CHICAGO BRIDGE & IRON COMPANY, APPELLANT V. CATERPILLAR TRACTOR
CO., ET AL.

   No. 81-349

   In the Supreme Court of the United States

   October Term, 1981

   On Appeal from the Supreme Court of Illinois

   Memorandum for the United States as Amicus Curiae

            TABLE OF CONTENTS
   Interest of the United States
   Discussion
   Conclusion
   Appendix

                     INTEREST OF THE UNITED STATES

   The federal government is charged with the conduct of the Nation's
foreign relations.  To that end, the Constitution confers upon
Congress the power "To regulate Commerce with foreign Nations * * * "
(Article I, Section 8, clause 3) and authorizes the President, "by and
with the Advice and Consent of the Senate, to make Treaties * * * "
(Article II, Section 2, Clause 2).  The watchword in the area of
foreign commerce is federal uniformity.  "In international relations
and with respect to foreign intercourse and trade the people of the
United States act through a single government with unified and
adequate national power." Board of Trustees v. United States, 289 U.S.
48, 59 (1933).

   The United States submits that the imposition of the Illinois
income tax on the apportioned combined worldwide business income of a
unitary group of related corporations, including foreign corporations,
impairs federal uniformity in an area where such uniformity is
essential.  The United States like most countries, employs the
arms-length method of allocating income among commonly controlled
corporations, and this method is mandated in numerous treaties, to
which the United States is a party, that are intended to prevent
international double taxation.  Under the arms-length method, the
income of each corporation is computed on a separate accounting basis
under the assumption that each member of the group must deal with
other members as if they were wholly separate entities owned by
unrelated interests.  Cf. 26 U.S.C. 482, and Treasury Regulations
promulgated thereunder.  The arms length method insures against
artificial shifting of income and deductions among related businesses.
 The Illinois apportioned combined method of computing income that is
at issue in this case, however, can result in the allocation of
taxable income to a corporation that incurs a loss on a separate
accounting basis computed in accordance with the arms-length method.
Thus, a domestic corporation that operates at a loss and has no
federal taxable income may be subject to state taxation on foreign
source income earned by its foreign affiliates (e.g., income of a
foreign parent or income of a foreign subsidiary that the domestic
parent has not repatriated).  These sharp differences between federal
and international tax policies, on the one hand, and state tax
policies on the other, undermine the federal government's ability to
"speak with one voice when regulating commercial relations with
foreign governments." Michelin Tire Corp. v. Wages, 423 U.S. 276, 285
(1976).

   Moreover, international double taxation can result if foreign
source income subject to the state combined unitary method is also
subject to tax in the foreign country in which it is earned.  The
federal tax laws provide a foreign tax credit in order to mitigate
such international double taxation.  See 26 U.S.C.(& Supp.III) 901 et
seq.  States employing the worldwide unitary method, however, do not
allow a credit for foreign taxes.

   We are accordingly advised by the Departments of State and
Treasury, the Department of Commerce, acting at the request of the
Delegation of the Commission of the European Communities, and the
United States Trade Representative, that a number of foreign
governments have complained -- both officially and unofficially --
that the apportioned combined method empowered by Illinois and other
states creates an irritant in their commercial relations with the
United States.  Retaliatory taxation may ensue, with consequent damage
to international trade.  Moreover, the method causes uncertainties
because it differs from the federal arms-length standard that is
generally accepted in international practice and in bilateral income
tax conventions.  Since this case poses much the same constitutional
problems as existed in Japan Line, Ltd. v. County of Los Angeles, 441
U.S. 434 (1979), in which we participated as amicus curiae pursuant to
the Court's invitation, we believe that the same federal interest
likewise mandates participation here.

                              DISCUSSION

   The question presented in this state income tax case is whether
Illinois' imposition of its income tax on the apportioned combined
worldwide business income of a group of related corporations,
including foreign corporations, violates the Commerce Clause.  Before
turning to the merits, however, we feel obliged to address a
jurisdictional question that has been raised by the amicus Financial
Executives Institute.

