Document: 488 U.S. 19 109 S.Ct. 278 102 L.Ed.2d 186 SHELL OIL COMPANY, Appellantv.IOWA DEPARTMENT OF REVENUE. No. 87-984. Argued Oct. 4, 1988. Decided Nov. 8, Syllabus Between tax years 1977 and 1980, a portion of Shell Oil Company's gross revenues was derived from the sale oil natural gas extracted Outer Continental Shelf (OCS). sold all its OCS directly at wellhead platform, but piped most crude inland, where it either to third parties or refined, which typically involved commingling with non-OCS oil. Shell's principal business in Iowa during issue chemical products were manufactured refined elsewhere included commingled In computing corporate income taxes for those years, adjusted apportionment formula State uses calculate in-state taxable income—under that overall net is "reasonably attributable trade within state" taxed exclude figure claimed reflected earned OCS. The had previously been upheld against Due Process Commerce Clause challenges Moorman Mfg. Co. v. Bair, 437 267, 98 2340, 57 197. Department Revenue rejected modification found payments deficient, decision affirmed by County District Court Supreme Court. Both courts contention Lands Act (OCSLA) pre-empts Iowa's therefore prevents taxing gas. Held: OCSLA does not prevent including formula. adopting civil criminal laws "each adjacent state," provide "[s]tate taxation shall apply" further specifies such adoption "shall never be interpreted as basis [a State's] claiming any interest [the OCS] therefrom." However, above-quoted provisions, when read context entire section they appear, background legislative history OCSLA, establish Congress exclusively concerned preventing States asserting, on territorial claims, jurisdiction assess direct commonly imposed offshore production sites, did intend prohibit OCS-derived provided so pursuant constitutionally permissible scheme Iowa's. inclusion unitary base amount extraterritorial prohibited OCSLA. argument that, even if allows include preapportioned sales occur off OCS, may value made since, face, makes no distinction and, general, irrelevant makeup formula's third-party outside State. Pp. 24-31. 414 N.W.2d 113 (Iowa 1987), affirmed. MARSHALL, J., delivered opinion unanimous Kenneth S. Geller, Washington, D.C., appellant. Harry M. Griger, Des Moines, appellee. Lawrence G. Wallace, amicus curiae support Justice MARSHALL 1 this appeal, we must decide whether (OCSLA), 67 Stat. 462, 43 U.S.C. § 1331 et seq. (1982 ed. Supp. III), (OCS) income. We hold not. 2 * Company (Shell) business,1 incorporated Delaware. Its activities producing, transporting, marketing are them. extracts only various also defined submerged lands three more geographical miles United coastline.2 case, 3 During issue, platform located above Nearly oil, contrast, transferred via pipelines continental States, it. refining process involves purchased drawn other places. Thus, original source Shell-refined product indeterminable. 4 Iowa. These 5 imposes an corporations doing Code 422.33(2) (1987). For like Shell, determined single-factor based sales. Under formula, share corporation's state." Ibid.3 have sales-based 197 (1978). 6 filed returns stated "income earned" OCS.4 audited modification. Accordingly, payment deficient. challenged determination, hearing before violated officer contention. appealed Polk Court, administrative decision, AA952 (Oct. 3, 1986), App. Juris. Statement 15a (Polk opinion), Kelly-Springfield Tire Board Tax Review, (1987).5 concluded, upon examination text pre-empt noted probable jurisdiction, 484 1058, 108 1010, 976 (1988), now affirm. II 7 held under Clause. supra. here purely one federal statutory pre-emption. It contends passing intended impose stricter requirements State's than operation alone. points believes evince clear congressional intent preclude their formulas arising assessing claim, review first then 8 plain language enacts "absolute categorical" prohibition state Brief Appellant 13. relies specifically subsections 1333(a)(2)(A) (a)(3) provide, pertinent part, follows: 9 "(2)(A) To extent applicable inconsistent subchapter Federal regulations . ., each declared law subsoil seabed outer Shelf, artificial islands fixed structures erected thereon, would area boundaries extended seaward margin Shelf. All administered enforced appropriate officers States. apply 10 "(3) provisions behalf purpose over property resources thereof §§ (emphasis added). 11 is, course, well settled "when statute unambiguously forbids particular kind need look beyond determine pre-empted." Aloha Airlines, Inc. Director Taxation Hawaii, 464 7, 12, 104 291, 294, 78 (1983). But meaning words depends context.6 reads italicized without reference argues these ban 12 believe 1333(a)(2)(A), entirety, supports narrower interpretation. Subsection begins clarifying will activity declares sites apply. goes create exception general incorporation. highly significant us refers "adjacent State[s]," subsequent subsection "state laws" can light antecedent State[s]." clearly lest incorporation deemed incorporate codes 13 ensuing subsection, 1333(a)(3), similarly drafted claims states "as States" whose has give them OCS.7 Reading enacting limited prohibiting followed 14 confirm textual reading refute view broader grew out dispute, developed 1930's, between Government ownership particularly, right lease exploration. S.Rep. 133, 83d Cong., 1st Sess., 21 (1953), U.S.Code Cong. & Admin.News 1953, p. 1385. rich gas, mineral deposits, id., 6, some far edge Id., 11. After series opinions, ruled Government, exclusive Louisiana, 339 699, 705, 70 914, 917, 94 L.Ed. 1216 (1950); Texas, 707, 717-718, 918, 923-924, 1221 California, 332 19, 38-39, 1658, 1668-1669, 91 1889 (1947), Congress, passed 15 "for orderly development resources." Maine, 420 515, 527, 95 1155, 1161, 363 (1975). defining lands, particularly leasing rights. "the appertain subject control, power disposition. ." 