PA Tax Appeals and Deductions Update: Corporate Relief for Medical Marijuana and Enhanced Taxpayer Rights

On October 29, 2024, Pennsylvania Governor Josh Shapiro enacted legislation aimed at providing corporate net income tax relief for medical marijuana dispensaries and enhancing taxpayer rights regarding personal income tax assessments. Key provisions of the legislation include:

1. Corporate Net Income Tax Relief for Medical Cannabis Businesses

Effective for taxable years starting after December 31, 2023, the definition of "taxable income" for corporate net income tax purposes has been revised to clarify that the tax deduction for qualified business expenses for medical cannabis businesses includes dispensaries. Previously, the deduction was only available to businesses holding an active grower/processer permit.

2. Extension for Personal Income Tax Appeals

Effective January 27, 2025, (a) the timeframe for taxpayers to appeal a personal income tax assessment from the Pennsylvania Department of Revenue (“Department”) by filing a Petition For Reassessment with the Board of Appeals, a division of the Department, will increase from 60 days to 90 days, and (b) similarly, the timeframe for taxpayers to appeal the decision of the Department to the Board of Finance and Revenue (“BFR”) by filing a Petition For Review of the Department’s Decision and Order, will increase from 60 days to 90 days. An extension of time to file either appeal may be allowed for cause, but such extension may not exceed 30 days.

3. BFR is authorized to initiate and/or oversee Settlement Conference Process for Personal Income Tax Appeals

Also starting January 27, 2025, a formal settlement conference process will be established for resolving tax disputes between a taxpayer and the Department under BFR jurisdiction. The goal is to facilitate a settlement and thereby enable taxpayers to avoid lengthy and expensive battles with the Department, most of which historically have had to be appealed to the Commonwealth Court before settlement can occur. Either party may submit a request for a settlement conference to the BFR or, alternatively, the BFR may direct that a settlement conference be held, the purpose in either case being to settle a Petition For Review of a Decision and Order issued by the Department. The non-requesting party or parties (i.e., when a conference is directed by BFR) must file a written response with the BFR in support of or opposition to the settlement conference.

Within five days of receiving a response from each party, the BFR will notify each party in writing whether it will refer an appeal to a settlement conference. If an appeal is referred, an independent settlement officer must be assigned to the case and a settlement conference must be held within 60 days. If the parties do not agree with the recommendations of the settlement officer, the officer may continue to facilitate a settlement for an additional 30 days. If the parties ultimately do come to an agreement, the agreement must be submitted to the BFR within 10 business days after reaching settlement. Once a settlement agreement is entered into, it may not be appealed or reopened. Failing settlement, the parties may proceed to appeal the matter in accordance with normal rules applicable to appeals.