Appeal from the Order of the Board of Finance and Revenue in case of Commonwealth of Pennsylvania v. The Potomac Edison Company, Docket No. R-1131.
Howell C. Mette, with him Lloyd R. Persun, of Shearer, Mette & Woodside, for appellant.
John H. Whitmoyer, Deputy Attorney General, with him Eugene J. Anastasio and Vincent Yakowicz, Deputy Attorneys General, for appellee.
President Judge Bowman and Judges Crumlish, Jr., Mencer, Rogers and Craig. Judges Wilkinson, Jr., Blatt, DiSalle and MacPhail, did not participate. Opinion by Judge Craig. President Judge Bowman did not participate in the decision in this case. Judge DiSalle did not participate in the decision in this case.
The Potomac Edison Company (taxpayer) appeals from the order of the Board of Finance and Revenue sustaining the Department of Revenue's settlement of its 1972 franchise tax, in the amount of $65,363.10 with interest. The Department of the Auditor General approved the settlement, and taxpayer filed a petition for resettlement with the Department of Revenue and the Department of the Auditor General, which was refused. Taxpayer appeals.
Taxpayer is a Maryland corporation operating as a public utility, with a certificate of public convenience from the Pennsylvania Public Utility Commission. Taxpayer is a tenant-in-common, with West Penn Power Company and Monongahela Power Company, of a site known as Hatfield's Ferry Power Station (station), where those tenants operate a steam-driven electric power plant as a joint venture. Taxpayer owns an undivided 20% interest in the power plant and the underlying real property. From
its share of the output of the station, taxpayer furnishes electric service only to customers in Maryland.
Section 602(b) of the Tax Reform Code of 1971, Act of March 4, 1971, P.L. 6, as amended, 72 P.S. § 7602(b), imposes a franchise tax on every foreign corporation, joint-stock association and limited partnership, but provides:
That the manufacturing, processing, research and development exemptions as contained under section 602(a) [imposing a tax on the capital stock of domestic corporations] shall also apply to foreign corporations. . . .*fn1
Section 602(a), 72 P.S. § 7602(a) states that:
Provided, That the provisions of this section shall not apply to the taxation of the capital stock of corporations, . . . organized for manufacturing, processing, research or development purposes. . . .
Section 4 of the Act of July 1, 1978, P.L. 594, eliminated the manufacturing exemption as to those companies that "enjoy and exercise the right of eminent domain." The intent of the General Assembly, as stated in Section 3 of that act, was that this ineligibility for the manufacturing exemption be retroactive to August 31, 1971, or the "furthest legal date possible," if the retroactive effect to the stated date was determined to be unlawful.
Taxpayer contends that the production of electrical energy constitutes "manufacturing" for the purposes of Section 602(b), and that it is entitled to ...