Lead
OPINION
We consider the Commonwealth Court’s decision that the three-year tax refund period specified in Section 3003.1(a) of the
Appellee, Mission Funding Alpha, is a calendar-year . taxpayer that conducted business in the Commonwealth of Pennsylvania during the year ending December 31, 2007 (2007 Tax Year), and pursuant to Section 602(b)(1) of the Tax Code, was subject to the Pennsylvania Foreign Franchise Tax,-72 P.S. § 7602(b)(1) (requiring foreign entities to pay franchise tax annually). The relevant - statutes require1 that corporate taxpayers such as appellee make installment payments of franchise taxes throughout the year, and that “the remaining portion of., :the franchise tax, if any, shall be paid upon the date the corporation’s annual report is required to be filed without reference to, any extension of time for filing such report.” 72 P.S. § 10003.2(a)(2), (c)(2). In this case, appel-lee’s annual tax report (the Report) was due to be filed on or before April 15, 2008. 72 P.S. § 707 (entities liable to pay franchise tax required to file annual report on or before fifteenth' of April and to pay .franchise tax at the time of making the report); 72 P.S. § 7403(a) (corporation liable to pay tax on or before April 15 shall file annual report); 72 P.S. § 7601(b) (requiring entities to file franchise tax report annually). As of April 15, 2008, appellee had timely remitted to the Pennsylvania Department' of Revenue (the Department) quarterly estimated payments, totaling $430,000 for its 2007 Tax Year liability. Stipulation,of Facts ¶10. A $32,297 credit overpayment was also carried forward for appellee’s 2007 Tax Year liability. Id. at ¶ 11. Thus, as of April 15, 2008, appellee’s estimated payments and deposited credits totaled $462,297. Id. at ¶ 12.
Without first seeking an extension of time to file its Report after the due date of April 15, 2008, appellee filed it late — on September 19, 2008 — reporting a $66,344 franchise tax liability arid a $314,175 corporate net income tax liability for a total tax liability of $380,519. Id. at ¶¶ 8, .13,14. The Department accepted appellee’s reported franchise tax liability and imposed a $913 late-filing penalty because appellee had not requested a filing extension and had not filed its Report by the due date of April 16, 2008. Id. at ¶ 19.
Appellee appealed to the Commonwealth. Court.
The Commonwealth Court- en banc agreed with appellee and reversed the Board of Finance and Revenue. Mission Funding Alpha v. Com.,
For-a tax collected by the Department of-Revenue, 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 of Revenue 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 department within three years of actual payment of the tax, interest or penalty.
Id. at 616-17, quoting 72 P.S. § 10003.1(a) (emphasis added). The court posited that in- order to determine whether a refund petition was -timely, it was required to interpret the undefined statutory phrase “actual payment of tax.” Id. at 617. The
According to Black’s Law Dictionary (9th ed. 2009), “payment” is the “[performance of an obligation by the delivery of money ... accepted in partial or full discharge of an obligation.” Id. at 1243 (emphasis added). Merriamr-Web-ster’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 “[efcisting in fact; real ....” Id. at 40 (emphasis added). According to Mer-riavF-Webster’s Collegiate Dictionary, “actual” means “existing in [fjact and not merely potentially[.]” Id. at 13 (emphasis added).
Id. at 617-18 (emphases in original). The court concluded “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.” Id. at 618. The court noted Section 403(b) of the Tax Code requires corporations to pay estimated tax and to make final payment of tax due with the annual corporate tax report, and Section 403(c) provides the amount of taxes not paid on or before the time as specified by statute shall bear interest from the date they are due and payable until paid. Id. at 618, citing 72 P.S. § 7403(b), (c). Therefore, according to the court, a corporate taxpayer makes its “final” tax payment only upon filing its annual report. Id. at 618, citing 72 P.S. § 7403(b) (taxpayer has duty “to make final payment of tax due for the taxable year with the annual report”).
Based upon its reading of these statutes, the court reasoned the General Assembly intended that a corporation’s franchise tax liability is not established until its annual report is filed and, although appellee’s taxes and Report were due on April 15, the Tax Code permits a taxpayer the opportunity to make a final tax payment whenever it files its annual report, which may be filed after tax liabilities are definitively known, albeit subject to interests and penalties. Id. at 619, citing, inter alia, 72 P.S. §§ 7403(c)-(d) (penalties shall be assessed for failure to make a report) and 7410 (penalties shall be imposed for failure to file report or maintain records). The court concluded “[bjecause 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.” Id. (emphasis in original). The court opined if the General Assembly intended for refund petitions to be filed within three years of April 15 following the applicable tax year, rather than within three years of when the taxpayer knows its actual tax liability, which is the annual report filing date, it would have expressly stated the same. Id. Accordingly, the court held appellee’s refund petition was timely
The question presented to this Court is: “[w]here a taxpayer pays the tax on the date it is due but does not file its annual report until several months later, does the three-year refund period commence on the date the tax was paid, rather than the date that the annual report was filed?” Appellant’s Brief at 4.
