Justia Tax Law Opinion Summaries

Two taxing districts undertook parallel challenges to a property’s partial tax exemption. Appellee Huston Properties, Inc. (“Taxpayer”), owned the subject property (the “Property”). In 2013, Taxpayer, claiming to be a charitable institution, sought tax-exempt status for the Property for the 2014 tax year. After a hearing, the Chester County Board of Assessment Appeals granted a partial exemption, reasoning that that portion of the Property was used for charitable purposes. The City of Coatesville appealed that decision to the Court of Common Pleas. Six days later, the Coatesville Area School District, another taxing authority encompassing the Property, lodged its own appeal, also challenging the Property’s partially-tax-exempt status. The School District also intervened in the City's case. Ultimately, the trial court affirmed the Board's grant of a partial exemption. Both the City and the School District appealed to the Commonwealth Court, and Taxpayer cross-appealed as to each, seeking fully-exempt status for the Property. In a memorandum decision, the Commonwealth Court vacated and remanded to the trial court for more specific findings to support the partial tax exemption. On remand, the trial court set forth particularized findings and conclusions, and re-affirmed its earlier decision assessing the Property. At this juncture, the City elected not to appeal to the Commonwealth Court. The School District appealed the ruling in its own case, but it did not appeal the identical, simultaneous ruling which contained the City’s docket number. Taxpayer moved to quash the School District’s appeal. The Commonwealth Court granted the motion and dismissed the appeal observing that the common pleas court’s ruling in the City’s case became final after no party appealed it. Because the School District had intervened in that matter, it was a party to those proceedings. With that premise, the court found that res judicata and collateral estoppel barred it from reaching the merits. The Pennsylvania Supreme Court found that issue preclusion under the rubric of collateral estoppel should not have been applied to defeat the School District’s ability to obtain merits review of its substantive arguments in the intermediate court. The Commonwealth Court's judgment was vacated and the matter remanded for a merits disposition of the consolidated cross-appeals. View "In Re: Appeal of Coatesville Area Sch Dist" on Justia Law

The appellant property owners (“Taxpayers”) allowed billboards to be placed their lands. The appellee local taxing authorities, Chester-Upland School District and Chichester School District (the “School Districts”), filed 22 assessment appeals relating to the subject properties for tax years 2014 and forward. In their appeals, the School Districts sought to increase the assessed value based on the presence of the billboards. After relief was denied by the county assessment board, the School Districts appealed to the Court of Common Pleas. Separately, four property owners also appealed to that court after their properties were reassessed due to the presence of billboards. The issue presented for the Pennsylvania Supreme Court's review was whether the presence of a billboard on a property could affect the valuation of that property, such as where the landowner was entitled to ongoing payments pursuant to a lease with the billboard company. The Supreme Court found the Pennsylvania General Assembly has directed that billboards and their supporting structures were not real estate for tax assessment purposes. Here, the Court concluded the Commonwealth Court appropriately concluded that, although a billboard’s value may not itself be considered when assessing the underlying real property’s value, any increase in such value attributable to the billboard’s presence could be considered. View "In Re: Consol Apl of Chester-Upland SD, et al -" on Justia Law

In this appeal, the issue presented to the Pennsylvania Supreme Court centered on whether the Business Privilege and Mercantile Tax (“BPT”) imposed by Appellee the City of York (“City”), had to be paid by Appellant, S & H Transport, Inc. (“S & H”), a freight broker, on the total yearly amount of money S & H receives from its customers for arranging shipping of commercial goods with freight carriers on their behalf, where, after deducting its commission, S & H remits the remaining money to the freight carriers as payment of their shipping fees. After careful review, the Supreme Court found that the amount of money S & H collected and passed on to freight carriers for their fees was excluded from taxation under the City’s BPT. View "S & H Transport v. City of York" on Justia Law

In a case brought in the Pennsylvania Supreme Court's original jurisdiction, Petitioner Sands Bethworks Gaming, LLC, challenged a recent amendment to Pennsylvania gaming law in which casinos paid a supplemental assessment on slot-machine revenue, and the funds are then distributed primarily to underperforming slot-machine facilities to be used for marketing and capital development. Sands alleged that the amendment violated the Pennsylvania Constitution’s requirement of uniform taxation, its mandate that all enactments have a public purpose, and its rule against special legislation. Sands also claimed the scheme violated the Equal Protection and Due Process Clauses of the Fourteenth Amendment to the federal Constitution. The Supreme Court concluded the amendments were indeed unconstitutional, and the offending parts could be severed from the rest of the statute. Any assessment monies paid to the Commonwealth pursuant to the amended gaming law were ordered to be refunded. View "Sands Bethworks Gaming v. PA Dept of Revenue et al" on Justia Law