   1. Jurisdiction.  In its brief, the Financial Executives Institute
(FEI) argues (at 9), that the Court has no jurisdiction in this case
because the state court judgment "would not be affected in any way by
resolution of the constitutional questions raised in the
jurisdictional statement." That state court judgment upholds
Caterpillar Tractor Company's claim for a refund on the ground that
"(t)he Unitary Apportionment Method * * * must be applied * * * in
order to fairly represent (Caterpillar's) business activities in
Illinois during" the years 1969-1974 (J.S. App. A1-A2).  That
judgment, the amicus submits, is limited to the particular situation
in which a taxpayer uses the unitary method to lower its taxes and
therefore does not turn on any of the constitutional questions.
Indeed, the amicus asserts (Br. 9) that the appellant has conceded
that there is no constitutional obstacle to granting Catepillar a
refund based upon the combined reporting method (see J.S. 16-17).
Hence, as the FEI sees the matter, there is no Article III case or
controversy before the Court because none of the constitutional issues
raised by the appellant can alter the judgment below.  FEI therefore
concludes that any disposition of the merits by this Court would be an
advisory opinion.

   The jurisdictional problem arises on account of the peculiar
Illinois procedure permitting the intervention of third parties,
either as a matter of right "when the representation of the
applicant's interest by existing parties is or may be inadequate and
the applicant will or may be bound by an order or judgment in the
action";  or as a matter of discretion "when an applicant's claim or
defense and the main action have a question of law or fact in common."
Illinois Civil Practice Act, Ill. Rev. Stat. ch. 110, Section 26.1
(1979) (see J.S. App. C6-C7).  The judgment below upheld appellant's
intervention as a matter of discretion and chose not to reach the
question whether appellant could intervene as a matter of right (see
J.S. App. C6-C9).  This case arose on Caterpillar's claim for refund
based upon the combined unitary method, to which the State acceded.
Other computational questions were litigated between Caterpillar and
the State.  However, because appellant and the 15 other corporations
would be subject to greater Illinois income tax liabilities if the
unitary method were upheld, they intervened in the action.

   While it is characterized as an "intervenor" for state law
purposes, appellant, in certain respects, bears a striking resemblance
to an amicus curiae, insofar as its particular tax liability is not at
issue and will not be determined in this case.  The court below
recognized as much because it did "not consider the intervenors to be
seeking a declaratory judgment" (J.S. App. C8) -- a form of relief
that cannot be granted in Illinois unless the plaintiff can establish
a right to injunctive relief.  But as an intervenor, appellant has the
full right of a party to appeal and seek to alter the judgment below
even though the taxpayer Caterpillar appears to be satisfied with that
judgment.  In that sense, appellant has far greater powers than an
amicus, whose right to appear is derivative from the party it
supports.  Indeed, here, appellant's position against the apportioned
combined method is at variance with that of both Caterpillar and the
State of Illinois.  And the court below held the Illinois statute
applicable to "a particular set of facts (of Caterpillar's) as against
the contention (of appellant) that such application is invalid on
federal grounds." Japan Line, Ltd. v. County of Los Angeles, supra,
441 U.S.at 441.  It therefore appears that the state statute has been
sustained within the meaning of 28 U.S.C. 1257(2).

   Moreover, we submit that there is a case or controversy before the
Court.  First, if appellant prevails and obtains a reversal of the
judgment below, it appears that Caterpillar will lose the refund
awarded to it because that refund was based upon the validity of the
apportioned combined method.  Second, the ruling of the court below
encompasses far more than a determination that Caterpillar was
entitled to a refund on the peculiar fact that the apportioned
combined method yielded a lower tax liability.  On the contrary, the
ruling in this case broadly upholds the apportioned combined method on
both constitutional (J.S. App. C17-C20) as well as on state statutory
grounds (J.S. App. C12-C17, C20-C21).  /1/

   To be sure, the record in this case does not support a claim that
the application of the Illinois method produces multiple international
taxation because the method produced a refund to Caterpillar for
1970-1974.  /2/ But if appellant is correct that the constitutionality
of the apportioned combined method to a group of corporations that
includes Boreign corporations violates the Commerce Clause because it
impairs federal uniformity in conducting foreign commerce, the
judgment below in favor of Caterpillar will nevertheless be set aside.
 We therefore submit that there is a proper case or controversy before
the Court.  /3/