The Commonwealth argues the meaning of “actual payment of the tax” as used in Section 3003.1(a) should be determined from the ordinary meaning of the words as illuminated by their use elsewhere in the statute. The Commonwealth asserts the term “payment” and its cognates are used throughout the Tax Code (as well as the Fiscal Code) to denote the delivery of money to the Department, rather than the filing of an annual corporate tax report. Appellant’s Brief at 12, citing 72 P.S. § 10003.2(c)(2) (“[ejstimated tax shall be paid as follows:... Payment of estimated stock and franchise tax shall be made in equal installments...), and 72 P.S. :§ 707 (every corporation must “compute and pay” franchise tax). The Commonwealth notes Section 3003.2(c)(2) of the Tax Code directs that after a corporation’s estimated payments have been made, any remaining tax “shall be paid” when its annual report is due “without reference to any extension of time” for filing the report itself.
The Commonwealth further notes the Fiscal' Code specifically provides if a taxpayer obtains an extension to file a report, the extension does not extend the date that tax is due and payable. Id. at 13, citing 72 P.S. § 805 (“taxes... due the Commonwealth shall be due and payable upon the dates the - reports or returns thereof are required by law to be made, and no extension of time for the filing of any report or return granted by the department, shall extend the date any tax or bonus shall be due and payable.... ”). The Commonwealth observes interest on unpaid taxes is keyed to the date the taxes are due and payable until paid! Id., citing 72 P.S. § 7403(c) (amount of all taxes not paid on or before April 15, shall- bear interest as provided in section 806 of the Fiscal Code from date they are due and payable until paid); 72 P.S. § 806 (“All taxes due the Commonwealth shall bear simple interest from the date they become due and payable until paid.... The payment of interest, as aforesaid, shall not relieve any person from any of the penalties, commissions or additional tax prescribed by law for neglect or refusal to furnish timely returns or reports to the Department of Revenue, or to pay any claim due to the Commonwealth from such person.”). The Commonwealth argues if the legislature intended the time for filing a refund to commence upon filing the annual tax report, it, would have stated so as it did in Section 407.3(a), which provides the Department may assess a tax “within three years after the date the [tax] report is filed.” 72 P.S. § 7407.3(a). Thus, the Commonwealth contends the payment of tax is entirely distinct from .the filing of an annual report and where those two events do not occur simultaneously, the three-year refund period runs from the date the tax is due.
The Commonwealth also argues City of Philadelphia v. City of Philadelphia Tax Review Board ex rel Keystone Health Plan East,
' The Commonwealth also asserts the Commonwealth ‘Court erred by ignoring the plain’language of the statute and instead concluding the filing of an annual corporate tax report is the same thing as actually paying tax. According to the Commonwealth, the Tax Code repeatedly treats payment and the filing of a report as two different events, even though the events may occur simultaneously. Appellant’s Brief at 16, citing 72 P.S. § 10003.1(c)(2) (franchise tax is to be paid on April 15 “without regard to any extension of time for filing” annual report). Additionally, the Commonwealth contends the Commonwealth Court misapprehended the dictionary definition of “payment,” which properly is defined as “the delivery of money.. .accepted, in partial or full discharge of an obligation.” Appellant’s Brief at 17, quoting Black’s Law Dictionary at .1243. Specifically, the “acceptance” referenced in the definition is not the taxpayer’s acceptance of its obligation to file an annual report, but rather the Department’s acceptance of the taxpayer’s money, which in this case occurred no later than April 15, 2008. The Commonwealth asserts there is no difference between the language of the Philadelphia tax ordinance — “within three years from the date of payment” — and the language of Section 3003.1(a), because both the Tax Code and the- Philadelphia tax ordinance tie the start of the refund period to payment. The Commonwealth further argues that, as neither Section 3003.1(a) of Tax Code nor Philadelphia’s Section 19-1703(l)(d) mentions tax “reports,” the date on which a taxpayer files its report is irrelevant to determining the refund period.
The . Commonwealth insists the Commonwealth Court erred in stating that Section 3003.1 as a tax statute must be strictly construed against the Commonwealth. The Commonwealth notes because the refund statute is not ambiguous and does not impose a tax, the courts are not required to strictly construe it against the Commonwealth. Appellant’s Brief at 19-20, citing Keystone,
Finally, the Commonwealth notes the legislature amended Section 3003,1 in 1997 to add the “actual payment of the tax” language and create a single refund period for all taxes even when paid in installments.
