EIT Bureau admits there was a pattern of distribution based on set or predetermined percentages

I recently asked the EIT Bureau Board President to confirm whether or not there was a percent-allocation distribution schedule. He recently clearly replied that there was a pattern of distribution based on a predetermined, or set, percentages. However, he said that it wasn't a "schedule." This response confirms the three points that I have been blogging about since July:

1. There was a known distribution pattern that Foltz did not deviate from. The accusers' own report demonstrates this.

2. Keystone's current distribution of EIT revenue is a deviation from an admitted distribution pattern, yet this change in the rules of administration for this tax was never properly enacted. The Enabling Act for the EIT requires such rules be adopted via resolution. There is no evidence that this was ever done. In the meantime, because our solicitor is failing to push the EIT Bureau and Keystone to follow the law here, Mt. Gretna is getting seriously short changed.

3. Our city solicitor is failing to properly represent Mt. Gretna on this issue. The accusers have not presented any evidence that presents any sort of legal sufficiency--its all been conclusory hearsay and accusation. Therefore, there is no basis for our solicitor to get us into any "settlement" negotiations, much less, a "settlement." His failure to properly represent us is primarily based in his conflicting representation of municipalities that are the "accusers" in this matter.

At the last Borough meeting, I asked our borough solicitor to "Please show me where you are finding the proof that something was done wrong here, because, in all my research, I can't find that proof?" His answer was for me to "read the Local Tax Enabling Act. The proof is in there." That is not a sufficient answer--and I knew that, because I, unlike some legal practictioners Ihave met, like to do my homework BEFORE asking the question. So, I kindly replied to him that I have already referred to that Act, and the laws embodied there really contradict all the things he has been asserting. (Later in the meeting, he admitted to another concerned resident that the documentary evidence that was found really is poor--"paper shoved in garbage bags shoved in a closet.")

You other residents should know that, before presenting that question to the Borough, I spoke at length with three very knowledgable sources--other EIT collectors and the Harrisburg guru on the matter, who each spent enormous amounts of time reviewing the Enabling Act with me. I am very appreciative of their graciousness in spending so much time with me and their transparent and eager sharing of knowledge on the administration of the EIT and the Local Tax Enabling Act. However, in each conversation, we concluded that:

1. There is NO mandate for distribution according to actual contributions to the EIT pool. That's simply how EIT taxing entities usually do it.

2. That taxing bodies are allowed to deviate from the 50/50 split by agreement (as long as they don't exceed the tax allowed by law), and

3. That such rules can be created by the tax officer but must be adopted by resolution.

So, applying these laws to the facts here, the conclusions are that an agreement to distribute according to the admitted to percentages was made some time ago, it was adhered to, and Keystone is deviating from that policy even though no resolution has been adopted that changes the administration of this tax in terms of distribution.

Further, the Enabling Act requires that each municipality annually reconcile its EIT receipts with the tax officer so that any adjustments for over or under payments can be immediately made. There has been no suggestion or evidence presented that this did not happen, and there is no requirement that it be done in writing. For nearly 50 years since this tax has been levied in Lebanon County, NO municipality or school district is known to have complained about being accused of, via this annual reconciliation and adjustment requirement, under or overpaying. So, absent sufficient evidence establishing the contrary, the ONLY supported conclusion here is that the distribution pattern was indeed an accepted "schedule" and ALL under and over-payments were reconciled annually.

The reality is that the EIT Bureau lost track of what it was supposed to be doing. That Foltz embezzled $800,000, that he could send a municipality a check at the ring of a phone call, and that he didn't send EIT entities outside Lebanon County their due revenues collected do NOT show that he didn't distribute the revenue appropriately within the County. Why? Well, a recent state study of the EIT shows that this tax is so poorly administered that millions and millions are "lost" each year--even to embezzlement. (The estimates put the loss at from $100 million to $200 million, a year!) Further, if your county's plan allocates a set percentage to each municipality, you know exactly how much you can send it when it calls you asking for a check. In Mt. Gretna's case, Foltz knew he could send us .35% of whatever had come in recently. From the resulting consistencies demonstrated in the actual EIT data of the McKonly Asbury report, Foltz apparently did an efficient job of making sure municipalities got only their percentage for the year, even though you could call and get part of that percentage earlier, rather than later. And, that recent government study also established that many EIT collectors weren't even sending the outside taxing bodies the tax their own county collected from the other counties' residents--ever. So, its no surprise that Foltz may have been under-paying these other taxing bodies--that was, and still is, common practice across the state.

Ultimately, all this is irrelevant but highlights a much more important point: it is up to the alleging entity to prove its case--it is not up to Mt. Gretna to prove its "innocence."

Here, the allegedly under-paid municipalities, the EIT Bureau, and our own solicitor are relying on the McKonly-Asbury report to make the accusers' case. (There is a link to that report in the Links List at the bottom of the page.) However, that report does not have the authority of an audit, and it relies on highly inaccurate data and hidden formulas to craft a conclusory argument:

1. The DOR data is simply not a reflection of EIT data, and therefore can not be used in place of EIT data--the two are very different sets of numbers, and

2. According to the Bureau's own admission, set percentages were apparently applied to the McKonly derived DOR data, yet those percentages were never called out in the report. Nor does the report explain its use of those percentages.

The report simply is a well-crafted, non-objective statement manipulated by the accusers to state their accusations in a different way. More importantly, no matter what way I read the report, I can not find that it provides support to their allegations--especially not legally sufficient support to justify taking more of our money for any type of "repayment" plan.

The documents referred to in this post can be viewed by clicking their link in the Links List at the bottom of this page.