   2. It is settled beyond question that "the entire net income of a
corporation, generated by interstate as well as intrastate activities,
may be fairly apportioned among the States for tax purposes by
formulas utilizing in-state aspect of interstate affairs."
Northwestern States Portland Cement Co. v. Minnesota, 358 U.S. 450,
460 (1959);  Mobil Oil Corp. v. Commissioner of Taxes, 445 U.S. 425,
436-442 (1980).  See also Underwood Typewriter Co. v. Chamberlain, 254
U.S. 113 (1920);  Hans Rees' Sons v. North Carolina, 283 U.S. 123
(1931);  Butler Brothers v. McColgan, 315 U.S. 501 (1942);  Moorman
Manufacturing Co. v. Bair, 437 U.S. 267 (1978).

   As the Court stated in Mobil Oil Corp. v. Commissioner of Taxes,
supra, 445 U.S.at 439, "the linchpin of apportionability in the field
of state income taxation is the unitiary-business principle" (footnote
omitted).  In accordance with this principle, the Court has upheld
state apportionment formulas, like that of Illinois, which combine the
income of several related corporations engaged in a "unitary"
business.  Income is allocated to the taxing state by multiplying the
total net income of the enterprise by a percentage comprised of the
average of the ratios of in-state property, payroll, and sales to
total property, payroll and sales.  See Section 304(a) of the Illinois
Income Tax Act, (Ill. Rev. Stat. ch. 120) J.S. App. E16-E18;  see also
United States Steel Corp. v. Multistate Tax Commission, 434 U.S. 452,
475 n.25 (1978);  Exxon Corp. v. Wisconsin Department of Revenue, 447
U.S. 207, 214 n.3 (1980);  Mobil Oil Corp. v. Commissioner of Taxes,
supra, 445 U.S.at 429-430 nn. 2-4.  A unitary business is one in which
all of the corporate constituents are involved in an economically
functionally-related enterprise.  As one leading commentator has
observed, the "very essence of formulary apportionment (is) that where
there are integrated, interdependent steps in the economic process
carried on by a business enterprise, there is no logical or viable
method for accurately separating out the profit attributable to one
step in the economic process from other steps." J. Hellerstein, State
and Local Taxation 400 (3d ed. 1969) .  See also J.S. App. C11;
Butler Brothers v. McColgan, supra, 315 U.S.at 508.  Hans Rees' Sons
v. North Carolina, supra, 283 U.S.at 133.

   Here, it is not disputed that Caterpillar and its 25 subsidiaries
constitute a unitary business enterprise, and the Illinois Supreme
Court so concluded (J.S. App. C11-C.2).  Thus, if Caterpillar and its
subsidiaries conducted their business solely within the United States,
the foregoing precedents we have cited would establish that the
Illinois combined apportionment method would pass muster under the
Commerce Clause for purposes of allocating its income among the
several states.  But Caterpillar is not a domestic enterprise.  On the
contrary, it conducts a worldwide enterprise and "Commerce Clause
scrutiny may well be more rigorous when a restraint on foreign
commerce is alleged,'. Reeves, Inc. v. Stake, 447 U.S. 429, 438 n.9
(1980).

   We submit that the Court's analysis in Japan Line, Ltd. v. County
of Los Angeles, supra, 441 U.S.at 434, undermines the basis of the
decision below and invalidates the unitary apportionment method as
applied to multinational corporate groups.  /4/ In Japan Line, the
Court struck down a California ad valorem property tax, as applied to
a Japanese company's shipping containers, as unconstitutional under
the Commerce Clause because it resulted in multiple taxation of the
instrumentalities of foreign commerce, and prevented this Nation from
"speaking with one voice" in regulating foreign trade and thus was
inconsistent with Congress' power to "regulate Commerce with foreign
Nations" (Article I, Section 8, Clause 3).  In so holding, the Court
pointed out that in the domestic context, "(t)he corollary of the
apportionment principle, of course, is that no jurisdiction may tax
the instrumentality in full * * * .  The basis for this Court's
approval of apportioned property taxation, in other words, has been
its ability to enforce full apportionment by all potential taxing
bodies" (441 U.S.at 447).

