On January 7, 2013, the Commonwealth Court upheld the longstanding "super credit" system in a decsion with implications for a number of Berks County taxpayers. See Berks Cty. Tax Coll. Comm v. Pa. Dep’t of Community and Econ. Dev., No. 378 M.D. 2012 (Pa. Commw. Ct., Jan. 7, 2013). The super credit applies to taxpayers living outside Philadelphia that maintain two jobs - one inside Philadelphia city limits, and another outside. (The same principal applies to taxpayers working from separate offices within the same company - i.e., Philadelphia and a suburban office.) Historically, these taxpayers have used Philadelphia’s hefty city wage tax as a credit to offset their local tax liability, oftentimes eliminating the need to pay an earned income tax ("EIT") to their local municipality and school district.
The plaintiffs, a number of tax collection committees of counties located in the Philadelphia metropolitan area, including the Berks County Tax Collection Committee (collectively, the “Committees”), filed a motion with the Court seeking relief in the form of a declaration that the super credit system violates the Uniformity Clause of the Pennsylvania Constitution. The Committees further asked the Court to ditch the super credit system in favor a system of apportionment.
President Judge Dan Pellegrini, writing for the Court, rejected the uniformity challenge and upheld the super credit system. Quoting its prior holding in Somma v. Commonwealth, 405 A.2d 1323 (Pa. Cmwlth. 1979), the Court held:
[W]e also recognize that ‘reasonableness’ is the standard by which classifications created by a taxation provision are judged and that the legislature ha[s] broad discretion in choosing acceptable categories…. [W]hen petitioners question the reasonableness of having to pay the sum of two taxes imposed by different authorities while others pay only one, they are not questioning the uniformity of the taxing provisions but rather the sense of fairness within the legislature which, by authorizing a local wage tax, permits the imposition of two separate and distinct taxes on one income. Two separate taxing schemes superimposed one upon the other do not create impermissible, unconstitutional inequalities; nor does recognition of credit for taxes paid to some other governmental authority.
Id. at 9-10. The Court further cited the General Assembly’s rationale for the system as a means of encouraging non-residents to “continue working in Philadelphia and to continue to voluntarily subject themselves to an increased EIT rate rather than moving their workplaces to the surrounding municipalities whose EIT rate is a fraction of that imposed by Philadelphia.” Id. at 10. The decision has been received as a win for non-resident taxpayers.