The Power Behind Pennsylvania’s Uniformity Clause

by Vito A. Cosmo Jr., CPA, CGMA, Matthew D. Melinson, CPA, and Patrick K. Skeehan, JD | Dec 20, 2019
Pennsylvania CPA Journal

The Tax Uniformity Clause of the Pennsylvania Constitution is central in the tax policy debates in the state. Gov. Tom Wolf’s desire to raise the personal income tax (PIT) rate from a flat 3.07 percent to a graduated system has generated speculation that the state constitution would first need to be amended. Meanwhile, the corporate net income tax’s “capped” net loss utilization1 and property tax issues have spawned tax appeals. Why? Because “similar” classes of Pennsylvania taxpayers must be taxed “similarly.”

The Pennsylvania Constitution
Pennsylvania is sovereign in its taxing powers, but there are rules to follow. Article VIII, Section 1, of the Pennsylvania Constitution states that “[a]ll taxes shall be uniform, upon the same class of subjects, within the territorial limits of the authority levying the tax, and shall be collected under general laws.”2 That’s it. That one simple sentence wields tremendous power in the state. The federal government and other states have similar restrictions, but Pennsylvania’s Uniformity Clause is a giant among its peers.
Merriam-Webster vs. Black’s Law
According to Merriam-Webster Dictionary, “uniformity” is defined as “the quality or state of being the same; the quality or state of being uniform or identical.” The word “uniform” as an adjective is defined as “having always the same form, manner, or degree; not varying or variable.” Meanwhile, Black’s Law Dictionary defines the term in the context of taxation: “[It] implies equality in the burden of taxation … in the mode of assessment, as well as in the rate of taxation.”

Historical Perspective
A reading of Pennsylvania case law may reveal why uniformity is unique for Pennsylvania tax purposes. The capital stock tax, as it was imposed on Pennsylvania-chartered corporations, was classified by courts as a property tax.3 Before the advent of the “fixed formula” in 1984, a corporation’s net worth was subject to various valuation measurements, which required settlement by the Department of Revenue (DOR). In 1900, the Pennsylvania Supreme Court ruled in Commonwealth v. Jamestown & Franklin Railroad Company4 that the valuation method employed by the DOR was different than the value ascribed to other railroad companies, whose value was based solely on the selling price of shares of stock. The court held that uniformity “not only applies to taxing statutes but also to the methods by which they are administered.”5 This was a new concept in 1900, and it addressed what is now known as the “As Applied” theory.6 But how broadly should this concept be applied? In Jamestown & Franklin Railroad, the court ruled that all railroad companies be taxed the same – not all corporations. In essence, all corporations of the same class must be taxed the same. However, the determination of the same class is subjective.
A discussion on uniformity in Pennsylvania taxation should include property taxes on real estate. In many states, commercial real estate is taxed higher than residential real estate. Because of the uniformity clause, that is not the case in Pennsylvania. In Philadelphia, this led to the creation of the Business Use and Occupancy Tax in 1970. In Wanamaker v. Philadelphia School District, the Pennsylvania Supreme Court considered whether this tax, imposed on the use or occupancy of real estate for commercial or industrial activity, “is an unequal tax on real estate and thus violates the Uniformity Clause of the Pennsylvania Constitution.”7 The court held “that the tax in question is a valid privilege tax on the use of such real estate and, hence, is in no sense violative of the uniformity provisions.”8

The reason Wolf’s proposal for graduated rates must be preceded by an amendment to the Pennsylvania Constitution is because of a Pennsylvania Supreme Court decision on the matter of different effective tax rates back in 1971. The original PIT had “piggy-backed” off the federal taxable income base, resulting in varying effective tax rates among individual taxpayers. In the case of Amidon v. Kane,9 the court determined that federal taxable income was adopted after taking into account personal exemptions and itemized deductions, which created preferential treatment of some individual taxpayers over others, thus violating uniformity. In effect, when each taxpayer’s PIT was compared to their taxable income, effective tax rates varied. 