   But the Court's ability to avoid multiple taxation by ensuring full
apportionment in the domestic context has no counterpart in the
international sphere.  As the Court explained (441 U.S.at 447-448;
footnote omitted) --

         (N)either this Court nor this Nation can ensure full
      apportionment when one of the taxing entities is a foreign
      sovereign.  If an instrumentality of commerce is domiciled
      abroad, the country of domicile may have the right, consistently
      with the custom of nations, to impose a tax on its full value.
      If a State should seek to tax the same instrumentality on an
      apportioned basis, multiple taxation inevitably results.  * * *
      Due to the absence of an authoritative tribunal capable of
      ensuring that the aggregation of taxes is computed on no more
      than one full value, a state tax, even though "fairly
      apportioned" to reflect an instrumentality's presence within the
      State, may subject foreign commerce "'to the risk of a double
      tax burden to which (domestic) commerce is not exposed, and
      which the commerce clause forbids.'" Evco v. Jones, 409 U.S.
      (91), at 94 (1972), quoting J. D. Adams Mfg. Co., 304 U.S.,at
      311.

   Apart from the risk of multiple international taxation, Japan Line
rests upon a second ground -- the need for federal uniformity in an
area in which federal uniformity is essential.  As the Court stated,
"Foreign commerce is preeminently a matter of national concern" (441
U.S.at 448).  Since "the Federal Government must speak with one voice
when regulating commercial relations with foreign governments"
(Michelin Tire Corp. v. Wages, 423 U.S. 276, 285 (1976), "(t)he need
for federal uniformity is no less paramount to ascertaining the
negative implications of Congress' power to 'regulate Commerce with
foreign Nations' under the Commerce Clause" (footnote omitted) (441
U.S.at 449).  As the Court further pointed out (id. at 450-451)
(footnotes omitted):

         A state tax on instrumentalities of foreign commerce may
      frustrate the achievement of federal uniformity in several ways.
       If the State imposes an apportioned tax, international disputes
      over reconciling apportionment formulae may arise.  If a novel
      state tax creates an asymmetry in the international tax
      structure, foreign nations

:7 disadvantaged by the levy may retaliate against American-owned

      instrumentalities present in their jurisdiction.  Such
      retaliation of necessity would be directed at American
      transportation equipment in general, not just that of the taxing
      State, so that the Nation as a whole would suffer.  If other
      States followed the taxing State's example, various
      instrumentalities of commerce could be subjected to varying
      degrees of multiple taxation, a result that would plainly
      prevent this Nation from "speaking with one voice" in regulating
      foreign commerce.

   In determining whether a state tax in the international context is
constitutionally valid, it is necessary to examine "whether * * * (it)
creates a substantial risk of international multiple taxation, and,
second, whether the tax prevents the Federal Government from 'speaking
with one voice when regulating commercial relations with foreign
governments'" (441 U.S.at 451).  For "(i)f a state tax contravene
either of these precepts, it is unconstitutional under the Commerce
Clause (ibid.; emphasis supplied).

   We submit that analysis of the Illinois tax under the principles of
Japan Line requires the conclusion that the combined apportionment
method, applied to a unitary business with foreign corporate
constituents, is barred by the Commerce Clause.  Like the ad valorem
tax at issue in Japan Line, the Illinois tax violates both precepts
discussed in that decision insofar as it creates a substantial risk of
international multiple taxation and impairs federal uniformity in the
conduct of foreign relations.  /5/ We turn now to an examination of
the operation of the Illinois tax in the multinational corporate
context.

   a. Risk of multiple international taxation.  As we have pointed out
(supra, pages 8-9), the Illinois apportionment formula allocates
income on the basis of payroll, property and sales.  Thus, in order to
determine what portion of the worldwide income of a unitary group of
corporations is allocable to Illinois, the total worldwide income of
all the corporations of the group is multipled by a fraction which is
the arithmetic average of the three ratios of in-state payroll,
property, and sales to total payroll, property, and sales.  See Mobil
Oil Corp v. Commissioner of Taxes, supra, 445 U.S.at 429-430 n.4, 437
n.13.