Appellee responds the Commonwealth Court properly determined, the “actual payment” of tax .occurred only when its tax liability was established by the filing of its 2007 Report and its money on deposit was applied against the established tax liability. Appellee relies upon various federal cases holding estimated payments are' not “payments of taxes” for purposes of starting the refund limitation period and the payment of taxes does not occur until the taxpayer’s liability is defined.'Appellee’s Brief at 7-10, citing, inter alia, Rosenman v. United States,
' Appellee further argues the legislature’s amendment of Section 3003.1 in 1997 established a new statutory time limit for filing refund petitions; appellee posits by eliminating the phrase “within [two or] three years of the payment of which a refund is requested” and substituting the phrase “within three years of actual payment of the tax” in Section 3003.1, the General Assembly intended the state’s taxing scheme should be more like the federal taxing scheme interpreted in Rosenman. Under appellee’s theory, “actual payment of the tax” has a well-settled, peculiar meaning in the law, i.e., applying money against a definite tax liability established by filing a tax return or réport, and therefore, the Commonwealth Court’s decision to commence the refund period from the time appellee filed its 2007 Report was consistent with federal precedent.
Appellee also distinguishes Keystone, arguing that case did not turn on the date of “actual payment of the tax.” Appellee asserts the language of the Philadelphia tax ordinance — which requires the filing of a refund petition with three years from “date of payment or the due date” — is distinguishable from the Pennsylvania Tax Code, which starts the refund period at “actual payment of the tax.” Appellee argues the Commonwealth improperly equates the tax due date (April 15) with the “actual payment” of tax, which it views as the filing of the Report. Appellee asserts Section 403(b) requires a corporation to make “final payment of tax due.. .with the annual report...” and, thus, “actual payment of tax” does not occur until tax liability is established, ie., when the annual tax report is filed. Appellee contends the Commonwealth Court properly recognized Section 3003.2(b)(6) defines “total tax” as the tax “reported by taxpayer,” and therefore, payment of tax cannot be made (and a refund cannot be sought) until the tax report establishes the actual amount of tax owed.
Additionally, appellee argues the Commonwealth Court’s statutory interpretation is proper because if the three-year refund clock starts anew each time a quarterly estimated installment payment is put on “deposit,” there are at least four separate dates to track in addition to credit from the prior year, attributable to several estimated payments, thus resulting in unnecessary complexity. Appellee further asserts the Commonwealth’s statutory interpretation causes unwarranted ambiguity because it treats the total of the estimated payments as a lump sum, making it impossible to determine which estimated payment is attributable to the tax liability desci’ibed in an annual report for purposes of determining when the refund period starts. Appellee also rejects the use of the payment due date of April 15 as the start of the refund period because this would result in two refund periods if the taxpayer paid some tax on or before April 15 and a final payment with its annual report some time later.
Finally, appellee observes the Commonwealth Court’s decision is supported by law from other jurisdictions. Appellee’s Brief at 27-28, citing Hanna Min. Co. v. Limbach,
This appeal presents a legal question of statutory interpretation and, accordingly, our standard of review is de novo and our scope of review is plenary. Dechert LLP v. Com.,
The parties have advanced different interpretations of the phrase “actual payment of tax” as used in Section 3003.1(a) for purposes of defining the start of the
As we have noted, Section 3003.1(a) states, in pertinent part, “[ejxcept as otherwise provided by statute, a petition for refund must be made, to the department within three years of actual payment of the tax, interest or penalty.” Section 3003.2 of the Tax Code provides, in relevant part:
(a) The following -taxpayers are required to pay estimated tax:
Sfc * * *
(2) Every corporation subject to the’ capital stock and franchise tax imposed by Article VI of this act.. .shall make payments of estimated capital stock and franchise tax during its taxable year as provided herein.
(c) Estimated tax shall be paid as follows:
# ⅛ $ $
(2) Payment of estimated capital stock and franchise tax shall be made in equal installments on or before the fifteenth day of the third, sixth, ninth and twelfth months of the taxable. year. The remaining portion of the capital stock and franchise tax due, if any, shall be paid upon the date the corporation’s annual report is required to be filed without reference to any extension of time for filing such report.
72 P.S. § 10003.2(a)(2), (c)(2) (emphasis added). These two provisions reveal the payment of tax and the filing of a tax report are distinct acts, although these acts may occur simultaneously.
At the same time, Section 403 provides, in relevant part:
(a) It shall be the duty of every corporation, liable to pay tax under this article, on or before April 15,1972, and each year thereafter, to transmit to the department, upon a form prescribed by the department, an annual report.. .of net income -taxable under the provisions of this article.
⅜ # ⅜* #
(b) It shall be the duty of each corporation liable to pay tax under this article to pay estimatéd tax under section 3003.2 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.. .from the date they aré due and payable until paid,....
