Alcatel-Lucent Inc. v. Commonwealth

Full title: ALCATEL-LUCENT USA INC., Appellee v. COMMONWEALTH OF PENNSYLVANIA…

Court: Supreme Court of Pennsylvania

Date published: Nov 20, 2024

8 MAP 2023 (Pa. Nov. 20, 2024)

Opinion

8 MAP 2023 J-20-2024

11-20-2024

ALCATEL-LUCENT USA INC., Appellee v. COMMONWEALTH OF PENNSYLVANIA, Appellant

WECHT JUSTICE.

ARGUED: March 6, 2024

Appeal from the Order of the Commonwealth Court at No. 803 FR 2017 dated December 28, 2022, sustaining the exceptions filed on October 13, 2021 to the September 13, 2021 Order, Reversing the decision of the PA Board of Finance and Revenue at No. 1628908 dated August 23, 2017 and remanding.

TODD, C.J., DONOHUE, DOUGHERTY, WECHT, MUNDY, BROBSON, McCAFFERY, JJ.

OPINION

WECHT JUSTICE.

In Nextel Communications of Mid-Atlantic, Inc. v. Pennsylvania Department of Revenue,¹ we held that the 2007 net-loss carryover deduction to Pennsylvania's corporate net income tax violated the Uniformity Clause of the Pennsylvania Constitution²because it favored one group of corporate taxpayers and disadvantaged another. Subsequently, in General Motors Corp. v. Commonwealth,³ this Court concluded that our Nextel decision applies retroactively to taxes that were collected before that decision. We hold today that General Motors was erroneous, and that Nextel should apply only prospectively. Accordingly, we reverse the decision of the Commonwealth Court.

1 171 A.3d 682 (Pa. 2017).

2 Pa. Const. art. VIII, § 1 ("All taxes shall be uniform, upon the same class of subjects, within the territorial limits of the authority levying the tax[.]").

3 265 A.3d 353 (Pa. 2021).

I. Nextel

We begin by examining this Court's decision in Nextel, which involved a Uniformity Clause challenge to the net-loss carryover deduction to Pennsylvania's corporate net income ("CNI") tax. Corporations are subject to Pennsylvania's CNI tax if they do business, carry out activities, or own property within the Commonwealth.⁴ For the tax years at issue in Nextel, the CNI tax was 9.99% of the corporation's federal taxable income, as defined by the IRS. Because the CNI tax is calculated based on the IRS' definition of taxable income, a corporation's losses necessarily are deducted from its income.

4 72 P.S. § 7402(a).

The net loss carryover ("NLC") deduction comes into play when a corporation has negative income, meaning that the corporation's calendar-year losses exceed its calendar-year income. When this happens, the corporation is said to have a "net operating loss." A corporation with a net operating loss can reduce its taxable income to zero and then carry over any remaining, un-deducted losses into a future tax year or years. But there is a statutory "cap" on these carryover deductions, which limits the amount of carried-over losses that can be deducted in any given calendar year.

Our decision in Nextel concerned the constitutionality of the 2007 cap on carried-over losses, which allowed corporations to deduct the greater of $3 million or 12.5% of the corporation's 2007 taxable income.⁵ Nextel claimed that the cap violated the Uniformity Clause because it allowed taxpayers with incomes below $3 million to fully offset their CNI tax liability, while larger companies (with taxable income greater than $3 million) could not do the same. In other words, Nextel argued that the 2007 cap created separate classes of taxpayers based solely upon income level-something that this Court has said the Uniformity Clause prohibits in other contexts.⁶

5 72 P.S. § 7401(3)4. (c)(1)(A)(II), partially invalidated by Nextel, 171 A.3d at 705.

6 See In re Cope's Est., 43 A. 79, 82 (Pa. 1899) ("The money value of any given kind of property . . . can never be made a legal basis of subdivision or classification for the purpose of imposing unequal burdens on [similarly situated] classes.").

Before the case reached this Court, the Commonwealth Court had agreed with Nextel that the 2007 cap violated the Uniformity Clause. In fashioning a remedy for that constitutional violation, the intermediate court explained that:

the unequal treatment suffered by Nextel must be remedied, and it can only be remedied in one of two ways-the favored taxpayers pay more or Nextel pays less. The latter is the only practical solution. Nextel seeks a refund of corporate net income tax paid in 2007. This is an appropriate remedy. Like similarly-situated taxpayers with $3 million or less taxable income in the 2007 Tax Year, Nextel should be permitted under the NLC deduction provision to reduce its taxable income to $0 by virtue of its positive net operating loss position that tax year.⁷

7 Nextel Commc'ns of Mid-Atlantic, Inc. v. Commonwealth, 129 A.3d 1, 13 (Pa. Cmwlth. 2015).

On appeal, this Court affirmed the Commonwealth Court's Uniformity Clause analysis but disagreed with the intermediate court's chosen remedy. We explained that there were three potential remedies available to cure the Uniformity Clause violation. We could either: "(1) sever the flat $3 million deduction from the remainder of the NLC; (2) sever both the $3 million and 12.5% deduction caps and allow corporations to claim an unlimited net loss-the remedy chosen by the Commonwealth Court majority; or (3) strike down the entire NLC and, thus, disallow any net loss carryover."⁸ The question, therefore, became "which of these actions would be most consistent with the legislature's intent in enacting the NLC."⁹

8 Nextel, 171 A.3d at 703.

9 Id.

Reviewing the history of the NLC deduction in Pennsylvania, we noted that the deduction was introduced for the first time in 1980 in order to "assist new 'high technology' businesses that were focused on the rapid development of new products, as well as to assist existing construction and farming enterprises which had been harmed by a recent recession."¹⁰ The deduction, which was uncapped, remained in place for eleven years until it was completely eliminated in 1991 as part of a broader effort to raise revenue amid another recession. The legislature then reenacted the deduction three years later, in 1994, but the reinstated version was capped at $500,000 for all corporations. Since 1994, both the deduction and the cap have remained in place (with the cap steadily increasing over the years). We explained that the above history

10 Id. at 703-04.

establishes that the General Assembly first granted the deduction without any cap at all, but abandoned this approach based on its determination that such an uncapped deduction had significant deleterious consequences for our Commonwealth's fiscal health. However, our legislature perceived that the deduction provided some public benefit by encouraging investment in the development of new technologies, as well as the acquisition of the physical infrastructure necessary to implement those technologies. Thus, the legislature reintroduced the deduction in 1994, but attempted to avert the excessive drain on the public fisc the prior unlimited deduction had caused by imposing a cap on the amount of this deduction which a corporation could take in a given tax year, and the legislature has steadfastly maintained this cap in various forms for the last 23 years. See Majority Caucus Brief at 2-4 (discussing evolving history of corporate net loss carryover deduction and highlighting that, since its reinstitution in 1994, it "has contained a dollar cap of some stripe"). Thus, the overall structure of the NLC reflects the legislature's intent to balance the twin policy objectives of encouraging investment (by allowing corporations to deduct some of the losses they sustain when making such investments against

their future revenues), and ensuring that the Commonwealth's financial health is maintained (through the capping of the amount of this deduction).¹¹

11 Id. at 704.

Turning to the three severance options, we concluded that the legislature's joint policy objectives could best be effectuated by severing the $3 million flat deduction, thus limiting all corporations to a deduction of 12.5% of their taxable income for 2007. This, we explained, would allow every corporation "to avail itself of a net loss carryover deduction, as the legislature intended, but such deduction will be equally available to all corporations during that year, no matter what their taxable income."¹² By contrast, the Commonwealth Court's chosen remedy (striking the entire NLC cap) contravened the legislature's intent to limit the deduction. In this regard, we underscored that the legislature, since the reinstatement of the deduction in 1994, consistently imposed a cap to avoid a repeat of the budgetary damage caused by the unlimited deduction that was in place from 1980-1991. We therefore reasoned that "[t]o remove all caps and allow unlimited net loss deductions would be clearly contrary to the wishes of the General Assembly."¹³

12 Id.

13 Id. at 705.

II. General Motors

Four years after Nextel, this Court decided General Motors Corp. v. Commonwealth,¹⁴ which involved a Uniformity Clause challenge to the cap on NLC deductions for the 2001 tax year. The statute at issue in General Motors imposed a flat $2 million cap on carried-over losses for all corporations. In other words, the 2001 statute did not have the either/or structure (i.e., "X dollars or Y percent of taxable income") that the 2007 cap we struck down in Nextel had. Under the 2001 statue, all companies- regardless of size or income-were limited to a maximum $2 million NLC deduction. The parties in General Motors agreed that this $2 million cap was unconstitutional for the same reason that the Nextel cap was unconstitutional. The only question for this Court was whether Nextel's reasoning should apply retroactively to taxes that became due and were collected long before Nextel was decided.

14 265 A.3d 353 (Pa. 2021).

"Whether a judicial decision should apply retroactively is a matter of judicial discretion to be decided on a case-by-case basis."¹⁵ A majority of this Court in General Motors applied the three-factor Chevron ¹⁶ test to determine whether Nextel's reasoning should be applied to taxes that were collected prior to our 2017 decision in Nextel. Under that test, courts must examine on a case-by-case basis: (1) whether the decision in question established a new principle of law; (2) whether retroactive application of the decision would advance or thwart operation of the underlying rule; and (3) whether the relevant equities dictate prospective application.¹⁷

15 Passarello v. Grumbine, 87 A.3d 285, 307 (Pa. 2014).

16 See Chevron Oil Co. v. Huson, 404 U.S. 97, 106 (1971).

17 Oz Gas, Ltd. v. Warren Area Sch. Dist., 938 A.2d 274, 282 (Pa. 2007).

The General Motors majority held that the "first [Chevron] factor controls because Nextel did not establish a new principle of law."¹⁸ Rather, the majority said that Nextel "steadfastly adhered" to longstanding precedent "interpreting the Uniformity Clause to invalidate tax 'classifications based solely upon the quantity or value of the property being taxed.'"¹⁹ Specifically, the General Motors Court cited Cope's Estate,²⁰ Kelley v. Kalodner,²¹ Turco Paint & Varnish Co. v. Kalodner,²² Commonwealth v. Warner Bros. Theatres, Inc.,²³ Saulsbury v. Bethlehem Steel Co.,²⁴ Amidon v. Kane,²⁵ and Mount Airy #1, LLC v. Pennsylvania Department of Revenue.²⁶ As we explain in more detail below, however, each of these cases involved taxes that are distinguishable from the NLC deduction to the corporate net income tax. The General Motors majority nevertheless concluded that Nextel did not establish a new principle of law, on the theory that the decision merely "applied this Court's jurisprudence developed consistently in Cope's Estate, Kelley, Saulsbury, Amidon, and Mount Airy holding that the Uniformity Clause is violated where a difference in taxation is 'based solely on a difference in quantity of precisely the same kind of property.'"²⁷ Having determined that Nextel "merely applied [a] century of jurisprudence to the NLC deduction provision," the General Motors majority concluded that the decision "does not necessitate prospective application under the Chevron test."²⁸

18 Gen. Motors, 265 A.3d at 368.

19 Id. (quoting Nextel, 171 A.3d at 696).

20 In re Cope's Est., 43 A. 79 (Pa. 1899).

21 181 A. 598 (Pa. 1935).

22 184 A. 37 (Pa. 1936).

23 27 A.2d 62 (Pa. 1942).

24 196 A.2d 664 (Pa. 1964).

25 279 A.2d 53 (Pa. 1971).

26 154 A.3d 268 (Pa. 2016).

