72 P.S. § 9), propose amendments to Chapter 5 (relating to payments by electronic funds transfer) to read as set forth in Annex A.
Purpose of Proposed Rulemaking
The purpose of this proposed rulemaking is to update the existing regulation that has, for the most part, not changed since it was originally promulgated in 1992. Prior amendments to the regulation consist of additions of taxes to which the electronic payment mandate applies and reductions to the threshold for the electronic payment mandate. For example, the act of July 2, 2012 (P.L. 823, No. 87) and the act of July 18, 2013 (P.L. 574, No. 71) reduced the payment threshold over which electronic payments are required from $20,000 to $10,000 and from $10,000 to $1,000, respectively.
Section 9 of The Fiscal Code requires the Department and the Treasury to promulgate regulations relating to the way payments are made to the Department for obligations due the Commonwealth. Currently, Chapter 5 focuses mostly on the electronic payment mandate. This proposed rulemaking broadens the scope of the original regulation to address all forms of payments to the Department, not just electronic payments. This proposed rulemaking also memorializes existing payment methods and does not broaden or limit the methods by which payments are currently made to the Department.
The existing regulation and electronic fund transfer (EFT) mandate already applies to persons remitting the following tax obligations to the Department: Sales and Use, Corporate Net Income, Employer Withholding, Capital Stock-Franchise, Liquid Fuels, Bank Shares, Fuel, Use, Title Insurance and Trust, Mutual Thrift Institutions, Company Shares, Oil Company Franchise, Insurance Premiums, Malt Beverage, Public Utility Realty, Motor Carrier Road Tax and Gross Receipts.
The Pennsylvania General Assembly has enacted several new taxes since the existing regulation was last updated, including the following: Other Tobacco Products Tax, Wine Excise Tax (WET), Wine Expanded Permit, Carsharing Fee, Consumer Fireworks Tax, Medical Marijuana Gross Receipts Tax and Fantasy Sports Tax. The Department proposes to impose the electronic payment mandate to these taxes as well as other obligations that are not otherwise exempted.
This proposed rulemaking also coincides with system programming of the Department's modernized tax system.
Description of Proposed Amendments
This proposed rulemaking is largely a rewriting and reorganization of the existing regulation. The major change is that the electronic payment mandate for obligations of $1,000 or more will now apply to all tax types, except for certain types of Personal Income Tax payments under Article III of the Tax Reform Code of 1971 (TRC) (72 P.S. §§ 7301—7361) and Inheritance Tax payments under Article XXI of the TRC (72 P.S. §§ 9101—9196), and all other obligations due the Commonwealth paid through the Department.
The Department proposes to amend the title of Chapter 5 to Payment Methods for Obligations Due the Commonwealth to clarify that this chapter addresses how all payments are made to the Department rather than just addressing electronic payments.
The Department proposes to delete §§ 5.1—5.7. Many of the substantive provisions are proposed to be carried over into new, reorganized and rewritten sections which are proposed to be added as §§ 5.11—5.16.
The Department proposes to delete § 5.1 and move the purpose for the chapter into § 5.11 (relating to purpose), with some changes as described in the explanation of § 5.11.
The Department proposes to delete § 5.2 in its entirety and move the definitions into § 5.12 (relating to definitions), with some changes as described in the explanation of § 5.12.
The Department proposes to delete § 5.3 in its entirety. Subsections (a)—(d) are obsolete. Subsections (e)—(g) set forth the current amount and method of payment, which will now be set forth in proposed § 5.14 (relating to payments required to be paid by EFT). Parts of subsections (g) and (h) will be set forth in Department guidance and instructions, thus eliminating the need for those provisions.
The Department proposes to delete § 5.4 because it will now be obsolete with the allowable methods of payment set forth in proposed § 5.13 (relating to payments in general).
Section 5.5 was previously deleted in a prior rulemaking published at 42 Pa.B. 7279 (December 1, 2012).
The Department proposes to delete §§ 5.6 and 5.7 because they contain technical rules related to EFT payments. The Department is proposing to provide these technical rules in Department instructions in the future as set forth in proposed § 5.13(c).
Proposed § 5.11 states the purpose of the regulation, which is to provide for how payments for Commonwealth obligations are to be remitted. The previous § 5.1 contained references to the Department and Treasury, which will not be carried over to proposed § 5.11. In addition, while the previous purpose section limited the scope of the chapter to EFTs, the proposed purpose section does not contain that limitation resulting in the application of this chapter to all obligations due the Commonwealth.
