General Motors Corp. v. Pennsylvania (majority)Annotate this Case
General Motors was a Delaware corporation engaged in the sale of motor vehicles in Pennsylvania, and subject to Pennsylvania’s corporate income tax. GM contested the calculation of its 2001 Tax Year corporate income tax, after filing a report of change in its federal taxable income in March 2010. In February 2012, GM timely filed a petition for refund with the Department of Revenue’s (“Department”) Board of Appeals. It claimed that the cap on the net loss carryover (NLC) resulted in a “progressive effective tax rate” which violated the Uniformity Clause of the Pennsylvania Constitution. It explained that “a taxpayer conducting business on a larger scale in Pennsylvania pays a higher effective tax rate than a similarly situated taxpayer conducting business on a smaller scale.” In Nextel Communications of the Mid-Atlantic, Inc. v. Commonwealth, Department of Revenue, 171 A.3d 682 (Pa. 2017), the Pennsylvania Supreme Court held that the NLC deduction applicable to corporate income tax for the tax year ending December 31, 2007 (“2007 Tax Year”), violated the Uniformity Clause. Here, the Court applied Nextel and considered GM's constitutional challenges to the NLC provisions applicable to corporate income tax in the tax year ending December 31, 2001 (“2001 Tax Year”). The Supreme Court agreed with the Commonwealth Court that Nextel applied retroactively to this case, however, it reversed the Commonwealth Court to the extent it remedied the violation of the Uniformity Clause by severing the $2 million NLC deduction cap, which would have resulted in an unlimited NLC deduction. Instead, the Supreme Court severed the NLC deduction provision in its entirety, resulting in no NLC deduction for the 2001 Tax Year. The Supreme Court affirmed the Commonwealth Court’s order to the extent it directed the Department to recalculate GM’s corporate income tax without capping the NLC deduction and issue a refund for the 2001 Tax Year, which the Court concluded was required to remedy the due process violation of GM’s rights pursuant to McKesson Corp. v. Division of Alcoholic Beverages and Tobacco, Department of Business Regulation of Florida, 496 U.S. 18 (1990).