189 A.3d 1137
Pa. Commw. Ct.2018Background
- Vetri Navy Yard, LLC (Vetri NY) leased and outfitted a restaurant in the Philadelphia Navy Yard KOZ in 2013; opened October 14, 2014, and received KOZ tax benefits for 2013–2015.
- Vetri NY agreed to sell the restaurant assets and operations to URBN NVY on November 16, 2015; sale closed January 30, 2016, after which Vetri NY ceased operations at the KOZ site.
- URBN NVY applied for and later received KOZ benefits for the portion of 2016 it operated the restaurant.
- DCED determined Vetri NY’s KOZ benefits for 2013–2015 were subject to recapture under Section 902(a) of the Act because Vetri NY had “relocated” (i.e., ceased operations) within three years, denied a waiver under Section 902(b), and denied Vetri NY’s application for any KOZ benefits for January 2016.
- Vetri NY appealed to the Commonwealth Court, arguing (1) it did not “relocate” outside the KOZ, (2) DCED could and should waive recapture, and (3) it was entitled to KOZ benefits for January 2016 because it actively operated during that month.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Vetri NY "relocated" for purposes of recapture under §902(a) | "Relocate" requires physical move; Vetri NY and the restaurant remained in KOZ so no relocation | Sale/cessation of Vetri NY’s active operations = relocation (equitable reading to prevent "take the money and run") | Court: "relocate" ambiguous; adopt Secretary/DCED interpretation — Vetri NY ceased active operations and thus relocated; recapture applies to 2013–2015 |
| Whether DCED abused discretion in denying a §902(b) waiver | Waiver appropriate given capital investment and jobs retained in KOZ via continued restaurant operation | Waiver only for circumstances beyond business’s control; Vetri NY voluntarily sold business so no waiver | Court: No abuse — voluntary sale not a basis for §902(b) waiver |
| Whether Vetri NY was entitled to any KOZ benefits for January 2016 | Vetri NY actively operated Jan 1–30, 2016; Section 103/307 read together entitle partial-year benefits for period of activity | Certification/qualification must be contemporaneous during application review; Vetri NY not actively operating when it applied; thus benefits denied | Court: Vetri NY was a qualified business for the January 2016 period and entitled to KOZ benefits for that month; denial in full reversed; only portion subject to recapture |
| Scope of recapture for benefits covering part of a taxable year | Vetri NY argued denial based on full recapture was improper because only percentage (66%) is recapturable within first 3 years | DCED noted recapture percentages but also relied on lack of active operation at application time | Court: Recapture percentages govern; Vetri NY retains statutory portion (34%) for month of January 2016; full denial improper |
Key Cases Cited
- Sklar v. Dep’t of Health, 798 A.2d 268 (Pa. Cmwlth. 2002) (statutory terms may be construed by reference to common usage and dictionaries)
- Velocity Express v. Pa. Human Relations Comm’n, 853 A.2d 1182 (Pa. Cmwlth. 2004) (statute ambiguous when subject to two reasonable interpretations)
- Scungio Borst & Assocs. v. 410 Shurs Lane Developers, 146 A.3d 232 (Pa. 2016) (courts may consult context and related provisions in statutory construction)
- Seeton v. Pa. Game Comm’n, 937 A.2d 1028 (Pa. 2007) (courts wary of deferring to agency positions advanced only in litigation)
- Riverwalk Casino, L.P. v. Pa. Gaming Control Bd., 926 A.2d 926 (Pa. 2007) (agency interpretations entitled to deference unless clearly erroneous)