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decided: October 5, 1978.


No. 110 May Term, 1977, Appeal from the Order entered October 6, 1977 of the Commonwealth Court of Pennsylvania at No. 1493 C.D. 1976, Affirming the Order of the Board of Finance and Revenue at Docket No. R-1570 (1976).


Sherill T. Moyer, Harrisburg, for appellant.

Joseph F. Lynch, Deputy Atty. Gen., for appellee.

Eagen, C. J., and O'Brien, Roberts, Pomeroy, Nix, Manderino and Larsen, JJ. Larsen, J., concurs in the result.

Author: Roberts

[ 481 Pa. Page 210]


We are here*fn1 presented with a record which demonstrates that the Commonwealth has violated the Uniform Taxation Clause, Pa.Const. art. VIII, § 1, by discriminatorily enforcing against appellant, Molycorp, Inc., that provision of the Tentative Tax Act*fn2 authorizing an additional tax to be

[ 481 Pa. Page 211]

    assessed when a taxpayer underpays its Pennsylvania Corporate Net Income Tax. We therefore reverse the order of the Commonwealth Court and strike the settlement of additional tax against Molycorp.

Four months after the beginning of any calendar or fiscal year, corporations subject to the Pennsylvania Corporate Net Income Tax must file returns for, and make payment of, their Tentative Corporate Net Income Tax for that year. The Tentative Tax Act provides corporate taxpayers a choice of two methods for calculating tentative tax:*fn3

Method I -- Application of the current tax rate to 90% of the "tax base" for the preceding calendar or fiscal year.

Method II -- Application of the current tax rate to 90% of the "taxable income" of the first three months of the current calendar or fiscal year, annualized.

The statute further provides that a corporation whose tentative tax payment for a given year is less than 95% of the 90% of its final tax liability for that year must pay an additional tax of 10% of the deficiency, plus interest.*fn4

Molycorp, Inc., a calendar year taxpayer, computed its 1973 tentative tax on the basis of Method II. The tentative tax so computed was zero. Molycorp reported its final corporate net income tax for 1973 as $97,978. Appellee, the

[ 481 Pa. Page 212]

Commonwealth, assessed Molycorp an additional tax of $8,818 because of Molycorp's underestimation of its tentative tax.*fn5 Molycorp sought review of the imposition of this additional tax. The Board of Finance and Revenue held that the additional tax was properly imposed and the Commonwealth Court affirmed.

Molycorp asserts that the Commonwealth administers the additional tax discriminatorily, in violation of the Uniform Taxation Clause of the Pennsylvania Constitution, Pa.Const. art. VIII, § 1.*fn6 Taxpayer allegations of violations of the federal equal protection clause and the Pennsylvania uniform taxation clause are analyzed in the same manner, e. g., Commonwealth v. Westinghouse Electric Corp., 478 Pa. 164, 386 A.2d 491 (1978); Fisher Controls, Inc. v. Commonwealth, 476 Pa. 119, 381 A.2d 1253 (1977); Columbia Gas Corp. v. Commonwealth, 468 Pa. 145, 153-54, 360 A.2d 592, 597 (1976), although the two clauses may not have exactly the same scope. See Amidon v. Kane, 444 Pa. 38, 279 A.2d 53 (1971) (statute violated uniformity clause only). In analyzing Molycorp's claim, we therefore examine both federal and state causes involving alleged unequal enforcement of tax laws.

"A taxpayer complaining that administration of a tax violates its right to be taxed uniformly with others in its class must demonstrate 'deliberate, purposeful discrimination in the application of the tax . . . before constitutional safeguards are violated.'" Fisher Controls, Inc. v. Commonwealth, 476 Pa. at 125, 381 A.2d at 1256, quoting

[ 481 Pa. Page 213]

I to calculate its 1973 tentative tax, it would still have paid no tentative tax, but would not have been assessed additional tax.

The Act, however, requires payment of additional tax by all corporate taxpayers whose tentative tax payments are less than 95% of 90% of their final corporate net income tax, whether the taxpayer chooses Method I or Method II.*fn7 The Commonwealth may not systematically discriminate against taxpayers choosing Method II by assessing additional tax against them, while allowing taxpayers using Method I to escape the additional tax.

In Cumberland Coal v. Board of Revision, supra, the county board of revision was authorized to tax unmined coal in the county at a uniform percentage of the in-ground value of the coal. Greene County Coal Tax Appeals, 302 Pa. 179, 182, 152 A. 755, 756 (1930), rev'd sub nom. Cumberland Coal Co. v. Board of Revision, supra. The county board, however, assessed all unmined coal at the same rate per unit volume, despite the fact that some taxpayers' coal was much more valuable than others. The taxpayers' coal, though very difficult to mine, was assessed at the same rate as coal more readily accessible, and hence more valuable.

The Supreme Court of the United States held that "the intentional, systematic undervaluation by state officials of taxable property of the same class belonging to other owners contravenes the constitutional right of one taxed upon

[ 481 Pa. Page 215]

    the full value of his property." 284 U.S. at 28-29, 52 S.Ct. at 50. This discrimination was "none the less systematic and intentional because of belief in its validity" and good faith on the part of the taxing authorities. 284 U.S. at 25, 52 S.Ct. at 49.

Molycorp here presents a similar case. The Commonwealth has adopted a system for assessment and collection of the tentative and additional taxes which, without statutory or other authorization, discriminates against those choosing Method II for calculating tentative corporate net income tax. Compare Commonwealth v. Westinghouse Electric Corp., supra (although some taxpayers received benefit of erroneous statement of policy in Tax Memorandum, taxpayer could not complain when memorandum was withdrawn after short time and correct policy instituted); Stilman v. Tax Review Board, supra (erroneous benefit given one taxpayer does not excuse others from paying the proper levy). The Commonwealth does not advance any reason to justify its pattern of enforcement. Molycorp therefore may not be assessed additional tax under this discriminatory enforcement scheme. E. g., Iowa-Des Moines National Bank v. Bennett, 284 U.S. 239, 52 S.Ct. 133, 76 L.Ed. 265 (1931) (remedy for systematic discriminatory enforcement of tax law is relief to complaining taxpayer); Cumberland Coal Co. v. Board of Revision, supra (same).*fn8

Accordingly, we reverse the order of the Commonwealth Court, and the settlement of additional tax against Molycorp is stricken.

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