Appealed From No. 91-3237. State Agency Board of Finance and Revenue.
Before: Honorable James Gardner Colins, President Judge, Honorable Joseph T. Doyle, Judge, Honorable Bernard L. McGINLEY, Judge, Honorable Doris A. Smith, Judge, Honorable Rochelle S. Friedman, Judge, Honorable Jim Flaherty, Judge. Opinion BY Judge McGINLEY. Judge Leadbetter did not participate in the decision in this case.
The opinion of the court was delivered by: Mcginley
OPINION BY JUDGE McGINLEY
Roxborough Manayunk Federal Savings and Loan Association (Roxborough) files exceptions to this Court's January 7, 1997, order affirming the January 22, 1992, order of the Board of Finance and Revenue which upheld the resettlement by the Commonwealth of Pennsylvania, Department of Revenue (Department) of Roxborough's Pennsylvania Mutual Thrift Institutions Tax for the year 1987.
The facts in this controversy are accurately recounted in an opinion by Judge Dan Pellegrini of this Court as follows:
Roxborough, a Pennsylvania corporation with its principal place of business in Philadelphia, is subject to the Pennsylvania Mutual Thrift Institutions Tax (MTIT) pursuant to Article XV of the Tax Reform Code of 1971 (Tax Reform Code), Act of March 4, 1971, P.L. 6, as amended, 72 P.S. §§ 8501-8506.
Roxborough[ *fn1 ] filed its 1987 MTIT report on February 13, 1988. In this report Roxborough did not include in its MTIT taxable income base the interest income earned from a demand deposit account[ *fn2 ] with the Federal Home Loan Bank of Pittsburgh (FHLB) because it believed such interest income was exempt.[ *fn3 ] In 1987, as it had in prior years, Roxborough deposited a substantial portion of its daily liquid funds in a demand deposit account with the FHLB. Demand deposit accounts with the FHLB, as well as bonds and notes it issues, all bear interest. Roxborough received periodic statements from the FHLB on this account detailing the interest accrued and daily balances.
The Department initially settled Roxborough's 1987 MTIT tax without changes. Then, in 1991, after resettling Roxborough's 1989 MTIT return, the Department initiated a resettlement of the 1987 report, increasing the tax due for that year. The Department resettled the tax by disallowing an exemption for the interest income from the FHLB demand deposit account, taking the position that an FHLB demand deposit account was not required to be exempt as a United States obligation, and adjusted the tax liability accordingly.[ *fn4 ] On Roxborough's appeal, the Board sustained the resettlement initiated by the Department. Roxborough then filed a petition for review with this Court which was heard de novo. (footnote omitted).
Roxborough Manayunk Federal Savings and Loan Association v. Commonwealth of Pennsylvania, 687 A.2d 1202, 1203-1204 (Pa. Commw. 1997).
This Court issued an order on January 7, 1997, affirming the order of the Board with judgment to be entered on the praecipe of either party unless exceptions were timely filed.
Roxborough filed the following exceptions:
1. The prior opinion of this Court misapplies and misconstrues federal law governing demand ...