72 P.S. § 7403(a), (b), and (c).
The Commonwealth Court construed the phrase “actual payment” for purposes of
We are not persuaded by the Commonwealth Court’s reasoning and instead find a more straightforward reading of the statutory language is appropriate. Black’s Law Dictionary defines “payment” as “[performance of an obligation by the delivery of money.. .accepted in partial or full discharge of the obligation.” Black’s Law Dictionary at 1309. Black’s Law Dictionary defines “actual” as “[ejxisting in fact; real....” Id., quoting Black’s Law Dictionary at 40. The obligation at issue here is appellee’s statutorily mandated duty to pay foreign franchise tax on or before April 15, 2008. 72 P.S. § 10003.2(c)(2); 72 P.S. § 403(b). Notably, appellee’s' obligation to pay the foreign franchise tax did not arise only when it ascertained its final tax liability. Appellee was actually obligated by statute to pay the foreign franchise tax on or before April 15, 2008, regardless of whether it had ascertained its final liability and filed its annual report. 72 P.S. § 10003.2(c)(2); 72 P.S. § 403(b); 72 P.S. § 805.
In' this case, because appellee páid its estimated tax in sufficient amounts and also carried forward credit from the prior tax year, the Department deemed appel-lee’s tax obligation satisfied as of April 15, 2008, despite the fact it had not yet filed its annual report. The Commonwealth Court’s interpretation that this “payment” did not start the refund period clock' ignores the language of Section 3003.2(c)(2). Subsection (c)(2) is unequivocal:' any portion of the franchise tax that remains due after payment of the estimated payments “shall be paid upon the date the corporation’s annual report is required to be filed without reference to any extension of time for filing such report.” 72 P.S. § 10003.2(c)(2). The language of subsection (c)(2) thus qualifies the language of Section 403(b) providing that the taxpayer shall make payment of final tax with the annual report, and thereby specifically instructs the tax is due and payable on April 15 regardless of whether a taxpayer files a tax report. See also 72 P.S. § 805 (amount of all taxes due' the Commonwealth “shall be due and payable upon the dates the reports or returns... are required by law to be made, and no extension of time for the filing of any report or return granted by the department, shall extend the date any tax.. .shall be due and payable....”).
Notwithstanding this straightforward interpretation of statutes intended to be read together, appellee — like the Commonwealth Court — insists “actual payment of tax” is a peculiar term of art with a special meaning. Appellee relies upon Rosenman,
Unlike the federal government, the Department is required to pay interest on overpayments of estimated tax and, as noted by the Commonwealth, estimated tax payments are not held in separate accounts by the Department. 72 P.S. § 806.1(a)(2) (interest on overpayments of tax shall be paid and overpayments of estimated tax are “deemed to have been overpaid on the last day prescribed for filing the final return or report”); Appellant’s Reply Brief at 10 (appellee’s remittances to Department were not maintained in any special “escrow” or “suspense” accounts). Thus, under Pennsylvania law, the Department deems estimated tax payments to be “taxes duly collected” as of the report filing due date — in this case April 15,2008 — and not mere deposits. Given the differences between federal and Pennsylvania law, Rosenman is inapposite.
Appellee’s reliance on Calvert I and II is similarly misplaced. At the time those cases were decided, Section 503 of the Fiscal Code provided petitions for refund “must be filed with the board within two years of the payment of which refund is requested.” Calvert II,
Moreover, although appellee claims the 1997 amendment to Section 3003.1 was intended to bring Pennsylvania in line with federal precedent that a tax is only “paid” when the amount is ascertained by the filing of a tax return, we read the substitution of “actual payment of tax” as the clear expression of the General Assembly’s intent to provide taxpayers with the ability to request a refund of any tax overpay-ments in a single petition filed within three years of the date on which the Department applied funds submitted by the taxpayer in full satisfaction of its tax liability.
Nor does Hanna Mining support the Commonwealth Court’s contrary reading. In that Ohio case, the relevant statute required a refund application to be filed “within three years from the daté of the illegal or erroneous payment of the tax.” Ohio Rev. Code § 5733.12. The Ohio Supreme Court reasoned because the tax commissioner is given three years from the date a final franchise tax report is filed to assess additional taxes it would be inequitable to require taxpayers to keep track of multiple limitations periods based on estimated installment payments and, therefore, taxpayers “who timely remit their final reports and' who timely remit the tax due in estimated payments should not be denied a full three-year period to seek a refund of the final tax due.” Hanna Mining,
Appellee’s reliance upon New Jersey tax procedure is similarly unavailing. In New Jersey, a “taxpayer, at any time within four years after the payment of any original or additional tax assessed against him” may file a claim for a refund. N.J.S.A. § 54:49-14a. However, the relevant regulation provides the “four-year statute of limitations period for filing a claim for refund commences to run from the later of the
Additionally, accepting either the Commonwealth Court’s or appellee’s interpretation of “actual payment of tax” would render nonsensical another provision in the statutory scheme — Section 3003.1(d)— and we must avoid such a result. See, e.g., 1 Pa.C.S. § 1922(1) (in ascertaining General Assembly’s intent we presume it did pot intend a result that is absurd or unreasonable); 1 Pa.C.S. § 1922(2) (courts should presume General Assembly intends the entire statute to be effective and certain). Section 3003.1(d) provides: “In the case of amounts paid as a result of an assessment, determination, settlement or appraisement, a petition for refund must be filed with the department within six months of actual payment of the tax.” 72 P.S. §§ 10003.1(d). Under Section 3003.1(d), when a taxpayer files a petition for refund, the refund period begins upon payment of the tax liability as reflected in the Department-issued assessment, determination, settlement or appraisement. The taxpayer’s obligation to pay tax arises from action taken ■ by the Department and the calculation of final tax liability by the taxpayer and filing of a tax report are not implicated. Therefore,-appellee’s assertion the phrase “actual payment of tax” means upon the filing of a corporate tax report makes no sense in the context of a refund request following the payment of tax pursuant to an assessment, determination, settlement or appraisement.
