Appeal from the Order of the Commonwealth Court at No. 562 C.D. 1985, entered April 21, 1987, reversing and remanding the Order of the Board of Finance and Revenue at Board Docket No. R-8481, entered January 30, 1985. Pa. Commw. ,
Nix, C.j., and Larsen, Flaherty, McDermott, Zappala, Papadakos and Stout, JJ. Larsen, J., files a dissenting opinion in which Papadakos, J., joins.
This appeal calls into question the constitutionality of Act 66 of 1983, the Single Exise Tax statute,*fn1 promulgated by the General Assembly as a direct result of this Court's decision in Dale National Bank v. Commonwealth, 502 Pa. 170, 465 A.2d 965 (1983). That decision struck down as violative of federal law the method of computing the Bank Shares Tax*fn2 which required the taxpayer to include obligations of the United States owned by the taxpayer in its total assets for the purpose of calculating net worth. The Single Exise Tax, a one-time tax upon all taxpayers which claim a benefit from Dale National Bank, "for the privilege of doing business in this Commonwealth," 72 P.S. § 8301, has as its express purpose the recoupment of revenue which would otherwise be lost as a result of that decision. 72 P.S. § 8305.
The mechanics of the Single Excise Tax, although at first blush appearing complex, are rather simple. The tax is calculated by multiplying the aggregate amount of the excise tax payable by a fraction, the numerator of which is the total of the refunds claimed or to be claimed and the unpaid shares taxes by each taxpayer as a result of Dale National Bank and the denominator of which is the total of refunds claimed or to be claimed and unpaid shares taxes of all taxpayers. 72 P.S. § 8303. The aggregate amount of excise tax is equal to the total of the refunds claimed or to be claimed and the unpaid shares taxes by all taxpayers as determined by the department. 72 P.S. § 8304. With the
aggregate amount in effect canceling out the denominator of the measurement fraction, the tax is actually the amount of the refund claimed or to be claimed by the individual taxpayer, or the amount the taxpayer has refused to pay, as a result of Dale National Bank.
Act 66 further provides that a taxpayer subject to its terms must make a lump sum payment of the excise tax on or before April 15, 1984. 72 P.S. § 8306. A taxpayer which has paid its bank shares tax and which seeks or contemplates seeking a refund is permitted to claim a credit against the excise tax due for the full amount of the refund, provided the taxpayer withdraws its refund petition or waives its right to file a petition for a refund. 72 P.S. § 8307.
First National Bank of Fredericksburg, a bank incorporated under the laws of the United States and having its principle place of business in Fredericksburg, Pennsylvania, paid its bank shares taxes in the full amounts settled by the Department of Revenue for the tax years 1978 through 1983, inclusive. On August 30, 1983, the bank petitioned the Board of Finance and Revenue ("The Board") for a full refund of the shares taxes paid, claiming that the department had improperly considered the value of the United States securities owned by the bank in calculating the tax owed, in violation of 31 U.S.C. § 742,*fn3 and the constitutional principle of state tax immunity announced in McCulloch v. Maryland, 4 Wheat. (17 U.S.) 316, 4 L.Ed. 579 (1819). The
bank apparently filed its refund petition as a response to the United States Supreme Court decision in American Bank and Trust Co. v. Dallas County, 463 U.S. 855, 103 S.Ct. 3369, 77 L.Ed.2d 1072 (1983), that struck down a state tax on bank shares computed on the basis of equity capital which was determined in part by United States obligations. The Court held that the tax was contrary to the language of 31 U.S.C. 742. On May 30, 1984, the Board granted First National Bank of Fredericksburg's Petitions for Refund, thereby reducing the bank's shares tax liability for the tax years 1978 through 1983 by $155,807.28, the full amount of the bank shares taxes paid for those years. The Commonwealth did not appeal this decision of the Board.
