Nextel $3.9M Refund Denial Violates Due Process: High Court Briefs

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By Leslie A. Pappas

The U.S. Supreme Court should review the denial of a $3.9 million tax refund to a Sprint Corp. subsidiary in Pennsylvania because the decision violates due process and could impact taxpayers in other states, two advocacy groups said.

The Pennsylvania Supreme Court’s October 2017 decision in Nextel Commc’ns of the Mid-Atlantic v. Commonwealth of Pa. violated the due process clause of the Fourteenth Amendment of the U.S. Constitution by refusing a remedy to illegal taxation, the California-based Pacific Legal Foundation (PLF) and the Washington, D.C.-based Council On State Taxation (COST) said in friend-of-the-court briefs filed June 4.

In that decision, Pennsylvania’s highest court denied Nextel Communications of the Mid-Atlantic Inc. a refund despite finding that the state’s provision on net loss carryover deductions as applied to the company in 2007 violated the state constitution’s uniformity clause. Nextel filed a petition for review with the U.S. Supreme Court May 3.

The question before the court is whether the due process clause requires a state to make a remedy available to a taxpayer if the collection of a tax violates settled state law, the Pacific Legal Foundation wrote in its brief June 4.

The case “goes to the fundamental fairness and justice of whether a state is permitted to keep ill-gotten gains because it violated state law, rather than federal law, in the illegal collection of taxes,” the brief said. The court should clarify that due process isn’t limited, “and that the guarantee of meaningful backward-looking relief is available to remedy the unlawful collection of taxes under state law as well as under federal law.”

‘Chilling Effect’

If the high court doesn’t review the decision, it will likely have a “chilling effect” on litigation of unfair taxes in other states, COST wrote in its brief.

Without court review, “states will likely see this as a signal they are free to disregard the requirement to provide meaningful post-payment relief or a refund,” COST wrote. “States will also likely feel emboldened to push the boundaries regarding state taxation through the passage of potentially unlawful laws, knowing taxpayers are handicapped when challenging such laws.”

If a state isn’t required to provide a meaningful remedy to unfair taxation, “taxpayers will be held hostage by states legislatures and courts,” the COST brief said.

The case has been distributed for the court’s June 7 conference.

PLF is a nonprofit, public interest law foundation that fights for limited government. COST is a nonprofit trade association the promotes nondiscriminatory state and local taxation of businesses.

The case is Nextel Commc’ns of the Mid-Atlantic v. Pa. Dep’t of Revenue , U.S., No. 17-1506, friend-of-the-court briefs filed 6/4/18 .

To contact the reporter on this story: Leslie A. Pappas in Philadelphia at

To contact the editor responsible for this story: Ryan C. Tuck at

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