Appeals, Nos. 144, 167, 168, 198, 215, 216, 217 and 218 C.D. 1972, from the Orders of the Court of Common Pleas of Allegheny County in cases of In re: Appeal of Duquesne Light Company from Tax Assessments in Springdale Borough and Springdale Township, No. 747, April Term, 1971; In Re: Appeal of American Telephone and Telegraph Company from Tax Assessment of Property in Penn Hills, No. 749, April Term, 1971; In Re: Appeal of The Bell Telephone Company of Pennsylvania from Tax Assessment of Property in Coraopolis, No. 748, April Term, 1971; and In Re: Appeal of West Penn Power Company from Tax Assessment of Property in Springdale Borough and Springdale Township, No. 746, April Term, 1971. Utilities appealed assessments of the Board of Property Assessment, Appeals and Review of Allegheny County to the Court of Common Pleas of Allegheny County. Petitioners held to be subject to the tax imposed until December 31, 1970 and exempt thereafter. MCCARTHY, J. Petitioners appealed and Board filed cross-appeals in the Commonwealth Court of Pennsylvania. Appeals consolidated for argument. Held: Reversed in part, and affirmed in part. The American Telephone and Telegraph Company granted reargument. Held: Prior opinion affirmed.
Richard B. Tucker, Jr., with him Donald P. Eriksen and Tucker, Arensberg & Ferguson, for The American Telephone and Telegraph Company and The Bell Telephone Company of Pennsylvania. Of counsel, Robert Coe, John B. King and Peter Pugliese.
David McNeil Olds, with him Frank W. Ittel, Edward W. Seifert and Reed, Smith, Shaw & McClay, for Duquesne Light Company. Of counsel, Thomas J. Munsch, Jr.
Daniel B. Dixon, with him Leon G. Krasinski and Rose, Schmidt & Dixon, for West Penn Power Company.
Francis A. Barry, County Solicitor, with him Thomas M. Rutter, Jr., Second Assistnat County Solicitor, and John G. Arch, Assistant County Solicitor, for Board of Property Assessment, Appeals and Review.
Albert J. Tomalis, Jr., with him Metzger, Hafer, Keefer, Thomas and Wood, and, of counsel, Robert L. Nathanson, for The American Telephone and Telegraph Company on reargument.
Before President Judge Bowman and Judges Crumlish, Jr., Kramer, Wilkinson, Jr., Mencer, Rogers and Blatt. Nos. 167 C.d. 1972 and 217 C.d. 1972 reargued June 5, 1973, before President Judge Bowman and Judges Crumlish, Jr., Kramer, Wilkinson, Jr., Mencer, Rogers and Blatt.
OPINION BY JUDGE KRAMER, January 12, 1973:
This case involves cross-appeals from an order of the Court of Common Pleas of Allegheny County, dated January 31, 1972. The final resolution of the case depends on the proper interpretation of Article VIII, Section 4 of the Pennsylvania Constitution of 1968 and the Public Utility Realty Tax Act, Act of March 10, 1970, P.L. 168, as amended, 72 P.S. §§ 3271 et seq., hereinafter referred to as "PURTA." The case consists of cross-appeals by Duquesne Light Company, The American Telephone and Telegraph Company (AT&T), The Bell Telephone Company of Pennsylvania and West Penn Power Company, all joined together as coparties on one side of the issue presented. All of these, except AT&T, will be referred to hereinafter as "Utilities." As will be explained in the last section hereof, the appeals involving AT&T must be dealt with separately. On the other side of the issues are The Board of Property Assessment, Appeals and Review of Allegheny County, and the County of Allegheny, in its own right as a party appellant, as co-parties, hereinafter referred to as "County."
In the lower court order, the Utilites' (and AT&T's) appeals from the reclassification by the county of their real property used or useful in the furnishing of public utility service to the public from an "exempt" status to a "taxable" status for real estate tax purposes, were dismissed in part. In effect, the court's order held this "reclassified" property as taxable for the period from July 1, 1970, through December 31, 1970; however, the order thereafter held the "reclassified" property to be exempt for the year 1971,
and thereafter, "... so long as the appellant [Utilities] makes the annual tax payments due from it [them] under PURTA and provided distributions under PURTA or otherwise in conformance with the constitutional provisions, are made annually by the Commonwealth to the respective reporting local tax authorities."
