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17 May 2018

Pennsylvania revenue department issues guidance on applying Nextel decision to cap on net loss carryforwards for pre-2017 periods

In Corporate Tax Bulletin 2018-02 (Bulletin 2018-02, issued May 10, 2018), the Pennsylvania Department of Revenue (DOR) announced that it will permit taxpayers to use the flat-dollar cap on net loss carryforwards (NLCs) for tax years beginning before January 1, 2017. Bulletin 2018-02 fills in the gap left by Corporation Tax Bulletin 2017-01 (Bulletin 2017-01) in which the DOR announced that it would not permit taxpayers to utilize the flat-dollar cap on NLCs for tax years beginning in 2017 and thereafter.

The following chart summarizes the DOR's published guidance on the utilization of NLCs:

Tax period beginning

Flat-dollar cap

Percentage cap

DOR Bulletin

January 1, 2017 forward

No

Yes

2017-01

After December 31, 2006 through December 31,2016

Yes

Yes

2018-02

Before January 1, 2007

Yes

 

2018-02

Implications

Bulletin 2018-02 states the DOR's position for tax years before January 1, 2017. The following pending matters, however, could affect the DOR's positions in both Bulletin 2018-02 and Bulletin 2018-01:

— The taxpayer in Nextel filed a petition for writ of certiorari with the Supreme Court of the United States on May 3, 2018.

— RB Alden Corp. v. Commonwealth, 66 MAP 2017 addressing the NLC issue as well, is currently pending appeal to the Pennsylvania Supreme Court. The Commonwealth's second brief is due to be filed on May 23, 2018.

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Contact Information
For additional information concerning this Alert, please contact:
 
State and Local Taxation Group
• Michael Semes(215) 448-5338
• Mark Achord(215) 448-3396
• David Dudrear(215) 448-5453

Document ID: 2018-1036

 

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