Bloomberg Tax
Jan. 24, 2022, 9:45 AM

What’s Certain in State Tax Litigation: Unpredictable Outcomes

Michael J. Semes
Michael J. Semes
Baker & Hostetler LLP

Typically, a state taxpayer strives for certainty foremost. This article juxtaposes four opinions, two each written by Pennsylvania Supreme Court Justices David N. Wecht and Debra Todd in the last six weeks of 2021, to demonstrate the unavoidable—but perhaps unnecessary—difficulty in predicting the outcome of state tax litigation.

On Nov. 19, 2021, Justice Todd authored the majority opinion in Greenwood Gaming & Entertainment, Inc. v. Commonwealth, and Justice Wecht wrote a concurring opinion.

On Dec. 27, 2021, Justice Wecht authored the majority opinion in O’Donnell v. Allegheny County North Tax Collection Committee, and Justice Todd dissented.

These decisions involve different tax statutes—Greenwood Gaming interpreted the Pennsylvania Gaming Tax statute, and O’Donnell interpreted the Personal Income Tax statute. The court applied the same rule of statutory interpretation in each case. Further, the following quotes from Justices Todd and Wecht—writing for their respective majorities—demonstrate that the justices agree that tax imposition statutes are to be strictly construed against the taxing authority:

“Our Court has already determined ... that the [statute at issue] is to be strictly construed in the casino’s favor as the taxpayer."—Justice Todd, writing for the majority in Greenwood Gaming.

“We cannot ignore [the rule of statutory construction] of strictly construing tax statutes against the government.” —Justice Wecht, writing for the majority in O’Donnell.

The justices certainly agree on this fundamental rule of statutory construction. Further, the majority opinions follow a similar pattern of analysis and reach similar conclusions. So, shouldn’t it be easy to predict how the Pennsylvania Supreme Court will interpret a tax statute? As illustrated below, the justices create uncertainty when they apply that rule of statutory interpretation differently. Interpreting this fundamental rule differently in decisions issued within several weeks of each other makes predictability nearly impossible. Perhaps an interpreter is needed to interpret the interpretation?

Greenwood Gaming Majority Opinion

In Greenwood Gaming, Justice Todd concluded for the majority that the “principle of strict construction also leads us to read the [statute being interpreted] in a manner which favors Greenwood.” Justice Todd did not provide significant analysis for reaching this conclusion other than to state that “principles of statutory construction [dictate that an ‘ambiguous’ statute] must be interpreted strictly in the favor of ... the taxpayer.”

O’Donnell Majority Opinion

Justice Wecht’s majority opinion in O’Donnell paralleled Justice Todd’s majority opinion in Greenwood Gaming. Just as Justice Todd reached her conclusion in Greenwood Gaming without substantial analysis, Justice Wecht succinctly concluded in O’Donnell that "[t]here is no ambiguity or reasonable doubt” as to the meaning of the statutory term the court had been asked to interpret.

Therefore, the Greenwood majority found the statute at issue to be ambiguous and interpreted it strictly in favor of the taxpayer. The O’Donnell majority, however, finding no ambiguity, interpreted the statute in favor of the taxing agency.

The results in these cases—and future cases—therefore, should not be surprising and should be predictable because a tax imposition statute either is or is not ambiguous, right? Wrong. And that’s what makes the outcome of tax cases—in Pennsylvania and in every other state—uncertain and unpredictable. Let’s now look at how Justices Todd and Wecht part ways and, in doing so, create uncertainty.

Greenwood Gaming Concurrence

Justice Wecht concurred with the majority but wrote separately to include “additional points not mentioned” by Justice Todd in her majority opinion. Justice Wecht expanded on the rule that tax imposition statutes were to be construed strictly against the government by emphasizing that “this Court is not bound by an administrative agency’s interpretation of an ambiguous statute” and that the “Commonwealth’s argument that we must unconditionally defer to the interpretation that the Department of Revenue proffers [–] unless it is ‘clearly erroneous’ [–] is a nonstarter.”

Justice Wecht also underscored Justice Todd’s conclusion that the statutory term at issue was not ambiguous, because it was not a “term of art in the gaming industry.” Therefore, the agency administering the statute did not need to apply its expertise to interpret that term. Finally, Justice Wecht questioned the objectivity of the taxing agency’s guidance because it was issued with the intent of supporting its litigation position in the case.

Therefore, to summarize Greenwood Gaming, Justices Todd and Wecht agreed that:

  • Tax imposition statutes are to be construed strictly against the government.
  • The statute at issue was not ambiguous.
  • The taxpayer prevailed.

Justice Wecht also added that an agency’s interpretation of a statutory term is entitled to deference in limited circumstances and no deference where the agency changes its interpretation to suit its litigation position.

O’Donnell Dissent

The three opinions above can be reconciled. However, Justice Todd’s dissent in O’Donnell provides the reason for uncertainty in predicting the outcome of tax cases.

Justice Todd disagreed with Justice Wecht’s majority, which concluded that the statutory term at issue was unambiguous. Justice Todd found that, because the taxing agency proffered “no less than three differing and inconsistent” interpretations of the statute at issue, the statute was “susceptible to multiple reasonable, but conflicting, interpretations” and was therefore ambiguous. Because ambiguous tax imposition statutes are to be interpreted strictly against the taxing authority, Justice Todd believed the taxpayer should have prevailed.

The Todd/Wecht disagreement goes even deeper. First, Justice Wecht’s majority opinion relied heavily on the taxing agency’s regulation. This position could be viewed as straying from his anti-deference position in Greenwood Gaming. However, unlike Greenwood Gaming, the taxing authority in O’Donnell promulgated a regulation—not merely an informal statement of policy—that it did not change to support its current litigation position. Further, after providing a detailed analysis based on the statutory language being ambiguous, Justice Wecht concluded without any analysis that the language at issue contains “no ambiguity or reasonable doubt.”


These isolated examples prove the difficulty courts have in interpreting tax statutes. They also illustrate that justices may agree on a particular rule of law but disagree on how that rule is to be applied. As this small sample of opinions illustrates, courts may disagree on whether a particular term is ambiguous—the first step in statutory interpretation. Once the justices take steps in different directions, it is impossible for them to reach the same destination or conclusion. Unfortunately, sometimes an interpreter may be needed to interpret how a court interprets—or predict how it will interpret—a statute.

This unavoidable reality necessarily—while it may be unavoidable, is it necessary?—creates uncertainty for taxpayers, and the opportunity for practitioners to ply their skills.

This article does not necessarily reflect the opinion of The Bureau of National Affairs, Inc., the publisher of Bloomberg Law and Bloomberg Tax, or its owners.

Author Information

Michael Semes is of counsel with BakerHostetler in Philadelphia and part of the firm’s state and local tax group. He is also Professor of Practice at the Villanova University Charles Widger School of Law in the Graduate Tax Program.

We’d love to hear your smart, original take: Write for Us

To contact the reporter on this story: Kelly Phillips Erb in Washington at

Learn more about Bloomberg Tax or Log In to keep reading:

Learn About Bloomberg Tax

From research to software to news, find what you need to stay ahead.

Already a subscriber?

Log in to keep reading or access research tools.