Appellant the School District of Lower Merion challenged a Commonwealth Court decision to quash its appeal of the grant of an injunction. Appellees were residents and taxpayers of Lower Merion Township, Montgomery County, Pennsylvania, who filed a multi-count, putative class action complaint against Appellant which asserted grievances about “proliferate spending and tax increases.” Appellees sought money damages in excess of $55,000,000 and the appointment of a trustee to undertake the responsibilities of the school board members. The amended complaint also contained a count seeking equitable relief, primarily in the form of court-supervised modifications of the procedures employed by the District’s administrators. Appellees submitted a “Petition for Injunctive Relief” seeking “immediate relief because without this [c]ourt’s intervention, the District will raise taxes and the bills for the same will go out July 1, 2016 to some 22,000 taxpayers.” Significantly, consistent with the prayer for immediate relief, the petition reflected criteria associated with a preliminary injunction, including an assertion of irreparable harm to the plaintiffs. In its written response, the District made clear -- consistent with the procedural posture of the case, the request for immediate relief, and the assertion of irreparable harm -- that it believed that Appellees were seeking a preliminary injunction, and the District proceeded to address Appellees’ petition on such terms. The dispute before the Pennsylvania Supreme Court centered on whether a post-trial motion was required, or whether the appellant was entitled to proceed with an interlocutory appeal as of right under Rule of Appellate Procedure 311(a)(4). The Supreme Court determined the common pleas court did not dispose of all claims for relief in its “Decision/Order”; therefore, “the decision” of the case was not rendered for purposes of Rule 227.1, and no post-trial motions were implicated under that rule. Rather, the District enjoyed the right to lodge an interlocutory appeal as of right under Rule of Appellate Procedure 311(a)(4). The Court reversed the Commonwealth Court's judgment holding to the contrary, and remanded this case for consideration of the merits of the District's interlocutory appeal filed as of right. View "Wolk v. Lower Merion SD" on Justia Law

At issue before the Pennsylvania Supreme Court in this matter was whether sales or use taxes must be paid in relation to two distinct items: the purchase of a closed-circuit horse-racing simulcasting system, and the payment of royalties for intellectual property used in conjunction with the operation of video poker machines. For the Taxpayer's off-track wagering locations, it used video poker machines. Taxpayer entered into a service contract with Teleview Racing Patrol, Inc., pursuant to which Teleview supplied equipment such as screens, satellite dishes, and closed-circuit television feeds. These items were used to provide live displays at each OTW facility of races occurring at Pocono Downs and other tracks across the country. Teleview provided the equipment for this system and, per the agreement, it also supplied personnel to install, maintain, and operate that equipment. In relation to the video poker games, Taxpayer purchased machines from International Gaming Technologies, PLC (“IGT”), on which it paid taxes which are not in dispute. In accordance with a separate intellectual property agreement, Taxpayer also paid IGT royalty fees for intellectual property associated with the various different “themes,” i.e., different poker games that would run on the machines. After a Pennsylvania Department of Revenue audit, Taxpayer was assessed approximately $340,000 in unpaid sales and use taxes, mostly stemming from Taxpayer’s payments to Teleview under the service contract. In challenging the assessment, Taxpayer concluded it had erroneously paid the $13,000 in taxes on its payment of royalty fees to IGT; thus, it sought a refund of those monies. After the Department denied relief, Taxpayer sought review of both matters in the Commonwealth Court, which consolidated the appeals. The court found Teleview consolidated taxable and nontaxable charges on its invoices. The panel thus concluded that Taxpayer had failed to present documentary evidence specifying which portions of the billed amounts were nontaxable, as required by departmental regulations. The Court also rejected Taxpayer's request for a refund on taxes it paid for IGT's royalty fees. The Pennsylvania Supreme Court reversed the Commonwealth Court's order insofar as it upheld the Board of Finance and Revenue's determination relative to the IGT contract, but affirmed in all other respects. View "Downs Racing, LP v. Pennsylvania" on Justia Law

The Pennsylvania Supreme Court allowed this appeal to address the City of Philadelphia's so-called "soda tax." In June 2016, City Council enacted the challenged ordinance, which imposed a tax regarding specified categories of drinks sold, or intended to be sold, in the municipal limits. Appellants -- a group of consumers, retailers, distributors, producers, and trade associations -- filed suit against the City and the Commissioner of the Philadelphia Department of Revenue, in the court of common pleas, challenging the legality and constitutionality of the tax and seeking declaratory and injunctive relief. The common pleas court differentiated the soda tax as a “non-retail, distribution level tax” and that the tax did not apply to the same transaction or subject as the state sales tax, thus, no violation of the "Sterling Act," Act of August 5, 1932, Ex. Sess., P.L. 45 (as amended 53 P.S. sections 15971–15973). A divided, en banc panel of the Commonwealth Court affirmed, the majority reasoning that in determining whether a tax was duplicative, the focus is upon the incidence of the tax; such incidence is ultimately determined according to the substantive text of the enabling legislation; and the concept of legal incidence does not concern post-tax economic actions of private actors. Because the City’s beverage tax and the state sales and use tax are imposed on different, albeit related, transactions and measured on distinct terms, the majority likewise concluded that the Sterling Act was not offended. The Supreme Court affirmed, finding that the Sterling Act conferred upon the City "a broad taxing power subject to preemption," while clarifying that “any and all subjects” are available for local taxation which the Commonwealth could, but does not presently, tax. The Commonwealth could, but did not, tax the distributor/dealer-level transactions or subjects targeted by the soda tax. "Moreover, the legal incidences of the Philadelphia tax and the Commonwealth’s sales and use tax are different and, accordingly, Sterling Act preemption does not apply." View "Williams v. City of Philadelphia" on Justia Law