Further, “[a] voluntary payment of taxes can be subsequently recovered by a taxpayer only as a statute. provides.” Calvert II,
We reiterate the object of statutory construction “is to ascertain and effectuate the intention -of the General Assembly.” Walker v. Eleby,
Jurisdiction relinquished.
Justice Donohue files a concurring opinion.
Justice Mundy files , a dissenting opinion.
Justice' Todd did not participate in the consideration or decision of this case.
Notes
, After the Department applied all tax credits and estimated payments to the 2007 Tax Year liability, an $81,778 overpayment remained ($462,297 minus $380,519), which the Department transferred to the 2008 Tax Year. Stipulation of Facts at ¶¶ 16, 18. The Department did not charge appellee any interest from the due date of April 15, 2008 to the actual' Report filing date of September 19, 2008. Id, at ¶ 20,
. Appellee sought a refund based on adjustments to capital stock value and apportionment as well as special apportionment and multiform/unrelated asset treatment,
. Appeals taken from the Board'of Finance and Revenue to. the Commonwealth Court lie in that court’s appellate- jurisdiction; however, review is de navo in nature as no record is certified front the Board. Tool Sales & Serv. Co. v. Com.,
. At times,- the parties and the court refer to statutes or case law from other jurisdictions— or from Pennsylvania in other contexts— where the term "tax' return” is utilized instead :of "tax report.” 72 P.S. § 7332(a) (taxpayer liable to pay personal income tax shall file a "tax return”); 26-U.S.C.S. § 6011(a) - (any person liable for .any tax impos.ed shall make a “return”). We note the terms are used ■interchangeably at times, but the relevant provisions of the Commonwealth’s Tax Code governing the corpprate tax liability at issue here refers to "reports.” Corporate taxpayer re- . ports are submitted on Form RCT-101 — PA Corporate Tax Report. -
. The court also addressed the quarterly estimated taxes a corporate taxpayer is required to pay pursuant to Section 3003.2. 72 P.S. § 10003.2. The court noted "total tax” is defined 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 department.” Mission Funding Alpha,
. Section 19 — 1703(l)(d) provides:
Every petition for refund of moneys collected by the Department on or after January 1, 1980, for or on behalf of the City or the School District of Philadelphia, including but not limited to any tax, ... shall be filed with the Department within 3 years from the date of payment to the City or the School District of Philadelphia or the due date, whichever is later.
Philadelphia Code § 19 — Í 703(l)(d) (emphasis added).
. Previously, Section 503 of the Fiscal Code provided the limitations period for refund petitions, and required a taxpayer to file a petition for refund "within two years of the payment of which refund is requested.” In' 1985, the limitations period was moved to Section 3003.1 of the Tax Code, and provided a petition for refund must be filed "within three years of the payment of which a refund is requested,” Act of July 1,, 1985, P.L. 78, 72 P.S. § 10003.1. In 1997, Section 3003.1 was amended to its current language — providing for a refund “within three years of actual payment of the tax,” Act of May 7, 1997, P.L. 85, 72 P.S. § 10003.1.
. The taxpayer in Calvert sought a refund in 1951 of taxes it erroneously paid in two installments, in 1946 and 1949. 63 Dauph. Cnty. at 313-14. The Board of Finance and Revenue awarded a refund of the 1949 payment only, relying on the two-year statutory refund limitations period. Id. at 314. Both the Dauphin County Court of Common Pleas (which exercised jurisdiction over all tax appeals at that time), and this Court (which had jurisdiction over direct appeals from the common pleas court), affirmed. Calvert I, 63 Dauph. Cnty. at 322-23; Calvert II,
. The Pennsylvania Institute of Certified Public Accountants filed an amicus brief in support of appellee, arguing (1) the date of the payment of the tax is the date that monies are applied against a tax liability shown on a tax report; and (2) any other date is unworkable, ambiguous and unfair and inconsistent with neighboring state and federal law.
