No. 5 M.D. Misc. Dkt. 1983, Petition for Review of Decision and Order of Board of Finance and Revenue at Board Docket No. C-7088
Frank A. Sinon, Sherill T. Moyer, Jack F. Hurley, Jr., Harrisburg, for petitioner.
Vincent J. Dopko, Deputy Atty. Gen., for respondent.
Roberts, C.j., and Larsen, Flaherty, McDermott, Hutchinson and Zappala, JJ. Nix, J., did not participate in the consideration or decision of this case.
Petitioner Dale National Bank seeks review of an order of the Board of Finance and Revenue refusing a petition for refund of bank shares tax paid for tax year 1978. In a petition for review filed in the Commonwealth Court, petitioner claimed that the bank shares tax imposed improperly reflected a tax on two classes of assets: obligations of the United States, in violation of 31 U.S.C. § 742 (now 31 U.S.C. § 3124(a)); and state and municipal obligations, in violation of the Act of August 31, 1971, P.L. 395, § 2, 72 P.S. § 4752-2 (Supp.1983). This Court assumed plenary jurisdiction over the petition for review on April 5, 1983, prior to decision by the Commonwealth Court. See 42 Pa.C.S. § 726.
We hold, in accordance with the recent decision of the Supreme Court of the United States in American Bank and Trust Co. v. Dallas County, U.S. , 103 S.Ct. 3369, 77 L.Ed.2d 1072 (1983), interpreting 31 U.S.C. § 742, that obligations
of the United States owned by petitioner were improperly taken into consideration in computing petitioner's bank shares tax. As to the claim of improper taxation of petitioner's state and municipal obligations, we hold that the Act of August 31, 1971, does not prohibit the consideration of such obligations in the computation of bank shares tax liability. Accordingly, we vacate the order of the Board and remand the record to the Board for proceedings consistent with this opinion.
Section 701 of the Tax Reform Code of 1971, Act of March 4, 1971, P.L. 6, 72 P.S. § 7701 (Supp.1983), requires state and national banks located in Pennsylvania to submit written reports to the Department of Revenue by April 15 of each year setting forth the "number of shares of the capital stock subscribed for or issued" and "the actual value thereof," as of January 1 of the reporting year. The actual value of each share is to be ascertained by adding together "the amount of capital stock paid in, the surplus, and undivided profits," and dividing the sum by the number of shares. It has been the practice of the Department to treat various reserve accounts derived from capital as part of the tax base. See Citizens National Bank & Trust Co. v. Commonwealth, 63 Pa. Commw. 383, 437 A.2d 1327 (1981). After the various reserve accounts have been added to the capital accounts, the "actual value" of capital is determined by adjusting the book value of the assets upward or downward to reflect the market value of the assets on January 1 of the reporting year. See Commonwealth v. Butler County National Bank, 376 Pa. 66, 101 A.2d 699 (1954). The Department is to assess the actual value of capital "at the rate of fifteen mills upon each dollar of actual value thereof." § 701.
Petitioner's statement of financial condition as of December 31, 1977, reported total assets of $58,681,870.17 and total liabilities of $54,760,541.07, leaving total capital of $3,921,329.10. ...