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General Motors Corp. v. Commonwealth

Pennsylvania Supreme Court

December 22, 2021

The Pennsylvania Supreme Court addressed the constitutionality of the state’s “net loss carryover” (“NLC”) provision that permits corporate taxpayers to deduct losses suffered in prior years from the current year’s taxable income to reduce their tax liability. Previously, the Supreme Court held that the NLC deduction applicable to corporate income tax for 2007 violated the Uniformity Clause of the state constitution. Here, the Court addressed General Motors’ similar challenge to the net loss carryover provisions for the tax year of 2001. The Supreme Court affirmed the Commonwealth Court to the extent that it deemed the prior holding regarding the 2007 tax year to apply retroactively to control. But the Court reversed the Commonwealth Court to the extent it remedied the violation of the Uniformity Clause by severing the $2 million NLC deduction cap. Instead, the Supreme Court concluded that the proper remedy was to sever the NLC deduction provision in its entirety for the 2001 Tax Year. Finally, the Supreme Court affirmed the Commonwealth Court’s order to the extent it remanded to the Finance and Review Board to recalculate GM’s corporate net income tax without capping its NLC deduction and to issue a refund based upon that recalculation, which the Court concluded was required to remedy the due process violation of GM’s rights under McKesson Corp. v. Division of Alcoholic Beverages and Tobacco, Department of Business Regulation of Florida.

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