Act 43 of 2017 created a withholding obligation for certain payors of Pennsylvania-source income and lessees of Pennsylvania real estate to non-residents. It also expanded the requirements with respect to when a copy of Federal Form 1099-MISC is required to be filed with the Pennsylvania Department of Revenue.

Beginning January 1, 2018, anyone that makes the following payments is required to withhold from such payments an amount equal to the tax rate specified per 72 P.S. § 7302 (currently 3.07%):

• Payments of PA source non-employee compensation or business income to a non-resident individual or disregarded entity that has a non-resident member and is reported on a 1099-MISC.
• A lessee of PA real estate who makes a lease payment in the course of a trade or business to a non-resident lessor.

Withholding is optional for payors or lessees paying less than $5,000 annually. However, if you are unsure of the total amount of payments that will be made during the year, the Department encourages you to withhold and remit income tax from all payments made.

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