Is rental income taxable to lessor in Lower Merion Township?

Stephano Slack LLC following recent local tax ruling.

Local governments have always been searching for ways to raise tax revenue ever since they were empowered to do so by the Commonwealth in 1965 with the Local Tax Enabling Act (LTEA).  Taxpayers, with the help of their tax advisors, have since been challenging local taxing authorities when a gray area presents itself.

In one most recent gray area the Pennsylvania Commonwealth Court ruled in favor of a Lower Merion resident taxpayer.  The taxpayer had rental income from rental properties located in the township.  Lower Merion’s stance was that the rental income was subject to the township’s Business Privilege Tax (BPT).  The taxpayer argued that the rental income was not subject to the BPT because the Township did not have the authority under the LTEA to levy a tax on income from leases.  A lower District court ruled in favor of the Township yet was reversed when the case reached the appellate Commonwealth Court.  The Commonwealth court ruled that under the LTEA local authorities are excluded from imposing any tax on leases or lease transactions therefore Lower Merion violated section 301.1(f)(1) of the LTEA which expressly states this limitation.

If you would like to discuss if this most recent ruling applies to you please feel free to contact us at Stephano Slack LLC in Wayne, PA.

Nicholas Ciocca, CPA

Hrabrick v. Township of Lower Merion, Pennsylvania Commonwealth Court, No. 1940 C.D. 2013, September

19, 2014, ¶204-384

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