The Pennsylvania Supreme Court has upheld the First Union rule, which provides that when an entity is formed through the combination of a Pennsylvania bank and an out-of-state bank, the out-of-state bank’s pre-merger value is not to be factored into the six-year average share value calculation under the shares tax provision of the Pennsylvania Tax Reform Code.
The court ruled 4-2 to reverse a Commonwealth Court ruling in Lebanon Valley Farmers Bank v. Commonwealth that held that when a Pennsylvania bank and an out-of-state bank merge, only the post-merger values of each can be factored into the taxable share value calculation layed out in the Tax Code.