We recognize, as do all of the parties to this case, that although only four public utilities are involved, the results herein will have far-reaching effect. The result of this case will determine whether public utilities and local real estate taxing authorities in this Commonwealth will pay or receive such tax revenues.
Prior to the appearance of the parties in court, the background for this case was set by the adoption of two fundamental changes in the law of this Commonwealth. The first occurred with the adoption, on April 23, 1968, of a new amendment to the Pennsylvania Constitution, as found in Article VIII, Section 4 (Pa. Const., art. 8, § 4), which provides:
"The real property of public utilities is subject to real estate taxes imposed by local taxing authorities. Payment to the Commonwealth of gross receipts taxes or other special taxes in replacement of gross receipts taxes by a public utility and the distribution by the Commonwealth to the local taxing authorities of the amount as herein provided shall, however, be in lieu of local taxes upon its real property which is used or useful in furnishing its public utility service. The amount raised annually by such gross receipts or other special taxes shall not be less than the gross amount of real estate taxes which the local taxing authorities could have imposed upon such real property but for the exemption herein provided. This gross amount shall be determined in the manner provided by law. An amount equivalent to such real estate taxes shall be distributed annually among all local taxing authorities
in the proportion which the total tax receipts of each local taxing authority bear to the total tax receipts of all local taxing authorities, or in such other equitable proportions as may be provided by law.
"Notwithstanding the provisions of this section, any law which presently subjects real property of public utilities to local real estate taxation by local taxing authorities shall remain in full force and effect." The "Schedule" annexed to this Section of Article VIII of the Constitution provides:
"Section four shall take effect July 1, 1970, unless the General Assembly earlier provides enabling legislation in accordance therewith."
The second change in the law occurred when the Legislature, intending to carry out the mandate of the aforementioned constitutional amendment, passed PURTA, which became effective March 10, 1970. Later, we will discuss in more detail, each of these two developments in the law.
Each of the Utilities (and AT&T) separately stipulated with the County a statement of the facts upon which the lower court issued its order. Each of the stipulations is similar, although obviously the statistics set forth therein are different for each. For the purposes of this opinion, the numbers contained in the statistics are unimportant, since the decision is based upon questions of law. Generally, the stipulations set forth that the real property of the Utilities (and AT&T) which the County has reclassified from "exempt" to "taxable" is used and useful in the rendering of public utility service to the public. On or before July 1, 1970, the County notified the Utilities (and AT&T) of the change in classification, for the tri-annual periods ending December 31, 1970, December 31, 1971, and December 31, 1972. The Utilities (and AT&T) paid the PURTA tax,
on or about June 1, 1970, to the Commonwealth for the year 1970,*fn1 and, as stated in a supplemental stipulation, each of the Utilities (and AT&T) also paid this tax for the entire year 1971. All of the Utilities (not AT&T, as explained hereinafter) also paid their entire state gross receipts tax under the Act of June 1, 1889,*fn2 P.L. 420, § 23, as amended, 72 P.S. § 2181 and 72 P.S. § 8101, for the years 1970 and 1971. At this point, we should note that the public utilities enumerated in the statute are the only persons or organizations in the Commonwealth that pay this state gross receipts tax. It was also stipulated that the payment by the Utilities of the PURTA taxes for the years 1970 and 1971, together with the payment of the gross receipts taxes for those years, far exceed all of the real estate taxes which could have been levied by the County and local taxing authorities for those same years. Nonetheless, assuming the power to tax public utilities' real estate, local taxing authorities have filed tax liens (for non-payment of local real estate taxes) against Utilities' property.
It is the contention of the Utilities that by virtue of Article VIII, Section 4 of the Pennsylvania Constitution, the passage of PURTA, and the payment by the Utilities of the PURTA tax, together with their payment of the Pennsylvania gross receipt taxes, the County illegally and improperly reclassified their real estate and certified to the local taxing authorities that said reclassified real estate was taxable after July 1, ...