Last year, H.R.1 made several changes to federal tax law that will take effect this year. As Pennsylvania's tax laws often follow federal rules in many cases, I believe we should examine the Commonwealth's tax structure as it now relates to new federal tax law changes.
 
One of the most significant changes in H.R. 1 was the addition of a new exemption for early withdrawal from an IRA or retirement account to pay for expenses related to the birth or adoption of a child. Under this new provision, each parent may withdraw up to $5,000 per child from an IRA or retirement account without paying the federal 10% early withdrawal penalty. Similarly, the federal exemption is currently available for first-time homebuyers, allowing withdrawals of up to $10,000 without penalty.
 
Even with these exemptions, Pennsylvania still taxes early withdrawals as they are treated as ordinary income and subject to the Personal Income Tax. This means that families may still pay state income tax on the same money that avoids the federal penalty.  Given the unique circumstances of these types of events, we should do more to help support young families, first-time homebuyers, and stimulate Pennsylvania's economy. 
 
I am proposing we waive the Pennsylvania PIT on all early withdrawals from retirement accounts that qualify for the birth, adoption or first-time homebuyer federal exemptions. If a taxpayer meets the federal requirements to withdraw funds without penalty, those funds should not be subject to Pennsylvania income tax. Waiving these taxes is a way to lower costs on families, encourage population growth, support first-time homeownership, and help make Pennsylvania more competitive with neighboring states.
 
I hope that you will join me in supporting this initiative by co-sponsoring this legislation.