27 Gen. Motors, 265 A.3d at 373 (quoting Nextel, 171 A.3d at 699).

28 Id. (footnote omitted).

III. The Present Dispute

This appeal involves a Uniformity Clause challenge to Pennsylvania's 2014 cap on net-loss carryover deductions. The statutory cap at issue allowed corporations in 2014 to carry forward net operating losses from prior years, but only up to the greater of $4,000,000 or 25% of the company's 2014 net income.²⁹ In 2014, Alcatel-Lucent USA Inc. ("Alcatel") had a Pennsylvania net income of $27,332,333, but the firm also had accumulated net operating losses from prior years which exceeded that amount. Because of the statutory cap, Alcatel was able to carry over only $6,833,083 of these accumulated losses to reduce its 2014 taxable income. That left the company with a taxable net income of around $20,000,000, meaning that the firm owed the Department of Revenue roughly $2,000,000 in CNI tax for the year. Alcatel paid that amount, and the Department of Revenue accepted Alcatel's tax report and did not issue any further assessments.

29 72 P.S. § 7401(3)4. (c)(1)(A)(V).

Alcatel subsequently filed a timely petition for a refund with the Department's Board of Appeals, arguing that the 2014 NLC cap violates the Uniformity Clause. To remedy the Uniformity Clause violation, Alcatel argued that the deduction should be recalculated without any cap at all, thereby reducing Alcatel's 2014 taxable net income to zero. The Board of Appeals denied Alcatel's request, pointing out that it lacks authority to decide constitutional challenges. Alcatel then appealed to the Board of Finance and Revenue, which denied relief for the same reason.

Alcatel then filed a timely petition for review in the Commonwealth Court. The parties agreed that the 2014 cap was unconstitutional and focused their advocacy on whether Nextel should apply retroactively to the 2014 tax year. A three-judge panel of the Commonwealth Court initially affirmed the Board's order denying Alcatel a refund.³⁰The panel applied the three-factor Chevron test and concluded that Nextel should not apply retroactively. The panel opined that the first Chevron factor weighed in favor of retroactive application, since Nextel did not establish a new principle of law but instead relied upon established tax-uniformity precepts.

30 Alcatel-Lucent USA Inc. v. Commonwealth, 803 F.R. 2017, 2021 WL 4142426, at *8 (Pa. Cmwlth. Sept. 13, 2021) (unpublished).

The panel nevertheless concluded that Nextel should not apply retroactively because the second and third Chevron factors militate in favor of prospective-only application. Specifically, the panel reasoned that applying Nextel retroactively "would not forward the operation of" of our Court's decision in Nextel given that Alcatel was "attempting to avoid application of the percentage cap altogether," whereas our decision in Nextel "upheld the percentage cap."³¹ As for the third Chevron factor, the panel concluded that retroactive application of Nextel "would produce a substantially inequitable result" because "taxpayers that took the dollar-based NLC deduction would actually owe more taxes if now forced to take the lesser, percentage-based deduction."³² Thus, in balancing the Chevron factors the panel held Nextel should not be applied retroactively.³³

31 Id. at *5.

32 Id.

33 Id. at *6.

Alcatel filed exceptions to the panel's ruling. While those exceptions were pending, this Court decided General Motors, where we held that Nextel applies retroactively, and that the Commonwealth must refund corporations that were constrained by the unconstitutional cap.³⁴ In light of General Motors, an en banc panel of the Commonwealth Court sustained Alcatel's exceptions and reversed the three-judge panel's earlier holding.³⁵ Citing General Motors, the en banc court held that Nextel applies retroactively and that due process requires that the Commonwealth refund Alcatel in order to "equaliz[e] the tax positions between favored and nonfavored taxpayers."³⁶ The Commonwealth then appealed, arguing that: (1) the en banc court erred in applying General Motors; and (2) General Motors should be overturned.

34 Gen. Motors, 265 A.3d at 380.

35 Alcatel-Lucent USA Inc. v. Commonwealth, 291 A.3d 438 (Pa. Commw. 2022) (en banc).

36 Id. at 447.

IV. Analysis

We agree with the Commonwealth that General Motors was incorrectly decided. Although the General Motors majority purported to apply the three-factor Chevron test to determine whether Nextel should apply retroactively, the Court failed to analyze all three Chevron factors. As explained above, courts applying Chevron must consider: (1) whether the decision in question established a new principle of law; (2) whether retroactive application of the decision would forward the operation of the decision; and (3) whether the relevant equities favor prospective application.³⁷ The General Motors majority only addressed the first Chevron factor, concluded that Nextel did not announce a new principle of law, and then declined to address the second and third factors.³⁸ This alone was error. Although the United States Supreme Court in Chevron seemed to treat the first factor as a threshold question,³⁹ Pennsylvania case law makes clear that all three Chevron factors are relevant to the retroactivity inquiry.⁴⁰ Indeed, this Court has stressed that the third factor-which the General Motors Court never even reached-is often the most important one.⁴¹

37 Oz Gas, 938 A.2d at 282.

38 Gen. Motors, 265 A.3d at 373 n.17 ("As we find the first factor to control this analysis, we do not speak to the second and third Chevron factors.").

39 Chevron Oil, 404 U.S. at 106 ("First, the decision to be applied nonretroactively must establish a new principle of law, either by overruling clear past precedent on which litigants may have relied or by deciding an issue of first impression whose resolution was not clearly foreshadowed." (internal citations omitted)).

40 See Blackwell v. Pa. State Ethics Comm'n, 589 A.2d 1094, 1101 (Pa. 1991) (concluding that the decision at issue did not announce a new principle of law, but nevertheless weighing the equities); Dana Holding Corp. v. W.C.A.B., 232 A.3d 629, 640 (Pa. 2020) ("[W]hile judicial decisions declaring statutes unconstitutional may not readily fit the paradigm of new rules or principles of law, particularly when the underlying constitutional precepts are well established, . . . such decisions raise the same concerns about reliance and vested rights that have animated the application of balancing tests to determine whether the effect of new rules should be limited to prospective application.").

41 Am. Trucking Ass'ns, Inc. v. McNulty, 596 A.2d 784, 790 (Pa. 1991) ("[T]he factors of Chevron Oil v. Huson remain determinative, with greater importance being assigned to the third factor, weighing the equities.").

As for the General Motors majority's conclusion that Nextel did not announce a new principle of law, we believe that this too was erroneous. The majority insisted that Nextel merely applied "a century of" pre-existing "case law interpreting the Uniformity Clause to invalidate tax 'classifications based solely upon the quantity or value of the property being taxed.'"⁴² Yet all of the cases that the General Motors majority relied upon involved taxes distinguishable from the NLC deduction at issue in Nextel.

42 Gen. Motors, 265 A.3d at 368 (quoting Nextel, 171 A.3d at 696).

Unlike the cap on carried-over losses in Nextel, Kelley v. Kalodner involved a graduated-rate income tax that violated the Uniformity Clause because it "result[ed] in taxing those whose incomes arise above a stated figure merely" because the General Assembly believed that those incomes were "sufficiently great to be taxed."⁴³ The tax statute that we struck down in Cope's Estate also bears no resemblance to the NLC deduction. Cope's Estate involved an inheritance tax that exempted from taxation the first $5,000 worth of property in every estate, which had the effect of exempting 90-95% of all estates in Pennsylvania from paying any inheritance tax at all. In striking down this tax as non-uniform, we explained that our Constitution divests the General Assembly of authority to exempt certain taxpayers based on the "the amount in value of property to be taxed."⁴⁴ That same rule was also applied in Saulsbury v. Bethlehem Steel Company, where we struck down a local ordinance that exempted those earning less than $600 in a given calendar year from the city's occupational tax.

43 Kelley, 181 A. at 602.

44 In re Cope's Est., 43 A. at 81.

While certain broad principles announced in Kelley, Cope's Estate, and Saulsbury do lend support for the idea that the statutory cap on NLC deductions renders the tax non-uniform, this Court's pre-Nextel case law had suggested that those individual income-tax decisions do not necessarily apply in the context of corporate income taxes. In Warner Brothers, for example, we rejected a Uniformity Clause challenge to a flat-dollar cap on deductions from corporate income.⁴⁵ Although this Court did not fully explain why the corporate deduction in Warner Brothers satisfied the Uniformity Clause while the individual exemptions in Cope's Estate and Kelley did not, we would go on to clarify many years later that analogies between individual income taxes and corporate income taxes are "unpersuasive" because corporations "are artificial legal entities created with the permission of the state for the purpose of maximizing profits for shareholders," whereas natural persons "cannot be likened to profit-maximizing entities."⁴⁶ A dominant view therefore emerged from our case law that our Uniformity Clause jurisprudence gives "a more liberal interpretation to the substantial equality test" in cases involving corporate net income taxes.⁴⁷

45 Warner Bros., 27 A.2d at 64.

46 Amidon, 279 A.2d at 63.

47 Maria R. McGarry, Taxation-New Interpretation of Pennsylvania's Requirement of Tax Uniformity-Leonard v. Thornburgh, 59 Temp. L.Q. 807, 814 (1986); id. at 817 ("Courts have given uniformity a broader interpretation in . . . corporate tax decisions than in individual income tax decisions.").

Nextel upset this expectation by applying the principle that "classifications based solely upon the quantity or value of the property being taxed" are unconstitutional even in the corporate net income tax context. The Court also held for the first time that fixed caps on deductions fail the substantial uniformity test for the same reason that the exemptions in Cope's Estate, Kelley, and Saulsbury did. This was a novel holding, and the General Motors Court erred in not recognizing so. Indeed, our decision in Nextel conceded as much. We admitted that we were dealing in that case with a tax that did "not explicitly exempt income below a certain threshold from taxation like the taxing statutes in [Cope's Estate, Kelley, and Saulsbury]" did.⁴⁸

48 Nextel, 171 A.3d at 698.

The General Motors Court attempted to explain away much of Nextel's novelty by suggesting that the Uniformity Clause analysis in Warner Brothers was too scant to be taken seriously, and that our subsequent holding in Amidon distinguishing between corporate income taxes and individual taxes offered a "somewhat minimal analysis."⁴⁹While those may be fair criticisms of the Amidon and Warner Brothers decisions, they are not entirely relevant to the question posed by Chevron's first prong. A judicial decision breaking with precedent can establish a new legal principle regardless of whether that precedent was well reasoned or poorly reasoned. The question of retroactivity is quintessentially a question about reliance interests. And lawmakers and taxpayers likely rely upon this Court's decisions even when they find the provided legal reasoning to be lacking.

49 Gen. Motors, 265 A.3d at 371.

Put simply, although the General Motors Court correctly recognized that Nextel was rooted in some of the broad pronouncements found in our Uniformity Clause jurisprudence, that does not mean that Nextel did not announce a new principle of law.

Indeed, very "[f]ew decisions are so novel that there is no precedent to which they may be moored."⁵⁰ At its core, Nextel presented an issue of first impression. And our decision resolving that novel issue upset settled expectations by departing from Warner Brothers and Amidon. We therefore hold today that the General Motors Court erred in concluding that Nextel did not establish a new principle of law.

50 Harper v. Va. Dep't. of Tax'n, 509 U.S. 86, 128 (1993) (O'Connor, J., dissenting).

As for the second Chevron factor, we do not believe that retroactively applying the holding in Nextel to taxes that were levied prior to the decision is necessary to further the operation of the rule that we announced in Nextel. Indeed, even under a fully retroactive approach, refunds would still only be available to those taxpayers that are within the window for filing-or have already filed-refund petitions with the Department of Revenue. Thus, while there may be inequities associated with prospective-only application of Nextel, such inequities seem inevitable given that the General Assembly consistently has opted to use a capped NLC deduction since 1994.

