Appeal from the Order of the Board of Finance and Revenue in case of Citizens National Bank & Trust Co. v. Commonwealth of Pennsylvania, No. C-5324.
Alphonsus R. Romeika, Romeika, Fish & Scheckter, for petitioner.
Vincent J. Dopko, Deputy Attorney General, for respondent.
President Judge Crumlish, Jr. and Judges Rogers, Blatt, MacPhail and Palladino. Opinion by Judge Palladino.
[ 63 Pa. Commw. Page 384]
This is an appeal by Citizens National Bank and Trust Company (Taxpayer) from an Order of the Board of Finance and Revenue refusing Taxpayer's Petition for Refund of a portion of its Bank Shares Tax. We affirm.
We adopt as our findings the facts stipulated by the parties.
Taxpayer, a banking institution, is subject to the annual Bank Shares Tax imposed by Section 701 of the Tax Reform Code of 1971, Act of March 4, 1971, P.L. 6, 72 P.S. § 701 (Bank Shares Tax), and uses an accrual system of accounting.*fn1 Taxpayer's Shares and Loans Tax Report conformed to the Department's Rules and Regulations, but taxpayer attached a rider reserving its right to challenge the Department's practice regarding Taxpayer's Reserve for Losses on Loans.
[ 63 Pa. Commw. Page 385]
Taxpayer's Shares and Loans Tax Report showed the actual value subject to tax to be $2,596,569. On April 26, 1978, the Department made a settlement of Taxpayer's Shares and Loans Tax Report and set Taxpayer's actual value subject to tax at $2,669,431. On May 1, 1978, the settlement was approved by the Department of the Auditor General.
In calculating the settlement, the Department determined Taxpayer's capital value by (1) including as undivided profits $170,044 contained in Taxpayer's Reserve for Losses on Loans (a contingency reserve of $108,440 plus a valuation reserve of $61,604) and (2) allowing Taxpayer a credit of $6,807, an amount based upon the yearly average of Taxpayer's actual loan losses for the five-year period immediately preceding the tax year in question.
Taxpayer's $170,044 Reserve for Losses on Loans is the sum of (a) $88,923, originally extracted from undivided profits to establish the Reserve, and (b) $81,121 not extracted from undivided profits. Taxpayer does not dispute the inclusion of the first sum but does dispute the inclusion of the second. If the entire $170,044 is included in Taxpayer's undivided profits, and consequently in its ...