A yearslong dispute between the Altoona Area School District and two Fiore construction companies is set for trial on Friday.
A lawsuit filed by Leonard S. Fiore Inc. and Fiore Brothers Inc. is over taxation of the businesses' gross earnings for work done outside of the school district's boundaries.
The district maintains the companies combined owe about $300,000 in back taxes on their gross earnings, including interest and penalties, dating back to 2008.
The back taxes are not all that's at stake for the district. If the companies win their lawsuit, the district would no longer be able to apply its business privilege tax to any businesses' transactions that occur outside of the district.
The Fiore companies assert that the district's practice of taxing gross receipts from their work done in areas outside of the school district's geographical boundaries is a violation of the state's Local Tax Reform Act.
The Altoona Area School District collected more than $1 million through business privilege taxes from July 1, 2012, to April 30, 2013. That revenue includes taxes from businesses' transactions outside of the district. For the 2012-13 school year, the district sent 6,795 business privilege and business privilege rental forms to qualified taxpayers.
"There is a lot of money at stake going forward," district solicitor David P. Andrews said of the 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 if enacted before Nov. 30, 1988. Altoona Area's tax survived.
But the district expanded the tax in 2007 to include businesses' transactions made outside of the district's boundaries. The 2007 amendment redefined what would be taxable under its business privilege tax, thus expanding the scope of the tax, which under the Local Tax Reform Act was not proper, Fiore is contending.
The act prohibits a taxing body from raising the rate of the tax, Andrews said, adding that the district did not raise the rate.
"The district did not change the rate. It only exercised its right to tax other work in the state," Andrews stated.
The companies' attorney Jackie Bernard of Grappone Law Offices contended the 2007 amendment is not only illegal, but it has a negative impact on job growth because companies in Altoona must embed the cost of the tax in competitive bids for any job they seek outside of the district's boundaries.
The Fiore companies first took steps to appeal the tax through the district. But a March 18 decision by a hearing officer, Robert Max Junker, who heard Fiore's complaints, was in favor of the school district.
The companies took their appeals to the county court. The lawsuits contest the imposition of the Business Privilege Taxes for 2008-11 on Leonard S. Fiore Inc. and Fiore Brothers Inc., located at 5506 Sixth Ave.
Judge Daniel J. Milliron is to preside over the trial
at the Blair County Courthouse.
No matter what Milliron decides, Andrews said he expects the losing party
will appeal to the Commonwealth Court.
Mirror Staff Writer Russ O'Reilly is at 946-7435.