Court Opinion

ID: 4966834
Source: CourtListenerOpinion
Date Created: 2021-09-24 16:21:28.335321+00
Date Added: 2024-06-11T08:16:14.104379
License: Public Domain

Justice EAJKIN,
dissenting.
I find this case controlled by the precedent of Laurel Pipe Line Company v. Commonwealth of Pennsylvania, Board of Finance and Revenue, 537 Pa. 205, 642 A.2d 472 (1994). Laurel was an Ohio corporation that operated pipelines from Philadelphia to Pittsburgh and intermediate points. It sold the Aliquippa to Cleveland pipeline, including “related equipment, land, rights of way, buildings, oil tanks, and similar real and personal property”; however, Laurel continued to operate other pipelines. Id., at 473 n. 1. While use of Laurel’s pipelines was the very asset that generated its income, this Court found this was not a disposition in the regular course of Laurel’s business, and thus was taxable as non-business income rather than business income.
If anything, the facts here are stronger here than those in Laurel. The present sale was of a single parcel of out-of-state land, not an extended property in Pennsylvania. The sale included no business ac*1014coutrements, no related equipment or rights of way, and nothing related to the use of the land as a business asset; in Laurel, the pipeline was only useful as a business asset. It was just land, and land transactions were not part, much less an integral part, of the “regular trade” of the seller, which was a very focused trade— acquiring and selling pulpwood. I find no reason to distinguish or reject the precedent of Laurel.
The majority does so based largely on the amendments to the relevant statutory definition of business income since Laurel was decided. The legislature’s decision to reframe a portion of the definition in the disjunctive is emphasized at length. Laurel, however, was not based on the conjunctive nature of that language. Indeed, it was not based on that portion of the definition at all — the court quotes the definition of course, but never mentions the conjunctive framing of the three words. Changing to the disjunctive did absolutely nothing to alter the reasoning of the court, which properly focused on whether the transaction was an integral part of Laurel’s regular trade or business.
While the amendments are irrelevant to the analysis, if anything, they undermine the very application of the “function” test on which the majority relies. Majority Op., at 1002-03. That test was first mentioned in Pennsylvania in Welded Tube Company of America v. Commonwealth of Pennsylvania, 101 Pa.Cmwlth. 32, 515 A.2d 988 (1986). This “alternate” test is not at all obvious from the language of the definition — it is acknowledged to be an interpretation of the second clause of the definition. See id., at 993-94. Other authorities do not find such a test, and deem this clause to be merely clarifying language modifying the substantive first clause. However, I acknowledge this Court approved of the test in Ross-Araco Corp. v. Commonwealth of Pennsylvania, Board of Finance and Revenue, 544 Pa. 74, 674 A.2d 691, 694 (1996).
What is worth noting is that the amending of the statutory language on which the majority relies so heavily is a change to the very language from which the function test was divined. The amendment does not address the analysis of Laurel — what it does is modify the language on which the function test is based. If anything, a significant change to that language suggests a need to reexamine the continued viability of a test which is based on the pre-amendment language. Where a test is an interpretation of a clause that is subsequently changed, it is the test itself that is in question.
In fact, the application of this part of the definition was not a problem in need of legislation — no case is cited where outcomes resulted from a court requiring all three factors (conjunctively), rather than only one (disjunctively). No case is cited where these three factors are in play at all — Glatfelter acquired, managed, and disposed of the land, just as Laurel acquired, managed, and disposed of the pipeline. Instead, every discussion of the function test revolves around the “integral parts” language — this is the language that is emphasized by the court in Welded Tube, where it is first mentioned, and again when the test was adopted in Laurel and Ross-Araco. Not one of these opinions discusses, much less relies upon, the “acquisition, management, disposition” language.
Therefore I would reverse on the authority of Laurel. As this would resolve the matter in favor of appellant, I offer no opinion on the second or third issues raised.1

. However, while some duplicative taxation has been found acceptable by the United States Supreme Court, I suggest the line of constitutional acceptability should be drawn somewhere short of taxing 142% of the sale proceeds as was the result here.