In the interim, we decided Dale National Bank, and the General Assembly responded with Act 66. In compliance with section 7 of the Act, adding section 1304 of the Tax Reform Code, 72 P.S. § 8304, First National Bank of Fredericksburg timely filed a "Report on Banks Shares Tax Refunds Claimed or to be Claimed Pursuant to Act No. 66 of 1983" on February 1, 1984. Thereafter the bank filed a Single Excise Tax Report for 1983 in accordance with 72 P.S. § 8306. In these reports, the bank indicated that it had previously claimed a refund in the amount of $155,807.32. On May 1, 1984, the department settled the bank's Single Excise Tax at $155,807.28, and a copy of the settlement was sent to the bank on May 11, 1984.*fn4
The bank thereupon petitioned the Board of Appeals of the Department of Revenue for a resettlement of the Single Excise Tax assessed. The Board of Appeals denied the petition on September 5, 1984. The bank then sought review with the Board of Finance and Revenue which
likewise denied the resettlement petition by order dated January 30, 1985.
On appeal, the Commonwealth Court, sitting en banc, reversed the order of the Board and remanded the matter to the department for a resettlement of the bank's Single Excise Tax. 103 Pa. Commw. 337, 520 A.2d 895. The court concluded that Act 66 deprived the bank of due process of law by extinguishing its right to recover the tax refund to which it was entitled. Moreover, the legislature, in promulgating the Single Excise Tax legislation, had impermissibly infringed upon the authority of this Court to curtail the operation of a state law which unconstitutionally conflicted with federal law, in violation of the doctrine of separation of powers. The court was careful to tailor its conclusions to apply solely to First National Bank of Fredericksburg, and expressly refused to address the bank's contention that the Act is unconstitutional per se.
Fearing that the decision of the Commonwealth Court would extend beyond the instant litigant and thus have grave ramifications upon the state fisc,*fn5 the Commonwealth filed a direct appeal to this Court pursuant to 42 Pa.C.S. § 723(b), which permits an appeal as of right to this Court from any final order of the Commonwealth Court entered in an appeal from a decision of the Board of Finance and Revenue.
The Commonwealth presents two arguments which it believes would mandate our reversing or modifying the order under review. It contends that the Commonwealth Court incorrectly assumed without deciding that our decision in Dale National Bank should be given retroactive effect. Were the decision to be applied prospectively only, i.e., to bank shares taxes assessed subsequent to the decision, the instant taxpayer would have had no right to a refund on the bank shares taxes paid. In the alternative, the Commonwealth contends that the bank was only entitled
to the shares taxes paid reduced on a pro rata basis, and not a complete refund of those taxes. We begin our inquiry with the first of these contentions.
First National Bank of Fredericksburg's Right to a Refund
The initial question presented to this Court is whether Dale National Bank provided taxpayers subject to the bank shares tax with a legal right to a refund of taxes erroneously assessed by including United States obligations in their tax base. As the Commonwealth correctly notes, this inquiry is essential to our subsequent determination of the constitutionality of the Single Excise Tax. Because the Single Excise Tax is effective only to the extent tax revenues are lost by reason of the Dale National Bank decision, 72 P.S. § 8305, that is, to the extent that taxpayers may claim refunds or refrain from paying bank shares taxes, we must determine whether Dale National Bank has provided First National Bank of Fredericksburg with these rights.
The instant litigants disagree on whether we resolved the question of the applicability of Dale National Bank to similarly situated taxpayers in that decision. It is the Commonwealth's position that we decided nothing more in that case than whether the consideration of United States securities in the assessment of the bank shares tax conflicted with 31 U.S.C. § 742. Because of a stipulation entered into between the parties, the appropriate relief to be given upon the invalidation of this procedure was not an issue. The stipulation provided, in relevant part, that
"If the Court sustains the position of the Petitioner as to the exclusion of U.S. securities and accrued interest thereon . . . it is agreed that the Petitioner's Bank Shares Tax as of January 1, 1978 is $-0-. . . ."
and so we did not address ...