Pennsylvania — Personal Income Tax

Pennsylvania imposes a flat personal income tax at a rate of 3.07% on residents and nonresidents. Every resident individual, estate, or trust pays the tax "for the privilege of receiving each of the classes of income" enumerated in Section 303 of the Tax Reform Code. The tax applies to each dollar of income received during the taxable year. Nonresidents are subject to the same 3.07% rate on income from Pennsylvania sources.

The current rate of 3.07% (three and seven hundredths percent) has been in effect for tax years beginning on or after January 1, 2004, when it was increased from the prior 2.8% rate.

Source: 72 P.S. § 7302

Pennsylvania personal income tax applies only to income falling within one of eight enumerated classes. The classes are: (1) compensation; (2) interest; (3) dividends; (4) net profits from the operation of a business, profession or farm; (5) net gains or income from the dispositions of property; (6) net gains or income from rents, royalties, patents and copyrights; (7) income derived through estates or trusts; and (8) gambling and lottery winnings, including cash prizes from the Pennsylvania Lottery.

Unlike federal tax law, which taxes all income "from whatever source derived," Pennsylvania taxes only income enumerated in these eight classes. Income that does not fall within one of these categories is not subject to Pennsylvania personal income tax. Each class is computed separately; losses in one class may not offset gains in another class, and gains or losses may not be carried backward or forward from year to year.

Source: 72 P.S. § 7303 | PA Department of Revenue — Personal Income Tax

An individual is a Pennsylvania resident for personal income tax purposes if domiciled in Pennsylvania or if a statutory resident. A statutory resident is an individual not domiciled in Pennsylvania who maintains a permanent place of abode in Pennsylvania and spends more than 183 days of the taxable year (counted midnight to midnight) in Pennsylvania. A permanent place of abode is a dwelling that can be maintained as a household for an indefinite period, whether owned or rented; barracks, employer-provided quarters for a definite period, and college dormitories do not qualify.

Source: 72 P.S. § 7301(p) | 61 Pa. Code § 101.3 | PA Dept. of Revenue — Determining Residency

Pennsylvania personal income tax returns are due on or before April 15 for calendar year taxpayers and on or before the fifteenth day of the fourth month following the close of the fiscal year for fiscal year taxpayers. The due date aligns with when the Federal income tax return is due or would be due if the taxpayer were required to file a Federal return. If the due date falls on a weekend or holiday, the deadline moves to the next business day without penalty.

Source: 61 Pa. Code § 117.1

Every Pennsylvania resident, part-year resident, or nonresident must file a personal income tax return if the taxpayer had an item of income or loss for the taxable year within the meaning of the Personal Income Tax article. The Department of Revenue's official guidance states that individuals must file when they realize income generating $1 or more in tax, even if no tax is due (for example, when an employee receives compensation where tax is withheld). Returns are due on or before April 15 for calendar-year taxpayers.

Source: 61 Pa. Code § 117.1 | PA Dept. of Revenue — Filing Requirements

When the Pennsylvania Department of Revenue determines that a taxpayer owes additional personal income tax, it issues a notice of assessment specifying the tax type, tax periods, the amount of additional tax, interest, and penalties due, and the deadline by which an appeal must be filed. For most Pennsylvania taxes, the appeal deadline is 60 days after the mailing date of the notice of assessment, but personal income tax appeals are governed by a longer statutory period under Article III of the Tax Reform Code.

Effective January 27, 2025, Pennsylvania extended the appeal deadline for personal income tax, employer withholding tax, and pass-through entity assessments from 60 days to 90 days after the mailing date of the notice of assessment. This change was enacted through Act 123 of 2024 and applies to petitions filed with the Board of Appeals on or after January 27, 2025. The 90-day period applies to petitions for reassessment (challenging the Department's proposed assessment) as well as to petitions for refund when the taxpayer has already paid the assessed amount.

A petition for reassessment must include (1) the tax type and tax periods at issue, (2) the amount of tax, interest, or penalties the taxpayer claims to have been erroneously assessed, and (3) the basis on which the taxpayer claims the assessment is erroneous. Petitions may be filed electronically through the Board of Appeals' Online Petition Center or by mailing Form REV-65. The Board of Appeals does not accept petitions by email or fax.

