Mission Funding Alpha v. Commonwealth of PA

IN THE COMMONWEALTH COURT OF PENNSYLVANIA
Mission Funding Alpha, :
Petitioner :
:
v. :
:
Commonwealth of Pennsylvania, : No. 313 F.R. 2012
Respondent : Argued: September 16, 2015
BEFORE: HONORABLE DAN PELLEGRINI, President Judge
HONORABLE BERNARD L. McGINLEY, Judge
HONORABLE BONNIE BRIGANCE LEADBETTER, Judge
HONORABLE RENÉE COHN JUBELIRER, Judge
HONORABLE MARY HANNAH LEAVITT, Judge
HONORABLE P. KEVIN BROBSON, Judge
HONORABLE ANNE E. COVEY, Judge
OPINION BY
JUDGE COVEY FILED: December 10, 2015
Mission Funding Alpha (MFA) petitions this Court for review of the
Board of Finance and Revenue’s (Board) March 27, 2012 order sustaining the Board
of Appeals’ (Appeals Board) order dismissing MFA’s Pennsylvania Foreign
Franchise Tax (Franchise Tax) refund claim as untimely. The sole issue before the
Court is whether the Board erred in concluding that April 15, 2008 was the date on
which MFA made its “actual payment of the tax” under Section 3003.1(a) of the Tax
Reform Code of 1971 (Tax Reform Code).1 Upon review, we reverse.
Pursuant to Rule 1571(f) of the Pennsylvania Rules of Appellate
Procedure, the parties stipulated:2 MFA is a calendar-year taxpayer that conducted
1
Act of March 4, 1971, P.L. 6, as amended, added by Section 14 of the Act of July 1, 1985,
P.L. 78, 72 P.S. § 10003.1(a).
2
There is no record in appeals from Board determinations; rather, the facts and issues are
stipulated by the parties. Pa.R.A.P. 1571(f).
business for the year ending December 31, 2007 (2007 Tax Year) and was subject to
Franchise Tax. During the 2007 Tax Year, MFA remitted quarterly estimated
payments to its 2007 Franchise Tax account totaling $430,000.00 for its 2007 Tax
Year liabilities. A $32,297.00 credit overpayment was also carried forward for
MFA’s 2007 Tax Year. As of April 15, 2008, MFA’s estimated payments and
deposited credits totaled $462,297.00. Without having sought an extension, MFA
filed its Corporate Tax Report (PA RCT-101) on September 19, 2008, reporting
therein its total tax liability of $380,519.00 (consisting of a $66,344.00 Franchise Tax
liability and a $314,175.00 Corporate Net Income Tax liability). After all tax credits
and deposits were applied to the 2007 Tax Year liability, there remained an
$81,778.00 overpayment. MFA elected to have the Department of Revenue
(Department) transfer the overpayment for application to its tax year ending
December 31, 2008 (2008 Tax Year). The Department transferred the overpayment,
accepted MFA’s Franchise Tax liability and imposed a $913.00 late-filing penalty
because MFA did not request a filing extension and did not file its Corporate Tax
Report by April 15, 2008.3
On September 16, 2011, MFA filed a Petition for Refund (Petition) of its
Franchise Tax with the Appeals Board. On September 20, 2011, the Appeals Board
dismissed the Petition as untimely. On December 15, 2011, MFA appealed from that
decision to the Board. On February 22, 2012, the Board notified MFA that its
untimely Petition was a jurisdictional defect that had to be resolved before it could
review the merits. By March 8, 2012 letter to the Board, MFA explained why its
3
Although the funds were remitted “[a]s of April 15, 2008,” the parties’ Stipulation of Facts
does not specify when the Department transferred and accepted the funds. Stipulation of Fact ¶ 10.
2
Petition was timely filed. By March 27, 2012 order, the Board sustained the Appeals
Board’s decision. MFA appealed to this Court.4
Initially, Section 3003.1(a) of the Tax Reform Code provides:
For a tax collected by the [Department], a taxpayer who has
actually paid tax, interest or penalty to the Commonwealth
or to an agent or licensee of the Commonwealth authorized
to collect taxes may petition the [Department] for refund or
credit of the tax, interest or penalty. Except as otherwise
provided by statute, a petition for refund must be made to
the [D]epartment within three years of actual payment of
the tax, interest or penalty.
72 P.S. § 10003.1(a) (emphasis added). This Court has held:
Where, as here, a statute provides a remedy, the directions
of the statute must be strictly pursued to obtain the
remedy. Section 1504 of the Statutory Construction Act of
1972 [(Statutory Construction Act)], 1 Pa.C.S. § 1504;
Cnty. of Dauphin v. City of Harrisburg, 24 A.3d 1083, 1090
(Pa.[]Cmwlth.[]2011).
The time limitation in a tax statute must ‘be strictly
enforced to prevent any uncertainty in the budgetary
planning and fiscal affairs of the Commonwealth.’ Phila.
