No. 131 March Term, 1977, Appeal from the Order and Judgment of the Commonwealth Court at No. 1353 C.D. 1975
Howell C. Mette, Shearer, Mette & Woodside, Harrisburg, for appellant.
Vincent Dopko Harrisburg, Deputy Atty. Gen., Philip C. Herr, Philadelphia, Scott Schearer, Harrisburg, for appellee.
Eagen, C. J., and O'Brien, Roberts, Pomeroy, Nix, Manderino and Larsen, JJ. Roberts and Nix, JJ., concurred in the result. Manderino, J., filed a dissenting opinion.
When appellant, a Pennsylvania corporation, filed its consolidated Federal corporate income tax return for calendar year 1969, it elected to claim the taxes which it paid to foreign governments as a credit against its Federal tax liability rather than as a deduction from its gross income.*fn1
Since the Pennsylvania Corporate Net Income Tax Act of May 16, 1935, P.L. 208, § 1 et seq. as amended, 72 P.S. 3420a et seq. (herein referred to as "the 'act'")*fn2 provided that a corporation's taxable income (for the purposes of calculating state tax liability) consisted of those funds which the Federal government designated as taxable on the corporation's Federal tax return, appellant, because it did not claim a deduction for foreign taxes on its 1969 Federal return, did not deduct said foreign taxes from its 1969 state return.
On December 17, 1970, appellant and the State Auditor General reached a settlement on appellant's state tax liability for calendar year 1969.
On March 10, 1972, the director of the State Bureau of Corporation Taxes issued a document entitled Taxing Memorandum No. 83 which provided that a corporation, when filing its state tax return, could claim foreign taxes as a deduction from its gross income even though said corporation did not deduct the foreign taxes from its Federal return. Accordingly, on May 5, 1972, appellant filed a petition with the State Board of Finance and Revenue requesting a partial refund of the taxes that appellant paid to the Commonwealth for calendar year 1969. Appellant claimed that it was entitled to this refund since, in determining its state tax liability for calendar year 1969, appellant did not deduct foreign taxes from its gross income as it was permitted to do under Taxing Memorandum No. 83.
The Board of Finance and Revenue denied appellant's petition for a partial refund of its 1969 state taxes. Appellant appealed the Board's decision to the Commonwealth Court, which affirmed the Board's denial of appellant's refund petition. Subsequently, appellant ...