The Department proposes to amend the definitions formerly contained in § 5.2 and move them to § 5.12.
The definitions ''ACH,'' ''ACH credit'' and ''ACH debit'' are not carried over to the proposed definitions section, as these are commonly used terms and have generally understood meanings that do not require specialized definitions for the purpose of the regulation. In addition, the Department proposes to forgo the use of ''ACH'' throughout Chapter 5 in favor of the term ''automated clearing house.''
The Department has not carried over the term ''business day'' because the term will not be used in this proposed rulemaking.
The Department proposes to carry over the definition of ''EFT—electronic funds transfer'' from § 5.2 to proposed § 5.12. The Department also proposes to amend the definition by listing the allowable types of electronic payments. Credit and debit card payments have been added as allowable payment methods, given that they are an expedient means of payment authorized by section 9(a)(1) of The Fiscal Code. This proposed definition is also consistent with the Federal Reserve Board's Regulation E in 12 CFR 205.3(b) (relating to coverage), defining electronic fund transfers. In addition, the proposed definition provides that virtual currency is not a permitted form of EFT.
The definition for ''Fedwire'' is carried over from § 5.2 and proposed to be amended to be consistent with the provisions found in 12 CFR 210.25—210.32 (relating to funds transfers through the Fedwire funds service).
The definition for ''financial institution'' is proposed to be added because this term is to be used in the definition of ''EFT.'' The definition is identical to the definition of ''financial institution'' found in 12 CFR 205.2(i) (relating to definitions).
The definition for ''virtual currency'' is proposed to be added because the term is to be used in the definition of ''EFT.'' The Department proposes to define ''virtual currency'' using language that is identical to the Internal Revenue Service definition used in IRS Notice 2014-21 and the IRS Frequently Asked Questions on Virtual Currency Transactions.
Proposed § 5.13 provides for the proposed place, method and procedures by which obligations due the Commonwealth are to be remitted. In subsection (a), the Department proposes a list of methods by which a person may remit payments of obligations due the Commonwealth. In subsections (a) and (c), the Department proposes that the place, procedures and technical criteria for the remittance of payments due the Commonwealth will be published in Department instructions and publications. Placing this information in Department instructions and publications rather than directly in the regulation is necessary to account for frequently changing addresses, systems and technologies. Ways to obtain forms and instruction by mail, phone or online can be found on the Department's web site at https://www.revenue.pa.gov/FormsandPublications/Pages/How-Do-I-Get-Forms.aspx.
Proposed § 5.14 provides the rules for the electronic payment mandate. Subsection (a) applies to payments of $1,000 or more, and to all tax types, with some exceptions as set forth in subsections (b) and (c). Subsections (b) and (c) outline the payment criteria for certain Personal Income Tax payments under Article III of the TRC and Inheritance Tax payments under Article XXI of the TRC. Proposed § 5.14(b) and (c) are the exceptions to the general rule contained in subsection (a).
Proposed § 5.14(b) provides that payments due under Article III of the TRC (Article III payments), as listed in proposed paragraphs (1)—(3) are not subject to the $1,000 EFT requirement. Section 9 of The Fiscal Code creates the EFT requirement, but also provides that the Department and the Treasury cannot impose the EFT payment requirement on Article III payments. Rather, Article III payments are subject to the $15,000 EFT requirement contained in section 332.1 of the TRC (72 P.S. § 7332.1). Section 332.1 of the TRC was specifically added in 2021 to apply to Personal Income Tax payments under Article III of the TRC. The regulatory provisions under § 5.14(b) are consistent with both section 9 of The Fiscal Code and section 332.1 of the TRC.
Proposed § 5.14(c) exempts inheritance tax payments under Article XXI of the TRC from the requirements of subsection (a). Inheritance Tax payments are exempted from the EFT payment requirement because those payments are all made to the County Registers of Wills (ROW), who act as agents for the Department. The ROWs have their own procedures and systems in place to receive payments. Imposing an EFT payment requirement and potential penalty for inheritance tax payments cannot be implemented given the myriad and divergent procedures and systems of the 67 ROW county offices.