Gas Works [v. Commonwealth], 741 A.2d [841,] 846 [(Pa.
Cmwlth. 1999), aff’d, 757 A.2d 360 (Pa. 2000)].
Compliance with the time limitation in the Tax Reform
Code is ‘an absolute condition to obtaining a refund.’
Id. Section 3003.1(a) of the Tax Reform Code is a statute
of repose that extinguishes entitlement to a tax refund upon
expiration of the three-year time period set forth therein; it
is not a statute of limitations that runs from the time of an
4
In appeals from determinations of the [Board], this Court essentially
acts as a trial court and exercises the broadest scope of review. Our
standard of review is de novo. The stipulation of facts entered into by
the parties is binding on them, although the Court may draw its own
legal conclusions.
Luther P. Miller, Inc. v. Commonwealth, 88 A.3d 304, 308 n.5 (Pa. Cmwlth. 2014) (citations
omitted).
3
injurious occurrence or discovery of such occurrence.
Consequently, a petition for refund filed beyond the
three-year time period in Section 3003.1(a) [of the Tax
Reform Code] is time-barred. The petitioner has the
burden of establishing the timeliness of the petition for
refund.
Quest Diagnostics Venture, LLC v. Commonwealth, 119 A.3d 406, 410 (Pa. Cmwlth.
2015) (citations omitted; emphasis added).
MFA argues that the Board erred in finding that April 15, 2008 was the
date on which MFA made its “actual payment of the tax” under Section 3003.1(a) of
the Tax Reform Code. 72 P.S. § 10003.1(a). Specifically, MFA contends that since
the tax to be paid was not known until its annual report was filed, its September 19,
2008 annual report filing established its tax liability and its actual payment of the tax.
Thus, because September 19, 2008 was the date on which MFA made its actual
payment of the tax, the September 16, 2011 Petition was timely filed within three
years. We agree.
In deciding the issue before this Court, we must interpret the undefined
phrase “actual payment of the tax” in Section 3003.1(a) of the Tax Reform Code.
Section 1921(a) of the Statutory Construction Act states: “The object of all
interpretation and construction of statutes is to ascertain and effectuate the intention
of the General Assembly. Every statute shall be construed, if possible, to give effect
to all its provisions.” 1 Pa.C.S § 1921(a). “A statute’s plain language generally
provides the best indication of legislative intent.” Bd. of Revision of Taxes v. City of
Phila., 4 A.3d 610, 622 (Pa. 2010).
Section 1903(a) of the Statutory Construction Act provides that when
words in a statute are undefined, they must be accorded “their common and approved
usage[.]” 1 Pa.C.S. § 1903(a). “Where a court needs to define an undefined term, it
may consult definitions in statutes, regulations or the dictionary for guidance,
4
although such definitions are not controlling.” Adams Outdoor Adver., LP v. Zoning
Hearing Bd. of Smithfield Twp., 909 A.2d 469, 483 (Pa. Cmwlth. 2006).
According to Black’s Law Dictionary (9th ed. 2009), “payment” is the
“[p]erformance of an obligation by the delivery of money . . . accepted in partial
or full discharge of an obligation.” Id. at 1243 (emphasis added). Merriam-
Webster’s Collegiate Dictionary (11th ed 2004) defines “payment” as “the act of
paying . . . : something that is paid: PAY[.]” Id. at 910 (emphasis added). Black’s
Law Dictionary defines “actual” as “[e]xisting in fact; real . . . .” Id. at 40 (emphasis
added). According to Merriam-Webster’s Collegiate Dictionary, “actual” means
“existing in [f]act and not merely potentially[.]” Id. at 13 (emphasis added). Based
upon these definitions, the common and approved usage of the phrase “actual
payment” means the delivering of money in the acceptance and performance of an
obligation, rather than the mere depositing of money on account for potential future
use.
The Tax Reform Code supports such a conclusion. The Commonwealth
imposes corporate net income taxes under Article IV of the Tax Reform Code (72
P.S. §§ 7401-7412), and franchise taxes under Article VI of the Tax Reform Code (72
P.S. §§ 7601-7607) on entities conducting business in Pennsylvania. Section 403 of
the Tax Reform Code relating to corporate net income taxes provides, in pertinent
part:
(b) It shall be the duty of each corporation liable to pay tax
under this article to pay estimated tax under [S]ection
3003.2 [of the Tax Reform Code] and to make final
payment of tax due for the taxable year with the annual
report required by this section.
(c) The amount of all taxes, imposed under the provisions
of this article, not paid on or before the times as above
provided, shall bear interest as provided in [S]ection 806
of the [A]ct of April 9, 1929 (P.L. 343, No. 176), known as
5
‘The Fiscal Code,’ [72 P.S. § 806,] from the date they are
due and payable until paid[.] . . .