   The theory underlying the three-factor formula, and indeed, the
basis for its acceptability for Commerce Clause purposes, is that a
dollar of payroll or property spent or a dollar of sales made in one
state, produces roughly the same amount of taxable income as a dollar
so spent or sales made in another state.  See J. Hellerstein, supra,
at 539.  While this assumption may be sound within certain
constitutional tolerances in a homogeneous economy such as the United
States and thereby provides a basis for the division of interstate
income, there is no comparable assumption that can be made in
allocating the income of a multinational group.  As the amici
Container Corporation (Br. 14-18) and the Union of Industries of the
European Community point out (Br. 10-11), there are great differences
between the cost of property and payroll in the several states, on the
one hand, and abroad, on the other, especially in developing nations.
These differences would shift a disproportionate share of the foreign
source income of a multinational group to state taxation if the
three-factor formula were used.

   Moreover, state use of the unitary apportionment method, in
contrasts to federal, and internationally accepted, use of the
arms-length standard, creates substantial risk of international
multiple taxation.  For example, if a U.S. subsidiary engages in
transactions with its foreign parent (which otherwise engages in no
U.S. business activity) on an arms-length basis and the U.S.
subsidiary operates at a loss, no portion of the foreign parent's
income would, under the arms-length standard, be subjected to federal
income tax.  At the federal level, therefore, there would be no
international double taxation because only the foreign country would
subject that income to tax.  Under the state unitary method, however,
a portion of the foreign parent's income would be allocated to the
U.S. subsidiary and would thus be subject to tax in the state.
Accordingly, both the state and the foreign country would tax such
apportioned income, thereby resulting in international double taxation
of the same income.  In this manner, the state unitary method
frustrates the federal policy, consistent with international usage, of
avoiding or mitigating international double taxation.  /6/

   To be sure, the application of the Illinois tax in this case does
not, as the California tax in Japan Line, "creates multiple taxation
in fact" (see 441 U.S.at 452 n.17).  Indeed, the unitary method has
produced a refund for Caterpillar, a fact which explains its support
of Illinois' position here.  But we believe that the foregoing
considerations demonstrate that the Illinois tax would, in most cases,
create a substantial risk of international multiple taxation that
would be sufficient to invalidate the unitary method in the
international context.  It would nevertheless be understandable if the
Court wishes to resolve the issue in a case with a more fully
developed record in which the state tax can be shown in fact to impose
multiple burdens.  This course of action may be appropriate insofar as
the Court has not decided "under what circumstances the mere risk of
multiple taxation would invalidate a state tax, or whether this risk
would be evaluated differently in foreign, as opposed to interstate
commerce." Japan Line, Ltd. v. County of Los Angeles, supra, 441
U.S.at 452 n.17 (emphasis in original).  Accordingly, if the Court
wishes to consider the question in this case in the context of a case
involving multiple taxation in fact, it may wish to defer decision in
this case and note probable jurisdiction in Container Corporation of
America v. Franchise Tax Board, No. 81-523.

   b. Federal Uniformity.  Even assuming arguendo that there is an
insufficient showing in this case that the Illinois unitary method
creates a risk of international multiple taxation, the tax is still
invalid because it impairs federal uniformity.  Under Japan Line, a
state tax is invalid if it prevents the federal government from
"speaking with one voice" in international trade, "(I)f it be
otherwise, a single State can, at her pleasure, embroil us in
disastrous quarrels with other nations." Chy Lung v. Freeman, 92 U.S.
275, 280 (1875).

