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Pay up! Pa. court says five local municipalities must refund $2.3M in tax overpayments

Five Lebanon County municipalities remain on the hook for about $2.3 million after a state appeals court ruled they must hand over that cash to settle a tax overpayment dispute.

The Commonwealth Court panel’s decision marks a legal defeat for Cornwall Borough and Heidelberg, North Annville, West Cornwall and Bethel townships.

It represents a win for their fellow boroughs, townships and school districts in the county amid the ongoing and rather bizarre saga of mismanagement and outright theft at the Lebanon County Earned Income Tax Bureau.

In an opinion Judge Anne E. Covey filed this week, the state court upheld a July 2015 ruling by county Judge Bradford H. Charles. The county judge fashioned what Covey called a “fair, reasonable and appropriate” remedy to a tax dispute that has rocked the county for about a decade.

The turmoil started when it was discovered that the tax bureau’s executive director, Donald Foltz Jr., had embezzled more than $800,000. Foltz committed suicide in March 2007. Further investigation showed the tax bureau’s operations and records to be a shambles, Covey noted.

In 2009, an investigating firm that examined the mess concluded that 18 school districts and municipalities had been overpaid by the bureau on earned income tax collections from 2004 to 2007. Thirteen of them agreed to return the overpayments without interest, but the five municipalities that were the focus of Covey’s opinion refused and were sued by the other participants in the tax bureau.

Cornwall Borough and Heidelberg, North Annville, West Cornwall and Bethel townships appealed to the state judges after Charles ordered them to pay up, with 6 percent interest, after an exhaustive investigation.

In agreeing that Charles made the right call, Covey found that Cornwall Borough owes $1.05 million, Bethel owes $70,751, Heidelberg owes $766,830, North Annville owes $275,413, and West Cornwall owes $129,588, not counting interest.

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