Judge: No taxes for business outside of district

A Blair County judge has ruled in favor of two construction companies that filed a lawsuit against the Altoona Area School District over taxation of business transactions made outside of the district’s boundaries.

Judge Daniel J. Milliron agreed with the Leonard S. Fiore Inc. and Fiore Brothers Inc., who asserted that the district’s 2007 amendment to its Business Privilege Tax policy violates the Local Tax Reform Act because it expanded the scope of the district’s tax to include work performed outside of the district’s geographical boundaries.

The money in dispute was about $300,000 in back taxes including penalties, which the district maintained the Fiore companies owed for work done outside of the district since 2007. Fiore is the district’s largest payer of the Business Privilege Tax.

Milliron’s conclusion that the district’s tax is improper affects all businesses taxed by the district for transactions made outside of the district.

“We are pleased that the court agreed with us that the Local Tax Reform Act prohibited the expansion of the definition of the gross receipts tax,” the companies’ attorney, Jackie Bernard of Grappone Law Offices, said.

“The end result is that other businesses will benefit,” she said.

The district collected more than $1 million through business privilege taxes from July 1, 2012, to April 30, 2013. Altoona Area School District solicitor Dave Andrews said he does not know how much tax revenue the district stands to lose as it would no longer be able to tax extra-territorial transactions as it has since 2007.

Andrews had previously anticipated the school board would appeal to the Commonwealth Court if it lost at the county level. However, he said Tuesday that the board may choose not to appeal for two reasons.

One reason is that Milliron’s decision may help the district retain companies and attract new ones.

“The board is also looking at this from a standpoint of promoting business in the district as well. Outside of the context of the law, Fiore made a practical argument (for not taxing work done outside of the district.) There should be an incentive to stay within the district and not move to another district,” Andrews said.

A second reason for not appealing is that new legislation may render the lawsuit against the district moot. Andrews said the language of House Bill 1513 raises questions of whether the board would have the right to levy business privilege taxes on work done outside of the district.

“The landscape has changed because in May, Gov. (Tom) Corbett signed House Bill 1513, which amended Business Privilege Tax law,” Andrews said.

The bill goes into effect next year. Essentially, the bill might achieve the same end as the Fiore companies’ lawsuit.

The district has been levying its business privilege tax for decades. The Local Tax Reform Act of 1988 abolished the ability of political subdivisions like school districts from enacting a business privilege tax on gross receipts, but it preserved taxes of districts that enacted them before Nov. 30, 1988.

The Fiore companies argued that the 2007 decision to apply the tax to businesses’ transactions made outside of the district’s boundaries expanded the district’s grandfathered tax. Andrews interpreted the law to mean that a taxing body cannot raise the rate of the tax.

However, Milliron, in his 12-page written opinion, referred to “plain language” of the 1989 resolution to support his decision that the district “chose to impose a Business Privilege tax on a portion of gross receipts only.”

Mirror Staff Writer Russ O’Reilly is at 946-7435.