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Supreme Court Declines to Consider Double Taxation Case

 

Today, the United States Supreme Court denied certiorari in Zilka v. City of Philadelphia Tax Review Board, meaning the Supreme Court will not hear the case.

The odds of the Court hearing any particular case are tough, as it only accepts 50 to 80 cases out of the thousands of appeals received each year. But this is disappointing news for state and local tax policy. As we explained in our amicus curiae (“friend of the court”) brief, the issue centered around Pennsylvania providing a credit for “state taxes” paid to another state and a credit for “city taxes” paid to another city, but refusing to aggregate the two. As a result, Diane Zilka, who lives in Philadelphia, Pennsylvania, and works in Wilmington, Delaware, faced double taxation because Pennsylvania found a way to only provide partial credit for her state and local tax payments.

Constitutionally, Pennsylvania cannot, for example, refuse to provide a credit for income taxes paid to Georgia, since that would violate the Commerce Clause as unfair multiple taxation. Pennsylvania sidesteps this duty by recategorizing its city and state taxes as purely state or purely local. Such an approach defies logic because a city does not have the same political autonomy as a state; a city is necessarily a part of a state. 

We warned that not hearing the case would allow Pennsylvania’s harmful tax policy to continue and could open the door for other states to adopt a similar loophole and enable double taxation. The Biden Administration, in its brief urging the Court not to hear the case, said this worry was unfounded. While we hope we’re wrong, we will vigilantly monitor states to fight for taxpayer-friendly policy in this area.