   As we have pointed out (supra, page 2), the United States and most
foreign countries use the arms-length method of allocating income
between corporations.  Illinois' variant unitary method impairs the
otherwise uniform international custom that is the basis of the
treaties between the United States and numerous foreign countries that
are intended to prevent international double taxation of income.
Indeed, the Secretary of the Treasury and the Secretary of State have
recently received diplomatic communications from the Governments of
Great Britain and Canada, complaining about the state unitary method
and emphasizing its incompatibility with international practice (see
Appendix, infra, 1a-9a).  Similarly, as appellant points out (J.S.
20), all nine members of the European Common Market joined in a
demarche emphasizing the incompatibility of worldwide combined
reporting with internationally accepted rules and principles of the
OECD.  "The risk of retaliation by (foreign countries), under these
circumstances, is acute, and such retaliation of necessity would be
felt by the Nation as a whole" (footnote omitted) (Japan Line, Ltd. v.
County of Los Angeles, supra, 441 U.S.at 453).  In this respect, the
amicus Union of Industries of the European Community (Br. 7-9) points
out that the application of the state unitary method may violate
certain treaties of friendship, commerce and navigation.  See
especially Article IX of the Convention with France which limits state
taxation of French companies to income "'directly related to their
activities within those territories'" (Br. 9 n.12).

   In sum, "the freedom of the States to formulate independent policy
in (the) area (of commerce) may have to yield to an overriding
national interest in uniformity" Moorman Manufacturing Co. v. Bair,
supra, 437 U.S.at 280.  "We cannot have trade and commerce in world
markets and international waters exclusively on our terms, governed by
our laws, and resolved in our courts." Bremen v. Zapata Off-Shore Co.,
407 U.S. 1, 9 (1972).  The income taxation of multinational businesses
is thus a matter that is subject only to a national rule conformable
with the practice of nations or adopted pursuant to the President's
authority "by and with the Advice and Consent of the Senate to make
Treaties * * * " or Congress' power "(t)o regulate Commerce with
Foreign Nations * * * ." "(Illinois), by its unilateral act, cannot be
permitted to place these impediments before this Nation's conduct of
its foreign relations and its foreign trade." Japan Line, Ltd. v.
County of Los Angeles, supra, 441 U.S.at 453.  /7/

   3. If, as we submit, the Court concludes that the Illinois combined
reporting requirement either:  (a) creates a substantial risk of
international multiple taxation, or (b) impairs federal uniformity in
the conduct of foreign relations, that is the end of the matter, and
the judgment below should be reversed.  In those circumstances, the
Illinois combined reporting method could not be constitutionally
applied to any multinational group of corporations -- a result we
believe to be compelled by the Commerce Clause.  If the Court
concludes, however, that the record in this case is inadequate to
support such a disposition, we urge it to defer resolution of the
issue to another case which has a more fully developed record.

   Whatever ruling it may render here, the Court should be aware that
neither this case nor any case presently pending before it presents
the issue in the context of a unitary business consisting of a U.S.
subsidiary whose parent corporation is foreign.  It may well be that
the multiple tax burdens and the impairment to federal uniformity in
international trade caused by the state apportionment method will be
more easily demonstrated in a case involving a corporate group with a
foreign parent.  In that case, there will be, in addition to the
considerations we have already pointed out, other burdens that the
state unitary method will impose on international trade and foreign
relations.  For example, a foreign parent corporation with no direct
U.S. activities would generally maintain its financial accounts
according to local (i.e. foreign) accounting principles and in the
local currency.  Conversion of such accounts to conform to U.S.
accounting principles and to the individual states' tax accounting
rules, as well as conversion of all entries into U.S. dollars (which
are required for apportionment under the state unitary method), pose a
severe administrative and financial burden on the foreign parent
corporation and other foreign affiliates.  Moreover, there will be
further burdens on international trade resulting from the demands by
state tax authorities that the foreign corporation produce and explain
its records of business transactions that are entirely unrelated to
activities within the United States.  Accordingly, the Court should
not decide this case on any ground that would foreclose any claims
that may be raised in a future case involving the imposition of the
combined reporting method to a group of corporations with a foreign
parent.

                              CONCLUSION

   For the reasons stated, the judgment of the Supreme Court of
Illinois should be reversed.

   Respectfully submitted.

