Appeal from the Order of the Commonwealth Court at Nos. 1704 and 1751 C.D. 1986, entered June 10, 1987 affirming the Orders of May 29, 1985 and May 7, 1986 of the Court of Common Pleas of Allegheny County, Civil Division, at No. GD 84-4673. Pa. Commw. A.2d (19 ).
Martin W. Sheerer, Pittsburgh, for Fox Chapel Area School Dist.
Ronald W. Crouch, Buchanan, Ingersoll, P.C., Pittsburgh, for Borough of Fox Chapel.
Arthur H. Stroyd, Jr., Thomas L. Peters, Reed Smith Shaw & McClay, Pittsburgh, Pennsylvania, for Anthony and Susan O'Reilly.
Nix, C.j., and Larsen, Flaherty, McDermott, Zappala, Papadakos and Stout, JJ.
This matter encompasses consolidated appeals from orders of the Commonwealth Court, 106 Pa. Commw. 516, 527
A.2d 581, which affirmed the order of the Court of Common Pleas of Allegheny County.
The uncontroverted facts are as follows. Anthony J.F. O'Reilly, a citizen of the Republic of Ireland, and his wife Susan O'Reilly, a citizen of Australia, are residents of the Borough of Fox Chapel. They derive income from Pennsylvania and the Republic of Ireland. This income was subject to taxation by the Borough of Fox Chapel and the Fox Chapel Area School District, pursuant to legislation authorized by the Local Tax Enabling Act.*fn1
On January 5, 1982, the O'Reilly's filed a claim seeking a refund of $16,437.59 for earned income taxes overpaid for the years 1978, 1979 and 1980. The O'Reilly's claimed they were eligible for a full dollar-for-dollar credit against their tax liability as a consequence of earned income taxes paid in those years to the Republic of Ireland. This claim was based upon the enabling act, which provided for a taxpayer credit for "payment of any tax on income to any State other than Pennsylvania." 53 P.S. § 6914. Their claim was denied on March 26, 1982. On April 21, 1982, the O'Reillys again filed a claim, on the same basis, for $7,978.98 based on earned income taxes paid to Fox Chapel in 1981. This claim was denied on November 2, 1982. The basis of these denials was the taxing authority's position that the tax credit only applied to taxes paid to "states" which were part of the United States.
As a result the O'Reillys instituted suit in the Court of Common Pleas of Allegheny County for a refund of earned income taxes which they claim were overpaid in 1980 and 1981. It was stipulated by the O'Reillys that they were barred by the applicable statute of limitation from recovering any taxes paid before January 5, 1980.
Subsequently, the Borough of Fox Chapel and the Fox Chapel Area School District counterclaimed for unpaid taxes due since the third quarter of 1981, alleging that the O'Reillys had improperly offset business losses against ...