1. … Current issues series …
Act 172
EMT/Firefighter
Active Volunteer Tax Credit
Bucks County Tax Collection Committee
Montgomery County Tax Collection Committee

2. Active Volunteer EIT Credit
Act 172 of 2016

3. Act 172 preamble
The purpose of this chapter [Act 172] is to authorize municipalities to enact a tax credit against an active volunteer’s tax liability as a financial incentive to:
Acknowledge the value and the absence of any public cost for volunteer fire fighters and nonprofit emergency medical services provided by active volunteers.
Encourage individuals to volunteer or for former volunteers to consider rejoining as active volunteers in a volunteer fire company or nonprofit emergency medical services agency.

4. Definition – Active Volunteer
A volunteer for a volunteer fire company or nonprofit emergency medical services agency.
Who has complied with the requirements of the volunteer service credit program.
And who is certified under section 79A23.
This involves submitting an application to the fire chief or EMS supervisor to certify that the active volunteer meets the local criteria.

5. Definition – Earned Income Tax
A tax on earned income and net profits.
Levied under Chapter 3 of the Local Tax Enabling Act.
The credit is for the municipal portion of the “base” EIT only.
School District portion of the EIT does not qualify for the credit.
Open Space Add On to the EIT does not qualify for the credit.

6. Example of how the credit works
Wages or Net Profits $120,000.00
Total EIT liability (at 1.25%) $1,500.00
SD EIT (0.5%) not subject to credit ($600.00)
Municipal Open Space (0.25%) not subject to credit ($300.00)
Municipal Base EIT (0.5%) $600.00
Qualified Act 172 Credit $600.00
Assume
Total EIT 1.25%
School EIT rate (0.50%)
Municipal Open Space (0.25%)
Municipal Base EIT 0.50%

7. EIT liability after Act 172 credit
Wages or Net Profits $120,000.00
Total EIT liability (at 1.25%) $1,500.00
SD EIT (0.5%) not subject to credit ($600.00)
Municipal Open Space (0.25%) not subject to credit ($300.00)
Municipal Base EIT (0.5%) $600.00
Qualified Act 172 Credit $600.00
EIT Liability
Total EIT $1,500.00
Act 172 Credit ($600.00)
EIT obligation $900.00

8. Credit on Return Form Line 126
LINE 12 – CREDITS:

9. Example – 0.5% Municipal Base EIT (with open space)
120000
1500
1.25%
1500
600
2100
600

10. The Tax Officer Needs from the Participating Municipality
List of Qualified Volunteers
The Ordinance
On or before December 31
of the tax year

11. The Ordinance – Considerations
Flat dollar credit or percent
Resident taxpayers only
Non-resident taxpayers
Qualifying criteria
Certification process
TCD-wide criteria/standards ?

12. Addressing the Questions
The state fire commissioner’s draft recommendations include a flat dollar credit:
“The municipal earned income tax credit must be set at a flat amount.”
Dollar amount provides equity
Municipalities know in advance how much the credit will cost
Should a municipality adopt a flat dollar credit or a percent of the EIT?

13. Addressing the Questions
Cory works in the pharmaceutical industry and earns $1.2 million a year.
His municipal EIT obligation (at 0.5%) is $6,000 a year.
If the municipal ordinance provides a 3/4 EIT credit
Cory qualifies for $4,500 credit A
percentage
is inequitable

14. Addressing the Questions
Melinda works in the health care industry and earns $150,000 a year.
Her municipal EIT obligation (at 0.5%) is $750 a year.
If the municipal ordinance provides a 3/4 EIT credit
Melinda qualifies for $563 credit A
percentage
is inequitable

15. Addressing the Questions
percentage
is inequitable
$4,500
$563

16. Addressing the Questions
A flat rate is equitable
$500
$500

17. Percentage Credit can be inconsistent
Full EIT Credit Year 1
Volunteer 1 EIT $900
Volunteer 2 EIT $2,500
Volunteer 3 EIT $6,000
Volunteer 4 EIT $750
Volunteer 5 EIT $500
Total Credit Amount $10,650
Full EIT Credit Year 2
Volunteer 1 EIT $650
Volunteer 2 EIT $2,000
Volunteer 3 EIT $9,000
Volunteer 4 EIT $750
Volunteer 5 EIT $500
Total Credit Amount $12,900

18. A Flat Rate Credit is consistent
Flat Rate Credit of $500
Volunteer 1 EIT $900
Volunteer 2 EIT $2,500
Volunteer 3 EIT $6,000
Volunteer 4 EIT $750
Volunteer 5 EIT $500
Total Credit Amount $2,500
Flat Rate Credit of $500
Volunteer 1 EIT $650
Volunteer 2 EIT $2,000
Volunteer 3 EIT $9,000
Volunteer 4 EIT $750
Volunteer 5 EIT $500
Total Credit Amount $2,500

19. Addressing the Question
The state fire commissioner’s draft recommendations say:
“Only residents of the municipality who are active volunteers could apply for the tax credit. A nonresident option is not available.”
Should a taxpayer who volunteers in a community outside of his or her residence qualify for credit?
Should the credit be limited to municipal residents?

20. Draft Credit Certificate
Proposed certificate
Provides needed information
For Municipality and Tax Officer
Income information cannot be required by the municipality
The municipal portion of the EIT is not always 0.5%

21. Updated Credit Certificate
Provides more space for Active Volunteer information.
Worksheet addresses the statutory requirements to:
Clearly indicate the School District portion of the resident EIT is not part of the Active Volunteer municipal credit.
Eliminate the Open Space and Occupation Elimination add-ons to the base EIT.
Provide for a variety of municipal EIT base rates over 0.5%
Bensalem in Bucks is 1%
West Conshohocken in Montgomery is 1%

22. Keystone’s worksheet Assume Wages $120,000 Total EIT 1.25% SD EIT 0.5%
Open Space 0.25%
Credit Limit $500

23. Keystone’s worksheet Assume Wages $120,000 Total EIT 1.25% SD EIT 0.5%
Open Space 0.25%
Credit Limit $500
1,500
(600)
(300)
600
500
500

24. Act 172 Requirements for Participating Municipalities
Establish an ordinance
Set the credit
Dollar amount (recommended)
Give public notice
Hold at least one hearing
Notify State Fire Commissioner
Create a certification process
Establish an appeals process
SEND THE ORDINANCE TO THE TAX OFFICER
PROVIDE THE TAX OFFICER WITH A LIST OF QUALIFIED ACT 172 ACTIVE VOLUNTEERS

25. Policy questions for your community
Flat dollar credit or percent
Resident taxpayers only
Non-resident taxpayers
Qualifying criteria
Certification process
TCD-wide criteria/standards ?