. In 2016, Section 403(a) was amended to allow a corporation to file its report on or before thirty days after its return to the federal government is due. Act of July 9, 2016, P.L. 270, 72 P.S, § 7403(a). The above-quoted language was the operative language in 2008, when appellee made the payments for the 2007 Tax Year at issue here.
. The taxing provision at issue in Rosenman has since been superseded and the U.S. Supreme Court has itself cast doubt on the continuing validity of the Rosenman Court’s reasoning given the existence of a “deemed paid" provision in the current federal tax code. Baral v. United States,
. Our research reveals Department policy is consistent with such an interpretation; all payments of tax, including prepayments and estimated payments, are deemed by the Department to have been paid on the due date for thé filing of the annual report. Weintraub, Stewart M., Pennsylvania Tax Handbook, § 16-13:1 at 979 (2017). See also 72 P.S. § 806.1(a)(2) ("Any amount overpaid as estimated tax.. .shall be deemed to have been overpaid on the last day prescribed for filing the final return... ”).
. In her dissenting opinion Justice Mundy states our decision will preclude taxpayers from exercising their right to choose to 'file their taxes late. Dissenting Op. at 768. We note the language of Section 3003.2(c) is mandatory — requiring that remaining franchise tax due "shall be paid upon the date the coiporation’s annual report is required to be filed....” No language in either Section 3003.2 or Section 7403 authorizes allowing a taxpayer to unilaterally extend the refund period relating to the payment of taxes, which as noted supra; is an act distinct from the filing of a tax report,
. .We recognize appellee has forwarded-an alternative argument that we should treat its petition for refund as a petition for credit; according to appellee, the three year refund period is not applicable to a petition for credit, Appellee’s Brief at 28-29. The Commonwealth argues app.ellee waived this claim by failing to request a credit when it filed its petition ‘for refund. Appellant’s Reply Brief at 14, citing Board of Appeals Petition Form. The Commonwealth also notes that whether a taxpqyer seeks a refund or credit it must nevertheless file a petition within the time spécified. Id. at 14-15, citing Philadelphia Gas Works,
Concurrence Opinion
CONCURRING
Resolution of this appeal turns on the interpretation of the phrase “actual payment of tax” as used in section 3003.1 of the Tax Reform Code, 72 _ P.S. § 10003.1(a), governing petitions for refunds.
None of the operative facts are in dispute. Throughout 2007, MFA made quarterly estimated tax payments toward its tax obligation. April 15, 2008 was the last date for MFA to file its tax report, yet MFA did not file a tax report on that date or seek an extension of time. More than five months later, on September 19, 2008, MFA filed its 2008 tax report. In this report, MFA determined that, through its estimated payments and a credit that was carried forward from a prior year, it overpaid its taxes in the amount of $81,778. On the tax report, MFA requested that the overpayment be transferred as a credit to future tax obligations. The Department of Revenue accepted the report but imposed a penalty of $913 for filing it late. On September 16, 2011, MFA filed a petition for refund.
The Tax Reform Code provides that “a petition for- refund piust be made ... within three years of actual payment of the tax[.]” 72 P.S. § 10003.1(a). It further provides that the taxpayer shall make quarterly estimated tax payments, and that any remaining taxes due “shall be paid upon the date [its] annual report is required to be filed without reference to any extension of time for filing such report.” 72 P.S. § 10003.2(c)(2). For the 2007 tax year, MFA’s annual tax report was required to
The question with which we are faced is when MFA’s tax payments, all of which were made prior to April 15, 2008 were “actually paid.” The Commonwealth Court defined “payment” as the performance of an obligation by delivery of money, which is then accepted in partial or full satisfaction the obligation. Mission Funding Alpha v. Commonwealth,
Respectfully, this analysis is flawed. A straightforward reading of the relevant statutory provisions reveals that the Tax Reform Code unmistakably distinguishes between the payment of tax and the filing of a tax report, such that “payment” is in no way dependent on the filing of a tax report. For instance, section 7403, “Reports and payment of tax,” devotes separate subsections to the .filing of a report and the payment of tax. Compare 72 P.S. § 7403(a) (establishing obligation to file tax report and specifying date of filing and content thereof), and § 7403(b) (establishing obligation to pay estimated taxes). Within section 7403, the division is made particularly explicit in subsection (b), which provides that each corporation has a duty “to pay estimated tax under section [10003.2] and to make final payment of the tax due ... with the annual report required by this section.” 72 P.S. § 7403(b). That this provision requires taxes to be paid at times other than the filing of the tax report illuminates the distinct nature of these transactions. In the same way, section 10003.2(c)(2) describes the payment of estimated taxes as separate from the filing of a tax report:
Payment of estimated capital stock and franchise tax shall be made in equal installments on or before the fifteenth day of the third, sixth, ninth and twelfth months of the taxable year. The remaining portion of the capital stock and franchise tax due, if any, shall be paid upon the date the corporation’s annual report is required to be filed without reference to any extension of time for filing such report.
