Court Opinion

ID: 6369735
Source: CourtListenerOpinion
Date Created: 2022-06-24 23:44:46.9838+00
Date Added: 2024-06-11T15:49:57.582545
License: Public Domain

*290Dissenting Opinion by
Judge Doyle :
I respectfully dissent. I believe our decisions in Commonwealth v. Commonwealth Federal Savings and Loan Association of Norristown, 29 Pa. Commonwealth Ct. 222, 370 A.2d 409 (1977) and First Federal Savings and Loan Association of Hazleton v. Commonwealth, 25 Pa. Commonwealth Ct. 359, 360 A.2d 773 (1976), which held that taxation under the Mutual Thrift Institutions Tax Act1 (MTIT Act) constitutes a franchise or excise tax on the privilege of doing business in the Commonwealth, are in error.
The nature of a tax is to be determined by its substance and not by its label. Gaugler v. Allentown, 410 Pa. 315, 189 A.2d 264 (1963); Coney Island, II, Inc. v. Pottsville Area School District, 72 Pa. Commonwealth Ct. 461, 457 A.2d 580 (1983). Coney Island is illustrative. In that case, we held that local “business privilege taxes” were invalid to the extent that they exceeded the limitations of Section 8 of the Local Tax Enabling Act.2 Section 8 provides in pertinent part:
No taxes levied under the provisions of this act shall be levied by any political subdivision on the following subjects exceeding the rates specified in this section:
(2) On each dollar of the whole volume of business transacted by wholesale dealers in goods, wares and merchandise, one mill, by retail dealers in goods, wares and merchandise and by proprietors of restaurants or other places where food, drink and refreshments are served, one and one-half mills....
We rejected the argument that gross volume of business was merely the measure of the tax and noted that *291the legislation which labeled the taxes “business privilege taxes” provided “that the taxes imposed shall be ‘ON each and every dollar of the whole or gross volume of business transacted. ’ ’ ’ Id. at 468, 457 A.2d 583 (emphasis by the Court). We looked beyond the face of the so called privilege taxes to their true nature and found them to be taxes on the subjects limited by Section 8. Similarly, the MTIT Act provides, in pertinent part:
(b) From and after the passage of this act, every mutual thrift institution shall annually, upon the fifteenth day of April of each year . . . make a report to the Department of Revenue, setting forth the entire amount of net earnings or income received or accrued by said mutual thrift institution from all sources during the preceding year, . . . and upon such net earnings or income the said mutual thrift institution shall pay into the State Treasury, through the Department of Revenue, for the use of the 'Commonwealth, within the time prescribed by this act for making such annual report, a State Excise Tax at the rate of six per cent (6%) for the years 1964, 1965, and 1966, and at the rate of seven and one-half per cent (7%%) for the year 1967 and the year 1968, and at the rate of eleven and one-half per cent (11 %%) for the year 1969 and thereafter, upon such annual net earnings or income.... (Emphasis added.)
72 P,S. §1986.3 (b).
It is clear from a reading of the MTIT Act that it imposes a tax ON the net earnings of mutual thrift institutions, not simply on the privilege of doing business measured by net earnings as the majority contends. As a tax on net earnings or income, the MTIT Act tax is limited by the exemption embodied in Act *29294.3 I do not believe interest income from the obligations of government or its agencies may be subject to taxation under the MTIT Act.
I would reverse the order of the Board of Finance and Revenue.
Judge Williams, Jr. joins in this dissent.

 Act of June 22, 1964, P.L. 16, as amended, 72 P.S. §§1986.1 through 1986.6.

 Act of December 31, 1965, P.L. 1257, as amended, 53 P.S. §6908.

 Act of August 31, 1971, P.L. 395, 72 P.S. §§4752-1 through 4752-2.