72 P.S. § 7403 (emphasis added). The report and payment requirements in Section
403 of the Tax Reform Code are incorporated into Article VI and are applicable to
foreign franchise taxpayers. 72 P.S. § 7603.5 Thus, a corporate net income/franchise
taxpayer is required to make its “final” tax payment with its annual report. 72 P.S. §
7403(b). Merriam-Webster’s Collegiate Dictionary defines “final” as “1[]a : not to
be altered or undone . . . . 2: coming at the end : being the last in a series, process, or
progress . . . . 3 : of or relating to the ultimate purpose or result of a process . . . .” Id.
at 469. Accordingly, on the annual report, the corporate taxpayer affirms under
penalty that its tax schedules and statements have been examined and, to the best of
its knowledge, the annual report is “true, correct and complete[.]” Stip. Ex. A at 1.
With respect to estimated quarterly corporate tax payments, Section
3003.2(b)(6) of the Tax Reform Code defines “total tax” as “[t]he total tax liability
of the taxpayer for the tax period including the tax reported by the taxpayer and
settled, resettled or assessed by the [D]epartment.” 72 P.S. § 10003.2(b)(6)
(emphasis added). Moreover, Section 3003.2(i) of the Tax Reform Code provides:
Whenever the amount shown as due on the annual
report, . . . is less than the amount paid to the [D]epartment
on account of that amount under this article, the
[D]epartment shall enter a credit in the amount of the
difference to the account of the taxpayer, which credit shall
be immediately subject to application, assignment or
refund, at the request of the taxpayer under [S]ection 1108
of . . . ‘The Fiscal Code,’ [72 P.S. § 1108,] or at the
initiative of the [D]epartment. . . .
72 P.S. § 10003.2(i) (emphasis added).
5
Article IV, Part III of the Tax Reform Code (relating to annual reports and corporate net
income tax payments), 72 P.S. § 7403 is incorporated by reference into Article VI of the Tax
Reform Code (relating to corporate franchise taxes). 72 P.S. § 7603.
6
In these subsections, the General Assembly made clear that a
corporation’s tax liability is not established until the corporation’s annual report is
filed. Thus, although April 15th is the date upon which taxes are due without interest
and/or penalty, see 72 P.S. § 10003.2(c), the Tax Reform Code expressly affords
corporate taxpayers the opportunity to make their final tax payments with their annual
reports, which are filed after their tax liabilities are known, albeit subject to interest
and, perhaps, penalties. 72 P.S. §§ 7403(c)-(d), 7410, 7603.
Moreover, in its brief, the Board stated that, as of April 15, 2008, MFA’s
payments “sufficiently satisfied” its 2007 Franchise Tax liability, such that “MFA
was not charged any underpayment interest from [] April 15, 2008 . . . to the actual
filing date of September 19, 2008.” Board Br. at 14 (emphasis added). Thus, the
Board acknowledges that MFA did not know its total tax liability as of April 15,
2008, but had paid enough to avoid interest when on September 19, 2008, it knew the
actual payment due and filed its annual report.
Because it is clear that a corporate taxpayer’s annual report filing date
is the date on which the corporation states and accepts to pay its tax liability, we
hold that “actual payment of the tax” cannot occur until the annual report is filed.
Had the General Assembly intended for refund petitions to be filed within three years
of April 15th following the applicable tax year, rather than within three years of when
the taxpayer knows its tax liability, which is the annual report date, such date varying
among corporate taxpayers, it would have expressly stated the same. Rather, the
General Assembly did not specify the refund limitation period to commence on April
15th following the applicable tax year. Thus, strictly construing all of the relevant
provisions of the Tax Reform Code, as we must, we hold that MFA’s “actual
payment of the tax” occurred on September 19, 2008 when it filed its annual report.
Because MFA’s September 16, 2011 Petition was filed within three years thereafter,
7
it was timely filed. Therefore, the Board erred by sustaining the Appeals Board’s
order dismissing MFA’s tax refund claim as untimely.
Based upon the foregoing, we reverse the Board’s order and remand this
matter to the Board, and direct the Board to order the Appeals Board to decide the
merits of MFA’s Petition.
___________________________
ANNE E. COVEY, Judge
President Judge Pellegrini concurs in the result only.
8
IN THE COMMONWEALTH COURT OF PENNSYLVANIA
Mission Funding Alpha, :
Petitioner :
:
v. :
:
Commonwealth of Pennsylvania, : No. 313 F.R. 2012
Respondent :
ORDER
AND NOW, this 10th day of December, 2015, the Commonwealth of
Pennsylvania Board of Finance and Revenue’s March 27, 2012 order is reversed and
this matter is remanded for proceedings in accordance with this opinion.
Unless exceptions are filed within 30 days pursuant to Pa.R.A.P 1571(i),
this order shall become final.
___________________________
ANNE E. COVEY, Judge