The final Chevron factor requires that we balance the equities, which clearly weigh in favor of prospective-only application of Nextel. As we have explained in the past, retroactive application of a decision striking down a tax statute "subjects the taxing entities to the potentially devastating repercussion of having to refund taxes paid, budgeted and spent by the entities for the benefit of all, including those who challenged the tax."⁵¹ For this reason, we have announced as a general rule that "a decision of this Court invalidating a tax statute takes effect as of the date of the decision and is not to be applied retroactively."⁵² This general rule can be overcome, for example, upon a showing that refunding the already-remitted taxes will not cause undue harm to the public fisc.⁵³ But no such showing can be made here, where retroactive application of our decision in Nextel would require the Commonwealth to pay back millions of dollars in tax revenue that was collected and spent nearly a decade ago, in reliance on case law that this Court has since abandoned. Thus, the third Chevron factor counsels against retroactivity.⁵⁴

51 Oz Gas, 938 A.2d at 285.

52 Id.

53 See, e.g., Sands Bethworks Gaming, LLC v. Pa. Dep't of Revenue, 207 A.3d 315, 325 (Pa. 2019) (striking down a casino tax on uniformity grounds and ordering the Department of Revenue to refund the amounts collected, which were not yet spent and had been "held in abeyance . . . during the pendency of this matter").

54 Some of this Court's past decisions arguably have suggested that the Chevron test does not apply at all in tax refund matters. In Mount Airy, for example, we applied the general rule that "a decision of this Court invalidating a tax statute takes effect as of the date of the decision," and we did not address the Chevron factors at all. Mount Airy, 154 A.3d at 280 n.11; see Gen. Motors, 265 A.3d at 382 (Wecht, J., dissenting) (stating that "the Oz Gas rule has displaced the Chevron factors in the tax arena"). We clarify today that such statements are best understood as speaking directly to Chevron's third prong. In other words, the idea that a decision "invalidating a tax statute takes effect as of the date of the decision" merely recognizes that, absent special circumstances that tilt the equitable balance, the concerns analyzed under Chevron's third factor will most often counsel against retroactivity in tax refund cases.

Because the factors outlined in Chevron all support prospective-only application of Nextel, the General Motors Court erred in holding that Nextel must be applied retroactively.⁵⁵ Given this conclusion, we also disagree with the General Motors Court's separate holding that the Fourteenth Amendment's Due Process Clause requires that we equalize the positions of the taxpayers that benefited from the cap on NLC deductions with those that were disadvantaged by it.⁵⁶ The General Motors Court posited that such a remedy was necessary given the United States Supreme Court's holding in McKesson Corp. v. Division of Alcoholic Beverages & Tobacco.⁵⁷ But McKesson only requires that we award backward-looking relief when our decision striking down the unconstitutional tax applies retroactively. Where, as here, we find that prospective-only application of a decision invalidating a tax statute is appropriate, any taxes collected prior to the date of our decision were not unconstitutional.⁵⁸

55 The dissent prefers the approach taken in Harper, a federal case whose relevance is undermined by the well-established rule that state law controls whether state courts must give their own decisions retroactive effect. Great Northern Ry. Co. v. Sunburst Oil & Refining Co., 287 U.S. 358, 364 (1932) ("We think the Federal Constitution has no voice upon the subject. A state in defining the limits of adherence to precedent may make a choice for itself between the principle of forward operation and that of relation backward."); see Am. Trucking Ass'ns, Inc. v. Smith, 496 U.S. 167, 177 (1990) (plurality) ("The determination whether a constitutional decision of this Court is retroactive-that is, whether the decision applies to conduct or events that occurred before the date of the decision-is a matter of federal law. When questions of state law are at issue, state courts generally have the authority to determine the retroactivity of their own decisions.").

56 Gen. Motors, 265 A.3d at 380 ("[T]he due process clause requires the Commonwealth to equalize GM's position with the favored taxpayers who were not subject to the $2 million NLC deduction cap by refunding the tax GM paid as a result of the imposition of the NLC deduction cap.").

57 496 U.S. 18 (1990).

58 Auto. Trade Ass'n of Greater Phila. v. City of Philadelphia, 596 A.2d 794, 796 (Pa. 1991) ("The result of the prospectivity decision was that the tax had not been unlawful when collected. There being no illegal collection to be remedied, the rule of McKesson did not apply.").

The dissent does not defend the General Motors Court's application of the Chevron test. Instead, the dissent would hold, contrary to our precedent, "that challengers with claims pending on direct review are entitled to the benefit of a change in the law."⁵⁹ The dissent uses the specific circumstances of this case to argue for the wholesale abandonment of the general rule favoring nonretroactivity in tax matters. For example, the dissent asks rhetorically: "What incentive . . . does a challenger have to bring a constitutional challenge to a tax scheme when this Court refuses to provide that challenger with relief[?]"⁶⁰ Yet the dissent itself acknowledges that this lack of an incentive cannot be attributed entirely to our retroactivity precedent; it is as much a consequence of the fact that the statute in question only applied to a single tax year.⁶¹ In a more typical case, "there is always an incentive, in the avoidance of liability for payment of taxes or fees in the future, to challenge the validity of a statute."⁶² It also warrants emphasizing that the lack of an incentive for taxpayers to challenge the constitutionality of tax statutes arises only in the context of post-payment constitutional challenges.⁶³ In circumstances where a taxpayer is able to challenge the constitutionality of a tax before paying it, the incentive for doing so is quite obvious.

59 Dissenting Opinion at 13; but see Oz Gas, 938 A.2d at 285 ("[W]e reaffirm McNulty in holding that a decision of this Court invalidating a tax statute takes effect as of the date of the decision and is not to be applied retroactively."); Mount Airy, 154 A.3d at 280 n.11 (mentioning the same rule).

60 Dissenting Opinion at 11.

61 Id. ("[T]he 2014 NLC deduction was only applicable for the 2014 tax year.").

62 Nextel, 171 A.3d at 705 (quoting Oz Gas, 938 A.2d at 2845).

63 Compare 72 P.S. § 10003.1 (relating to refund petitions), with 72 P.S. § 9702 (relating to reassessment petitions); see generally Sands Bethworks Gaming, 207 A.3d at 318 (involving a complaint seeking declaratory and injunctive relief that was filed in this Court's original jurisdiction).

The dissent also suggests that applying Nextel retroactively but limiting its application only to taxpayers that have timely filed refund petitions with the Department for the tax year(s) in question would avoid "great strain to our Commonwealth's coffers."⁶⁴Contrary to the dissent's suggestion, the Commonwealth's total financial exposure here is substantial considering the number of refund petitions pending and the number of years in which the General Assembly has implemented a similarly structured NLC deduction. Although we do not know exactly what the total cost would be if Nextel applies retroactively and the Commonwealth is forced to issue refunds, the amount could easily reach eight or nine figures.⁶⁵ Furthermore, the dissent would abolish the Oz Gas rule favoring nonretroactivity not just for taxes imposed and collected at the state level. The dissent's proposed rule would also apply to other taxing entities like local municipalities, which do not have multibillion-dollar budgets or the ability to refund taxes that were collected and spent long ago. Thus, the mere fact that the treasury of this Commonwealth might be able to withstand retroactive application of Nextel does not justify discarding the general rule favoring nonretroactivity in tax cases.⁶⁶

64 Dissenting Opinion at 12.

65 See Brief for Commonwealth at 23 (arguing that "[a]pplying Nextel retroactively in this instance would result in a tax refund exceeding $358 million."); but see Brief for Alcatel at 23 (questioning the accuracy of the Commonwealth's estimate but agreeing that "applying Nextel retroactively will require the Commonwealth to issue a significant amount of refunds to other taxpayers"). This rough estimate assumes that refunds will be limited to taxpayers that have timely filed refund petitions with the Department for the tax year(s) in question. See $1,000,000,000 Commonwealth of Pennsylvania General Obligation Bonds, First Series of 2022 at 54, available at https://www.budget.pa.gov/Publications%20and%20Reports/InvestorInformation/Docum ents/PA%20OS%20Final%201st%202022.pdf ("Applying Nextel retroactively would result in tax refunds of approximately $150 million for the 2014-2016 tax years and tax refunds of approximately $208 million for the 2007-2013 tax years.").

66 The dissent notes, and we acknowledge, that the United States Supreme Court in McKesson left open the possibility that a state could remedy a discriminatory tax by collecting additional amounts from those favored by the scheme instead of issuing refunds to those disfavored by it. But the McKesson Court itself admitted that efforts to do so "may not be perfectly successful." McKesson, 496 U.S. at 41 n.23. And the prospect of such a remedy in the present case is something of a chimera. First, "there is a three-year statute of limitations under which the Department may order an additional assessment." Nextel, 171 A.3d at 702. Second, the Fourteenth Amendment's due process clause also limits the ability of the states to assess taxes retroactively. McKesson, 496 U.S. at 41 n.23 ("[B]eyond some temporal point the retroactive imposition of a significant tax burden may be 'so harsh and oppressive as to transgress the constitutional limitation,' depending on "the nature of the tax and the circumstances in which it is laid.") (quoting Welch v. Henry, 305 U.S. 134, 151 (1938) (suggesting that a tax on income received two years earlier approached but did not exceed "the limit of permissible retroactivity")). Lastly, there are obvious practical difficulties associated with attempting to collect additional taxes a decade or two after they were paid. Id. (noting that some entities "may no longer be in business" when the state attempts to collect additional taxes from them); see generally General Motors, 265 A.3d 353 (involving the 2001 tax year); Nextel, 171 A.3d 682 (involving a telecommunications company that no longer exists because it was acquired by another telecommunications company that also no longer exists).

V. Conclusion

Revisiting our holding in General Motors, we conclude today that the Nextel decision should be given prospective effect only and that due process therefore does not require the Commonwealth to refund the corporate net income taxes that Alcatel paid in 2014. Accordingly, we reverse the en banc decision of the Commonwealth Court.

Justices Dougherty, Mundy and McCaffery join the opinion.

Justice Mundy files a concurring opinion.

Justice McCaffery files a concurring opinion. Chief Justice Todd files a concurring and dissenting opinion in which Justice Donohue joins.

Justice Brobson files a dissenting opinion.

CONCURRING OPINION

MUNDY, JUSTICE.

I join the majority's well-reasoned opinion and write to observe that, ever since General Motors v. Commonwealth, 265 A.3d 353 (Pa. 2021), the discussion of whether Nextel Communications v. Department of Revenue, 171 A.3d 682 (Pa. 2017), should apply retroactively to other tax laws has involved the use of shorthand terminology that has the potential to confuse the already-difficult topic of retroactivity in the tax arena. Consistent with the foundational precept that "the holding of a judicial decision is to be read against its facts," Oliver v. City of Pittsburgh, 11 A.3d 960, 966 (Pa. 2011); accord Cohens v. State of Virginia, 19 U.S. (6 Wheat.) 264, 399-400 (1821) (Marshall, C.J.), the holding in Nextel only involved the statute at issue in that case. To me, therefore, it seems more precise to say that the question before us is whether the stipulated-to invalidity of the present statute (pursuant to the reasoning of Nextel) should apply retroactively to the taxpayer now seeking a refund of taxes paid under that statute.

Nextel involved a challenge to the 2007 tax statute's flat $3 million net-loss carryover (NLC) cap. We reached three distinct holdings: the 2007 flat-dollar cap was unconstitutional; per a severability analysis, only the flat-dollar cap should be severed (rather than also severing the percentage cap or severing the entire NLC scheme); and Nextel was not entitled to a tax refund. When a taxpayer forwards a meritorious challenge to a taxing scheme in hopes of obtaining a refund, our usual practice is to determine whether the holding applies retroactively.¹ Although in Nextel the taxpayer's challenge was indeed meritorious, and it was seeking a refund, we did not undertake such an analysis. Rather - and contrary to the general rule that tax-invalidation rulings only apply prospectively, see Majority Op. at 14 - we applied the holding to the taxpayer, Nextel, and determined that no refund was due because Nextel had paid the correct amount of taxes under the as-severed statute. See Nextel, 171 A.3d at 705.

