The opinion of the court was delivered by: Senior Judge Kelley
BEFORE: HONORABLE BONNIE BRIGANCE LEADBETTER, President Judge, HONORABLE DAN PELLEGRINI, Judge, HONORABLE JAMES R. KELLEY, Senior Judge.
Valentine Company (f/k/a Nichols & Associates, Inc.) (Valentine) petitions for review of the order of the Pennsylvania Board of Finance and Revenue (Board)*fn1 refusing Valentine's petition for review of the Pennsylvania Department of Revenue's (Department) determination of its surplus lines tax obligation imposed on gross premiums for the tax year ending December 31, 2004 (2004 tax year) pursuant to the provisions of Article XVI of The Insurance Company Law of 1921 (Insurance Law).*fn2 We affirm.
Valentine is an insurance company licensed to carry surplus lines of liability insurance in Pennsylvania.*fn3 An excess healthcare professional liability policy in the amount of $25,000,000.00, Policy No. 6791291 (Policy), was issued by Lexington Insurance Company through Valentine for the policy period July 1, 2004 through July 1, 2005. Temple University -- of the Commonwealth System of Higher Education, the Temple University Health System, and a number of their subsidiaries, unincorporated divisions, and employees (collectively, Temple) were included as some of the named as insureds on the Policy.*fn4 Temple paid the premiums for the Policy, totaling $6,800,000.00 for the relevant policy period.
On January 7, 2005, Valentine filed a timely Surplus Lines Tax Report with the Department for the 2004 tax year. Although Valentine reported the gross premiums for the Policy, it deducted those premiums from the gross premiums taxable in the report.*fn5
On September 23, 2005, the Department mailed a settlement to Valentine for the 2004 tax year. The settlement assessed an additional tax due in the amount of $204,000.00, representing the 3% surplus lines tax imposed under Section 1621(a) of the Insurance Law on the gross premiums of $6,800,000.00 for the Policy.
On October 18, 2005, Valentine filed a timely petition for resettlement with the Department, arguing that Temple was immune from the surplus lines tax because it is an instrumentality of the Commonwealth. On March 20, 2006, the Department issued a decision and order denying Valentine's petition for resettlement.
On May 1, 2006, Valentine filed a petition for review of the decision and order with the Board. On September 15, 2006, the Board issued an opinion and order disposing of Valentine's petition in which it made the following relevant conclusion:
[Valentine]'s gross premiums tax shall not be resettled. Temple University, its numerous affiliated entities, and the individuals employed or contracting with Temple and its affiliated entities are not governmental entities entitled to a presumption of tax immunity. See Mooney v. Temple University Board of Trustees, 448 Pa. 424[, 292 A.2d 395] (1972); see also Doughty v. City of Philadelphia, 596 A.2d 1187 [(Pa. Cmwlth. 1991)]. As the statute does not exempt any premiums from tax and government tax immunity does not apply, the premiums received by [Valentine] from policy #6791291 are subject to the surplus lines tax.
Board Opinion at 6. Based on the foregoing, the Board issued an order refusing Valentine's petition for review, and sustaining the Department's decision and order. Id. at 7. Valentine then filed the instant petition for review in this Court from the Board's order.
In this case, Valentine claims: (1) that the Board erred in refusing its petition for review and sustaining the Department's decision and order because Temple is immune from the surplus lines tax as it is a Commonwealth instrumentality under the provisions of the Temple University-Commonwealth Act (Temple Act)*fn6; and (2) that even if it is assumed that Temple is not immune from the surplus lines tax, any change in Temple's immunity from the tax should only be prospectively applied.*fn7
Valentine first claims that the Board erred in refusing its petition for review and sustaining the Department's decision and order because Temple is immune from the surplus lines tax as it is a Commonwealth instrumentality under the Temple Act.*fn8 More specifically, Valentine alleges that a number of provisions in the Temple Act demonstrate that Temple is an instrumentality of the Commonwealth.*fn9 In addition, Valentine sets forth instances in which the Department has previously recognized that Temple is immune from other taxes as a Commonwealth instrumentality.*fn10 Further, Valentine points to Exhibits G, H, and I of the Stipulation of Facts, outlined above, in which the Department considered Temple to be immune from the surplus lines tax as a Commonwealth ...