On December 14, 2023, Pennsylvania Governor Josh Shapiro signed Senate Bill 815 which amended the Pennsylvania tax code by integrating the federal grantor trust provisions into Pennsylvania law. Pennsylvania finally joins the other 49 states plus the District of Columbia in following the Federal grantor trust taxation regime.

When effective, under the new law, income received by a Pennsylvania resident trust (or a nonresident trust with income from Pennsylvania sources) which is treated as a grantor trust for Federal income tax purposes, will now be taxable to the grantor for Pennsylvania income tax purposes. This applies irrespective of whether the income is distributed to the trust beneficiaries.

This alignment with Federal standards brings Pennsylvania in line with the rest of the country, alleviating the administrative and tax complexities stemming from the disparate treatment of trusts.

The new legislation will be effective for tax years starting after January 1, 2025. The change will not apply to trusts for either the 2023 or 2024 tax years.

For guidance on navigating the implications of this legislation on your trust and estate planning, please reach out to your tax advisor at Isdaner & Company. We are ready to assist you in understanding and managing the impact of these changes.