1 In cases where a tax law is declared invalid, applying the holding retroactively means applying it to the present litigants and others with cases pending on direct review when the holding was announced, where the same issue was raised and preserved. This seems to be the sense in which General Motors used the term, and such is consistent with its use in other arenas. See, e.g., Blackwell v. State Ethics Comm'n, 589 A.2d 1094, 1102 (Pa. 1991). Applying the new rule purely prospectively means applying it only to events occurring after the ruling is announced. See James B. Beam Distilling v. Georgia, 501 U.S. 529, 535-37 (1991) (plurality); McNulty, 596 A.2d at 790. The underlying "events" in such cases are the transactions that caused the corporate taxpayer to incur tax liability. See McNulty, 596 A.2d at 791 (quoting Am. Trucking Ass'ns v. Smith, 496 U.S. 167, 188 (1990) (plurality)). Another possibility, not applicable here, is to apply the holding to the litigants in the case in which it is announced, but not to other cases where the underlying events predated the announcement. This is called selective prospectivity (or modified prospectivity). See James B. Beam, 501 U.S. at 537. A fully retroactive decision in a tax case (again not presently applicable) is one in which the new rule is applied relative to preceding events even as to future litigants, i.e., those for whom review is not yet pending, "consistent with res judicata and procedural barriers such as statutes of limitations." Id.

This led to the situation in General Motors, which we portrayed as involving the question of whether Nextel should be applied retrospectively. See General Motors, 265 A.3d at 366 (referring to the question before the Court as "whether this Court's 2017 decision in Nextel should apply retroactively to GM's 2001 Tax Return"). However, we were dealing with a different statute, the 2001 statute, and the parties stipulated that the flat-dollar cap appearing in that statute was just as defective as the one in the 2007 statute at issue in Nextel.² Ordinarily, a reviewing court declares a tax statute invalid and then separately has to figure out what to do about all the taxpayers who already paid taxes under that enactment - the one that was invalidated.³ That is what is meant by the question, does the holding apply "retroactively": do the taxpayers who successfully challenged the law get their money back? When understood in that way, the question before the General Motors Court was whether the (stipulated) invalidity of the 2001 tax statute should apply retroactively to General Motors's 2001 tax return - not whether Nextel's holding (invalidating the 2007 statute) should apply retroactively to General Motors. This is more than a technicality because, as discussed, the question of retroactivity follows from the invalidation of the statute under which government extracted the very taxes sought to be recouped.

2 The 2001 NLC statute included a flat $2 million cap but no percentage cap. In the wake of Nextel, it was obvious to both parties in General Motors that the 2001 statute was defective, and hence, the parties did not dispute the issue. See General Motors, 265 A.3d at 360-61 (reflecting the parties' stipulation to the constitutional defect).

3 See Sands Bethworks Gaming, LLC v. Dep't of Revenue, 207 A.3d 315, 325 (Pa. 2019); Mount Airy #1, LLC v. Dep't of Revenue, 154 A.3d 268, 280 n.11 (Pa. 2016); Oz Gas, Ltd. v. Warren Area Sch. Dist., 938 A.2d 274, 283 (Pa. 2007); Am. Trucking Ass'ns v. McNulty, 596 A.2d 784, 790 (Pa. 1988).

Viewed in this light, and taking a step back, the underlying circumstances in General Motors involved two potential questions: whether the same reasoning used in Nextel relative to the 2007 statute should be used to invalidate the 2001 statute, and whether that invalidation should be applied retroactively to General Motors's 2001 tax return. As to the first question, as noted, the parties agreed that the constitutional defect discerned in Nextel was identical to the one inherent in the 2001 statute at issue in General Motors. See supra note 2.⁴ Given that we credited Nextel's argument as to the 2007 law, we surely would have credited the same argument made by General Motors as to the 2001 law even if the Nextel litigation had not reached us first.⁵ The closely-contested issue, of course, was the second one: whether the recognition in General Motors of the invalidity of the 2001 statute's flat-dollar NLC cap should be applied retroactively to General Motors. We did not directly answer that question. Because we ended up severing the entire NLC scheme, see General Motors, 265 A.3d at 375, a retroactive application would have meant General Motors paid too little in taxes, as it had availed itself of the NLC provision (albeit subject to a cap) to reduce its tax liability. We nonetheless awarded a refund under the Due Process Clause, see infra note 7, which had the effect of superseding or mooting out the retroactivity issue.⁶

4 It is also identical to the defect in the 2014 statute presently under review. See Majority Op. at 7-8 (reciting that the 2014 statute includes a flat $4 million or 25% cap, whichever is greater).

5 Similarly, if Appellee had been the first taxpayer to reach us with this argument, we, again, would presently credit it. Thus, there has never been any real issue of whether Nextel applies retroactively to invalidate the statute under review. This is in contrast to the General Motors Court's statement that "if Nextel applies retroactively, then the $2 million cap included in the 2001 NLC deduction provision violates the Uniformity Clause for the same reasons that the 2007 $3 million NLC deduction cap was deemed unconstitutional in Nextel." General Motors, 265 A.3d at 373. There is no "if" about it.

6 I agree with the majority that General Motors erred in holding that Nextel did not establish a new principle of law for purposes of the applicable retroactivity standard. First, and as the majority highlights, see Majority Op. at 11-12, our decision that most closely dealt with the present topic, Commonwealth v. Warner Brothers Theaters, 27 A.2d 62 (Pa. 1942), had held a similar flat-dollar cap did not violate uniformity, and that decision was still good law when the General Assembly enacted the tax at issue. I believe it would be unfair to tell our coequal branches of government that they are obligated to recognize when our precedents are wrongly decided, and to refrain from relying on them in formulating tax policy on pain of having their reliance interests swept aside as insignificant. See Majority Op. at 13 ("The question of retroactivity is quintessentially about reliance interests."). Second, although the general precept that the tax rate cannot depend on the amount of the thing being taxed was already established as a general principle, see id. at 6, 13, in Nextel this Court first realized the precept applies to flat-dollar caps on carried-over net losses. In Nextel the statute's nonuniformity on such grounds only came into view when the taxpayer constructed a creative argument based solely on how the flat-dollar cap discriminated between two subgroups of a defined subset of taxpayers. The subset was taxpayers whose carried-over net losses were greater than their net income for the relevant tax year. One subgroup of that subset paid no taxes, while the other subgroup paid taxes. This, in my view, is too far removed from the more general precept to be described as "clearly foreshadowed" by earlier decisional law. Chevron, 404 U.S. at 106.

In the instant matter, we depart from General Motors upon determining the "holding in Nextel" was not retroactive. Majority Op. at 14. Like in General Motors, this is shorthand: it means the undisputed circumstance, that in light of Nextel's reasoning the 2014 tax statute's flat-dollar cap also violates the Uniformity Clause, does not entitle the taxpayer to a refund. It seems likely the same will be true in relation to any other challenges currently pending where the taxpayer claims a particular tax year's flat-dollar NLC cap violates uniformity.⁷

7 I am not unsympathetic to one aspect of the dissenting expression: that a judicial ruling that some aspect of a tax statute is unconstitutional means it was void ab initio. See Dissenting Op. at 10 (Brobson, J.). But even if we applied that precept in the instant case, I would not regard it as requiring a different outcome because, as in Nextel, the taxes assessed and paid by Appellee were correct absent the offending provision. That being the case, Appellee would only be entitled to a refund if the Due Process Clause separately demanded it. In this latter regard, a refund might be necessitated per McKesson Corp. v. Division of Alcoholic Beverages & Tobacco, Department of Business Regulation of Florida, 496 U.S. 18 (1990), if the challenged statute violated the federal Interstate Commerce Clause. But I am not convinced the present violation of the state Uniformity Clause requires the same result. In particular, and notwithstanding the conclusory assertion in General Motors that Commerce Clause violations and Uniformity Clause violations should be treated the same, see General Motors, 265 A.3d at 379, I find McKesson materially distinguishable from the present controversy. In McKesson, the Florida tax was unconstitutional when it became law inasmuch as Hawaii's substantively-identical scheme had already been invalidated. See McKesson, 496 U.S. at 23 (noting that after the decision in Bacchus Imports v. Dias, 468 U.S. 263 (1984), was announced, Florida enacted the law at issue in McKesson). By contrast, the 2014 tax at issue here was enacted and applied before Nextel was decided, in an era when Commonwealth v. Warner Brothers Theatres, 27 A.2d 62 (Pa. 1942), was still good law. After Nextel was decided in 2017, the Department could perhaps still have issued thousands of retroactive assessments to make up for the revenue shortfall stemming from tax refunds for Appellee and similarly-situated taxpayers. See Stipulation of Facts ¶ 19 (reflecting that over 16,500 corporations used the flat-dollar NLC-carryover limitation for the 2014 tax year). But it relied on Nextel's rejection of a retroactive remedy in deciding not to do so. See id. ¶ 22, discussed in Brief for Appellant at 28. By the time we reversed course in General Motors, the three-year limitation period for such actions had expired, and none of the aforementioned taxpayers had consented in writing to an extension. See id. ¶ 21. As a consequence, the Department is now unable to back-charge taxpayers whose carried-over losses were subtracted in excess of 25% of their income. Therefore, while the tax imposed in the present dispute may have been "discriminatory" in the sense that it allowed some corporations (but not Appellee) to deduct too much, it is not clear to me that the Due Process Clause would require a refund in these circumstances even under a retroactive application of our present ruling.

CONCURRING OPINION

McCAFFERY, JUSTICE.

While I cannot disagree with Justice Wecht's conclusion on its face, I conclude that under the Sunburst doctrine, the retroactivity of the Nextel and General Motors decisions is not the dispositive issue here. Nevertheless, I agree with the Majority that Alcatel is not due a total refund of its 2014 tax payments; I do so because the proper remedy under our Uniformity Clause must be rooted in the purpose behind the Clause itself. I therefore write separately to highlight my concerns.

I agree with Justice Mundy that the question before us is most appropriately presented as "do the taxpayers who successfully challenged the law get their money back?" Justice Mundy's Concurring Opinion at *3. To answer that question, we must first recognize that we are applying a provision of the Pennsylvania Constitution that has no counterpart in the federal Constitution. Under the Sunburst doctrine, state law, not federal law, controls the question of retroactivity of state court decisions applying state constitutional protections. See Great Northern Ry. Co. v. Sunburst Oil & Refining Co., 287 U.S. 358, 364 (1932). To that extent, I conclude Justice Wecht properly finds that General Motors improperly applied the Chevron test in assessing retroactivity.

But the Sunburst doctrine has larger implications. In General Motors, we justified a monetary remedy based on an assumption the Supreme Court of the United States "required states to provide meaningful backward-looking relief to rectify any unconstitutional deprivation if taxpayers are relegated to a [post payment] refund action." General Motors Corp. v. Commonwealth, 265 A.3d 353, 376 (Pa. 2021) (citing McKesson Corp. v. Division of Alcoholic Beverages and Tobacco, Department of Business Regulation of Florida, 496 U.S. 18 (1990)) (internal quotation marks omitted). As noted, this conclusion is entirely contrary to Sunburst.¹ While the Constitution of this Commonwealth may require some form of remedy for violations of the Uniformity Clause, nothing in the United States Constitution does pursuant to the Sunburst doctrine. Thus, General Motors' conclusion can only be justified by an implicit assumption that McKesson overruled Sunburst. See id. (contending, without reference to Sunburst, that McKesson's holding is not "restrict[ed] … to Commerce Clause violations but instead speaks broadly in terms of erroneous or unlawful tax collection and unconstitutional deprivations.") (citation, internal quotation marks, and brackets omitted).

1 Moreover, even in the absence of Sunburst, I would conclude that McKesson's remedy for a violation of the dormant interstate Commerce Clause is not a relevant consideration when evaluating a proposed remedy for a violation of the Uniformity Clause. The dormant Interstate Commerce Clause prohibits states from discriminating against out-of-state commercial interests in favor of in-state interests. See id. at 22-23; see also Zilka v. Tax Review Bd. of City of Philadelphia, 304 A.3d 1153, 1156 (Pa. 2023). Thus, an appropriate remedy for violating the dormant Interstate Commerce Clause requires placing the unfairly discriminated against business in a position equal to its in-state competitors. In contrast, as I discuss more fully below, the Uniformity Clause intends to ensure that the common tax burden is borne by all citizens. Therefore, the appropriate comparator is every Pennsylvania taxpayer, not just Alcatel's corporate peers. And the appropriate remedy is, to the extent reasonably possible, to ensure all taxpayers pay their fair share.