Appellee Mission Funding Alpha was a calendar-year taxpayer that conducted business in the Commonwealth of Pennsylvania during the year ending December 31, 2007, and subject to the Pennsylvania Foreign Franchise Tax. In this case, appellee’s annual tax report (the Report) was due to be filed on or before April 15, 2008. As of that date, appellee had timely remitted to the Pennsylvania Department of Revenue (the Department) quarterly estimated payments totaling $430,000 for its 2007 Tax Year liability. A credit overpayment was also carried forward for appellee’s 2007 Tax Year liability. Without first seeking an extension of time to file its Report after the due date of April 15, 2008, appellee filed it late, on September 19, 2008. The Department accepted appellee’s reported franchise tax liability and imposed a $913 late-filing penalty because appellee had not requested a filing extension and had not filed its Report by the due date of April 15, 2008. On September 16, 2011, appellee filed a petition for refund with the Board of Appeals, seeking a refund of the entire amount of its reported 2007 franchise tax liability ($66,344). The Board of Appeals dismissed the petition as untimely, stating it was filed more than three years after the payment date of April 15, 2008. Appellee then appealed to the Board of Finance and Revenue, arguing its refund petition was timely because the time to file a petition did not begin to run until its tax was defined or deemed paid, which did not occur until appellee filed its 2007 Report on September 19, 2008. The Board of Finance and Revenue affirmed the decision of the Board of Appeals, concluding although appellee paid $66,344 in franchise tax for 2007 on the due date of April 15, 2008, the refund petition was filed more than three years after that due date, and therefore was untimely. Appellee argued the applicable statute of limitations for a refund claim is three years from the date of payment of tax but a tax is not deemed “paid” until amounts are applied to a definite tax liability. The Pennsylvania Supreme Court held the Commonwealth Court erred in holding the three-year tax refund period specified in Section 3003.1(a) of the Tax Reform Code of 1971 (Tax Code), 72 P.S. 10003.1(a), began to run on the date the corporate taxpayer files its annual tax report. Appellee’s refund petition was not timely filed because the three-year tax refund period began to run on April 15, 2008, and expired prior to the September 16, 2011 filing date. View "Mission Funding Alpha v. Pennsylvania" on Justia Law

In this direct appeal, the issue presented for the Pennsylvania Supreme Court was whether the “net loss carryover” provision of the Pennsylvania Revenue Code for tax year 2007 (“NLC”), which restricted the amount of loss a corporation could carry over from prior years as a deduction against its 2007 taxable income to whichever is greater, 12.5% of the corporation’s 2007 taxable income or $3 million, violated Article 8, Section 1 of the Pennsylvania Constitution (“the Uniformity Clause”). Nextel Communications, incorporated in Delaware, earned $45,053,282 in taxable income on its business activities in the Commonwealth. Under the NLC, Nextel was entitled to deduct from its 2007 taxable income the net losses it sustained in prior tax years in the amount of $3 million or 12.5% of its 2007 taxable income, whichever total was greater. In 2007, Nextel had a cumulative net loss dating from the tax year 1997 of $150,636,792. Because 12.5% of Nextel’s 2007 taxable income amounted to $5,631,660, and, hence, was greater than $3 million, Nextel claimed the 12.5% amount as a net loss deduction, thereby reducing its taxable income for 2007 to $39,421,622. Under the corporate net income tax rate of 9.9%, Nextel’s total tax liability to the Commonwealth on this adjusted income was $3,938,220, which Nextel paid to the Department. The Supreme Court affirmed the Commonwealth Court’s holding that the NLC, as applied to Nextel violated the Uniformity Clause. However, the Court also found that the portion of the NLC which created the violation, the $3 million flat deduction, could be severed from the remainder of the statute, while still enabling the statute to operate as the legislature intended. View "Nextel Communications v. Pennsylvania" on Justia Law

This appeal raised a question of whether the Uniformity Clause of the Pennsylvania Constitution permitted a taxing authority to selectively appeal only the assessments of commercial properties, such as apartment complexes, while choosing not to appeal the assessments of other types of property – most notably, single-family residential homes – many of which were under-assessed by a greater percentage. The common pleas court sustained the preliminary objections and dismissed the complaint, finding Appellants’ claims failed as a matter of law because the School District (the taxing authority) was not the entity that set assessments, and the applicable statute gave it a clear statutory right to appeal tax assessments set by the County. In rejecting Appellants’ argument relating to discriminatory treatment, the Court indicated that “[t]he filing of selective appeals does not result in a uniformity violation, and it is not deliberate discrimination.” In this regard, the court ultimately concluded “the Uniformity Clause does not require equalization across all subclassifications of real property.” The Commonwealth Court affirmed in a published decision. The Pennsylvania Supreme Court disagreed with the lower courts, finding Appellants’ complaint set forth a valid claim that the School District’s appeal policy violated the Uniformity Clause. View "Valley Forge Towers v. Upper Merion SD" on Justia Law