   REX E. LEE

   Solicitor General

   STUART A. SMITH

   Assistant to the Solicitor General

   January 1982

   /1/ Moreover, appellant has not conceded that there is no
constitutional obstacle to granting Caterpillar a refund based upon
the combined reporting method.  The reference to the Jurisdictional
Statement (at 16-17) cited by amicus FEI as evidence of such a
concession simply acknowledges "that worldwide combination may result
in a State income taX advantage for some corporations" (J.S. 16) and
that this fact explains Caterpillar's support for this method of
computation.  But appellant amplified its position by further stating
as follows:  'However, the fact that worldwide combined reporting may
result in unjustifiable undertaxation in some instances cannot justify
unconstitutional overtaxation in others.  This is not a case where two
wrongs make a right" (id. at 17;  emphasis in original).

   /2/ The Illinois Appellate Court rejected Caterpillar's claim that
the apportioned combined apportioned method was not applicable for
1969 (when it yielded a greater tax liability) (see J.S. App. C4-C5) .
 Caterpillar did not appeal this aspect of the case to the Illinois
Supreme Court (J.S. App. C6).

   There was also a computational dispute between Caterpillar and the
State of Illinois that was resolved by the decision below (see J.S.
App. C21-C23).  That issue is not before this Court.

   /3/ The amicus FEI further argues (Br. 16-24) that the record in
this case is inadequate for the Court to decide the constitutional
issues raised by appellant.  In our view, the case has a decidedly
abstract quality because of the absence of any record detailing
appellant's business structure and international tax burdens.  As we
point out (infra, pages 18-19), the Court should therefore refrain
from rendering a broad ruling that might foreclose future multiple tax
claims that may be made on a more concrete set of facts, or in a case
involving a foreign parent with U.S. subsidiaries.  If the Court
ultimately concludes that the record in this case is inadequate for
the resolution of the issue in this case, it may wish to defer
decision here and note probable jurisdiction in Container Corporation
of America v. Francise Tax Board, No. 81-523, which contains a more
fully developed record.

   /4/ Bass, Ratcliff & Gretton, Ltd. v. State Tax Commission, 266
U.S. 271 (1924) has no bearing on the question presented here.  That
case involved the application of a New York apportionment formula to a
single British corporation which manufactured its product in England
and sold it in New York through branch offices.  See id. at 282.  The
taxpayer did not conduct its business in multinational corporate group
form.  There was accordingly no occasion for the Court to consider the
constitutionality of the combined apportionment method and its
inconsistency with the arms-length method in a multinational corporate
setting.  Compare Hans Rees' Sons v. North Carolina, supra, 283 U.S.at
132-133, with Mobil Oil Corp. v. Commissioner of Taxes, supra, 445
U.S.at 438-439, 440-441.

   /5/ Hence, there is no basis for the Illinois Supreme Court's
conclusion (J.S. App. C18) that Japan Line is "obviously
distinguishable" because "(t)his appeal does not involve the multiple
taxation of items or instrumentalities of foreign commerce nor does
unitary reporting affect Federal authority in governing foreign
commerce." The same considerations of international multiple taxation
and federal uniformity in the conduct of foreign relations upon which
Japan Line rests are equally applicable to a state income tax.

   /6/ As we have pointed out (supra, page 3), the federal income tax
law mitigates international double taxation through the foreign tax
credit.  See 26 U.S.C.(& Supp.III) 901 et seq.  Under these
provisions, foreign income taxes that are imposed on foreign source
income that is also subjected to U.S. taxation can be credited against
that U.S. tax liability.  In marked contrast, the state unitary method
at issue has no comparable provision.

   /7/ Mobil Oil Corp. v. Commissioner of Taxes, supra, 445 U.S.at
425, upon which the decision below relied (J.S. App. C18), has no
bearing on this case.  There, the Court held that a New York
corporation having a place of business in Vermont could not object, on
Commerce Clause grounds, to the imposition of a Vermont corporate
income tax which allocated a portion of foreign source dividend income
paid by its foreign subsidiaries.  The taxpayer, however, admitted
that New York, as the state of commercial domicile, could tax such
foreign-source dividends in full.  Hence, Japan Line was not
implicated because there was no issue of international multiple
taxation (see 441 U.S.at 446-447, 448).

   Appendix Omitted