The Commonwealth Court has deemed unconstitutional state regulations barring estates from collecting tax rebates under the Senior Citizens Property Tax and Rent Rebate Assistance Act if the senior citizens paid taxes for the year but died before they could collect the rebates.

On March 14, a deeply split en banc panel ruled that estates can seek rebates under the act if they meet any of the three criteria outlined in the definition of “claimant” under 53 P.S. Section 6926.1303.

The majority in Muscarella v. Commonwealth held that the regulations violated the equal protection and due process clauses of the U.S. and Pennsylvania constitutions, and that the legislature did not intend to specifically exclude estates from the right to pursue rebates for years in which a decedent died.

The state had asked the court to invalidate the regulations; however, Judge Patricia A. McCullough, who wrote the majority opinion, said that the Commonwealth Documents Law prevented the court from striking the regulations.

“Because Section 1303 of the act refers to a ‘person,’ which we interpret as including an ‘estate’ under Section 1991 of the Statutory Construction Act, and the CDL precludes the commonwealth from attempting to void the applicable regulations in the course of this litigation, the commonwealth’s arguments must fail,” McCullough said. “The resolution presently sought by the commonwealth rests in the hands of the General Assembly and/or the [Pennsylvania Department of Revenue].”

McCullough was joined by Judges Bernard L. McGinley and Robert Simpson and President Judge Dan Pellegrini.

Judge P. Kevin Brobson wrote a dissenting opinion taking issue with McCullough applying the definition of “person” under 1 Pa.C.S. Section 1991 to the rebate regulation, as the definition includes not only estates but also foundations and business and governmental entities.

“No one in this case is arguing, let alone suggesting, that these latter entities are ‘claimants’ under the act because they are ‘persons’ under Section 1991 of the Statutory Construction Act,” Brobson said. “The reason no one is taking such an absurd position is apparent from the context of the act. That context should also preclude the court from interpreting ‘claimant’ to include estates.”

Brobson was joined by Judges Bonnie Brigance Leadbetter and Anne E. Covey.

According to McCullough, the plaintiff’s decedent, Josephine Carbo, owned property in Norristown, Pa., where she paid property taxes, and had previously received rebates under the act. Carbo died Nov. 13, 2009.

Charles Muscarella, the executor of Carbo’s estate, filed a property tax rebate claim under the act, but the claim was denied because Carbo did not survive for the entire year. The state Department of Revenue cited Section 401.43 of its regulations, which relate to the act.

Sections 401.1(iv) and 401.43(a) both provide that an estate representative can file for a rebate “if, and only if, the decedent lived during some part of the year next succeeding the calendar year for which a rebate is claimed.”

Muscarella petitioned the Board of Finance and Revenue, but the department was sustained. Muscarella then filed a motion for certification of a class of claimants, and the Commonwealth Court granted the motion, defining the class as estates of people who filed property tax rebate claims for 2003 through 2008, were eligible for rebates, but then died before the end of the applicable year.

Muscarella then filed an application for entry of judgment, seeking that the court declare sections of the regulations as invalid for violating the equal protection and due process clauses.

The state also filed its own application for relief, seeking that the court declare that estates are not eligible for property tax rebates under the act, and the regulations are invalid to the extent that they are inconsistent with the language of the act.

According to McCullough, Muscarella established that the record lacked any indication that the state had a legitimate interest in treating claimants who die during the claim year different from those who live through the year. The state, McCullough said, also failed to produce evidence to support a legitimate state interest in denying the rebate.

McCullough also disputed the state’s claim that Section 1303 does not include estates. She found that, because Section 1303 included the term “person,” and the definition of the word “person” in the Statutory Construction Act includes “estates,” the section should be construed as including estates.

As long as the estate met the three scenarios in Section 1303 that outline how a person can qualify as a “claimant,” the estate could pursue the rebate, McCullough said.

According to McCullough, Brobson’s dissent overlooked the fact that, while the act has been revised several times since its predecessor was enacted in 1971, it was never amended to specifically deny estates the right to file for rebates.

“We emphasize that the department itself made a determination nearly 40 years ago that an estate may qualify as an eligible ‘claimant’ under the act and it enacted regulations to effectuate that determination. However, the department placed a condition on an estate’s receipt of the rebate, a condition which we determined above does not pass constitutional muster,” she said. “Estates have been receiving rebates for nearly four decades. We are simply invalidating the condition imposed by the department precluding certain estates from obtaining the rebate.”

Richard Stern, of Stern & Eisenberg, and Mitchell Kramer, of Kramer and Kramer, co-counsel for the plaintiff, said they were pleased with the outcome.

The attorneys had handled a similar case that went before the Commonwealth Court in 1980. However, that case was settled without the court ruling on the merits of the case.

“We had assumed without really looking into it that the commonwealth after that case had changed the regulations, but they didn’t,” Kramer said. “Someone came to us and said the same thing that our earlier client said decades ago.”

Kramer said the ruling will affect thousands of estates.

“This is the first time we’ve had a decision on the merits,” Stern said. “We’re gratified that the outcome was in our favor, and we’re looking forward to having a hearing on the damages.”

Carol L. Weitzel, of the state Office of Attorney General, declined to comment.

Max Mitchell can be contacted at 215-557-2354 or mmitchell@alm.com. Follow him on Twitter @MMitchellTLI.

(Copies of the 28-page opinion in Muscarella v. Commonwealth, PICS No. 14-0446, are available from Pennsylvania Law Weekly. Please call the Pennsylvania Instant Case Service at 800-276-PICS to order or for information.) •