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Philadelphia Earned Income Tax “Super Credit” Decision Issued

The long-awaited decision on the future of the Philadelphia Earned Income Tax “Super Credit” was issued on January 9, 2013 by the Commonwealth Court of Pennsylvania [Pennsylvania Commonwealth Court, No.  378 M.D. 2012, January 7, 2013].  Multiple Pennsylvania county tax collection committees challenged the so-called Philadelphia Earned Income Tax “Super Credit” on separate grounds and were defeated on both positions.

First, the Court held that the “Super Credit” was not a violation of the Uniformity Clause of the Pennsylvania Constitution and the Local Enabling Act because it did not treat similarly situated taxpayers differently.  The Court stated that the collection committees’ premise was faulty in that a taxpayer that pays earned income tax entirely outside Philadelphia and a taxpayer who pays earned income tax inside and outside Philadelphia were not similarly situated because of the increased rate imposed on income earned within Philadelphia.  Secondly, the collection committees challenged the validity of the Dunmire case which authorizes the “Super Credit.”  The Court held that the Dunmire case was not misinterpreted or misconstrued and was controlling in its holding that permits the use of the Philadelphia “Super Credit” against total net earnings, not just those earnings attributable to Philadelphia.

 

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