Appeals from the Order of the Court of Common Pleas of Allegheny County in case of City of Pittsburgh, a municipal corporation, and Joseph Cosetti, Treasurer v. Allegheny Valley Bank of Pittsburgh, Commercial Bank and Trust Company, Iron and Glass Bank, Keystone Bank and North Side Deposit Bank, state banking associations, and Mellon Bank, N.A., Pittsburgh National Bank, The Union National Bank of Pittsburgh and Equibank, N.A., national banking associations, Nos. 2899 and 2898 October Term, 1973.
Eugene B. Strassburger, III, Deputy City Solicitor, with him Grace S. Harris, Executive Assistant City Solicitor, and Mead J. Mulvihill, Jr., City Solicitor, for appellants.
Carl E. Glock, Jr., with him J. Sherman McLaughlin; Reed, Smith, Shaw & McClay; George L. Cass; Buchanan, Ingersoll, Rodewald, Kyle & Buerger; Everett K. Dilworth; John P. Papuga; Tucker, Arensberg & Ferguson; James F. Malone, III; Brandt, Milnes, Rea & Malone; Robert H. Stevenson; Anderson, Moreland & Bush; Abraham Fishkin; William B. Mallin; Ray C. Stoner ; and Eckert, Seamans Cherin & Mellott, for appellees.
President Judge Bowman and Judges Crumlish, Jr., Wilkinson, Jr., Rogers and Blatt. Opinion by President Judge Bowman. Concurring and Dissenting Opinion by Judge Crumlish, Jr.
[ 35 Pa. Commw. Page 504]
These consolidated cross appeals*fn1 evolve from litigation initiated by the City of Pittsburgh in the Court of Common Pleas of Allegheny County to enforce collection of its Business Privilege Tax*fn2 assertedly due and owing by nine banking institutions (banks), State and Federal, for the tax years 1969-73.
There is no dispute that the taxing ordinance as enacted reaches banks and would impose the tax upon them for the privilege of doing business in Pittsburgh, said tax measured by the gross receipts of banks as defined in the ordinance and supporting regulations. Rather, the banks have consistently denied liability for the tax on the theory that State law precludes the City from imposing the tax on banks, and, as to several tax years involved, the Federal banks argue that Federal legislation is also a bar to taxing them.
[ 35 Pa. Commw. Page 505]
In the lower court, the banks were successful except as to gross receipts derived by them from "nontraditional" banking activities which were held to be subject to the City's tax. Hence, these cross appeals in which the City insists that neither State nor Federal law precludes imposition of its gross receipts business privilege tax upon banks, while the banks argue that there can be no distinction between traditional and nontraditional banking activities for tax purposes as all such activities are conducted and carried on with the approval of the Secretary of Banking, who enjoys the exclusive power and authority to supervise and regulate banks in the conduct of their business.
The first issue requires consideration of the provisions of a State statute imposing a State tax upon banks and the provisions of the State statute by the authority of which the City has enacted this taxing ordinance.
THE BANK SHARES TAX (SHARES TAX)*fn3
Section 701 of the Tax Reform Code of 1971, 72 P.S. § 7701, and its predecessor legislation impose an annual State tax upon the actual value of the capital stock of banks incorporated in or located within the Commonwealth. It is imposed at the rate of fifteen mills*fn4 upon the actual value of each share of stock to be "ascertained and fixed by adding together the amount of capital stock paid in, the surplus, and undivided profits, and dividing this amount by the number of shares."
[ 35 Pa. Commw. Page 506]
Of significance in these cross appeals, this same section further provides:
[S]o much of the capital and profits of such bank . . . as shall not be invested in real estate, shall be exempt from local taxation under the laws of this Commonwealth; and such bank . . . having capital stock shall not be required to make any report to the local assessor or county commissioners of its personal property owned by it in its own right for purposes of taxation and shall not be required to pay any tax thereon.
The lower court concluded that this language of the Shares Tax prohibited the City from imposing its Business Privilege Tax upon banking institutions measured by gross receipts as defined in the taxing ordinance applicable to banking institutions, reasoning that gross receipts as so defined makes the tax, in reality, as one on gross profits, not gross receipts, derived for the most part upon interest received from loans and investments. Having found the local tax to be essentially an income tax as applied to banks rather than a gross receipts tax, the lower court concluded that the above language exempted banks from the attempted imposition of the local tax.
There is no doubt that the legislative history of the predecessor legislation to the present Shares Tax and the decisional law interpreting exemption language contained therein support the conclusion reached by the lower court on this issue. In Oil City v. Oil City Trust Co., 151 Pa. 454, 25 A. 124 (1892), in issue as to several of the tax years in question was whether banks subject to the then State Shares Tax which exempted them "from local taxation under the laws of this commonwealth" could be subjected ...