Appeal from the Order of the Board of Finance and Revenue in the case of In Re: First National Bank of Fredericksburg, Docket No. R-8481, dated February 1, 1985.
Frank A. Sinon, with him, Sherill T. Moyer and Jack F. Hurley, Jr., Rhoads & Sinon; Of Counsel: Calvin D. Spitler, Spitler & Kilgore, for petitioner.
George T. Bell, Chief Counsel, with him, Steven R. Marcuse and William E. Kellogg, Assistant Counsels, for respondent.
John J. Brennan, with him, Gordon W. Gerber and Kathleen M. McCarthy, Dechert, Price & Rhoads, and P.J. DiQuinzio, for Amicus Curiae, Pennsylvania Bankers Association.
Harry J. Rubin, with him, Donald D. Geyer, Krekstein, Rubin and Lasday, for Amicus Curiae, Keystone National Bank.
President Judge Crumlish, Jr., and Judges Craig, MacPhail, Doyle, Barry, Colins and Palladino. Opinion by Judge Craig.
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The First National Bank of Fredericksburg appeals an order of the Board of Finance and Revenue which refused the bank's petition for review of Resettlement of Single Excise Tax for the year ended 1983, as settled by the Department of Revenue and approved by the Department of Auditor General.
This case, and the statute which the bank here challenges, arose as a result of the Pennsylvania Supreme Court's decision in Dale National Bank v. Commonwealth of Pennsylvania, 502 Pa. 170, 465 A.2d 965 (1983). In that case, the Supreme Court held, in accordance with the United States Supreme Court's decision in American Bank and Trust Co. v. Dallas County, 463 U.S. 855 (1983), that, when the Commonwealth is computing the amount of bank shares tax which a taxpayer bank owes, it may not, under 31 U.S.C. § 742,*fn1 consider obligations of the United States owned by the bank.
As in American Bank and Trust Co., the court in Dale National Bank concluded that the bank shares tax imposed on the taxpayer bank was invalid because the amount was computed on the basis of equity capital, which in turn was determined, in part, by United States obligations. "Congress intended . . . to invalidate all taxes measured directly or indirectly by the value of
[ 103 Pa. Commw. Page 340]
federal obligations, except those specified in [section 742]." Dale National Bank, 502 Pa. at 175, 465 A.2d at 968 (quoting American Bank and Trust Co., 463 U.S. at 867).
Under Article XIII of the Tax Reform Code of 1971, entitled "A Single Excise Tax on Certain Banks, Title Insurance Companies, Bank and Trust Companies and Trust Companies," as amended in 1983,*fn2 the express purpose of the single excise tax is
to provide revenues to the Commonwealth to match the anticipated revenues under Articles VII and VIII, as formerly in effect, which may be lost by reason of, or arising out of or supported by the interpretation of the provisions of such articles as construed by, the decision of the Supreme Court of Pennsylvania in Dale National Bank v. Commonwealth, 502 Pa. 170, 465 A.2d 965 (1983), and if for any reason no such revenues shall be lost, the tax imposed by this article shall be abated.
According to the Stipulations of Fact entered into by the parties, the department settled bank shares taxes against the bank which the bank paid for the tax years 1978 through 1983, inclusive. On August 30, 1983, the bank filed petitions for refund of shares taxes for those dates because, in determining the tax owed by the bank, the department had considered the value of the bank's United States securities in violation of 31 U.S.C. § 742. On February 1, 1984, the bank timely filed a "Report of Banks Shares Tax ...