The 90-day deadline is jurisdictional; the Board of Appeals has no authority to extend it for late filings, although Act 123 of 2024 introduced a limited "good cause" exception for late appeals. A petition is deemed timely filed if it is received by the Board or postmarked by the U.S. Postal Service on or before the 90th day after the notice of assessment was mailed. The mailbox rule applies to designated private delivery services that meet the Internal Revenue Code's designated-delivery-service criteria.

Taxpayers may amend a petition for reassessment to add additional facts or to contest additional portions of the assessment at any time before the Board issues its decision and order, provided the amendment arises out of the same transaction, issue, or item of income, deduction, or credit as the original assessment.

Source: PA Department of Revenue – Tax Appeals Technical Provisions and Q&A Source: PA Board of Finance and Revenue – Act 123 of 2024 Updates

Pennsylvania personal income tax disputes follow a three-tier administrative and judicial review structure: Board of Appeals → Board of Finance and Revenue → Commonwealth Court. Each level is governed by statute and provides progressively more formal review.

## Board of Appeals (First Tier)

The Board of Appeals (established under Article XXVII of the Tax Reform Code) is the initial review body for all Pennsylvania Department of Revenue assessments, refund denials, and determinations. A taxpayer dissatisfied with a notice of assessment for personal income tax must file a petition for reassessment with the Board of Appeals within 90 days of the mailing date of the notice (for personal income tax, employer withholding tax, and pass-through entity assessments filed on or after January 27, 2025; 60 days for other tax types). Similarly, a taxpayer seeking a refund must file a petition for refund with the Board within the applicable statutory limitation period.

Hearings before the Board are informal; professional representation is not required, although taxpayers may be represented by attorneys, accountants, or enrolled agents. Testimony is taken under oath, and the Board may make a record of the proceedings. The Board issues a decision and order, which may uphold, modify, or reverse the Department's determination. Decisions of the Board (with confidential information redacted) are published on a publicly accessible website.

Act 123 of 2024 introduced an optional mediated settlement conference procedure. Either party may request a settlement conference in writing with the petition for review or within 30 days of filing. The Board of Finance and Revenue may also initiate a settlement conference sua sponte. Settlement conferences are voluntary; either party may decline to participate even after a referral is made.

## Board of Finance and Revenue (Second Tier)

A taxpayer or the Department dissatisfied with a Board of Appeals decision may appeal to the Board of Finance and Revenue (BF&R), a three-member body within the Pennsylvania Treasury. Two members are appointed by the Governor and confirmed by the Senate; the State Treasurer (or designee) serves as the third member and Chair. Appeals to the BF&R are governed by 72 P.S. § 9704(b), which establishes a general 60-day appeal deadline from the date of the Board of Appeals' order, though specific tax types may have different appeal periods. Taxpayers file appeals through the BF&R Tax Appeal Portal.

BF&R proceedings are also informal. The BF&R reviews the Board of Appeals' decision de novo—no formal transcript or record is made at the Board of Appeals level, and the BF&R conducts its own review of the facts and law. Decisions of the BF&R may be appealed to Commonwealth Court.

## Commonwealth Court (Judicial Review)

A party dissatisfied with the BF&R's decision may appeal to Pennsylvania Commonwealth Court, the intermediate appellate court with exclusive original jurisdiction over state tax matters. Commonwealth Court appeals are governed by the Pennsylvania Rules of Appellate Procedure and are conducted de novo. Further appeal lies to the Pennsylvania Supreme Court by leave.

Exception: Inheritance tax assessments that do not involve refunds are appealed directly to the Court of Common Pleas, Orphans' Court Division, not to the BF&R.

Source: PA Department of Revenue – Tax Appeals Source: PA Board of Finance and Revenue

Pennsylvania taxes nonresidents only on income from Pennsylvania sources. The Tax Reform Code defines "income from sources within this Commonwealth" for nonresident individuals, estates, and trusts as compensation, net profits, gains, dividends, interest, or income enumerated in the eight classes under Section 303, but only to the extent earned, received, or acquired from Pennsylvania sources.

Five statutory categories of Pennsylvania-source income

The statute enumerates five specific ways income is sourced to Pennsylvania for nonresidents, under 72 P.S. § 7301(k):

1. Real and tangible personal property – income by reason of ownership or disposition of any interest in real or tangible personal property located in Pennsylvania.

1. Trade, profession, occupation, or personal services – income in connection with a trade, profession, or occupation carried on in Pennsylvania, or for the rendition of personal services performed in Pennsylvania.

