Title: Ex Parte Kimberly-Clark Corp.

State: alabama

Issuer: Alabama Supreme Court

Document:

503 So. 2d 304 (1987)
Ex parte KIMBERLY-CLARK CORPORATION.
(Re James C. White, as Commissioner of Revenue of the State of Alabama
v.
Kimberly-Clark Corporation).
85-870.

Supreme Court of Alabama.
February 6, 1987.
*305 Warren H. Goodwyn and William E. Shanks, Jr., of Balch & Bingham, Birmingham, for petitioner.
Charles A. Graddick, Atty. Gen., and B. Frank Loeb, Chief Counsel, and Mark D. Griffin, Asst. Counsel, Dept. of Revenue, and Asst. Attys. Gen., for respondent.
MADDOX, Justice.
This appeal involves the Alabama corporate income tax. We granted certiorari in order to determine whether the Court of Civil Appeals, 503 So. 2d 296, correctly decided three issues of first impression.
Kimberly-Clark is a foreign corporation registered to do business in Alabama; it conducts business in Alabama and many other of the United States, as well as in the international marketplace. Alabama income tax on corporations doing business both within and without Alabama is calculated by means of an apportionment formula that compares the corporation's net income (derived from property, payroll, and sales) from business done within Alabama to that from business both within and without Alabama. That formula may be expressed as:
Petitioner originally filed suit in circuit court seeking refund of a portion of its 1977-1981 income taxes. The trial court ruled in Kimberly-Clark's favor on all three issues raised; it held: (1) that, under Code 1975, § 40-18-35(13), Kimberly-Clark could deduct noncapital maintenance and operating expenses related to pollution control equipment from its apportioned (Alabama) income; (2) that, pursuant to Alabama Department of Revenue Regulation 810-3-31-.02(16)(b), sales to foreign countries from Alabama shipping points should not have been included as Alabama sales in determining the numerator value of the apportionment formula; and (3) that I.R.C. § 78 and § 951 Subpart F income should have been excluded from the denominator of the apportionment formula. The Court *306 of Civil Appeals reversed the trial court's rulings on all issues; we affirm that decision.
As we find that the Court of Civil Appeals correctly decided the first issue, we quote and adopt the following from Judge Wright's opinion:
The petitioner contends that this Court's holding in Eagerton v. Courtaulds North America, Inc., 421 So. 2d 104 (Ala.1982), supports its position. In Courtaulds, this Court construed the sales and use tax exemptions, Code 1975, §§ 40-23-4(16) and -62(18), to allow exemption, as "material," of fuel oil used to fire pollution control boilers. Kimberly-Clark asserts that the expenses here in question should be treated similarly. However, the sales and use tax statutes in Courtaulds are materially different from the income tax statutes at issue here. The sales and use tax provisions contemplate current sale or use; the income tax provisions, as discussed above, contemplate investment in durable goods and fixtures, not the expenses of materials for current consumption.
Petitioner's second issue, that sales to customers in foreign countries from Alabama shipping points should not be included in the numerator of the apportionment formula, must also fail. While Dept. of Rev.Reg. 810-3-31-.02(16) provides that sales made to foreign customers may be excluded when the taxpayer is subject to taxation in the state of the purchaser, petitioner failed to produce any evidence to show that it was subject to foreign taxation. The parties stipulated to certain facts relevant to this issue:
In this regard, we again adopt the language of the Court of Civil Appeals:
Petitioner complains that, in so ruling, the Court of Civil Appeals articulated a new standard for determining whether a business is subject to taxation by a foreign jurisdiction. However, that standard is clearly expressed in Dept. of Rev.Reg. 810-3-31-.02(3)(c): the taxing power of a foreign state is measured by the same due process standards applicable to another of the United States. We agree that it is not unjust to hold Kimberly-Clark to a knowledge of this standard, and we uphold the Court of Civil Appeals' refusal to remand for more evidence on this issue.
Finally, we must also affirm as to petitioner's third issue. Kimberly-Clark correctly states our holding in State v. Chesebrough-Ponds, Inc., 441 So. 2d 598 (Ala.1983), wherein we held that net income computation for purposes of the Alabama income tax is not dependent on federal income tax definitions. However, we also find the Court of Civil Appeals to be correct in ruling that I.R.C. § 78 and § 951 Subpart F income should be included in the denominator of Kimberly-Clark's apportionment formula, as a benefit has inured to Kimberly-Clark by virtue of the federal income tax credit. As before, we adopt the language of the Court of Civil Appeals as our own:
In light of the foregoing, the judgment is due to be, and it hereby is, affirmed.
AFFIRMED.
TORBERT, C.J., and JONES, ALMON, SHORES, BEATTY, ADAMS, HOUSTON and STEAGALL, JJ., concur.