Deferred compensation in Pennsylvania: clarification and update.

• Position: Recent Activities

A news story on page 90 of the March-April 2004 issue of The Tax Executive proved to be premature. As explained in TEI's Comments Foster Taxpayer Victories in Pennsylvania, there were positive indications that the Commonwealth of Pennsylvania had decided to concede two cases involving the issue of when deferred compensation becomes subject to the Commonwealth's personal income tax. The two consolidated cases, Ignatz v. Pennsylvania and Peabody v. Pennsylvania, challenged the Pennsylvania Department of Revenue's position that deferred compensation is subject to Pennsylvania income tax at the time of deferral, asserting that it is not subject to tax until the time of distribution (the issue arises either through an audit of the employee's Pennsylvania return or through an audit of an...