1. Distributive share from pass-through entities – a distributive share of income from an unincorporated business, Pennsylvania S corporation, profession, enterprise, undertaking, or other activity as the result of work done, services rendered, or other business activities conducted in Pennsylvania (except as allocated to another state pursuant to Department regulations).

1. Intangible property employed in Pennsylvania business – income from intangible personal property employed in a trade, profession, occupation, or business carried on in Pennsylvania.

1. Gambling and lottery winnings – gambling and lottery winnings by reason of a wager placed in Pennsylvania, the conduct of a game of chance or other gambling activity located in Pennsylvania, or the redemption of a lottery prize from a lottery conducted in Pennsylvania (excluding noncash prizes of the Pennsylvania State Lottery).

Important exclusions for nonresidents

The Department of Revenue's official guidance confirms that nonresidents do not pay Pennsylvania personal income tax on:

• Ordinary interest income from personal savings and checking accounts
• Dividend income
• Gains from the sale, exchange, or disposition of intangible personal property such as stocks and bonds

The statutory definition expressly excludes "any items of income enumerated above received or acquired from an investment company registered with the Federal Securities and Exchange Commission under the Investment Company Act of 1940."

Compensation sourcing

Nonresidents pay Pennsylvania income tax on compensation for services performed in Pennsylvania. If an employer does not separately report Pennsylvania wages on Form W-2, the nonresident must file Pennsylvania Schedule NRH to apportion compensation between Pennsylvania and other states based on days worked in each location.

Business income apportionment

When a nonresident carries on a business, trade, profession, or occupation partly within and partly outside Pennsylvania, Pennsylvania regulations at 61 Pa. Code Chapter 109 provide apportionment methods to allocate income fairly. The regulations are designed to apportion and allocate to Pennsylvania in a fair and equitable manner the income of a nonresident from sources within Pennsylvania. If the prescribed methods do not result in fair apportionment, the Department may require an alternative method.

Source: 72 P.S. § 7301(k) | 61 Pa. Code Chapter 109 | PA Dept. of Revenue — Nonresidents and Part-Year Residents

Pennsylvania imposes separate limitation periods for the Department's ability to assess additional personal income tax and for a taxpayer's ability to claim a refund. Both periods run from either the date a return was filed or the end of the calendar year in which the tax liability arose, whichever occurs later; early-filed returns are deemed filed on the statutory due date for purposes of calculating the statute of limitations.

## Assessment Statute of Limitations

The Pennsylvania Department of Revenue must assess additional personal income tax within three years after the return was filed (or, if the return was filed before the due date, within three years after the due date). This three-year period applies to underpayments and understatements where the taxpayer filed a return. The Department may make assessments at any time during this period, even if it has previously assessed the taxpayer for the same year or for part of that year.

The three-year limitations period is codified in 61 Pa. Code § 119.14, which implements the general assessment authority under Article III (Personal Income Tax) of the Tax Reform Code, 72 P.S. §§ 7301–7361. The regulation provides that any return filed before the statutory due date is deemed filed on the due date for purposes of computing the limitations period; this prevents the statute from expiring before the due date of the return.

Exceptions to the general three-year rule exist for: (1) failure to file a return — the Department may assess at any time if no return is filed; (2) fraudulent return — the Department may assess at any time if the taxpayer filed a false or fraudulent return with intent to evade tax; and (3) substantial omission of income — if the taxpayer omits from gross income an amount properly includible that exceeds 25 percent of the amount of gross income stated in the return, the Department has six years (rather than three years) to assess. Pennsylvania's personal income tax regulations mirror these exceptions, which are consistent with the structure of 72 P.S. § 7348 (Limitations on Assessment and Collection).

## Refund Claim Statute of Limitations

A taxpayer seeking a refund of personal income tax paid must file a petition for refund with the Board of Appeals within the time prescribed by statute. 72 P.S. § 7350 (Limitations on Refund or Credit) generally provides that a claim for refund must be filed within three years from the time the return was filed or two years from the time the tax was paid, whichever period expires later. If no return was filed, the claim must be filed within two years from the time the tax was paid.

The petition for refund must state the specific grounds for the refund claim and comply with the Board of Appeals' filing requirements. The refund statute of limitations is jurisdictional; the Board of Appeals lacks authority to grant a refund for claims filed outside the statutory window. Taxpayers who pay an assessed deficiency retain the option to file a petition for refund (subject to the statutory limitation period) rather than a petition for reassessment.

