Appeal from the Order of the Board of Finance and Revenue in case of In the Matter of the Franchise Tax of Halco (Mining) Inc., for the Taxable Year 1973, Box No. 2949-04.
Edward J. Greene, with him Janice C. Bowers, Eckert, Seamans, Cherin & Mellott, for appellant.
Vincent J. Dopko, Deputy Attorney General, for appellee.
President Judge Bowman and Judges Crumlish, Jr., Wilkinson, Jr., Mencer, Blatt, Craig and MacPhail. Judges Rogers and Williams, Jr. did not participate. Opinion by Judge Blatt. President Judge Bowman did not participate in the decision in this case. Judge Wilkinson, Jr. dissents.
[ 51 Pa. Commw. Page 441]
Halco (Mining) Inc., hereinafter Halco, timely filed its 1973 franchise tax report pursuant to Article VI of the Tax Reform Code of 1971.*fn1 (Code) The franchise tax report was settled on June 19, 1975 and reflects the determination by the Department of Revenue that Halco was not allowed the preferred "holding company" status for purposes of the tax. Halco filed a Petition for Resettlement which was denied. It then filed a Petition for Review with the Board of Finance and Revenue (Board) which was also denied.*fn2 This appeal followed with the parties submitting a Stipulation of Facts.
[ 51 Pa. Commw. Page 442]
It is Halco's position that it qualifies as a holding company under Section 602(f) of the Code, 72 P.S. § 7602(f) and is therefore entitled to calculate its franchise tax at the rate of ten mills upon each dollar on a maximum of only ten percent of the actual value of its entire capital stock. The term "holding company" is defined in Section 602(f) as
[A]ny corporation (i) at least ninety percent of the gross income of which for the taxable year is derived from dividends, interest, gains from the sale or other disposition of stock or securities and the rendition of management and administrative services to subsidiary corporations, and (ii) at least sixty per cent of the actual value of the total assets of which consists of stock securities or indebtedness of subsidiary corporations.
It is undisputed that Halco meets the criteria of (ii) above, and the sole issue is whether or not ninety percent of its gross income for the year 1973 was derived from the enumerated sources.
Halco is a Delaware corporation having its principal place of business in Pittsburgh. It was incorporated in 1953 and has been utilized to participate with the Republic of Guinea in mining bauxite in that West African country. Halco owns fifty-one percent of the stock of Compagnie des Bauxites de Guinee (CBG) a corporation formed to aid in the bauxite mining. The other forty-nine percent of the stock is owned by the Republic of Guinea. Halco provides management services to CBG and instrumentalities of the Government of Guinea. In pursuing its program for economic development through bauxite mining, Guinea has experienced difficulty in obtaining equipment and raw material from suppliers outside the country due to the fact that its currency known as the syli is unconvertible and thus has little power in the world market.
[ 51 Pa. Commw. Page 443]
On a number of occasions, therefore, Guinea has requested Halco, its co-sharehold in CBG to assist in obtaining goods which it needs from the world market. In 1972 Halco purchased aluminum sheet for a Guinean government corporation (S.O.G.U.I.F.A.B.) with its useable currency and took its payment from Guinea in sylis. Halco charged the corporation ...