1332. "[b]y Act, 'emphatically implemented paramount rights three-mile limit. .' " Maryland 451 725, 752-753, n. 26, 101 2114, 2131-2132, 68 576 (1981) (quoting supra, 526, 1161). 16 Once control faced problem should govern sites. Constitution cover 1333(a)(2)(A). recognized, however, because interstitial nature, sufficiently detailed legal framework life miraculous rise sea bed [OCS]." Christopher, Act: Key New Frontier, Stan.L.Rev. 23, 37 (1953).8 yet, same time, reflect strong allowing making incorporated. 37, 41. 17 debates representatives argued despite retain allowed extraterritorially. particular, Senator Long Louisiana since providing services workers. 411, (1953) (minority report Sen. Long); see 99 Cong.Rec. 7261 (remarks Long). 18 Opponents adjacent-State extending States' borders "unconstitutional," Rec. 2506 Rep. Celler); 2524 Machrowicz); 2571-2572 Keating), confer windfall benefit few expense inland 2523 Rodino); Machrowicz). House, Representatives pressed authorizing collect severance taxes. House version bill, reported Subcommittee Judiciary Committee, contained present See 2571 Keating). Committee amended allow Ibid. also, H.R. 4198, Sess. 8(a) (1953). On floor, provision deleted replaced appears 2569, 2571-2573 20 There reliable pre-empted. long speech criticizing prevented imposing taxes, mentioned, passing, employers profits tax. supra 67; unable point remark vocal opponent This usually accord much weight statements bill's opponents. '[T]he fears doubts opposition authoritative guide construction legislation.' Gulf Offshore Mobil Corp., 453 473, 483, 2870, 2878, 69 784 Schwegmann Bros. Calvert Distillers 341 384, 394, 71 745, 750, 1035 (1951)). Moreover, Long's remarks apparently premised assumption private lessees engage borders. (1953); 67. Finally, entirely possible referring which, unlike Iowa's, measured Texas Cooper, 236 La. 380, 107 So.2d 676 (1958) (Louisiana collector company's separate accounting rather method). find reliance isolated statement misplaced. sum, language, background, leave doubt OCS.9 primarily sites: example, U.S., 753, 2132, 26 ("It valid land").10 cry scheme. 22 hinges mistaken premise preapportionment tantamount production. not, virtue inclusion, Only fraction total determines (by multiplying fraction) As our analysis clear, taxation. repeatedly emphasized function business' fairly attributed activities. Exxon Corp. Wisconsin Dept. Revenue, 447 207, 219, 100 2109, 2118, 65 66 (1980); Commissioner Taxes Vermont, 445 425, 440, 1223, 1233, 63 510 (1980). claim cannot squared concession consistent 23 A contrary result—forbidding formula—would companies exemption measure exemption, evidence do 24 reject secondary Shell. wellhead. 228-229, 2122-2123. Actual (as opposed internal sales) numerator ratio. From base, follow dollar (which base) includes III 25 reasons set above, intended, State, asserting judgment hereby ordered. defines "carried partly carried contributes 422.32(5) "all lying beneath navigable waters 1301 title." 1331. "[L]ands waters" coastline 1301. (1987) provides, "(2) If corporation state, income, reasonably said "(b)(4) Where manufacture tangible personal property, part proportion bear sales." adjusts law. 422.32(6) (11) Described method calculating ( Gross Sales ) Taxable ________________ x Income Adjusted = Total per Law (__Iowa Sales_ (Non-OCS (Taxable minus "sales" sought deduct denominator ratio both actual wellhead, case technique, record transfers divisions. multiplier. appeal consolidated Tire. Judge Learned Hand eloquently noted: "Words pebbles alien juxtaposition; communal existence; interpenetrate other, aggregate take purport setting used. NLRB Federbush Co., 121 F.2d 954, 957 (CA2 1941). event, Senate thought duplicate 1333(a)(3)'s floor manager Cordon, explained stating Shelf" requested conferees "in superabundance caution." 10471-10472 According "adds nothing took bill Senate." Christopher "whole circle problems" resolved could arise large crews working great "die, wills, pay They fight, gamble, borrow money, perhaps kill. bargain conditions sometimes injured job." Stan.L.Rev., 37. fact enclave attempting White Mountain Apache Tribe Bracker, 448 136, 2578, 665 Nor policy Ramah Navajo School Bd., Bureau Mexico, 458 832, 3394, 73 1174 (1982). Although aimed obviously applies Before Court's rulings passage conceivably removed grounds extended, extend, into ocean. Iowa, landlocked appeared foolish claim. precluded opinion, 4. Likewise, otherwise

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