Philadelphia v. Depuy

244 A.2d 741, 431 Pa. 276, 1968 Pa. LEXIS 619

• Court: Supreme Court of Pennsylvania
• Decided: August 6, 1968
• Docket: Appeals, 3, 4 and 8
• Status: Published

Opinions

Opinion by

Mr. Justice Roberts,

This litigation centers around one paragraph of the Act of June 1, 1889, P. L. 420, §23, as amended, 72 P.S. §2181 (Supp. 1967). The act generally imposes an annual tax of 14 mills on the gross receipts of certain enumerated utilities; the section directly involved in this litigation exempts from taxation the gross receipts of municipally owned or operated public utilities to the extent that these gross receipts are derived from business done inside the limits of the municipality. Municipal gas companies, however, are denied this exemption by the language of the act. As a result, appellants Philadelphia Gas Works and Chambersburg Gas Department attacked the amended Act of 1889, claiming (1) that the act is unconstitutional because it violates the uniformity clause of the Pennsylvania Constitution, Article IX, §1 and the Fourteenth Amendment of the United States Constitution; (2) that it violates the prohibition in the Pennsylvania Constitution against local or special laws, Article III, §7; (3) that the Philadelphia Gas Works, being municipally owned and operated should be exempt; and (4) that the act really does not tax any municipal utilities.

The case presently comes before us for the second time. In our first decision, Philadelphia v. Smith, 412 Pa. 262, 194 A. 2d 177 (1963), we found against appellants on all but their first contention. On this classification issue, however, we remanded the case to the court below for further testimony on whether there existed any real differences between municipal gas and electric companies to justify different tax treatment for the two. As a result of a second decision adverse to appellants, the case is here again.

We start with the well-established proposition that one seeking to show a statute unconstitutional must carry a very heavy burden. This doctrine was most recently reiterated in Commonwealth v. Life Assurance Co. of Pennsylvania, 419 Pa. 370, 214 A. 2d 209 (1965), appeal dismissed for want of a substantial federal question, 384 U.S. 268, 86 S. Ct. 1476 (1966), where we held that although there must be some reasonable basis for distinguishing one taxable from another, it is the allegedly aggrieved taxpayer who must demonstrate the lack of such basis. “All doubt is to be resolved in favor of sustaining the legislation.” Milk Control Comm’n v. Battista, 413 Pa. 652, 659, 198 A. 2d 840, 843 (1964); Anstine v. Zoning Bd. of Adjustment, 411 Pa. 33, 190 A. 2d 712 (1963). Moreover, the taxpayer’s burden will be deemed met only if the challenged statute “clearly, palpably and plainly violates the Constitution.” Daly v. Hemphill, 411 Pa. 263, 271, 191 A. 2d 835, 840 (1963) (Emphasis in original.); Chartiers Valley Joint Schools v. Allegheny Cty. Bd. of Sch. Directors, 418 Pa. 520, 546, 210 A. 2d 487, 501 (1965). The court below found that appellants failed to carry their heavy burden of showing that there existed no reasonable basis for distinguishing gas from electric companies. We agree.

Appellants presented but three witnesses. The first of these, a former State Senator, testified as to his own recollection of the events surrounding the passage of the act, concluding that gas companies were taxed discrimina torily. There can be no doubt that this testimony was both irrelevant and improper. The remaining two witnesses, both experts, testified concerning the increasing competition between gas and electric companies. Even admitting, however, that these two utilities perform substantially similar functions and are frequently in competition, this is not enough to show that the classification for taxing purposes is unreasonable. We realize that gas and electric companies (along with coal and oil companies) compete, for example, in the area of space heating. But, as this Court said in Life Assurance, supra, “the Legislature may distinguish for purposes of taxation activities which are sufficiently unique despite the fact that the subjects so taxed are but one segment of a larger class engaged in similar activity, [citing cases.]” 419 Pa. at 380, 214 A. 2d at 216. See also Heisler v. Thomas Colliery Co., 274 Pa. 448, 118 Atl. 394 affirmed, 260 U.S. 245, 43 S. Ct. 83 (1922).

Apart from the similarity of functions, it cannot be gainsaid that gas and electricity are distinct power sources, each sufficiently unique to sustain separate tax treatment. In fact, classifications arguably far less reasonable on their face than this one have already been sustained by our Court. See, e.g., Philadelphia v. Samuels, 338 Pa. 321, 12 A. 2d 79 (1940) (different tax treatment for open parking lots and closed parking garages); Heisler v. Thomas Colliery Co., supra (different tax treatment for anthracite and bituminous coal).

Accordingly, the decree of the court below is affirmed. Each party to pay own costs.