This is not to say we are not required to provide a remedy, but rather that any such requirement must come from our own Constitution, or laws drawn from it. I conclude that our legislature has created a statutory right to a remedy for overpayment of taxes. See 72 P.S. § 10003.1. Therefore, any right to a monetary remedy pursuant to a Uniformity Clause violation requires the claimant establish they overpaid their taxes.

Further, the Uniformity Clause, like all parts of our Constitution, must be interpreted "in its popular sense, as understood by the people when they voted on its adoption." Pa. Environmental Defense Foundation v. Commonwealth, 161 A.3d 911, 929 (Pa. 2017). As now-Chief Justice Todd explained in Nextel, the Uniformity Clause was the result of a populist revolt against the legislature:

This provision was part of a larger package of constitutional provisions the people of the Commonwealth approved in adopting the "Reform Constitution" of 1874 for the purpose of altering certain legislative practices which had become commonplace during the 19th century, but which, by the latter part of that century, had fallen into serious disfavor with the populace, who rightly perceived that these practices were intended to advance private or personal interests at the expense of the public's welfare. The Uniformity Clause, the language of which has remained unchanged since its initial ratification by the voters, was a direct response to the legislative use of special tax laws applicable only to particular industries or individuals.

The use of such special tax laws in Pennsylvania to favor particular industries began in the early part of the 19th century as part of a broader effort underway at the time by many state governments to foster "internal improvements" within their borders, i.e., the construction of large physical transportation infrastructures such as canals, locks, dams, and ports on rivers to support the development of industries such as agriculture, coal mining, and timbering, and, later, as the Industrial Revolution came to America, iron and steel production. Although the Pennsylvania legislature directly financed many of these ventures for the benefit of private industries through bond issues which were repaid through tax dollars, it also provided indirect subsidies by bestowing upon these industries preferential tax treatment.

Most notably, a primary beneficiary of support from our Commonwealth's public fisc was the railroad industry, which received generous assistance from the General Assembly through the appropriation of funds for the construction of railroad lines, and the direct award of charters to individuals for the creation and exclusive operation of railroad companies in certain geographic areas. By the era of the Civil War, the railroad companies had acquired such influence over the Pennsylvania legislature that they routinely obtained the passage of special legislation advancing their interests. In the field of taxation, the railroads were particularly successful at securing special tax legislation through the efforts of their lobbyist Simon Cameron, who later became President Lincoln's Secretary of War, such that, in 1861, the legislature voted to exempt them entirely from taxation.

There was considerable popular anger generated by such preferential tax treatment, as it was perceived that the burdens of taxation, and its benefits, were not being equally shared. This anger fueled the clamor for a constitutional convention dedicated to constraining the power of the legislature to enact preferential local and special legislation, which the legislature ultimately acquiesced to by authorizing the constitutional convention of 1872-1873. The Uniformity Clause was, thus, the specific remedy fashioned by the delegates to that convention to eliminate the power of the legislature to enact special tax legislation, and its paramount purpose in requiring uniformity of taxation "was to prevent certain groups from having to shoulder the burden of progress from which all would benefit."

The language of the Uniformity Clause chosen by the framers of the 1874 Constitution requires uniformity of taxation on "the same class of subjects." It was unique in that it was the first such clause of any state constitution to require uniformity within classes of the subjects of taxation.

Nextel Commc'ns of Mid-Atl., Inc. v. Commonwealth, Dep't of Revenue, 171 A.3d 682, 694-695 (Pa. 2017) (citations and footnotes omitted).

The Uniformity Clause's purpose was to ensure no citizen was unfairly exempted from paying taxes. General Motors's remedy wholly exempting General Motors from its obligation of paying taxes for 2001 is clearly contrary to that purpose.² Rather, the appropriate question was whether General Motors overpaid its tax obligation due to the Uniformity Clause violation. And, as General Motors itself conceded, General Motors did not overpay its 2001 taxes.

2 This is inarguably the result of General Motors. General Motors had approximately nine million dollars in income taxable in Pennsylvania in 2001, while it had over two hundred million dollars in available carried over net losses to apply in 2001. See General Motors, 265 A.3d at 356. So, when this Court directed the Finance and Review Board "to recalculate GM's corporate net income tax without capping its NLC deduction and to issue a refund based upon that recalculation[,]" General Motors was refunded the entirety of its 2001 corporate income tax payments. Id. at 380.

In most cases, as here, the purpose of the Uniformity Clause is arguably sufficiently served by the prospective invalidation of the offending statutory language. I agree with the Majority that the 2014 net loss carryover flat deduction should be (and, as a matter of fact, already has been) invalidated. Further, though the Majority does not explicitly reach the issue, I conclude that Alcatel did not overpay its 2014 taxes, and therefore, is due no monetary refund.

Nonetheless, I recognize that litigants such as Nextel, General Motors, and Alcatel are pursuing claims that hold our government accountable under the Constitution of Pennsylvania. The complete lack of a monetary refund or other remuneration for successful claimants would disincentivize this important public service. Ideally, the legislature should provide for some form of bounty under these circumstances. In the absence of any legislative action, I would adopt the "private attorney general" exception to the "American Rule" regarding reasonable attorneys' fees but limit the exception to only these specific circumstances. Claremont School District v. Governor, 761 A.2d 389, 392-393 (N.H. 1999). Parties that successfully establish Uniformity Clause violations but are unable to establish that they overpaid their taxes, should, at a minimum, be entitled to recover attorneys' fees from the government which was acting outside the law. I believe the Uniformity Clause is uniquely amenable to such an equitable rule due to the clause's genesis as a popular uprising against the legislature.

DISSENTING OPINION

BROBSON, JUSTICE.

A legal rule that denies relief to applicants who successfully demonstrate that the Commonwealth violated their constitutional rights to uniform taxation is repugnant to the Pennsylvania Constitution and our system of law. That is precisely the rule that the Majority adopts today. There is no dispute in this case that the flat cap in the 2014 "net loss carryover" (NLC) deduction violates the Uniformity Clause of the Pennsylvania Constitution¹ and that Alcatel-Lucent USA, Inc. (Alcatel) was subject to that unconstitutional taxing scheme. Moreover, Alcatel's challenge to the 2014 NLC deduction was pending at the time this Court issued its decision in Nextel Communications of Mid-Atlantic, Inc. v. Pennsylvania Department of Revenue, 171 A.3d 682 (Pa. 2017). This material fact distinguishes Alcatel from the taxpayer in Oz Gas, Ltd. v. Warren Area School District, 938 A.2d 274 (Pa. 2007), on which the Majority relies heavily to deny Alcatel any relief in this case. Under these circumstances, and unlike the taxpayer in Oz Gas, Alcatel is entitled to relief from this Court. I, therefore, respectfully dissent.

1 Pa. Const. art. VIII, § 1.

In Harper v. Virginia Department of Taxation, 509 U.S. 86 (1993), the United States Supreme Court considered whether its decision in Davis v. Michigan Department of Treasury, 489 U.S. 803 (1989), should have retroactive effect. The Davis Court held that "a State violates the constitutional doctrine of intergovernmental tax immunity when it taxes retirement benefits paid by the Federal Government but exempts from taxation all retirement benefits paid by the State or its political subdivisions." Harper, 509 U.S. at 89. The applicants in Harper raised the same complaint in Virginia state court, but the Supreme Court of Virginia, applying the retroactive/prospective analysis set forth by the United States Supreme Court in Chevron Oil Co. v. Huson, 404 U.S. 97 (1971), ultimately concluded that Davis should have a strictly prospective application and denied the applicants relief.²

2 For a decision to have prospective application, the United States Supreme Court explained in Chevron that a court must consider: (1) whether the decision establishes a new principle of law; (2) "the prior history of the rule in question, its purpose and effect, and whether retrospective operation will further or retard its operation;" and (3) equity to the parties in prospective application. Chevron, 404 U.S. at 106-07 (quoting Linkletter v. Walker, 381 U.S. 618, 629 (1965), overruled by Griffith v. Kentucky, 479 U.S. 314 (1987)). A party does not necessarily have to satisfy all three factors for prospective application.

Reversing, the United States Supreme Court pronounced that its "application of a rule of federal law to the parties before the Court requires every court to give retroactive effect to that decision." Harper, 509 U.S. at 90. The Supreme Court explained:

"[B]oth the common law and our own decisions" have "recognized a general rule of retrospective effect for the constitutional decisions of this Court." Robinson v. Neil, 409 U.S. 505, 507 . . . (1973). Nothing in the [Federal] Constitution alters the fundamental rule of "retrospective operation" that has governed "[j]udicial decisions . . . for near a thousand years." Kuhn v. Fairmont Coal Co., 215 U.S. 349, 372 . . . (1910) (Holmes, J., dissenting). Harper, 509 U.S. at 94 (most alterations in original). The Supreme Court observed that, in Griffith, it eliminated limits on retroactivity for constitutional rulings in the criminal context but commented that civil retroactivity was still governed by Chevron. The Justices then divided over the application of Chevron in the civil context in American Trucking Associations, Inc. v. Smith, 496 U.S. 167 (1990) (Smith), with four Justices in the dissent advocating against a prospective approach to rulemaking. See Smith, 496 U.S. at 212 (Stevens, J., dissenting) ("Fundamental notions of fairness and legal process dictate that the same rules should be applied to all similar cases on direct review;" "'simple justice,' requires that a rule of law, even a 'new' rule, be evenhandedly applied." (quoting Griffith, 452 U.S. at 401)).³

3 Justice Scalia concurred in the judgment but "share[d]" the dissent's "perception that prospective decision[-]making is incompatible with the judicial role, which is to say what the law is, not to prescribe what it shall be." Smith, 496 U.S. at 201 (Scalia, J., concurring).

In Harper, the Supreme Court noted that both Griffith and Smith left the retroactive question unresolved until the Court's plurality decision in James B. Beam Distilling Co. v. Georgia, 501 U.S. 529 (1991), explaining:

Although . . . Beam . . . did not produce a unified opinion for the Court, a majority of Justices agreed that a rule of federal law, once announced and applied to the parties to the controversy, must be given full retroactive effect by all courts adjudicating federal law. In announcing the judgment of the Court, Justice [Souter] laid down a rule for determining the retroactive effect of a civil decision: After the case announcing any rule of federal law has "appl[ied] that rule with respect to the litigants" before the court, no court may "refuse to apply [that] rule . . . retroactively." . . . (opinion of [Souter], J., joined by [Stevens], J.). Justice [Souter's] view of retroactivity superseded "any claim based on a Chevron . . . analysis." . . . Justice [White] likewise concluded that a decision "extending the benefit of the judgment" to the winning party "is to be applied to other litigants whose cases were not final at the time of the [first] decision." . . . (opinion concurring in judgment). Three other Justices agreed that "our judicial responsibility . . . requir[es] retroactive application of each . . . rule we announce." . . . ([Blackmun], J., joined by Marshall and [Scalia], JJ., concurring in judgment). . . .

Beam controls this case, and we accordingly adopt a rule that fairly reflects the position of a majority of Justices in Beam: When this Court applies a rule of federal law to the parties before it, that rule is the controlling interpretation of federal law and must be given full retroactive effect in all cases still open on direct review and as to all events, regardless of whether such events predate or postdate our announcement of the rule. This rule extends Griffith's ban against "selective application of new rules." . . . Mindful of the "basic norms of constitutional adjudication" that animated our view of retroactivity in the criminal context, . . . we now prohibit the erection of selective temporal barriers to the application of federal law in noncriminal cases. In both civil and criminal cases, we can scarcely permit "the substantive law [to] shift and spring" according to "the particular equities of [individual parties'] claims" of actual reliance on an old rule and of harm from a retroactive application of the new rule. Beam, supra, 501 U.S.[] at 543, . . . (opinion of [Souter], J.). Our approach to retroactivity heeds the admonition that "[t]he Court has no more constitutional authority in civil cases than in criminal cases to disregard current law or to treat similarly situated litigants differently." American Trucking, supra, 496 U.S.[] at 214 . . . ([Stevens], J., dissenting).

