As construction contractors in the state of Pennsylvania prepare to restart operations and projects, state and local governments have made changes and implemented programs to help ease the burden and financial pain caused by COVID-19. For many construction contractors, managing cash is critical during these challenging times. Below is a summary of various relief options available to assist construction contractors with cash management as a result of the COVID-19 pandemic.
- Deferral of Pennsylvania Sales Tax Accelerated Payment
The Pennsylvania Department of Revenue is waiving the requirement to make accelerated sales tax prepayments in April, May, and June 2020. Waiving this requirement should help businesses preserve cash flow, since the prepayment is calculated based on operations in the preceding year when businesses were presumably better off financially.
Certain businesses are required to make monthly sales tax prepayments to the Commonwealth of Pennsylvania. The prepayment represents the acceleration of the subsequent month’s sales tax liability and is computed using 50 percent of the sales tax liability reported for the same month in the preceding year. Failure of a business to pay the accelerated prepayment of sales tax typically results in the imposition of significant penalties.
Businesses that normally have an accelerated prepayment requirement will not be charged penalties for missing the prepayment during this three-month period.Businesses should only remit the actual tax collected. The due dates for the returns have not been extended and are due on the original date. Monthly filers will continue to file their returns on April 20, May 20, and June 22.
- Pennsylvania 2020 COVID-19 Related EITC/OSTC Modifications
Governor Wolf has signed SB 841, which includes amendments to the Educational Improvement Tax Credit (EITC) program as well as the Opportunity Scholarship Tax Credit (OSTC) program. As a result, the following changes have been made for those tax years affected by COVID-19:
- Organizations participating in the EITC/OSTC programs are not required to make their qualifying contribution within 60 days following the approval of an application, as originally required. Organizations now have until the end of their applicable tax year to make their contribution.
- Organizations fulfilling year two of a two-year commitment and impacted by the COVID-19 disaster emergency will be permitted to receive a tax credit up to 90 percent of the amount contributed in year two, even if the contribution is less than credit authorized in year one of the two-year agreement.
The deadline to submit EITC/OSTC applications has not been adjusted and remains May 15, 2020. Furthermore, organizations still must provide the Department of Community and Economic Development proof of contribution within 30 days of the qualifying contribution.
- Philadelphia Wage Tax Relief for Non-Residents
Non-resident employees who work for Philadelphia-based employers are not subject to Philadelphia Wage Tax during the time they are required to work outside of Philadelphia due to COVID-19. Those non-resident employees whose base of operations is the employer’s location within Philadelphia, and who have had Philadelphia wage tax withheld when the employer required services be performed outside of Philadelphia during the COVID-19 pandemic, will have the opportunity to file for a refund with a Wage Tax reconciliation form in 2021.
- Philadelphia $10 Million Small Business Loan Fund
Mayor Kenney announced on April 24, 2020 that Philadelphia has partnered with Goldman Sachs and Lendistry to provide $10 million in potentially forgivable SBA “Paycheck Protection Program” style loans to help small businesses, including non-profit organizations. Qualifying small businesses are those with 500 or fewer total employees, including nonprofits, veterans’ organizations, self-employed individuals, sole proprietorships, and independent contractors. Qualifying businesses may receive up to $250,000 in loans. Online applications can be filed at lendistry.com.
The relief options discussed above demonstrate State and City support for the entrepreneurial business community. The state of Pennsylvania and the City of Philadelphia value the economic impact that these businesses have on community development and sustainability, and they have instituted these measures as a means to assist businesses during the COVID-19 pandemic.
As a firm we are here to help in any way we can. Should you have any questions or concerns regarding specific state programs and incentives, please do not hesitate to contact our State and Local Tax group. For additional resources, please visit our COVID-19 Resource Center, which we continue to update regularly.
Reed Brown, Senior Accountant, Tax Strategies, can be reached at Email or 215.441.4600.
Information contained in this alert should not be construed as the rendering of specific accounting, tax, or other advice. Material may become outdated and anyone using this should research and update to ensure accuracy. In no event will the publisher be liable for any damages, direct, indirect, or consequential, claimed to result from use of the material contained in this alert. Readers are encouraged to consult with their advisors before making any decisions.