Proposed § 5.15 (relating to date of receipt rules) provides the date on which payments are considered received by the Department. Persons with obligations due the Commonwealth are notified they are responsible for their choice of payment and bear the burden of any late payments associated with their choice, even if the late payment is due to circumstances beyond the person's control.
Proposed § 5.16 (relating to penalty) reiterates the statutory penalty for failure to remit payments by EFT when required. See section 9.1 of The Fiscal Code (72 P.S. § 9.1) regarding failure to make payment by EFT. The statute requires the Department to impose a penalty if there is a failure to make a payment by EFT when required. This proposed language clarifies that the penalty is imposed upon the total amount of each payment remitted. It further clarifies that the penalty is imposed upon each payment regardless of whether the payment is for principal tax, interest, penalties, additions, fees or a combination thereof. In addition to the specific amendments cited previously, outdated references to Department Bureaus and addresses are proposed to be deleted. Provisions relating to filing tax returns are beyond the scope of the regulations and are also proposed to be deleted.
Affected Parties
This proposed rulemaking applies to all persons making payment of obligations due the Commonwealth through the Department.
Fiscal Impact
The Department has determined that this proposed rulemaking will have minimal or no revenue impact on the Commonwealth.
Paperwork Requirements
This proposed rulemaking will not result in additional paperwork for the public or the Commonwealth.
Effective Date
This proposed rulemaking will become effective upon final-form publication in the Pennsylvania Bulletin.
Sunset Date
This proposed rulemaking is scheduled for review within 5 years of final publication. A sunset date has not been assigned.
Public Comments and Contact Person
Interested persons are invited to submit in writing any comments, suggestions or objections regarding this proposed rulemaking to Maria L. Miller, Office of Chief Counsel, Department of Revenue, Dept. 281061, Harrisburg, PA 17128-1061, within 30 days after the date of the publication of this proposed rulemaking in the Pennsylvania Bulletin.
Regulatory Review
Under section 5(a) of the Regulatory Review Act (71 P.S. § 745.5(a)), on May 15, 2024, the Department submitted a copy of this proposed rulemaking and a copy of a Regulatory Review Form to the Independent Regulatory Commission (IRRC) and to the chairperson of the Committee on Finance of the Senate and the chairperson of the Committee on Finance of the House of Representatives. A copy of this material is available to the public upon request.
Under section 5(g) of the Regulatory Review Act, IRRC may convey comments, recommendations or objections to the proposed rulemaking within 30 days of the close of the public comment period. The comments, recommendations or objections must specify the regulatory review criteria in section 5.2 of the Regulatory Review Act (71 P.S. § 745.5b) which have not been met. The Regulatory Review Act specifies detailed procedures for review prior to final publication of the rulemaking by the Department, the General Assembly and the Governor.
PATRICK BROWNE,
SecretarySTACY GARRITY,
State TreasurerFiscal Note: 15-463. No fiscal impact; recommends adoption.
Annex A
TITLE 61. REVENUE
PART I. DEPARTMENT OF REVENUE
Subchapter A. GENERAL PROVISIONS Chapter 5. [PAYMENTS BY ELECTRONIC FUNDS TRANSFER] PAYMENT METHODS FOR OBLIGATIONS DUE THE COMMONWEALTH § 5.1. [Purpose] [Reserved].
§ 5.2. [Definitions] [Reserved].
§ 5.3. [Payments required to be paid by EFT] [Reserved].
§ 5.4. [Voluntary participation] [Reserved].
§ 5.6. [EFT payments] [Reserved].
§ 5.7. [Miscellaneous provisions] [Reserved].
(Editor's Note: Sections 5.11—5.16 are proposed to be added and are printed in regular type to enhance readability.)
Sec.
5.11. Purpose. 5.12. Definitions. 5.13. Payments in general. 5.14. Payments required to be paid by EFT. 5.15. Date of receipt rules. 5.16. Penalty. § 5.11. Purpose.
Under section 9 of the FC (72 P.S. § 9), this chapter provides the method by which obligations due the Commonwealth shall be remitted to the Department.
§ 5.12. Definitions.
The following words and terms, when used in this chapter, have the following meanings, unless the context clearly indicates otherwise:
EFT—electronic funds transfer—A transfer of funds, other than a transaction originated by check, draft or similar paper instrument, which is initiated through an electronic terminal, telephone, computer or magnetic tape to order, instruct or authorize a financial institution to debit or credit an account. For purposes of this chapter, the term includes only the following types of EFT:
(i) Automated clearing house debit or credit.
