Earned Income Tax Ordinance of City of Wilkes-Barre, In re

• Decision Date: 15 September 1966
• Docket Number: WILKES-BARRE
• Citation: 222 A.2d 499,208 Pa.Super. 424
• Parties: In re Appeal from 1966 EARNED INCOME TAX ORDINANCE OF the CITY OFIn re Appeal of Taxpayers from ORDINANCE NO. 2 OF CITY OF Appeals of CITY OF
• Court: Pennsylvania Superior Court

Page 499

222 A.2d 499

208 Pa.Super. 424

In re Appeal from 1966 EARNED INCOME TAX ORDINANCE OF the

CITY OF WILKES-BARRE. In re Appeal of Taxpayers from

ORDINANCE NO. 2 OF CITY OF WILKES-BARRE.

Appeals of CITY OF WILKES-BARRE.

Superior Court of Pennsylvania.

Sept. 15, 1966.

Petition for Allowance of Appeal Denied Nov. 28, 1966.

George L. Fenner, Jr., City Sol., Wilkes-Barre, Thomas J. Foley, Scranton, for appellant.

Bernard J. Hendrzak, Wilkes-Barre, for appellee in No. 522.

Arthur Silverblatt, Wilkes-Barre, for appellee in No. 512.

Before ERVIN, P.J., and WRIGHT, WATKINS, MONTGOMERY, JACOBS, HOFFMAN and SPAULDING, JJ.

HOFFMAN, Judge.

This is an appeal from an order of the Court of Quarter Sessions of Luzerne County declaring invalid an earned income tax ordinance of the City of Wilkes-Barre on the grounds that:

1) the ordinance was adopted on January 10, 1966, under the Act of June 25, 1947, P.L. 1145, as amended, 53 P.S. § 6851 et seq., which was specifically repealed by the General Assembly on January 1, 1966; and

2) the ordinance was not properly advertised in accordance with law.

I

Was the ordinance invalid because enacted under a repealed statute?

On December 7, 1965, the City Clerk of Wilkes-Barre was directed by the City Council to advertise the City's intention to impose an income tax. The ordinance was to be enacted under the authority of the Act of June 25, 1947, (P.L. 1145), as amended. On December 8, 15, and 22, 1965, such notice was advertised in the Wilkes-Barre Record.

On Friday, December 31, 1965, Governor Scranton signed into law Act No. 511 known as 'The Local Tax Enabling Act,' 53 P.S. §§ 6901--6924, effective January 1, 1966. This act provided in part: 'Section 23. Repeals. The Act of June 25, 1947, (P.L. 1145), entitled, as amended * * * is repealed.'

On Tuesday, January 4, 1966, at a regular meeting, the Council passed the proposed tax ordinance on first reading. On January 10, 1966, the Council met again and enacted the ordinance after a second and third reading. The ordinance reads in part: 'BE IT ORDAINED AND ENACTED BY THE COUNCIL OF THE CITY OF WILKES-BARRE under the authority of the Act of June 25, 1947, (P.L. 1145) AND ITS AMENDMENTS, as follows * * *.'

A municipality has no original power of taxation; a municipal tax ordinance must be authorized by an act of the General Assembly. Should there be a repeal of such an act, the power to tax would also be withdrawn. Allentown School District Mercantile Tax Case, 370 Pa. 161, 87 A.2d 480 (1952); Marson v. Philadelphia, 342 Pa. 369, 21 A.2d 228 (1941). On its face, therefore, the ordinance would appear invalid, since it was purportedly enacted under the authority of a repealed act.

Before examining this major problem, however, we must consider the significance of the City's failure to comply with the requirement of the 1965 Local Tax Enabling Act which provides: 'Each ordinance * * * shall state that it is enacted under the authority of this act, known as 'The Local Tax Enabling Act." (§ 5).

The importance of such a direction was considered in Pleasant Hills Borough v. Carroll, 182 Pa.Super. 102, 125 A.2d 466 (1956). In that case, a taxpayer contended that the Borough wage tax ordinance was invalid because the ordinance did not contain a statement that it was enacted under the authority of the 1947 taxing act, as required by statute. We held that the requirement of a statement of legislative authority in the ordinance was only directory and not mandatory. We stated further that: 'To hold that a provision is directory rather than mandatory, does not mean that it is optional--to be ignored at will. Both mandatory and directory provisions of the legislature are meant to be followed. It is only in the Effect of non-compliance that a distinction arises. A provision is mandatory when failure to follow it renders the proceedings to which it relates illegal and void; it is directory when the failure to follow it does not invalidate the proceedings.' ¹ (pp. 106--107, 125 A.2d p. 469)