Source: 61 Pa. Code § 119.14 (Limitations on Assessment) Source: 61 Pa. Code § 119.15 (Omission from Return) Source: 61 Pa. Code § 119.16 (Exceptions to General Period of Limitations on Assessment and Collection)

Pennsylvania offers both a Voluntary Disclosure Agreement (VDA) program for taxpayers with unreported past-due liabilities and mechanisms for obtaining letter rulings and advisory guidance on uncertain tax positions.

## Voluntary Disclosure Program

The Pennsylvania Department of Revenue administers a Voluntary Disclosure Program that allows businesses and individuals who have recently become aware of their Pennsylvania tax obligations to voluntarily come forward, file returns, and pay taxes and interest owed in exchange for penalty waiver and a limited look-back period. The program applies to personal income tax, employer withholding tax, sales and use tax, corporate net income tax, and certain other taxes administered by the Department. The program does not cover future tax issues; prospective-only agreements are not available.

Eligibility

To qualify for the Voluntary Disclosure Program, the taxpayer must:

• Not be registered with the Department of Revenue for the tax type at issue (the Department evaluates eligibility on a tax-by-tax basis; registration for one tax type does not disqualify a taxpayer from entering the program for a different tax type).
• Not have been contacted by the Department for the tax type at issue. Taxpayers whom the Department has already contacted, audited, or pursued for collection are generally ineligible.
• Agree not to contest any of the taxes reported under the VDA.

Corporation tax liabilities of foreign and domestic corporations already registered with the Pennsylvania Department of State or Department of Revenue are not eligible for the program.

Look-back Period and Penalty Waiver

For non-corporate taxpayers (including individuals subject to personal income tax), the look-back period is three years plus the current year. Corporate taxpayers face a longer look-back (up to five years for certain corporate taxes). Penalties for the disclosed periods are waived upon completion of the VDA requirements; prior-year liabilities beyond the look-back period are forgiven. Interest is not waived and remains due in full.

Exception for business trust fund taxes: Taxpayers who collected but failed to remit sales and use tax or employer withholding tax must pay tax for all years collected, not just the limited look-back period. Penalties will still be waived, but the look-back limitation does not apply because the taxpayer held funds in trust for the Commonwealth.

Anonymous Application

Taxpayers may apply anonymously by contacting the Voluntary Disclosure Office at ra-voluntarydisclosure@pa.gov and requesting a case number. The taxpayer must disclose their identity only upon receipt of a proposed Voluntary Disclosure Agreement. After a case is opened, the Voluntary Disclosure Office sends a Business Activities Questionnaire (Form DEO-50) and instructions. The taxpayer must submit a letter of intent that includes: the tax types involved, the date liabilities began, a detailed description of Pennsylvania activities, an explanation for the failure to file, and verification that the Department has not previously contacted the taxpayer.

Agreement Execution

A Voluntary Disclosure Committee reviews the application. If approved, the taxpayer receives a proposed VDA for signature. The taxpayer or authorized representative must sign and return the agreement within 45 days, along with a completed power of attorney (if applicable). The agreement may not be modified in any way; any alteration renders it void. Once executed by the Department (and, if required, the Auditor General), the taxpayer receives instructions for filing returns and remitting payment. The Voluntary Disclosure Office handles all account processing, including registration.

Failure to comply with the terms of the VDA or other program requirements voids the agreement, and the taxpayer becomes subject to full assessment and penalties. Taxpayers pursuing a VDA should not register on their own for the taxes being disclosed; premature registration or filing outside the program will void eligibility.

## Letter Rulings and Advisory Opinions

Pennsylvania does not maintain a formal published private-letter-ruling program comparable to the IRS or some other states. However, taxpayers may request written guidance from the Department of Revenue on specific tax questions through the Department's Office of Chief Counsel. Such requests are evaluated on a case-by-case basis. The Department publishes certain guidance in the form of Revenue Information Releases, Tax Bulletins, and Letter Rulings (redacted for confidential taxpayer information) on its website. Taxpayers seeking binding guidance on a novel or uncertain tax position should submit a detailed written request to the Office of Chief Counsel, PA Department of Revenue, Harrisburg, PA 17128-1061, describing the facts, the issue, and the taxpayer's proposed treatment.

Source: PA Department of Revenue – Apply for the Voluntary Disclosure Program Source: PA Department of Revenue – How to Participate in Voluntary Disclosure