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COMMONWEALTH PENNSYLVANIA v. COMMONWEALTH FEDERAL SAVINGS AND LOAN ASSOCIATION NORRISTOWN (03/11/77)

decided: March 11, 1977.

COMMONWEALTH OF PENNSYLVANIA
v.
COMMONWEALTH FEDERAL SAVINGS AND LOAN ASSOCIATION OF NORRISTOWN, APPELLANT



Appeal from the Order of the Board of Finance and Revenue in case of In Re: Commonwealth Federal Savings and Loan Association of Norristown, dated September 27, 1974.

COUNSEL

Ernest L. Nagy, with him Gerald Krekstein, Patrick T. Ryan, Kathryn H. Levering, and Drinker, Biddle & Reath, for appellant.

Paul S. Roeder, Deputy Attorney General, for appellee.

Judges Kramer, Wilkinson, Jr. and Rogers, sitting as a panel of three. Opinion by Judge Kramer.

Author: Kramer

[ 29 Pa. Commw. Page 223]

This is an appeal from an order of the Board of Finance and Revenue, dated September 27, 1974. The order denies review of the Commonwealth Federal Savings and Loan Association of Norristown's (appellant) petition for resettlement of its Mutual Thrift Institution's (M.T.I.) tax for the year ending December 31, 1972.

The tax involved is a franchise or excise tax on the privilege of doing business in the Commonwealth.*fn1 The Department of Revenue (Department) included in the appellant's net earnings, upon which the tax is based, interest received on a loan to the Chester County Industrial Development Authority (Authority).*fn2 Appellant asserts that this interest was not properly includable as income for the determination of M.T.I. tax liability. This assertion is founded upon the fact that this income, received from an obligation of the Commonwealth, is tax-exempt by virtue of the provisions in the Act of August 31, 1971, P.L. 395, 72 P.S. § 4752-2 et seq. (Act No. 94), as well as those in Act No. 102, note 2, supra. Appellant argues that inclusion of this income for M.T.I. purposes is a tax on this otherwise exempt income. We cannot agree.

The language in Act No. 94, 72 P.S. § 4752-2, pertinent to appellant's argument, provides:

Notwithstanding the provisions of any law presently or hereafter enacted to the contrary,

[ 29 Pa. Commw. Page 224]

    all obligations, their transfer and the income therefrom . . . issued by the Commonwealth, any public authority, commission, board or other agency created by the Commonwealth, any political subdivision of the Commonwealth or any public authority created by any such political subdivision, shall at all times be free from taxation . . . except . . . [inheritance and estate taxation] . . . .

In addition, tax exemption for such obligations is also provided by the language in Act No. 102, 73 P.S. § 385 (as amended by Act No. 34, April 7, 1976):

The effectuation of the authorized purpose of authorities created under this act shall and will be in all respects for the benefit of the people of the Commonwealth of Pennsylvania, . . . and, since they will as public instrumentalities of the Commonwealth be performing essential governmental functions in effectuating such purposes, authorities shall not be required to pay any taxes or assessments upon any property acquired or used by them for such purposes, and the bonds issued by any authority, their transfer and the income ...


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