Appeal from order of Court of Common Pleas of Dauphin County, No. 342 Commonwealth Docket, 1962, in case of Commonwealth of Pennsylvania v. Rieck Investment Corporation.
Vincent X. Yakowicz, Deputy Attorney General, with him Walter E. Alessandroni, Attorney General, for Commonwealth, appellant.
Carl H. Cordes, for appellee.
Bell, C. J., Musmanno, Jones, Cohen, Eagen, O'Brien and Roberts, JJ. Opinion by Mr. Justice Jones.
This appeal, involving the imposition by the Commonwealth of a franchise tax upon a foreign corporation, presents a problem of first impression in this Court.
Rieck Investment Corporation (Rieck) is a Delaware corporation registered and authorized to do business in Pennsylvania its business being the purchase, sale and holding for investment purposes of securities and other properties.*fn1 Rieck maintained an office in Pittsburgh, kept its books, records, securities and bank accounts in Pennsylvania and, concededly, at the time in question was "doing business" in Pennsylvania.
Prior to 1948, Rieck bought and sold realty in Florida within the scope of its business purposes. On May 16, 1946, the Governor of Florida cancelled, for nonpayment of corporate taxes, Rieck's certificate of authority to do business in that state*fn2 and, by June 1948, Rieck had disposed of the last of its realty holdings in Florida. However, in 1953, Rieck acquired two vacant lots in Dade County, Florida, which, concededly, produced no income. During the time in question in the
instant litigation Rieck paid no taxes, maintained no office and was not authorized to do business in Florida.
For the calendar year 1956, Rieck filed a franchise tax report in this Commonwealth. In that report, as part of the denominator of the tangible property fraction employed for the ascertainment of its tax liability, Rieck included the value of its two Florida lots ($8,802). On December 1, 1959, the appropriate officials of the Commonwealth made a settlement of Rieck's account which reflected a total tax liability of $19,813.53. In August 1961, a resettlement was made which excluded from the denominator of the tangible property fraction the value of the Florida lots, an exclusion which resulted in a total tax liability of $27,500.*fn3
The Board of Finance and Review refused Rieck's petition for a review of the resettlement. On appeal, the Court of Common Pleas of Dauphin County set aside the resettlement and upheld Rieck.*fn4 From that order the present appeal was taken.
The instant appeal presents two questions involving the construction of the Franchise Tax Act*fn5 and one question of fact. These questions are: (1) does the apportionment formula set forth in the Franchise Tax Act apply to a foreign corporation whose business is confined to Pennsylvania? (2) may tangible property of the foreign corporation located in a state other than Pennsylvania and which is unrelated to the business done by the corporation in Pennsylvania be included
in the denominator of the tangible property fraction of the Franchise Tax Act? (3) does the record justify a finding that Rieck was not doing business in Florida in 1956?*fn6
Does the Apportionment Formula in the Franchise Tax Act Apply to a Foreign Corporation Whose Business Is Confined to Pennsylvania?
Rieck, although it claims that it was "doing business" in Florida during 1956, maintains that by reason of the language of the Franchise Tax Act a foreign corporation which does business in Pennsylvania, may take advantage of the apportionment formula contained in that statute, even though it does not do ...