In personal income tax, further providing for definitions.
Summary
HB1537 amends Pennsylvania’s Tax Reform Code definition of “compensation” for personal income tax purposes. The bill removes a bracketed provision and then re-adds, in a new clause, language stating that compensation does not include any part of a distribution under a plan described in section 409A(d)(1) of the Internal Revenue Code that is attributable to an elective deferral of income or the earnings on that deferral, whether paid during employment or after retirement. In practical terms, the bill is a technical tax-definition change aimed at clarifying how certain deferred compensation arrangements are treated under the state personal income tax.
The bill does not create a new tax or change tax rates; instead, it narrows and clarifies what counts as taxable compensation under the personal income tax article. By excluding these 409A-related deferred compensation distributions from the definition of compensation, it would affect taxpayers receiving deferred pay, employers that offer nonqualified deferred compensation plans, payroll and tax administrators, and the Department of Revenue’s interpretation and enforcement of taxable income rules. The act would take effect 60 days after enactment.
Impact
HB1537 would amend section 301(d) of the Tax Reform Code of 1971, which defines “compensation” for Pennsylvania personal income tax. The principal legal effect is to exclude certain deferred compensation distributions tied to elective deferrals under Internal Revenue Code section 409A from state taxable compensation, aligning the statute’s wording with that treatment and replacing the existing bracketed language with a cleaner, explicit exclusion. This would affect the tax treatment of deferred compensation plans, including payments made during employment or after retirement, and would guide how the Department of Revenue, employers, and taxpayers report and withhold on those amounts.
Sentiment
No committee transcript or vote history was provided, so there is no recorded debate or roll-call evidence of support or opposition in the available materials. Based on the bill text alone, HB1537 appears to be a technical and targeted tax conformity/clarification measure rather than a broad policy change, which often draws limited public controversy. The available record does not show any formal sentiment from committee members or legislators.
Contention
Because no discussion transcripts or votes are included, specific points of contention are not documented. The only likely substantive issue suggested by the text is whether Pennsylvania should continue to exclude these deferred compensation amounts from taxable compensation and whether the amendment is merely clarifying existing law or making a substantive change in tax treatment. Any disagreement would likely involve taxpayers with deferred compensation, employers offering nonqualified plans, and tax administrators concerned with conformity to federal definitions and state revenue effects.
In personal income tax, further providing for classes of income; in corporate net income tax, further providing for definitions; in tax credit and tax benefit administration, further providing for definitions; and providing for personal health investment tax credit.
In personal income tax, further providing for classes of income; in corporate net income tax, further providing for definitions; and providing for personal health investment tax credit.