Court Opinion

ID: 9637484
Source: CourtListenerOpinion
Date Created: 2023-08-22 15:07:37.322046+00
Date Added: 2024-06-11T18:09:56.487496
License: Public Domain

OPINION BY
Judge COHN JUBELIRER.
The Commonwealth of Pennsylvania, pursuant to Pa. R.A.P. 1571(i), filed Exceptions to this Court’s decision in First Union Natl Bank v. Commonwealth, 867 A.2d 711 (Pa.Cmwlth.2005)(en banc), arguing that this Court’s en banc opinion (1) is contrary to precedent, (2) fails to account for both the February 22, 1998 merger of “First Union National Bank” (North Bank) and “First Union National Bank (South)” (South Bank), and the April 28, 1998 merger of the Surviving North Bank with “CoreStates Bank, N.A.” (CoreStates), (3) fails to give deference to the Department of Revenue in this “highly technical matter,” and (4) erred in not adequately or properly addressing all of its previous arguments.1
By way of background, there were three banks relevant to the appeal: North Bank, which possessed continuous tax contacts with Pennsylvania for the entire period relevant to this appeal; CoreStates, which engaged in business in Pennsylvania for the entire period relevant to this appeal; and, South Bank, which was only engaged in business in North Carolina and never Pennsylvania. These banks were all owned by a holding company, First Union Corporation (the “Holding Company”). Because the name “First Union National Bank (South)” was confusingly similar to “First Union National Bank,” the parties agreed to refer to the former as the South Bank and the latter as the North Bank for purposes of the appeal.
In our en banc opinion we held that, under Section 701.1 of what is colloquially known as the Bank and Trust Company Shares Tax (Shares Tax),2 where two banks merge, and one had no pre-merger tax contacts with Pennsylvania, the six years of pre-merger book values of that extraterritorial bank are not to be included in the Shares Tax historical averaging method to determine its “current value” for the computation of its Shares Tax liability. As we articulated in First Union Nat’l Bank:
Section 701.5 of the Shares Tax clearly defines “institution” so as not to include banks with no tax contacts with Pennsylvania. Because South Bank had no pre-merger tax contacts with Pennsylvania, it was not an “institution.” Thus, its pre-merger value must be excluded when calculating the tax. In the 1994 amendments to Section 701.1 of the Shares Tax, the General Assembly changed all references in the Shares Tax statute from “banks” to “institutions.” The Department’s interpretation of the Shares Tax does not distinguish between institutions and banks. Were we to follow that interpretation, and read “institutions” to mean “banks,” we would not be giving effect to the statutory amendments. This we cannot do. It is true *114that the General Assembly did not enact a provision specifying the formula for calculating the Shares Tax where an institution merges with a bank that does not meet the definition of an institution. However, even if we were to determine that the statute was not clear because it does not contain this specific formula, we would have to resolve any ambiguity in favor of the taxpayer.
867 A.2d at 716 (footnote and citations omitted).
Commonwealth first argues that this Court ignored well-established precedent upholding the propriety of using an historical averaging method to determine “current value.” Fidelity Bank, N.A. v. Commonwealth, 165 Pa.Cmwlth. 524, 645 A.2d 452 (1994). It asserts that the Shares Tax, by using the six-year average, does not actually tax a bank’s extraterritorial capital, surplus and profits from previous years; rather, it only employs this method “to determine a reliable reflection of the value of shares to be taxed in the current year .... ” (Commonwealth Br. at 9)(em-phasis in original)(quoting Fidelity Bank at 460.) It posits that the “clear holding [of Fidelity Bank ] is that historical value data can be considered in computing a present value, and that such consideration does not constitute retroactive taxation of historical values.” (Commonwealth Reply Br. at 2.) We, however, agree with North Bank that, in this case, no one is challenging the use of the six-year average in computing a present value as required by statute. Instead, this case involves whether the statute requires that the six-year average be used in the mergers that occurred involving North Bank, South Bank and CoreStates. Consequently, the principles established and affirmed in Fidelity Bank were not determinative to the issue presented.
Next, Commonwealth asserts that, because North Bank merged with South Bank prior to its merger with CoreStates, its merger with CoreStates was, effectively, the merger of two “institutions” and requires the inclusion in the average value calculation of all six years for all three banks. We, however, agree with North Bank that there is “no authority or logic” to support the argument that the second merger between North Bank and CoreS-tates (admittedly, a merger of two “institutions”) retroactively turns the earlier North Bank/South Bank merger (admittedly, not a merger of two “institutions”) into a merger of two institutions.
We believe all of the remaining issues were properly disposed of by the decision of our en banc Court, which neither misapplied nor misconstrued the law.3 Accordingly, the Exceptions to First Union Nat’l Bank v. Commonwealth are dismissed.

ORDER

NOW, October 20, 2005, the Exceptions filed by the Commonwealth of Pennsylvania on March 2, 2005, in the above-captioned matter are hereby DISMISSED.

. We would clarify that footnote 13 to this Court's en banc decision should not be read to impose a requirement on the Commonwealth to preserve/present issues before the Board of Finance and Revenue. Because the Board functions as an adjudicator in Board of Finance and Review proceedings, it could neither raise nor preserve any issue.

. Act of March 4, 1971, P.L. 6, as amended, added by Section 2 of the Act of December 17, 1982, P.L. 1385, 72 P.S. § 7701.1.

. Furthermore, as our holding is premised on a straightforward application of statutory construction, this is not an instance where we are required to give deference to the Department of Revenue’s interpretation of the Shares Tax statute.