Harper, 509 U.S. at 96-97 (some alterations in original). Based upon this reasoning, the United States Supreme Court in Harper (1) concluded that the Supreme Court of Virginia erred in applying Chevron to determine the retroactive effect of civil cases and (2) ruled that Davis had retroactive application to the parties before the Supreme Court and those cases pending on appeal. As a result, the United States Supreme Court's decision in Harper essentially eradicated the application of Chevron in civil cases. Instead, it applied the principle of the Griffith decision.

Notably, the United States Supreme Court issued Harper after Smith and Chevron, with the dissenting faction in Smith finding ground in the Harper majority, and multiple states have now adopted the Harper rule of retroactivity either in full or to some degree. See, e.g., Dempsey v. Allstate Ins. Co., 104 P.3d 483, 489 (Mont. 2004) (adopting Harper but allowing Chevron as exception where all three factors are clearly satisfied; "[w]e agree with the Harper court that limiting a rule of law to its prospective application creates an arbitrary distinction between litigants based merely on the timing of their claims."); Beavers v. Johnson Controls World Servs., Inc., 881 P.2d 1376, 1381-83 (N.M. 1994) (adopting "presumption" in favor of retroactivity due to "the desirability of treating similarly situated parties alike"); State v. Styles, 693 A.2d 734, 735 (Vt. 1997) (referencing Harper to hold that "change in law will be given effect while a case is on direct review, except in extraordinary cases, . . . whether the proceedings are civil or criminal."). Rather than tackle Harper head on, the Majority dismisses it out of hand under the sunburst doctrine.⁴Instead, the Majority leans into American Trucking Associations, Inc. v. McNulty, 596 A.2d 784 (Pa. 1991) (McNulty), and Oz Gas, both of which predate Harper, and applies the since-rejected Chevron test to deny relief to Alcatel. For the reasons set forth below, Harper so undermines the federal precedent on which both McNulty and Oz Gas are based that neither supports the Majority's decision.

4 See Great N. Co. v. Sunburst Oil & Refining Co., 287 U.S. 358, 364 (1932) ("A state in defining the limits of adherence to precedent may make a choice for itself between the principle of forward operation and that of relation backward.").

We decided McNulty on remand from the United States Supreme Court after it concluded that a Pennsylvania highway tax violated the Commerce Clause⁵ in American Trucking Associations, Inc. v. Scheiner, 483 U.S. 266 (1987) (Scheiner). The Supreme Court remanded for us to determine whether Scheiner should apply retroactively to afford the petitioners relief. In the interim, the United States Supreme Court issued its decision in Smith, which was a challenge to an Arkansas tax that was similar to the Pennsylvania tax the Supreme Court invalidated in Scheiner. As such, the petitioners in Smith asked the Supreme Court to apply Scheiner retroactively and issue the petitioners refunds for the taxes they paid to Arkansas. The Supreme Court conducted a Chevron analysis and refused to apply Scheiner retroactively, however, finding that Scheiner constituted a new rule of law by overruling prior precedent, retroactive application would not further the purpose of the Commerce Clause or the holding of Scheiner, and substantial inequity would befall the state of Arkansas because issuing refunds could deplete the state treasury.

5 U.S. Const. art. I, § 8, cl. 3.

This Court appropriately held its consideration of McNulty pending the outcome of Smith, and we proceeded to reach the same conclusion as the United States Supreme Court that Scheiner should not apply retroactively under Chevron. "[W]eighing . . . the equities . . ., we conclude[d] that pure prospective application of the rule in Scheiner from the date of the decision in that case, June 23, 1987, [wa]s appropriate," and we denied "[t]he claims for refunds prior to that date." McNulty, 596 A.2d at 790. The taxpayers also argued unsuccessfully in the alternative that they were entitled to a refund on a statutory basis unrelated to Chevron. Rejecting that rationale, we reasoned:

The deficiency in this argument is that it fails to perceive the effect of a declaration that a ruling is to be applied purely prospectively. Under a ruling that Scheiner is to be applied prospectively, it is as though the taxes collected prior to the date of the Scheiner decision were not unconstitutional. This is the very meaning of prospective application; the holding of unconstitutionality applies from the date of decision, and not before. A decision on the retroactive or prospective effect of Scheiner is thus indispensable to determining whether the statutes or the stipulations require that refunds be made. A ruling of pure prospectivity would be a determination that the Commonwealth was "rightfully and equitably entitled" to the taxes paid prior to the date of the Supreme Court's decision in Scheiner, precluding a claim for refunds under [the applicable state refund statutes.]

Id. at 787 (emphasis omitted)..

Oz Gas concerned the retroactive/prospective application of this Court's decision in Independent Oil and Gas Association v. Board of Assessment Appeals of Fayette County, 814 A.2d 180 (Pa. 2002) (IOGA). In IOGA, this Court held that the plain language of Section 201(a) of The General County Assessment Law,⁶ 72 P.S. § 5020-201(a), does not authorize the taxation of oil and gas rights in the Commonwealth. Oz Gas paid taxes on its oil and gas interests to Warren Area School District from 1999 to 2002. After this Court issued IOGA, Oz Gas filed a complaint on May 13, 2003, seeking a refund for the taxes it paid under Section 5566b(a) of what is commonly referred to as the Tax Refund Law or the Refund Act,⁷ 72 P.S. § 5566b(a), which permits a refund of taxes where the Commonwealth or a political subdivision causes money to be paid into a treasury that the Commonwealth or a political subdivision is not entitled to receive.

6 Act of May 22, 1933, P.L. 853, as amended, 72 P.S. §§ 5020-101-602.

7 Act of May 21, 1943, P.L. 349, as amended, 72 P.S. §§5566b-5566c.

Significantly, IOGA, and, therefore, Oz Gas, did not involve an unconstitutional tax. In rejecting Oz Gas' refund request by holding that the Court's prior decision in IOGA should apply only prospectively, we explained:

IOGA differs from Scheiner in that IOGA found that the ad valorem taxes on oil and gas reserves, at issue in that case, were improper as a matter of statutory construction, and not on constitutional grounds. A reasoned argument could be made (as it was made by the dissenting opinion in Smith) that a taxing statute found to be unconstitutional (as in Scheiner) should be deemed unconstitutional from its inception because the constitutional provision the statute violated never changed. By contrast, a colorable argument can be made that an interpretation of language in a taxing statute, because it is not grounded in unchanging constitutional provisions, may be said to be effective from the date of the decision announcing the interpretation.

Had this Court found the taxes assessed pursuant to Section 201(a) of the General County Assessment Law to be unconstitutional, McNulty, which remains good law, would counsel a conclusion that the decision had only prospective application, even though a statute that fails to pass constitutional muster presumably never was constitutional. In IOGA, this Court interpreted Section 201(a) and determined that ad valorem taxes could not be assessed against oil and gas reserves that remained underground as a matter of statutory construction. If a finding that the same tax was unconstitutional, meaning that the tax was never validly collected, would be subject to prospective-only application, it would defy logic to hold that IOGA's holding, based in statutory interpretation, must apply retroactively. This is so because the effect of retroactive application remains the same, regardless of the basis for the invalidation of the tax. Accordingly, pursuant to this Court's teaching in McNulty, we hold that the ad valorem taxes on underground oil and gas reserves are invalid prospectively, i.e., only from the date of the IOGA decision and not before.

Oz Gas, 938 A.2d at 282-83.

This Court also conducted a Chevron analysis, which we reasoned supported prospective application. Finally, we explained that the McNulty prospective approach was "sensible":

Due to the perhaps-unique effect of holding that a decision regarding a tax statute is retroactive, the approach in McNulty (and the Smith plurality) is sensible. To avoid the potentially devastating consequences to taxing entities, it is important that taxes collected pursuant to a valid statute remain valid unless and until otherwise determined by this Court. The incentive to challenge still remains for the challenge, if successful, results in relief from the tax going forward. With respect to tax statutes, then, we reaffirm McNulty in holding that a decision of this Court invalidating a tax statute takes effect as of the date of the decision and is not to be applied retroactively. Accordingly, IOGA does not apply retroactively to invalidate taxes paid by Oz Gas for the three years prior to the issuance of that decision.

Id. at 285.

Based on the foregoing, the Majority adopts the McNulty rationale that the 2014 NLC deduction was not unconstitutional until our decision in Nextel in 2017.⁸Majority Op. at 15-16. But the Majority fails to recognize that McNulty is implicitly overruled by Harper. Again, McNulty involved a tax challenge under the Commerce Clause, and Harper made clear that decisions concerning federal constitutional rules must apply retroactively. Indeed, in Annenberg v. Commonwealth, 757 A.2d 338 (Pa. 2000), we rejected the prospectivity rationale of McNulty because that case involved a Commerce Clause challenge to a county level tax, and we concluded that the tax was unconstitutional under the Commerce Clause based on the United States Supreme Court's decision in Fulton Corp. v. Faulkner, 516 U.S. 325 (1996). We were bound, therefore, by Harper to apply Fulton retroactively and afford the challengers a tax refund. Annenberg, 757 A.2d at 350-51. Harper and Annenberg, therefore, clarify that McNulty lacks any precedential value.

8 For purposes of structuring this dissenting opinion, I have followed the Majority's phraseology of the central question as relating to the retroactivity of Nextel, a decision that dealt only with a discrete and specific statutory tax scheme for the 2007 tax year. I agree with Justice Mundy, however, that this Court's decision in Nextel provides only the reasoning and rationale supporting the determination that the discrete statutory tax scheme at issue in this matter for the 2014 tax year falls for the same reasons set forth in Nextel. (Mundy, J., concurring at 1.) The more precise way to phrase the question before the Court now is whether the Court's decision in this matter should be applied retroactively to allow a refund to Alcatel for the corporate net income tax it paid and that the Commonwealth collected in 2014.

Further, in his concurring opinion in Smith, Justice Scalia persuasively explains why McNulty's reasoning is flawed:

The very framing of the issue that we purport to decide today-whether our decision in Scheiner shall "apply" retroactively-presupposes a view of our decisions as creating the law, as opposed to declaring what the law already is. Such a view is contrary to that understanding of "the judicial Power," U.S. Const., Art. III, § 1, which is not only the common and traditional one, but which is the only one that can justify courts in denying force and effect to the unconstitutional enactments of duly elected legislatures, see Marbury v. Madison, 1 Cranch 137 (1803)-the very exercise of judicial power asserted in Scheiner. To hold a governmental Act to be unconstitutional is not to announce that we forbid it, but that the Constitution forbids it; and when, as in this case, the constitutionality of a state statute is placed in issue, the question is not whether some decision of ours "applies" in the way that a law applies; the question is whether the Constitution, as interpreted in that decision, invalidates the statute. Since the Constitution does not change from year to year; since it does not conform to our decisions, but our decisions are supposed to conform to it; the notion that our interpretation of the Constitution in a particular decision could take prospective form does not make sense. Either enforcement of the statute at issue in Scheiner (which occurred before our decision there) was unconstitutional, or it was not; if it was, then so is enforcement of all identical statutes in other States, whether occurring before or after our decision; and if it was not, then Scheiner was wrong, and the issue of whether to "apply" that decision needs no further attention.

