RESOLUTION AUTHORIZING THE FILING BY THE TAX SECTION OF AN AMICUS CURIAE BRIEF IN AN APPEAL INVOLVING THE VALIDITY OF MONTGOMERY COUNTY'S RETROACTIVE ASSESSMENT OF PERSONAL PROPERTY TAX

WHEREAS, the Tax Section requests that the Board of Governors authorize the filing by the Tax Section of an amicus curiae brief in an appeal that involves the validity of Montgomery County's retroactive assessment of personal property tax. The recent opinion by Judge Smyth of the Montgomery County Court of Common Pleas in Annenberg et al. v. Board of County Commissioners of County of Montgomery et al. contains two statements of law which the members of the Tax Section believe are contrary to long-standing, established authority and contrary to sound tax and public policy. The brief would be limited to these two specific issues of general public interest and would not take a position on the ultimate issue of whether Montgomery County is required to issue refunds to the Annenbergs;. and

WHEREAS, in litigation commenced in 1996 by Walter and Lenore Annenberg, the Pennsylvania Supreme Court determined in 2000 that Montgomery County and other Pennsylvania counties violated the U.S. Constitution by imposing the Personal Property Tax ("PPT") on the stock of out of state corporations that were not subject to the Pennsylvania capital stock tax or franchise tax, while not imposing PPT on corporations that were subject to either capital stock or franchise tax. The Supreme Court ordered each taxing county to provide a meaningful backward-looking remedy for the unconstitutional application of the PPT. In response, Montgomery County announced its intention to assess additional PPT on the stock of in-state corporations, for certain past tax years, including years barred by the statute of limitations, and simultaneously offered to enter into a settlement agreement with taxpayers whereby the County waived its claim to additional PPT and the taxpayers waived any claim to a refund of PPT; and

WHEREAS, the Annenbergs challenged the validity of the retrospective remedy provided by Montgomery County. In a recent decision upholding the County's remedy, Judge Smyth of the Montgomery County Common Pleas Court took two positions which the members of the Tax Section believe contradict long-standing, established authority and are contrary to the interests of sound tax policy. The Tax Section requests authorization from the Board of Governors to file an amicus brief in this on-going litigation limited to the following two issues:

A. Judge Smyth ruled that when the Annenbergs filed a Petition in the Commonwealth Court challenging the constitutionality of the PPT, "the time within which Montgomery County could have assessed PPT taxpayers was tolled until such time as the matter was finally adjudicated by the Supreme Court of Pennsylvania." Under this novel legal theory, the statute of limitations for all taxpayers, not just the Annenbergs, was suspended when the Annenbergs filed their initial petition in Commonwealth Court. We believe there is no basis in the statute or case law for the assertion that the statute of limitations was tolled as to any party, but particularly as to taxpayers who not were parties to the litigation, and that this result is contrary to the sound public policy behind having a fixed period of time within which the government can assess taxpayers for additional taxes.

B. Judge Smyth also stated that "a 'Court of equity has the power to afford relief despite the existence of a legal remedy where, from the nature and complications of a given case, justice can best be served by means of equity's flexible machinery.' ...The history of this case is long and the issues are complex. Equity, in this case, would clearly sanction the remedy suggested by the Supreme Court and chosen by Montgomery County." It is not clear how Judge Smyth thought that the rules of equity applied, or how they affected his opinion, but his opinion implies that the financial hardship that would be imposed on the County if it were ordered to refund unconstitutionally collected tax. The Tax Section believes that a governmental body is rarely (if ever) entitled to equitable relief and certainly not for financial hardship occasioned by its own unconstitutional actions; .and

WHEREAS, the brief to be filed by the Tax Section would be limited to these two issues and would not take a position on the issue of whether the County is required to give refunds to the Annenbergs; and

WHEREAS, the Annenbergs have requested that the Supreme Court accept King's bench jurisdiction in this case. If the Supreme Court accepts such jurisdiction, the amicus curiae brief would be filed in the Supreme Court. Otherwise, the amicus curiae brief would be filed with the Commonwealth Court and then, if necessary, in a further appeal to the Supreme Court.

NOW, THEREFORE, BE IT RESOLVED that the Tax Section of the Philadelphia Bar Association is authorized to file an amicus curiae brief in the appropriate courts in connection with the following two issues in the case of Annenberg et al. v. Board of County Commissioners of County of Montgomery et. al.: (1) the filing of a petition challenging a tax does not toll the statute of limitations to assess additional tax against taxpayers who were not parties to the litigation challenging the tax and (2) equity does not permit a taxing authority to retain an unconstitutional tax.

PHILADELPHIA BAR ASSOCIATION
BOARD OF GOVERNORS
ADOPTED: NOVEMBER 20, 2001