Appeal from the Order of the Board of Finance and Revenue in case of In Re: Columbia Gas Transmission Corporation, Docket No. R-10 (1973).
Frank A. Sinon, with him Robert L. Weldon, and Rhoads, Sinon & Reader, for appellant.
Vincent J. Dopko, Deputy Attorney General, for appellee.
Gerald Krekstein, with him Drinker, Biddle and Reath, and, of counsel, Harry J. Rubin, and Krekstein, Rubin and Lasday, for amicus curiae, Chrysler Realty Corporation.
President Judge Bowman and Judges Crumlish, Jr., Kramer, Wilkinson, Jr., Mencer, Rogers and Blatt. Opinion by Judge Rogers.
[ 19 Pa. Commw. Page 524]
Columbia Gas Transmission Corporation (hereinafter referred to as appellant, taxpayer or Columbia), a Delaware corporation, has appealed from a decision and order of the Board of Finance and Revenue sustaining the action of the Department of Revenue and the Auditor General in computing and settling Columbia's liability for Excise Tax on Foreign Corporations for the period from
[ 19 Pa. Commw. Page 525]
July 1, 1971 through December 31, 1971 in the amount of $191,143.92.
The parties have entered into a stipulation of facts from which we make findings as follows:
1. Columbia Gas Transmission Corporation is a Delaware corporation authorized to do business in Pennsylvania.
2. Columbia is a natural gas transmission company engaged in the sale, storage and delivery in interstate commerce of natural gas for resale to other subsidiaries of its parent company, Columbia Gas System, Inc., and to other gas distributors in Pennsylvania, New York, Virginia, Maryland, West Virginia, Kentucky and Ohio. It is licensed to conduct its interstate activities by the Federal Power Commission and its sales are within the exclusive jurisdiction of that Commission. Columbia's Pennsylvania operations are an integral part of its overall interstate operations.
3. Columbia maintains three division offices, one each in Pennsylvania, New York and Maryland at which the maintenance, construction and operation of its interstate pipelines in Pennsylvania, New York, Ohio, Maryland and West Virginia are regulated.
4. Columbia is the successor by merger to Manufacturer's Light and Heat Company, a former Pennsylvania domestic corporation, which merger was effective at the close of business on June 30, 1971.
5. Prior to the merger, Manufacturer's Light and Heat Company paid the Commonwealth of Pennsylvania Excise Tax on Domestic Corporations of $150,000 on authorized capital stock having an aggregate par, or stated, value of $75,000,000.
6. Columbia filed its Foreign Excise Tax Report with the Department of Revenue for the short period July 1, 1971 through December 31, 1971, reporting the following:
[ 19 Pa. Commw. Page 526]
Amount of capital actually
employed within Pennsylvania,
including gas stored underground
Credit claimed from mergers -25,747,447
Increase of capital employed
in Pennsylvania subject to
Excise Tax Law 57,317,430
Amount of tax due (one-third
of one per cent) $190,866.94
7. The settlement made by the Department of Revenue and approved by the Department of the Auditor General, sustained by the Board of Finance and Revenue, and here appealed was:
Amount of capital actually
employed within Pennsylvania $83,064,877
Increase of capital subject to tax $83,064,877
Tax of one-third of one per cent
Less credit for merger of
Manufacturer's Light & Heat Co. 85,739.00
Amount of settlement $191,143.92
8. The Department of Revenue failed to use any apportionment formula in computing the Foreign Excise Tax due by Columbia, simply applying the statutory rate of one-third of one per cent to the increase of capital actually employed within Pennsylvania.
9. The ratio of Columbia's pipeline cubic foot capacity in Pennsylvania to total pipeline cubic foot capacity is 12.2392%. If this ratio should be applied to Columbia's capital actually employed in Pennsylvania ($83,064,877) the increase of capital would be $10,166,476 and the Foreign Excise Tax at the rate of one-third of one per cent would be $33,888.22.
10. Included within the total of Columbia's assets actually employed within Pennsylvania amounting to $83,064,877 is $6,263,094, being the value of gas which
[ 19 Pa. Commw. Page 527]
at December 31, 1971 was in fields in Pennsylvania in the course of movement through, into or out of Pennsylvania as part of Columbia's interstate supply system.
11. The Department of Revenue calculated the credit allowed for the $150,000 of Domestic Excise Tax paid by Manufacturer's Light and Heat Company by ascertaining the ratio of the value of the assets, both tangible and intangible, of Manufacturer's actually employed within Pennsylvania to total assets, both tangible and intangible, of Manufacturer's, thus:
Pennsylvania assets $100,855,782
Excise Taxes paid 150,000
to Pennsylvania 57.1593521
12. The value of capital actually employed within Pennsylvania by Manufacturer's transferred to Columbia was $80,647,832 and, as found, the value of capital actually employed during the tax period by Columbia was $83,064,877, a difference of $2,417,045. Such additional capital, ...