Smith, 496 U.S. at 201 (Scalia, J., concurring) (emphasis omitted). Justice Stevens, dissenting in Smith, is likewise compelling on this point:

Our judgment in Scheiner leaves no doubt that the Arkansas [Highway Use Equalization (HUE)] tax is unconstitutional. As Justice [Blackmun] concluded, in ruling on petitioners' application for establishment of an escrow account, the taxes challenged by petitioners are "substantially similar" in effect "to that of the Pennsylvania unapportioned flat taxes invalidated in Scheiner," and work "to deter interstate commerce." The

State Supreme Court held, and the plurality today acknowledges, that the Arkansas HUE tax, like the Pennsylvania flat taxes, violates the command of the Commerce Clause by exerting a pressure on interstate businesses to ply their trade within state boundaries.

In my opinion, the Arkansas HUE tax also violated the Constitution before our decision in Scheiner and petitioners are entitled to a decision to that effect. Like the taxpayers in Scheiner itself, petitioners timely challenged the constitutionality of the state flat tax. Petitioners would have prevailed if the Pennsylvania tax invalidated in the Scheiner case had never been enacted, or if that litigation had not reached our Court until after their litigation did. They should not lose simply because we decided Scheiner first. In Scheiner, we applied our understanding of the Commerce Clause retroactively, reversing the Pennsylvania Supreme Court's judgment that a similar flat highway tax was unconstitutional and remanding the case for further consideration of the remedial issues. We should follow the same course here. The accidental timing of our decisions in two timely filed and currently pending cases should not, and has not in the past, produced such a difference in the law applicable to the respective litigants.

Smith, 496 U.S. at 211-12 (Stevens, J., dissenting) (citations omitted).

As explained above, even Justice Castille, in his majority opinion in Oz Gas, found merit to this notion: "A reasoned argument could be made . . . that a taxing statute found to be unconstitutional (as in Scheiner) should be deemed unconstitutional from its inception because the constitutional provision the statute violated never changed." Oz Gas, 938 A.2d at 282-83 ("[A] statute that fails to pass constitutional muster presumably never was constitutional."). Clearly, to say that the 2014 NLC deduction was constitutional in 2014 at the time Alcatel paid its tax is to perpetrate a fiction.

In addition, Oz Gas can be harmonized with the rule set forth in Harper because Oz Gas' claim for a refund was not pending at the time IOGA was decided. Rather, the applicant, after learning of our IOGA decision, filed a claim for a refund roughly 5 months after the decision was issued. This Court rightfully rejected that claim based on "the potentially devastating repercussion of having to refund taxes paid, budgeted and spent by the entities." Oz Gas, 938 A.2d at 285. I do not advocate for allowing new claims to be filed after a tax decision is rendered so that new challengers can benefit from the acumen of pending challengers that sought to vindicate their constitutional rights in court. To open the floodgates to all new challengers could, as the Majority suggests, bankrupt the state. The pending claims were also public knowledge and new challengers had the ability to learn of such challenges and file claims if they desired relief. On these bases, the Oz Gas decision to deny relief to a taxpayer who did not have a claim pending at the time IOGA was decided remains good law and is entirely consistent with how I would dispose of this matter. To deny relief entirely to other challengers with pending claims simply because another challenger's claim is resolved first, however, is, as Justice Stevens explained in his dissenting opinion in Smith, nonsensical and inequitable.

Further, in Nextel, we discussed how a failure to provide a taxpayer with a remedy would not "chill the bringing of future such actions to contest the constitutionality of taxing statutes" because we reasoned that "there is always an incentive, in the avoidance of liability for payment of taxes or fees in the future, to challenge the validity of a statute." Nextel, 171 A.3d at 705 (quoting Oz Gas, 938 A.2d at 284). As Justice Wecht recognized in his dissenting opinion in General Motors Corp. v. Commonwealth, 265 A.3d 353 (Pa. 2021), however, that is not the case here because the 2014 NLC deduction was only applicable for the 2014 tax year. General Motors, 265 A.3d at 382 (Wecht, J., dissenting). Nor does our law clearly entitle a challenger to an injunction against a tax prior to paying, as Justice Wecht also suggested in his dissenting opinion in General Motors, or some type of pre-payment determination of constitutionality, as suggested by the Majority. (Maj. Op. at 17 & n.63.) By contrast, the law provides an express statutory remedy to file a claim for a refund after the taxpayer remits the funds. See 72 P.S. § 5566b(a). What incentive, then, does a challenger have to bring a constitutional challenge to a tax scheme when this Court refuses to provide that challenger with relief under the prescribed statutory procedure to obtain a refund established by our General Assembly?

To deny relief under such circumstances may also violate the remedies clause of the Pennsylvania Constitution, which provides:

All courts shall be open; and every man for an injury done him in his lands, goods, person or reputation shall have remedy by due course of law, and right and justice administered without sale, denial or delay. Suits may be brought against the Commonwealth in such manner, in such courts and in such cases as the Legislature may by law direct.

Pa. Const. art. I, § 11; Singer v. Sheppard, 346 A.2d 897, 903 (Pa. 1975) ("Article I, Section 11, can be invoked . . . with respect to a legal injury."). Again, the parties do not dispute that the 2014 NLC deduction scheme is unconstitutional, Alcatel was subject to that scheme, and Alcatel's claim was pending at the time Nextel was decided. Yet, under the Majority's disposition, Alcatel receives neither retroactive, prospective, nor present relief despite having succeeded in court. That result would seem contrary to the mandate of Article I, Section 11 that the courts are open and must provide a remedy for an injury. To the extent Oz Gas, despite the demise of the federal precedent that underlies its reasoning, has any air left in the tank, it stands only for the proposition that a taxpayer cannot seek a refund after a court decision invalidating a tax. It says nothing about claims pending at the time the court makes that decision. Consistent with this limiting principle, and more recent precedent on the prospective/retroactive subject, Alcatel is entitled to relief for the constitutional harm that it suffered, as are any other taxpayers with similar and pending refund claims relating to the 2014 NLC cap. This approach avoids the extreme alternatives on both sides-(1) open the floodgates for more refund claims after the Court issues its decision in this case, or (2) provide no remedy at all to anyone. The first, I acknowledge, could cause great strain to our Commonwealth's coffers. The second, however, causes great strain to our constitution and the willingness of our courts to right the wrongs of government. Both, in my view, are unpalatable.

Parenthetically, I note that issuing a refund to a successful challenger is not the only remedy discussed by the United States Supreme Court in McKesson Corp. v. Division of Alcoholic Beverages and Tobacco, 496 U.S. 18 (1990). The Supreme Court also indicated that a charge against entities that failed to pay a correct amount would be permissible under the Due Process Clause of the United States Constitution⁹ or "any form of relief" a state fashions that meets minimum due process standards. Id. at 51. The Majority, however, sees only one remedy possible-full and immediate retroactive refund, predicting dire financial repercussions that would befall the budgets of state and local government agencies if a court were to impose such a remedy. Unlike the Majority, I am open to the possibility that a court could fashion another form of relief-i.e., partial refunds, credits, etc.-that would remedy the constitutional wrong and temper the impact on government budgets if an immediate, full refund would be harmful to the Commonwealth.

9 Of course, I am not suggesting this is a perfect or even palatable remedy, as I discussed in Nextel Communications of Mid-Atlantic, Inc., v. Commonwealth, 129 A.3d 1 (Pa. Cmwlth. 2015), which this Court reversed in its Nextel decision. See Nextel, 129 A.3d at 13 ("[W]e fully recognize that our decision in this case could be far-reaching. Nonetheless, our analysis and remedy is appropriately confined to the Commonwealth, Nextel, and the 2007 Tax Year. To the extent our decision in this as-applied challenge calls into question the validity of the NLC deduction provision in any other or even every other context, the General Assembly should be guided accordingly.").

For all these reasons, I would adopt the rule set forth in Harper that challengers with claims pending on direct review are entitled to the benefit of a change in the law and award Alcatel relief. Thus, I respectfully dissent.

CONCURRING AND DISSENTING OPINION

TODD, CHIEF JUSTICE.

I agree with the majority to the extent it concludes that our decision in Nextel ¹applies prospectively with respect to all Uniformity Clause² challenges, pending at the time of that decision, to net loss carryover ("NLC") provisions of the Pennsylvania Revenue Code that are of the same structure as the one at issue in Nextel. Unlike the majority, however, in my view, this conclusion is not irreconcilable with our Court's relatively recent decision in General Motors ³ in which we retroactively applied the rationale and remedy of Nextel to a pending challenge to an NLC provision of a different structure; thus, I would not overrule that decision. My reasoning follows.

1 Nextel Communications of the Mid Atlantic, Inc. v. Pennsylvania Department of Revenue, 171 A.3d 682 (Pa. 2017).

2 This provision of our Constitution provides: "All taxes shall be uniform, upon the same class of subjects, within the territorial limits of the authority levying the tax, and shall be levied and collected under general laws." Pa. Const. art. 8, § 1.

3 General Motors v. Commonwealth, 265 A.3d 353 (Pa. 2021).

At issue in Nextel was the 2007 NLC provision under the Revenue Code which provided a corporate taxpayer with the option to deduct from taxable income the amount of its prior years' net losses up to a flat dollar amount (the "flat cap") of $3 million, or up to 12.5% of its income for that year (the "percentage cap"), whichever was greater. In addressing Nextel's as-applied challenge to this provision under the Uniformity Clause, we concluded that the flat cap deduction portion violated this constitutional provision because it placed different tax burdens on classes of similarly situated taxpayers based solely on the amount of the taxpayers' income. As a remedy for this violation, and in accordance with what we discerned was best aligned with the General Assembly's intent in enacting this deduction, we severed the flat cap portion of the provision from the percentage cap, thereby preserving the 12.5% deduction for all taxpayers. Because Nextel had already availed itself of this deduction, our Court concluded it was not entitled to any refund of the taxes which it had paid, as, having taken the maximum percentage deduction, it had paid only what it was legally obligated to pay.

At issue in the instant case is the 2014 NLC provision, which allowed a corporation to take a NLC deduction for that tax year in the amount of either 25% of its taxable income, or $4,000,000, whichever was greater. This litigation challenging the 2014 NLC provision was pending before the Commonwealth Court at the time of our Nextel decision, and, as the majority recounts, the parties recognized that, under the reasoning of Nextel, the flat cap portion of the 2014 NLC statute was likewise violative of the Uniformity Clause. Indeed, the parties stipulated to that fact.

Hence, the central inquiry in this case is whether this holding of Nextel should be given retroactive effect for the purpose of granting Appellee remedial relief in the form of a refund for all corporate income taxes it paid in 2014. While I agree with the majority that we should reject Appellee's entreaty to apply Nextel retroactively for this purpose, in reaching this conclusion, the majority overrules our decision in General Motors which is of recent vintage. In so doing, the majority fails to recognize a critical distinction between this case and General Motors: General Motors addressed a NLC provision which afforded a corporate taxpayer only a flat cap deduction of $2,000,000 for the 2001 tax year, and in General Motors we applied Nextel retroactively to effectively strike that cap in its entirety and so granted the taxpayer the remedy of a refund of all taxes which it previously paid under that statute.⁴

4 I would agree with Justice Mundy that, in General Motors, we stated that we were striking the 2001 NLC provision in its entirety. See Concurring Opinion (Mundy J.) at 4, n.6. However, what we ultimately did, as a due process matter, was afford General Motors, as the challenging taxpayer, tax relief by leaving the NLC deduction in place and allowing General Motors to apply it for that tax year without the flat cap portion. See General Motors, 265 A.3d at 380 ("We affirm the Commonwealth Court's order to the extent it remands to the Finance and Review Board to recalculate GM's corporate net income tax without capping its NLC deduction and to issue a refund based upon that recalculation." (emphasis added)). It is this chosen remedy that I focus on for the purpose of the full Chevron retroactivity analysis I discuss below.

