Pennsylvania lawmakers are weighing a significant shift in how the state pursues fraud enforcement. House Bill 1697 would create a Pennsylvania False Claims Act – a law that sounds straightforward, but actually carries far-reaching complications for businesses, taxpayers and the accounting professionals who serve them.
When questions arise about whether a business or individual has properly paid state taxes, the Pennsylvania Department of Revenue manages the process — conducting audits, interpreting tax law and resolving disputes consistently across taxpayers and industries. The department brings real institutional expertise to this work: tax law is rarely black and white, and complex provisions regularly require professional judgment. Disagreements between a taxpayer and the state over how a rule applies are common and do not constitute fraud. The existing framework, including a structured appeals process, balances enforcement with fairness, confidentiality and predictability.
HB 1697 would allow private individuals (known as “relators”) and their attorneys to file lawsuits on behalf of the commonwealth over alleged false claims involving public money, including state and local tax matters. These qui tam lawsuits carry a powerful financial incentive: the relator can collect 15 to 30% of whatever the government recovers.
The practical effect is significant. Imagine a small accounting firm that spent years helping a hospital navigate complex Medicaid billing rules. A disgruntled former employee teams with a contingency-fee attorney and files a qui tam complaint over a disputed billing interpretation. No fraud needs to be proven. The firm now faces treble damages and penalties up to $27,000 per claim — potentially catastrophic exposure from years of monthly invoices. Many businesses in this position settle simply to avoid litigation costs, even when they’ve done nothing wrong. The relator and attorney collect up to 30%. The firm’s reputation is damaged with no finding of wrongdoing by any state authority.
That is the core danger: a False Claims Act covering tax matters shifts enforcement from the agency best equipped to handle it to private litigants motivated by profit. The bill also introduces a 10-year statute of limitations, meaning businesses could face claims long after decisions were made in good faith.
Supporters argue the legislation would help the commonwealth recover revenue lost to fraud. That is a legitimate goal that the Pennsylvania Institute of Certified Public Accountants shares. Fraud should be detected and punished. The issue at hand has nothing to do with fighting fraud; it concerns applying a False Claims Act to tax matters, where good-faith differences of professional opinion can be misconstrued and weaponized.
There is also a practical question about where recovered funds actually go. Under a qui tam structure, a significant share of any recovery goes to private attorneys and relators – not to Pennsylvania taxpayers. Proponents have pointed to the bill as a budget solution, but the revenue projections must be weighed against the litigation costs businesses will bear and the chilling effect on investment and professional services in the commonwealth.
The federal False Claims Act – the model on which state versions are typically based – explicitly excludes tax matters. Congress recognized that tax enforcement is a core governmental function requiring centralized oversight, specialized expertise and the protection of confidential taxpayer information. Most states with their own False Claims Acts have followed that same approach.
If HB 1697 passes as currently written, Pennsylvania would be departing from that well-established national standard and becoming an outlier. Businesses evaluating where to invest or expand do consider the predictability and fairness of state tax administration. A system that exposes companies to private litigation over routine tax decisions – decisions the Department of Revenue itself might never have questioned – introduces a level of uncertainty that could affect Pennsylvania’s economic competitiveness.
The PICPA is not asking lawmakers to abandon fraud enforcement. We are asking for one amendment: the explicit exclusion of state and local tax matters from the scope of HB 1697. That single change aligns Pennsylvania with federal law, mirrors what most other states have done, and eliminates the most serious risks while preserving the bill’s anti-fraud enforcement muscle in other areas where private litigation is appropriate.
Tax disputes belong in the Department of Revenue’s hands and not in the courts, where private attorneys profit at the expense of businesses that complied with the law in good faith. Pennsylvania can be a leader in fraud enforcement without becoming an outlier in tax administration.
This is a contributed opinion column. Peter Calcara is vice president of government relations at the Pennsylvania Institute of Certified Public Accountants. The views expressed in this piece are those of its individual author, and should not be interpreted as reflecting the views of this publication. Do you have a perspective to share? Learn more about how we handle guest opinion submissions at themorningcall.com/opinions.