72 P.S. § 10003.2(c)(2). This statute characterizes the sums tendered as quarterly estimated tax as payments, not deposits, and clearly anticipates that these payments occur separate from, and prior to, the filing of a tax report.
In further agreement with this premise is the fact that different penalties are imposed for the late payment of taxes owed (assessment of interest on the amount owed) and the late filing of a tax report (a fee based on amount of tax owed, explicitly not subject to interest). See 72 P.S. § 7403(c),(d). Indeed, in the present case, when the Department accepted and processed MFA’s late tax report, it assessed a late filing penalty of $913, but did not assess a late payment penalty in the form of interest. Stipulations of Fact, 5/26/2105, ¶¶ 19-20. Interest penalties are imposed on “[a]ll taxes ... from the date they become due and payable until paid.” 72 P.S. § 806 (emphasis added); see also 72 P.S. § 7403(c). If the Commonwealth Court’s conclusion was accurate and the taxes were not paid until the filing of the tax report, the Department would have assessed an interest penalty under section 806, as interest penalties are tied expressly
In the present ease, because MFA’s estimated tax payments were accepted and applied on the same date its tax report was required to be filed, the operative date for the calculation of the limitations' period coincides with the due-date for filing the tax report (April 15, 2008). This result is driven entirely by these particular facts, and different facts would yield' different results. If, for instance, MFA had not made any estimated payments and instead tendered payment with its delinquent tax report, on September 16, 2008, the limitations period for seeking a refund would have begun on that date, as it was the date of actual payment. This might seem to be an unfair result, as it extends the period for applying for a refund for a taxpayer who ignores its statutory obligation to make quarterly estimated payments, see 72 P.S. § 10003.2(a) (requiring the payment of estimated taxes), but it is not. If a taxpayer takes this course, it would be subject to an interest-penalty on the entire amount of tax owed. 72 P.S. § 7403(c) (providing that interest is imposed from date tax is due until paid). Assuming ar-guendo that a taxpayer fails to make required quarterly payments and then also overpays taxes with a lump sum, the interest penalty would diminish the amount of any refund due. In this respect, the exposure to an interest penalty acts as a counterbalance to any benefit that might otherwise be gained by virtue of a later date for filing a refund petition.
Yet another result would have occurred if MFA had made insufficient quarterly tax payments and remitted an additional payment with its late tax report. Pursuant to our holding, in such a situation the estimated payments would been have accepted for payment as of April 15, 2008. The amount paid with the tax report would be deemed actually paid on September 19, 2008, as that is the date of its tender to, and acceptance by, the Department of Revenue. Thus, only an amount not exceeding this belated payment would have been recoverable by a refund petition. However, this portion would have also been subject to a late-payment interest penalty, 72 P.S. § 7403(c), thus, reducing the amount of any refund.
In sum,. the rule we announce here is fact-sensitive, and various results will arise from its application. While the Commonwealth Court’s bright-line rule has the appeal of simplicity, it is unsupported by-the statutory scheme. - ...
. ."For a tax collected by the Department of Revenue, a taxpayer who has actually paid tax, interest or penalty to the Commonwealth ■ ... may petition the Department of Revenue 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 department within three years of actual payment of the tax, interest or penalty.” 72 P.S. § 10003.1(a).
.. This rationale mirrors how the Fiscal Code mandates that the Department of Revenue handle amounts of overpayment that result from estimated tax payments,' See 72 P.S, § 806.1(a)(2) (providing that any amount that is dverpaid as an estimated tax "shall be deemed, to have been overpaid on the last day prescribed for filing the final return or report for the taxable year[.]’’).
Dissenting Opinion
DISSENTING
I respectfully disagree with the Majority that Mission Funding Alpha (MFA) did not satisfy the three-year tax refund period provided in 72 P.S. § -10003.1(a). Instead, I would affirm the Commonwealth Court’s decision that MFA did satisfy the statute’s three-year tax refund period, but on slightly different grounds. Unlike the
In this case, our only task is to interpret the phrase “actual payment of the tax” within the meaning of Section 10003.1(a).
In my view, framing the issue in this manner unfairly focuses on the date the annual tax report was filed. Instead, this Court should focus on the date MFA finalized and satisfied its tax liability: September 19, 2008. The fact that MFA finalized and satisfied its tax obligation on the same day it filed its annual tax report is typical because many corporations' do not make final tax liability calculations until they file their annual tax reports. However, this will not always be the case. For example, had MFA filed its annual tax report on September 19, 2008 and remitted payment for its final tax liability on October 18, 2008, then MFA’s tax refund period would have begun on October 18, 2008, the date of the “actual payment of the tax.”
