In October 2017, the Pennsylvania Supreme Court decided Nextel Communications of the Mid-Atlantic, Inc. v. Commw. (see our prior coverage here), in which the court held that the $3 million cap on the net operating loss deduction (NOL) violated the Uniformity Clause of the Pennsylvania Constitution, but left in place the 12.5 percent of taxable income limitation on the NOL deduction. On Nov. 16, 2017, the Department of Revenue issued PA Corporation Tax Bulletin 2017-01 announcing that the flat-dollar cap on the NOL is not available for taxable years starting in 2017 and thereafter, but left the issue of the application of the Nextel decision to years starting prior to Jan. 1, 2017 open pending a final decision of the Pennsylvania Supreme Court. In order to provide greater clarity for corporate taxpayers, the Department of Revenue has announced, in PA Corporation Tax Bulletin 2018-02, that it will not apply the Nextel decision to tax years starting before Jan. 1, 2017, but will determine the corporate net income tax liability for tax years starting after Dec. 31, 2006 and through Dec. 31, 2016 by allowing the greater of the flat dollar cap or the percentage cap as authorized by statute prior to the Nextel decision. For tax years starting before Jan. 1, 2007, the Department will determine corporate net income tax liability by applying the flat dollar cap as authorized by statute prior to the Nextel decision.
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