Governor Signs Anticipated Changes to EMS Tax
On June 27, Gov. Ed Rendell signed Act 7 of 2007 (SB 218) into law, which will make comprehensive changes to the emergency and municipal services tax. Act 7 takes effect for tax year 2008, so townships do have time to budget for the impact of these changes.

Act 7 will:

• Change the name of the tax to the “local services tax.”
• Require municipalities that impose a tax of more than $10 to exempt those whose total income from earned income and net profits is less than $12,000 for the calendar year in which the tax is levied.
• Authorize taxpayers who expect to make less than $12,000 for the calendar year to file an exemption certificate with their employer. The employer would not deduct the tax until the employee’s income reached $12,000 for the year or the municipality informed the employer that the employee’s income had reached $12,000.
• Require municipalities that levy the tax to enact regulations to provide refunds for those eligible for the low-income exemption.
• Require employers to withhold the tax based on their number of payroll periods if the municipality and school district levy a combined tax of more than $10.
• Require employers to submit tax revenues to the municipal tax collector within 30 days of the end of each quarter.
• Clarify that the tax must be used for emergency services, including police, fire, and ambulance service; road construction or maintenance; the reduction of property taxes; or property tax relief through the implementation of a homestead or farmstead exemption. In addition, municipalities would be required to use at least 25 percent of the tax revenues for emergency services.
• Restrict the withholding of the tax to the employee’s principal employer.
• Require the state Department of Community and Economic Development to develop uniform forms and provide technical assistance for the bill’s implementation.

In response to municipal concerns with the up-front exemption provisions, the Governor has directed the Department of Community and Economic Development to work with local government associations and businesses to develop a uniform procedure for filing and processing exemption certificates.

For a copy of Act 7, go to www.legis.state.pa.us.