In the state statute authorizing the BIRT, the General Assembly delegated responsibility to the City of Philadelphia’s Revenue Commissioner to develop apportionment rules. In doing so, the General Assembly specified that the Revenue Commissioner should give “due regard” to a taxpayer’s property, wages, and receipts.1 And for three decades the Commissioner did just that—for three decades the Commissioner’s apportionment formula followed the statutory specifications and thus contained property, payroll, and sales factors. Then, without any change in the enabling act, that changed in 2015.
In 2015, the Revenue Commissioner adopted a regulation which required taxpayers to apportion their net income to Philadelphia using a sales-factor-only apportionment formula instead of the three-factor formula (property, payroll, and double-weighted sales) adopted in 1985.2 As a result, many taxpayers that are primarily located outside the city are now paying significantly more BIRT than prior to the apportionment change. In fact, in many instances the apportionment change has nearly doubled their tax liability.