In December of 2015, Pennsylvania’s Commonwealth Court issued an important decision holding that the structure of the net loss carryover deduction for the Corporate Net Income Tax violated the uniformity clause of the Pennsylvania Constitution. Nextel Communs. of the Mid-Atlantic, Inc. v. Commw., 129 A.3d 1 (Pa. Commw. 2015). Specifically, the court held that the cap on the deductibility of losses violated the uniformity clause by treating taxpayers in a disparate fashion based on their taxable income without any reasonable justification. Nextel, 129 A.3d at 9-10. The court ordered a refund to remedy the violation. Id. at 12-13. Currently, the case is on appeal to the Supreme Court of Pennsylvania; all briefs have been filed and the matter is awaiting further action from the court.… Read More
The Pennsylvania Constitution requires that taxes be uniform: “All taxes shall be uniform, upon the same class of subjects, within the territorial limits of the authority levying the tax, and shall be levied and collected under general laws.” Pa. Const. art. VIII, § 1. While this provision sounds similar to the equal protection clause of the Fourteenth Amendment, in practice, it is much more robust.
On September 28, 2016, the Pennsylvania Supreme Court ruled that the local share assessment imposed under Section 1403 of the Pennsylvania Race Horse Development and Gaming Act violated the uniformity clause of the Pennsylvania Constitution because casinos were taxed differently based upon the amount of their gross revenue.… Read More
One of the more important Pennsylvania tax cases decided last year was Nextel Communications of the Mid-Atlantic, Inc. v. Commonwealth, 129 A.3d 1 (Pa. Commw. 2015). Decided under the Corporate Net Income Tax, Nextel held that the net loss carryover provision of 72 P.S. § 7401(3)4.(c)(1)(A) violated the Uniformity Clause of the Pennsylvania Constitution because it treated taxpayers with small operating losses more favorably by permitting them to offset their losses against all of their taxable income, while taxpayers with large losses could not. Nextel, 129 A.3d at 9. Specifically, in the 2007 tax year, which was at issue in Nextel, taxpayers could deduct the greater of $3,000,000 or 12.5% of taxable income.… Read More
Under the Bank and Trust Company Shares Tax, Pennsylvania taxes banks and trust companies that are located within the Commonwealth. The amount of the tax is a function of the book value of the institution’s equity capital. If institutions are combined, then their aggregate book value drives the amount of the tax. 72 P.S. § 7101.1(c)(2).
Historically, the book value was subject to an averaging position (eliminated in 2013), that looked at a six year average of book value to determine the tax base. Recently, the Supreme Court of Pennsylvania looked at a challenge to that provision based upon the uniformity clause of the Pennsylvania Constitution, Pa.… Read More