The opinion of the court was delivered by: Judge Pellegrini
BEFORE: HONORABLE BONNIE BRIGANCE LEADBETTER, President Judge, HONORABLE DAN PELLEGRINI, Judge, HONORABLE JAMES R. KELLEY, Senior Judge.
Before this Court is a petition for review filed by Dijas Capital, LLC (Dijas) from what it alleges is a final adjudication of the Department of Community and Economic Development (Department) awarding it $20,868.25 in enterprise zone tax credits under the Neighborhood Assistance Act. Also before us is a motion to quash filed by the Department alleging that Dijas may not file a petition for review because there was no final adjudication of tax credits that was subject to judicial review.
This case involves the Neighborhood Assistance Act (Act)*fn1 which offers tax credits as encouragement to businesses to rehabilitate, expand or improve buildings or land in impoverished communities that are designated as "Enterprise Zones."*fn2 Sections 1903-A and 1904-A of the Act, 72 P.S. §§8903-A, 8904-A. See also 12 Pa. Code §§135.2, 135.3 "Impoverished areas" is defined under the Act as "[a]ny area in this Commonwealth which is certified as such by the Department of Community and Economic Development and the certification is approved by the Governor. Such certification shall be made on the basis of Federal census studies and current indices of social and economic conditions." Section 1902-A, 72 P.S. §8902-A.*fn3 "Enterprise Zones" are defined as "[s]pecific locations with identifiable boundaries within impoverished areas which are designated as enterprise zones by the Secretary of Community and Economic Development." Section 1902-A of the Act, 72 P.S. §8902-A.
In order to receive tax credits under the Act, the business must submit a proposal to the Department and then it must be approved by the Secretary. The proposal of the business must set forth the program to be conducted, the impoverished area selected, the estimated amount to be invested in the program and the plans for implementing the program. See Section 1904-A of the Act, 72 P.S. §8904-A; 12 Pa. Code §§135.47, 135.48. Pursuant to Section 1904-A(f), the tax credit approved shall be applied against the business firm's tax liability for the taxes for the current taxable years as of the date on which the credit was approved. Under Section 1905-A of the Act, 72 P.S. §8905-A, the tax credit may be granted for 25% of the total amount contributed during the taxable year by a business or 25% of qualified investments by a private company in programs approved pursuant to Section 1904-A of the Act; 12 Pa. Code §135.50. The Secretary will notify the business of his/her decision to approve or disapprove a proposal in writing. If it approves the proposal, it shall state the maximum credit allowable to the business. Section 1906-A of the Act, 72 P.S. §8906-A; 12 Pa. Code §135.48. The total amount of tax credit granted for programs approved under the Act cannot exceed $18 million. 72 P.S. §8904-A. The Act does not provide for an appeal process from the denial of a proposal or from the grant of a proposal for less than the requested amount.
Regarding this appeal, Dijas owns property in Bucks County, Pennsylvania, in an enterprise zone consisting of a 19,000 square-foot building that it leases to Irene's Bakery and Gourmet Kitchen.*fn4 Dijas purchased the building for $1,050,000 and spent an additional $83,473 in construction and renovation costs to improve the property.*fn5 On June 1, 2007, pursuant to Section 1904-A(a) of the Act, 72 P.S. §8904-A(a), Dijas submitted an application to the Department seeking a tax credit under the Act for fiscal year 2007-2008, along with letters of support from Bucks County agencies.
By letter dated August 1, 2007, the Department acknowledged receipt of Dijas' application and assigned it control #200707071105. It advised Dijas that the application was incomplete because it lacked sufficient information to "render a fair review" of the request. The letter noted: "Prior to the start of a project, plans must receive approval from the Department in order to be eligible for tax credits. Only construction-related costs for work to be accomplished can be submitted." It informed Dijas that in order to complete processing of its application, a revised and completed application had to be submitted along with its original application. It also requested documentation of property ownership. Dijas resubmitted its application with the requested information on October 1, 2007, further requesting an additional $262,500 for additional acquisition costs.*fn6 The Department acknowledged receipt of this application and assigned it control #200711291524. Because Dijas had submitted the second application under the bakery's name and not its own, there were e-mails back and forth between Department personnel that a withdrawal letter had to be submitted for the second application for control #200711291524 because it was a duplicate but with a different applicant name. Also contained within those e-mails were specific comments regarding the enterprise zone tax credit requested indicating that only construction costs would be permitted and that information should be conveyed to Dijas.
Dijas withdrew the second application and was given an extension of time to submit the necessary information that was omitted from the first application. However, Dijas never provided documentation with the original or resubmitted application to prove that the property was purchased within the fiscal year July 1, 2007, through June 30, 2008.
Ultimately, the Secretary awarded Dijas tax credits in the amount of $20,868.25 based on 25% of its qualified expenditures/investment of $83,473 made for improvements for the period of July 1, 2007, through June 30, 2008. Believing that it was still owed $283,368 in tax credits, 25% for the acquisition costs of the building at $1,050,000, Dijas filed a petition for review with this Court alleging that the Department abused its discretion by disallowing acquisition costs for consideration which were incurred prior to July 1, 2008. It requested that we reverse the Department's determination and order the Department to approve the remaining amount of tax credits it requested in the amount of $283,368. In response, the Department filed a motion to quash that petition arguing that its offering of $20,868.25 in tax credits to Dijas was not an adjudication which could be appealed to this Court. We will first address the Department's motion to quash before addressing the merits of Dijas' petition for review.
The Department argues that not all decisions by a Commonwealth agency are adjudications subject to appeal, and only agency decisions that affect a party's legitimate expectations of personal or property rights are appealable.*fn7 The Department contends that Dijas has no entitlement to tax credits under the Act because a business is only eligible for tax credits 1) if the Secretary approves the proposal of the business, (2) the Department may limit the amount of tax credits it grants to any applicant, and (3) nothing contained within the Act requires the Department to grant tax credits in any amount to any applicant. Therefore, the Department's approval or disapproval of Dijas' application for enterprise zone tax credits is not an adjudication subject to judicial review because Dijas cannot have any expectation to receiving a tax credit and it is not a property right.*fn8
Dijas disagrees, arguing that the Secretary's decision is an adjudication subject to judicial review because a tax credit is a reduction in tax liability. Dijas explains that a tax credit has value and a reduction in the tax liability of the taxpayer is a decision affecting the liability or obligations of the taxpayer. Because it affects the liabilities and obligations of the taxpayer, it determines the amount of money the taxpayer must pay and, therefore, is a decision affecting a property right.
Section 501 of the Administrative Agency Law, 2 Pa. C.S. §501, provides the following:
(a) General Rule. -- Except as provided in subsection (b),*fn9 this subchapter shall apply to ...