In the instant case, the City not only failed to recite the proper legislative authority for its actions but, also, referred to a statute which had been repealed. This additional error need not prove fatal, however, for it is likewise a general statement of law that a misrecital in an ordinance of the source of power by which the ordinance is passed does not invalidate it if in point of fact the power to enact it existed. City of Waco v. McCraw, 127 Tex. 268, 93 S.W.2d 717 (1936); Ralston Purina Company v. Acrey, 220 Ga. 788, 142 S.E.2d 66 (1965); Missouri-Kansas-Texas Railroad Company v. Maltsberger, 189 Okl. 363, 116 P.2d 977 (1941); Mayor, etc., of Baltimore v. Ulman, 79 Md. 469, 30 A. 43 (1894); State v. Clark, 88 Idaho 365, 399 P.2d 955, (1965); 5 McQuillin, Municipal Corporations § 16.14, p. 183 (3d ed. 1949); 62 C.J.S. Municipal Corporations § 414, p. 791.

Thus, the improper reference to the Act of 1947 rather than the Act of 1965 does not invalidate the ordinance so long as the City in fact had the power to enact it in 1966. ² Neither party disputes that the City had such power. The significant question in this case, therefore, is whether enactment proceedings, which were initiated by the City in 1965, could be continued and concluded in 1966, even though the Legislature, in the interim, had repealed the 1947 act and simultaneously enacted the 1965 act.

In considering this question special note must be taken of § 82 of the Statutory Construction Act of May 28, 1937, P.L. 1019, 46 P.S. § 582, which provides: 'Whenever a law is repealed and its provisions are at the same time re-enacted in the same or substantially the same terms by the repealing law, the earlier law shall be construed as continued in active operation, and a reference to the earlier law in any other law shall be construed as a reference to the repealing law. All rights and liabilities incurred under such earlier law are preserved and may be enforced. As amended 1953, May 27, P.L. 240, § 2.'

In light of this section, we must consider whether the 1965 Act constitutes a substantial re-enactment of the 1947 Act, so that the earlier statute should be construed to have continued in active operation without any break in its authority. ³ If so, enactment proceedings begun by the City of Wilkes-Barre under the 1947 Act could be continued and concluded under the 1965 Act. Cf. Kraus v. Philadelphia, 265 Pa. 425, 109 A. 226 (1919).

Under the 1947 Act, local taxing authorities were empowered to enact per capita, income, real estate transfer, mercantile, occupation and occupational privilege taxes.

The 1965 Act, in large measure, re-enacts and continues many of the provisions of the 1947 Act. Thus, there is no change from prior law in the types of taxes which may be imposed or in the procedure for levying such taxes. Similarly, there is no change in the maximum rate which may be imposed, nor is there any change in the procedure for appeal from the enactment of any such ordinance. Other provisions relating to the Register for Earned Income Taxes and the Vacation of Tax Ordinances and Resolutions by State Tax Measures are largely unaffected. The provisions for Personal Property, Limitations on Assessment, Joint Agreements among Political Subdivisions, and Tax Limitations have similarly been re-enacted.

There are significant additions in the new act, however, Section 11 of the Act imposes special requirements relating to the auditing of books and records of income tax collectors by public accountants. Section 14, while re-enacting the provisions relating to payments of tax to other political subdivisions in Pennsylvania, establishes a new crediting provision for taxes paid by a Pennsylvania resident to another State or political subdivision located in another State. Section 18 provides for the distress and sale of goods and chattels of the taxpayer. Sections 19 and 20 provide for the collection of delinquent taxes from employers or from the Commonwealth.

The most significant provisions relating to income tax ordinances are contained in § 13. On and after January 1, 1966, all of § 13 is construed to be a part of every ordinance imposing an income tax. Foremost among the provisions in § 13 are definitions which are exclusive for any earned income tax and which may not be altered or changed by any political subdivision levying such tax. These include definitions of 'earned income,' 'net profits,' 'domicile,' 'employer,' and the like. Subsection II of § 13 makes all local income taxes payable on a calendar year basis. All such taxes are regarded as continuing in nature. Subsection III provides for the declaration and payment of net profits and earned income taxes. Included in this subsection are several optional provisions relating to filing dates, declarations of estimated tax, and quarterly payments. Subsection IV sets out requirements for the withholding of taxes by employers. Subsections V, VI and VIII outline the specific powers and duties of the income tax officer, including the right to sue for collection of taxes. These subsections also require that the officer give bond and provide for his compensation. Subsections VIII and IX establish a schedule of fines, penalties and interest for delinquent taxes and for violations of these ordinances.

It is apparent, therefore, that many new provisions are contained in the 1965 Act. Nonetheless, it is our conclusion that the 1965 Act was intended to be and is, in effect, no more than a substantial re-enactment of the 1947 statute.

A brief explanation of the circumstances underlying the enactment of the 1965 Act is necessary for a full understanding of the problem. The 1947 Act served as the authority for income taxes enacted by taxing authorities until 1965. The act itself, however, had been amended some twenty-five times after 1947, not always in a consistent fashion. In addition, many practical difficulties had been...