Similarly, it is not possible for a company like MFA to , make an “actual payment of the tax” until it finalizes its tax liability. Logically, until MFA completed the relevant tax calculations, neither, MFA nor the Commonwealth knew the status of MFA’s tax obligation, making it impossible for MFA to make an “actual payment of the tax.” Mission Funding Alpha,
The Majority holding that MFA cannot make an “actual payment of the tax” until it finalizes its tax liability is consistent with 72 P.S. § 10003.2(b)(6). “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 [Department.’ ” Mission Funding Alpha,
I believe the Majority focuses too much on whether the taxes were “paid” as opposed to whether there was an “actual payment of the tax.” These are two distinct acts. The process for calculating interest set forth in 72 P.S. § 7403(c) helps illustrate the difference. Simply put, taxes must be paid by April 15, and those unpaid bear interest. See 72 P.S. § 7403(c). However, the Commonwealth cannot compute interest owed on late taxes until the company determines its final tax liability. Id. (stating that the interest will be calculated on the amount of taxes owed). Therefore, the Majority is correct that the Commonwealth accepted MFA’s estimated taxes as paid on April 15th. However, on that date no “actual payment of the tax” occurred because MFA had not finalized its tax liability and satisfied its obligation. As a result, until September 19, 2008, the Commonwealth had no basis on which to charge MFA interest. Finally, when MFA did finalize and satisfy its tax obligation in September (making an “actual payment of the tax”), MFA owed no interest because its estimated payments and previous credit carried forward exceeded its final tax liability.
Next, I believe the approach applied by the Majority would in effect usurp a corporation’s statutory right to pay its taxes late. The Majority relies heavily on the language from 72 P.S. § 10003.2(c)(2) to conclude that all taxes are due on April 15 regardless of whether a corporation files an extension. Majority Op. at 759.1 do not disagree with this conclusion. However, I do think the Majority fails to adequately consider the conflicting language of 72 P.S. §§ 7403(b)-(d). Section 7403(b) requires corporations to make their final payment of tax with their annual tax report. 72 P.S. § 7403(b). Section 7403(c) specifically provides that taxes not paid on or before April 15 will accrue interest. Id. § 7403(c). Finally, Section 7403(d) imposes penalties on corporations for failing to file required reports. Id. § 7403(d). What the Majority fails to account for in their analysis is that Sections 7403(c)-(d) give taxpayers the choice to file their taxes late, so long as they are willing to pay interest and penalties. Therefore, by reversing the Commonwealth Court’s decision, the Majority prevents taxpayers from exercising their right to choose.
In addition, I find persuasive MFA’s reliance on Calvert Distillers Corp. v. Board of Finance and Revenue, 63 Dauph. 312 (Dauph. Cnty. 1953), aff'd,
Therefore, I would affirm the Commonwealth Court’s decision because MFA finalized and satisfied its tax obligation on September 19, 2008, which constituted the “actual payment of the tax” within the meaning of Section 10003.1(a). I believe the legislature statutorily affords taxpayers the right to pay them taxes late, albeit subject to interest and penalties. I believe the “actual payment of the tax” language has a special meaning in the law, which our legislature sought to incorporate when it amended the relevant statutory language in 1997. Finally, I do not imagine the legislature intended to go back to the Calvert approach of tying refunds to specific payments. Accordingly, I respectfully dissent.
. "Except as otherwise provided by statute, a petition for refund must be made to the [Department within three years of actual payment of the tax, interest or penalty,” 72 P.S. .§ 10003.1(a) (emphasis added).
. § 503. Refunds of state taxes, license fees, et cetera.
(a) All such petitions for refund must be filed with the board within two years of the payment of which refund is requested, or within two years of the settlement in the case of taxes or bonus, whichever period last expired. ...
72 P.S. § 503(a). (emphasis added) The editors’ notes provide that subsection (a) was repealed by 1997, May 7, P.L. 85, No. 7, § 35.1(b).
. Because of the statutory language change in 1997, I disagree with Justice Donohue’s concurrence that had MFA made insufficient quarterly payments and an additional late payment along with its annual tax report, it could only request a refund to the extent of the late payment. Concurring Op. of Dono-hue, J. at 766. This is not the right result because it returns us to Calvert’s payment approach, which the legislature specifically eliminated in 1997. In addition, I respectfully disagree that if the Commonwealth Court opinion were correct that MFA did not actually pay its taxes until it filed its annual tax report, then the Department of Revenue would have charged MFA interest for its late payment. Id. at 765-66, This statement fails to appreciate the distinct nature between a "payment” and an "actual payment of the tax.” The Commonwealth did not impose interest because when MFA determined its final tax liability in September, it became clear that MFA had already satisfied its obligation through the estimated payments and credit carried forward from a prior year. Accordingly, while MFA did pay its taxes in April, the "actual payment of the tax” occurred in September, when MFA finalized its tax liability and satisfied its obligation.