As our Court has emphasized repeatedly in our jurisprudence involving the retroactivity of our judicial decisions, resolution of such questions is not a rote, mechanical exercise in the application of a "one-size fits all" generic rule. Passerello v. Grumbine, 87 A.3d 285, 307 (Pa. 2014). Rather, such a determination must be conducted on a case-by-case basis. Id.; see also Blackwell v. State Ethics Commission, 589 A.2d 1094, 1099 (Pa. 1991).

Like the majority, in my view, the three-part test for retroactivity in Chevron Oil Company v. Huson, 404 U.S. 97 (1971) (plurality), remains the governing analysis under Pennsylvania law for questions of retroactivity involving decisions from our Court invalidating taxing statutes, as we reaffirmed in Oz Gas v. Warren Area School District, 938 A.2d 274 (Pa. 2007).⁵ In applying this test to determine whether a decision of our Court is to be given retroactive or prospective effect, we consider three discrete factors: (1) whether the decision established a new principle of law; (2) whether retroactive application of the decision will further its operation; and (3) an evaluation of the equities involved in a prospective versus retroactive application of the decision. Id. at 278. We have also indicated that the third factor of this test - the weighing of the equities - is of greater importance than the other two. American Trucking Associations v. McNulty, 596 A.2d 784, 790 (Pa. 1991).

5 As the majority has noted, see Majority Opinion at 15, n.55, under the Sunburst doctrine, "[a] state in defining the limits of adherence to precedent may make a choice for itself between the principle of forward operation and that of relation backward." Great Northern Railway Company v. Sunburst Oil and Refining, 287 U.S. 358, 364 (1932). Thus, even though the high Court in Harper v. Virginia Department of Taxation, 509 U.S. 86 (1993), may have abandoned the Chevron test in holding that decisions announcing a rule of federal law automatically applied retroactively to cases pending before it, the Court did not purport to overrule its Sunburst decision. Rather, the Harper Court continued to recognize that states retain the right to determine whether their own judicial decisions interpreting state law must be given retroactive effect, which it viewed as distinguishable from a state's obligation under the Supremacy Clause of the United States Constitution to give United States Supreme Court decisions interpreting the United States Constitution or federal law retroactive effect. See Harper, 509 U.S. at 100 ("Whatever freedom state courts may enjoy to limit the retroactive operation of their own interpretations of state law cannot extend to their interpretations of federal law." (citation omitted)). In my view, Oz Gas reflects our Court's deliberate decision to continue to apply the three Chevron factors, purely as a matter of Pennsylvania law, to determine whether a decision of our Court invalidating a Pennsylvania taxing statute will be given retroactive application.

As the majority has recognized, in accordance with the teaching of Oz Gas, all three components of this test are relevant in determining whether our Nextel decision is to be given retroactive effect. Majority Opinion at 10; see also Oz Gas, 938 A.2d at 283. In General Motors, our Court analyzed the first factor of the Chevron test and determined that Nextel did not announce a new rule of law.⁶ Majority Opinion at 11-14. The late Chief Justice Baer, writing for a majority of our Court, undertook an exhaustive analysis of the caselaw on which the Nextel decision rested. See General Motors, 265 A.3d at 368-373 (discussing Cope's Estate, 43 Pa. 79 (Pa. 1899); Kelley v. Kalodner, 181 A. 598 (Pa. 1935); Saulsbury v. Bethlehem Steel, 196 A.2d 664 (Pa. 1964), Amidon v. Kane, 279 A.2d 53 (Pa. 1971) and Mount Airy, L.LC. v. Pa. Department of Revenue, 154 A.3d 268 (Pa. 2016)). Based on his evaluation of that foundational precedent, he concluded:

6 While our Court was arguably remiss in failing to address the remaining two Chevron factors in our opinion in General Motors, as I discuss below, an analysis of those two factors would have led to the same result.

[R]ather than establishing a new principle of law, Nextel faithfully applied this Court's jurisprudence developed consistently in Cope's Estate, Kelley, Saulsbury, Amidon, and Mount Airy holding that the Uniformity Clause is violated where a difference in taxation is "based solely on a difference in quantity of precisely the same kind of property." Nextel, 171 A.3d at 699 (quoting Cope's Estate, 43 A. at 81). We observed that the Court has "consistently viewed as unconstitutional" statutes which exempt entire classes of taxpayers from the payment of taxes based solely upon whether their income or property value falls below the statutorily designated exemption value, as it required the non-exempted taxpayers to bear the full tax burden. Id. at 697. We have repeatedly deemed these quantity-based distinctions in tax burden to be "necessarily unjust, arbitrary and illegal." Id. at 699. Nextel merely applied this century of jurisprudence to the NLC deduction provision.

Id. at 373 (emphasis added).

I joined then-Chief Justice Baer's analysis of this question because I considered it to be an accurate assessment of the effect of our Nextel decision - namely, that it did not announce a new rule of law. See Blackwell, 589 A.2d at 802 (holding that a case which merely applies well-established principles of constitutional law to a new factual situation is not regarded as having announced a new rule of law). Thus, I disagree with the majority that this conclusion was in error. See Majority Opinion at 11.

Nevertheless, I agree with the result in the instant case because, unlike in General Motors, I consider the latter two factors of the Chevron test to weigh heavily in favor of a prospective-only application of Nextel's holding herein and to other pending challenges to NLC statutes which follow the same structure and design as the one at issue.

While we did not expressly analyze the second and third Chevron factors in our General Motors opinion, applying those factors to the evidence of record in that matter nevertheless supported the retroactive application of Nextel's holding therein. The second Chevron factor requires a court to consider whether retroactive application of the decision will further its operation. Oz Gas, 938 A.2d at 278. The central objective of Nextel, consistent with the fundamental purpose of the Uniformity Clause, was to equalize the tax liability of corporate taxpayers by ensuring that each was eligible to receive the same allowable benefit of a constitutionally sound NLC deduction against their taxable income. Because the NLC statute in General Motors allowed only a flat cap deduction - which, under the holding of Nextel, was violative of the Uniformity Clause - permitting General Motors to avail itself of the NLC deduction, but removing the cap on that deduction and thereby allowing an unlimited deduction, furthered Nextel's purpose by equalizing the tax liability of General Motors with that of all other taxpayers by giving it the benefit of the same unlimited NLC deduction for that tax year which those taxpayers, who fell under the cap, were allowed to take.⁷

7 As Justice McCaffery has highlighted in his concurrence, our chosen remedy of allowing General Motors an unlimited deduction for the 2001 tax year resulted in it paying no taxes for that tax year; consequently, as he cogently points out, this result is seemingly at odds with the purpose of the Uniformity Clause which is to ensure that no person or entity is unfairly exempted from its obligation to pay taxes. Concurring Opinion (McCaffery, J.) at 4. Although I find merit to his suggestion that alternative remedial measures should be considered by the General Assembly for these situations, we are, at present, constrained to fashion a suitable remedy using the tools which our Constitution and the law currently provide.

Regarding the third factor of the Chevron test, whether the equities weighed in favor of retroactive or prospective application, in General Motors the Commonwealth had not presented evidence in the lower courts to demonstrate that retroactive application would impair the fiscal health of the Commonwealth. See General Motors v. Commonwealth, 222 A.3d 454, 473 (Pa. Cmwlth. 2019) ("[T]he Commonwealth did not present evidence regarding this tax burden beyond the refund it would owe GM. It has not shown that the Commonwealth's financial health will be impaired. Thus, it did not carry its burden of showing the inequities present here."). Thus, this factor did not weigh in favor of prospective-only application.

By contrast, in the case sub judice, analysis of the second and third Chevron factors strongly favors prospective-only application. With respect to the second factor, retroactive application of Nextel in this case would not further its operation. Here, retroactive application of Nextel's holding in this matter would do nothing to further the purpose of that case - to equalize the legal tax liability among corporate taxpayers eligible to take the NLC deduction - given that, just as in Nextel, the appropriate remedy would be severance of the flat cap from the 2014 NLC statute, while leaving the percentage deduction in place. Notably, Appellee has already received the full benefit of this constitutionally permitted percentage deduction, having taken it for the 2014 tax year at issue. It has, therefore, received the same tax benefit which all taxpayers were constitutionally eligible to claim, and severance of the flat cap is not necessary to equalize Appellee's legal tax liability with that of other taxpayers.

Similarly, the third Chevron factor - whether a balancing of the equities favors retrospective or prospective application - weighs in favor of prospective application in this case. As our Court underscored in Oz Gas, there is a "potentially devastating repercussion, [in requiring a government] to refund taxes paid, budgeted and spent by the entities for the benefit of all, including those who challenged the tax." 938 A.2d at 285 (emphasis added). The negative impact of retroactive application of Nextel is manifest in this situation. As the majority notes, due to the number of years in which this type of tax deduction was permitted by the General Assembly, and, based on the number of refund petitions currently pending, the deleterious financial consequences to the Commonwealth are significant, given that the projected estimated cost of refunds to eligible taxpayers is estimated to be in excess of $358 million. Majority Opinion at 18, n.65; Commonwealth Brief at 23 n.4.⁸

8 The Commonwealth points out that, by contrast, the Commonwealth's liability for tax refunds occasioned by our General Motors decision amounted to just over 1/10 of that amount, or $37 million. Commonwealth Brief at 23.

Accordingly, I agree with the majority to the extent it applies Nextel prospectively to cases such as this one involving pending Uniformity Clause challenges to NLC deduction provisions which are structured like the provisions at issue in Nextel and the present matter; however, I would not overrule General Motors, but, instead, would cabin its rationale and chosen remedy to pending Uniformity Clause challenges brought to NLC provisions that provide only a flat cap deduction.

Additionally, and notably, in overruling General Motors, the majority does not discuss, let alone analyze, stare decisis principles. Stare decisis embodies the notion "that for purposes of certainty and stability in the law, 'a conclusion reached in one case should be applied to those which follow, if the facts are substantially the same.'" Stilp v. Commonwealth, 905 A.2d 918, 966-67 (Pa. 2006) (quoting Burke v. Pittsburgh Limestone Corp., 100 A.2d 595, 598 (Pa. 1953)) (emphasis added). As discussed above, in this case we are deciding, for the first time, whether the holding of Nextel retroactively applies to invalidate the flat cap deduction of the 2014 NLC statute, and thus entitling a taxpayer who paid taxes after taking that deduction to a full refund. Accordingly, in my view, stare decisis is not implicated. See, e.g. Commonwealth v. Rosario, 294 A.3d. 338, 356 (Pa. 2023) (stare decisis is not implicated whenever our Court interprets and applies a statute for the first time).

Regardless, "[t]o reverse a decision, we demand a special justification, over and above the belief that the precedent was wrongly decided." Commonwealth v. Alexander, 243 A.3d 177, 196 (Pa. 2020) (quotation marks and citation omitted). Ultimately, the question of whether it is appropriate for this Court to overrule prior precedent depends on a number of factors such as "the age and lineage of the decision[], as well as 'the quality of [its] reasoning, the workability of the rule it established, its consistency with other related decisions, . . . and reliance on the decision.'" Allegheny Reproductive Health v. Pennsylvania Department of Human Services, 309 A.3d 808, 850 (Pa. 2024) (quoting Alexander, 243 A.3d at 196).

The majority offers no special justification to overrule General Motors. That decision is only three years old, and it relied on well-established tenets of our Uniformity Clause jurisprudence. Further, as discussed above, I do not find General Motors to be poorly reasoned. Nor did it create an unworkable rule: its chosen remedy of striking the flat cap-only portion of the NLC deduction for the challenging taxpayer and allowing it an unlimited NLC deduction in those limited number of cases where this Uniformity Clause challenge was preserved on appeal at the time of our Nextel decision is straightforward and easily applied. Finally, taxpayers who have preserved that issue are entitled to rely on General Motors, and the Department is likewise entitled to rely on it in calculating the effect of its required remedy on the public fisc.

For all these reasons, I concur in the result reached by the majority, but dissent from its decision to overrule General Motors.

Justice Donohue joins this concurring and dissenting opinion.