If variations in effective tax rates could violate uniformity, wouldn’t actual graduated rates? It appears so. While other state constitutions contain similar uniformity-type language, Pennsylvania appears to be the only one for which the state supreme court prohibits the state legislature from adopting a graduated tax rate structure.
Wolf, along with some notable tax scholars, asserts that his proposal is not a graduated tax, but rather a flat rate tax (3.7 percent has been discussed in the governor’s proposed budget) on all taxpayers with incomes above $30,000. Other tax scholars, however, claim that the $30,000 exemption itself makes the proposal graduated, producing varying effective tax rates among the same class of taxpayers – individuals.

Meanwhile, a host of corporations are challenging the net loss cap for corporate net income tax purposes. They say that it violates uniformity by creating varying effective tax rates between the haves (those that can use 100 percent of their net losses, because they fall under the cap) and the have-nots (those whose net losses far exceed the cap and may even expire after the 20-year carry-forward period has expired). In its September session, Commonwealth Court will consider whether Pennsylvania’s statutory cap on net loss deductions violates the Uniformity Clause by improperly subjecting taxpayers with larger amounts of income to a higher effective tax rate.10

Taxpayer representatives and government officials must remain mindful of the Uniformity Clause in negotiations with the Pennsylvania Board of Appeals and Board of Finance and Revenue, the Philadelphia Tax Review Board, and on local business privilege and property tax issues. At the same time, Pennsylvania courts have recognized that “perfect” uniformity is not essential to satisfy constitutional uniformity.11 Thus, reasonable discretion and flexibility should be appropriate when conducting negotiations and generating settlement agreements between taxpayers and taxing authorities. 

1 For 2015, corporations are limited to the greater of 30 percent of apportioned taxable income, or $5 million. 72 Pa. Stat. Ann. Section 7401(3)4.(c)(1)(A)(VI).
2 Pa. Const. art. VIII, Section 1 (Uniformity of Taxation) (enacted 1884).
3 See, for example,
Commonwealth v. Standard Oil Co., 101 Pa. 119 (1882). On the other hand, the franchise tax on “foreign” corporations is a privilege tax.
4 3 Dauphin 214 (1900).
5 Leighton Paxton Stradley and Isadore H. Krekstein,
Corporate Taxation and Procedure in Pennsylvania (2d ed. 1952).
6 “As Applied” has been used by the courts in various ways, such as in this context. Another context is to apply the rule of law to the taxpayer’s specific facts in determining constitutionality. See, for example,
Whirlpool Properties Inc. v. Director, N.J. Division of Taxation, 208 N.J. 141, 26 A.3d 446 (2011).
Wanamaker v. Philadelphia School District, 441 Pa. 567, 274 A.2d 524 (1971).
8 Ibid. 
9 444 Pa. 38, 279 A.2d 53 (1971).
Nextel Communications of the Mid-Atlantic Inc. v. Commonwealth of Pennsylvania, Docket No. 98 F.R. 2012. 
11 See
Lebanon Valley Farmers Bank v. Commonwealth of Pennsylvania, 623 Pa. 455 (2013) (citing Clifton v. Allegheny County, 600 Pa. 662 (2009)) (“Some practical inequalities [in taxation] are obviously anticipated, and so long as the taxing scheme does not impose substantially unequal tax burdens, rough uniformity with a limited amount of variation is permitted.”).

Vito A Cosmo Jr., CPA, CGMA, is a managing director, state and local taxes, at Grant Thornton LLP in Philadelphia. He can be reached at

Matthew D. Melinson, CPA, is a partner, state and local taxes, at Grant Thornton and a member of the
Pennsylvania CPA Journal Editorial Board. He can be reached at

Patrick K. Skeehan, JD, is a state and local tax senior associate with Grant Thornton. He can be reached at
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