FW: BUDGET PROCESS
Fellow solicitors,
As you know the Local Tax Enabling Act authorizes up to a 3 mil tax for the purchase of fire equipment and other expenses relating to fire fighting.
One of the local governments that I represent has traditionally applied the tax revenue to a separate budgetary line item to accumulate monies for the future purchase of fire equipment which is very expensive.
A question has come up that since the budget must be balanced, whether the "fire equipment surplus" that is carried from year to year without repealing the tax is lawful and must the money that was collected in a calendar year, be spent in that calendar year.
The question is whether a local government can tax to save for definite future expenditures? Could the government set up a separate saving of CD to which the year's accumulation could be deposited.
I would appreciate any help that you could give me.
Thank you and best wishes for the holidays.
Jack Mihalik
John A. Mihalik, Esquire
Hummel, Lewis & Smith, LLP
3 East Fifth Street
Bloomsburg, PA 17815
570/784-7516
570/387-8132 (fax)
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Jack,
Assuming the Act is silent, and there's no case law on point, I'd take the position that the funds are dedicated but do not have to be spent in the same calendar year and can instead be accumulated. I had a similar issue in the context of a county with a large, general fund surplus that was being carried year-to-year, and we couldn't find any authority for the proposition that the accumulation of a surplus was improper. Indeed, we concluded it was prudent - a conclusion that seems especially appropriate now, with the state budget crisis we had recently.
Note also that school districts routinely accumulate general funds for a variety of reasons, including an anticipate major construction project.
Accumulating the funds until a major purchase can be made also makes sense - a concept not entirely foreign here in the Commonwealth. The tax proceeds may not be large enough to cover an expensive purchase, such as a truck.
Again, assuming the Act is silent, and there's no case law on point, I think that you're okay. I'd be interested in the thoughts of others.
William W. Warren, Jr.
Saul Ewing LLP
Suite 700
2 North Second Street
Harrisburg, PA 17101
Office (717) 238-7698
Fax (717) 257-7584
wwarren@saul.com
From: Pmlsolicitors [mailto:pmlsolicitors-bounces@lists.imla.org] On Behalf Of Chuck Thompson
Sent: Friday, December 16, 2016 10:02 AM
To: pmlsolicitors@lists.imla.org
Subject: [Pmlsolicitors] FW: BUDGET PROCESS
Fellow solicitors,
As you know the Local Tax Enabling Act authorizes up to a 3 mil tax for the purchase of fire equipment and other expenses relating to fire fighting.
One of the local governments that I represent has traditionally applied the tax revenue to a separate budgetary line item to accumulate monies for the future purchase of fire equipment which is very expensive.
A question has come up that since the budget must be balanced, whether the "fire equipment surplus" that is carried from year to year without repealing the tax is lawful and must the money that was collected in a calendar year, be spent in that calendar year.
The question is whether a local government can tax to save for definite future expenditures? Could the government set up a separate saving of CD to which the year's accumulation could be deposited.
I would appreciate any help that you could give me.
Thank you and best wishes for the holidays.
Jack Mihalik
John A. Mihalik, Esquire
Hummel, Lewis & Smith, LLP
3 East Fifth Street
Bloomsburg, PA 17815
570/784-7516
570/387-8132 (fax)
CONFIDENTIALITY NOTICE: The information contained in this electronic mail transmission (including any accompanying attachments) is intended solely for its authorized recipient(s) and may be confidential and/or legally privileged. Nothing in this email is intended to constitute a waiver of any privilege or the confidentiality of this message (including any attachments). If you are not an intended recipient or responsible for delivering some or all of this transmission to an intended recipient, you have received this transmission in error and are hereby notified that you are strictly prohibited from reading, copying, printing, distributing, or disclosing any of the information contained therein. In that event, please contact us immediately by telephone (570/784-7516) or by reply email and destroy the original and all copies of this transmission (including any attachments) without reading or saving in any manner.
NOT LEGAL ADVICE: The above information may contain an opinion which does not constitute legal advice. Unless a retainer agreement has been signed, this firm is not your legal representative and you should not rely upon any opinions contained in this message.
IRS CIRCULAR 230 NOTICE: To ensure compliance with certain regulations promulgated by the U.S. Internal Revenue Service, we inform you that any federal tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, by any taxpayer for the purpose of (1) avoiding tax-related penalties under the U.S. Internal Revenue Code, or (2) promoting, marketing, or recommending to another party any tax-related matter addressed herein, unless expressly stated otherwise.
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