“Pa. Tax Talk: Tax Cap Cases Highlight Chevron Issues”

Article by Jennifer Karpchuk on “Pa. Tax Talk: Tax Cap Cases Highlight Chevron Issues”

In an article published on October 25, 2021, in Law360, Philadelphia-based Shareholder Jennifer Karpchuk provides an overview of Alcatel-Lucent USA Inc. v. Commonwealth of Pennsylvania, the latest in a string of cases addressing remedy in light of the Pennsylvania Supreme Court's 2017 decision in Nextel Communications Inc. v. Commonwealth.

“In Alcatel, the latest chapter of the Nextel saga, the tax year at issue was 2014,” explains Karpchuk. “During 2014, the NLC was limited to the greater of 25% of a company's taxable income, or $4 million. Alcatel argued that the department's prospective application of Nextel was improper and allowed smaller companies to fully deduct their losses while larger companies could only deduct a percentage of theirs. The court disagreed; it found that the facts of the case failed the test for retroactivity established by the U.S. Supreme Court in 1971 in Chevron Oil Co. v. Huson.”

Karpchuk further explains that although it may seem the results in Alcatel and General Motors are incongruous, the differing outcomes are tied to the court's treatment of retroactive application with regards to remedy and highlight the issues with the Chevron test.

The article concludes by outlining that “some additional guidance could come from the Pennsylvania Supreme Court once it issues its decision in General Motors. “Although the Commonwealth Court tried to distinguish Alcatel from General Motors, based on the Chevron test their results should not be so dissimilar and the fact that they are disparate highlights issues that can arise from the subjective nature of the test,” said Karpchuk.

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