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Pennsylvania: Taxpayer Asks US Supreme Court if Philadelphia Validly Denied Wage Tax Credit for Taxes Paid to Other State

Docket No. 23-____, US (petition for cert. filed 2/20/24). In a case involving a resident of the City of Philadelphia, Pennsylvania (City) who worked full-time in the City of Wilmington, Delaware and unsuccessfully claimed an additional credit against her City of Philadelphia wage taxes for a portion of income taxes that she paid to the State of Delaware, the resident has petitioned the US Supreme Court (Court) to consider how states credit taxpayers’ out-of-state tax liabilities under the Commerce Clause. In the underlying case, the Pennsylvania Supreme Court recently affirmed denial of the resident’s claim for an additional City wage tax credit for a portion of the Delaware state taxes incurred [see Case Nos. 20 EAP 2022 and 21 EAP 2022, Pa. (11/22/23) and State Tax Matters, Issue 2023-47, for details on the Pennsylvania Supreme Court’s 2023 decision] – concluding that state and local taxes need not be aggregated in conducting a dormant Commerce Clause analysis, and that, ultimately, the City’s wage tax scheme does not discriminate against interstate commerce. In the resident’s filed petition, she asks the Court whether the Commerce Clause requires states to consider a taxpayer’s burden in light of the state tax scheme as a whole when crediting a taxpayer’s out-of-state tax liability “as the West Virginia and Colorado Supreme Courts have held and this Court has suggested,” or whether it permits states to credit out-of-state state and local tax liabilities as “discrete tax burdens” as held by the Pennsylvania Supreme Court in this case. Please contact us with any questions.