(ii) Debit or credit card.
(iii) Fedwire or other wire transfer, but only with prior approval of the Department.
(iv) Other EFT as designated in Department instructions or publications. The term does not include virtual currency.
Fedwire—Fedwire funds service—The funds-transfer system, as described in 12 CFR 210.25—210.32 (relating to funds transfers through the Fedwire funds service), owned and operated by the Federal Reserve Banks.
Financial institution—A bank, savings association, credit union, or any other person that directly or indirectly holds an account belonging to a consumer, or that issues an access device and agrees with a consumer to provide EFT services.
Treasury—The Treasury Department of the Commonwealth.
Virtual currency—A digital representation of value, other than a representation of the United States dollar or a foreign currency, that functions as a unit of account, a store of value and a medium of exchange.
§ 5.13. Payments in general.
(a) Place. A person shall remit payment of an obligation due the Commonwealth at the location the Department shall designate in Department instructions or publications.
(b) Method. Unless otherwise provided in this chapter, a person may remit payment of an obligation due the Commonwealth to the Department by one of the following methods:
(1) Cash.
(2) Check, draft or similar paper instrument, including personal check, certified check or cashier's check.
(3) EFT.
(c) Procedures and technical criteria. The Department will provide procedures and technical criteria for remittance of payments in Department instructions and publications.
§ 5.14. Payments required to be paid by EFT.
(a) General rule. Unless otherwise provided for in this section, a payment of $1,000 or more toward an obligation due the Commonwealth must be remitted to the Department using one of the following payment methods:
(1) EFT. Failure to comply with Department instructions related to the manner and procedures for the remittance of EFT payments will be deemed to be a failure to remit by EFT.
(2) A certified or cashier's check.
(b) TRC section 332.1 payments. The following payments are subject to the electronic payment provisions of section 332.1 of the TRC (72 P.S. § 7332.1) and are not subject to the payment provisions in subsection (a):
(1) Form PA-40 (Personal Income Tax Return) and PA-41 (Fiduciary Income Tax Return) tax liability payments, including estimated payments and payments made with the return.
(2) Form PA-40 NRC (Nonresident Consolidated Income Tax Return) tax liability payments.
(3) Withholding payments required under sections 316.2, 324 and 324.4 of the TRC (72 P.S. §§ 7316.2, 7324 and 7324.4).
(4) Other payments made by individuals under sections 301—361 of the TRC (72 P.S. §§ 7301—7361).
(c) Inheritance tax payments. Inheritance tax payments under sections 9101—9196 of the TRC (72 P.S. §§ 9101—9196) are not subject to the payment provisions in subsection (a).
§ 5.15. Date of receipt rules.
(a) The receipt date of a payment of an obligation due the Commonwealth depends upon the method of payment.
(1) For an automated clearing house debit payment, the receipt date is the date the payor authorizes the Department to debit the payor's account.
(2) For an automated clearing house credit or Fedwire payment, the receipt date is the settlement date provided by the payor's originating institution.
(3) For a credit or debit card payment, the receipt date is the date the Department's third-party provider approves the payment.
(4) For payments mailed to the Department, the receipt date is the United States Postal Service postmark date.
(5) For payments delivered in person or by courier, the receipt date is the date the payment is delivered to and accepted by the Department.
(b) The person with the obligation due the Commonwealth bears the burden of remitting the payment by the due date. The person with the obligation due the Commonwealth is accountable for errors committed by the person, the payor or third parties. These errors are not justification for the abatement of interest or penalty.
§ 5.16. Penalty.
A person who fails to remit an obligation due the Commonwealth using the method required under § 5.14(a) (relating to payments required to be paid by EFT) shall be subject to a penalty of 3% of the total amount of each payment remitted, not to exceed $500. The penalty will be imposed upon all payment types including principal tax, interest, penalties, additions and fees, or a combination thereof.
[Pa.B. Doc. No. 24-753. Filed for public inspection May 24, 2024, 9:00 a.m.]
No part of the information on this site may be reproduced for profit or sold for profit.This material has been drawn directly from the official Pennsylvania Bulletin full text database. Due to the limitations of HTML or differences in display capabilities of different browsers, this version may differ slightly from the official printed version.
