Opinion ID: 1919998
Heading Depth: 1
Heading Rank: 1

Heading: The Comptroller's Appeal

Text: The Comptroller's argument is essentially this: Article 81, § 316 (c) is similar to the statutes of other states providing for the allocation of corporate income, see Underwood Typewriter Co. v. Chamberlain, 254 U.S. 113 (1920). It is recognized that separate accounting should be employed in the case of separate businesses and the formula method in the case of unitary businesses, Keesling and Warren, The Unitary Concept in the Allocation of Income, 12 Hastings L.J. 42, 43-44 (1960). Whether a business can be regarded as unitary may hinge on unity of ownership and management, Butler Brothers v. McColgan, 315 U.S. 501, 508 (1942); on whether the business operated within a state is dependent upon or contributes to the business operated without the state, Edison California Stores, Inc. v. McColgan, 30 Cal.2d 472, 183 P.2d 16 (1947); on whether major policy decisions are made within or without the state, Chase Brass and Copper Co. v. Franchise Tax Board, 10 Cal. App.3d 496, 95 Cal. Rptr. 805 (1970), or on whether income is commingled and used for purposes of the business, Johns-Manville Products Corp. v. Commissioner of Revenue Administration, 115 N.H. 428, 343 A.2d 221 (1975), appeal dismissed, 423 U.S. 1069, 96 S.Ct. 851 (1976). Finally, the Comptroller argues, even if the Diebold-Young & Selden business is not unitary, there is no warrant in the Maryland law, see Art. 81, § 280A (a), for the treatment of a manufacturing division, not itself incorporated, as a separate entity for income tax purposes, Keesling, A Current Look at the Combined Report and Uniformity in Allocation Practices, 42 J. Tax 106 (Feb. 1975). Diebold counters with the argument that there was evidence that Young & Selden was engaged in a different business; that Young & Selden had its own officers and sales force, and maintained its own payroll and accounting system, from which the Tax Court could conclude that the business of Diebold was not unitary. It points also to the further finding of the Tax Court that Diebold had met its burden of showing that the application of the three-factor formula in the fashion urged by the Comptroller is unreasonable and arbitrary. We begin by noting that judicial review of decisions of the Maryland Tax Court is severely limited. Code (1957, 1969 Repl. Vol.) Art. 81, § 229(1) provided: the circuit court ... shall determine the case upon the record of the Maryland Tax Court ...; provided, that, unless such order is erroneous as a matter of law or unsupported by substantial evidence appearing in the record it shall be affirmed. [2] We have held that the standard by which a result reached by the Tax Court is reviewed is whether a reasoning mind reasonably could have reached the factual conclusion which that agency reached, Fairchild Hiller Corp. v. Supervisor of Assessments, 267 Md. 519, 521, 298 A.2d 148, 149 (1973). The application of this test need not and must not be either judicial fact finding or a substitution of judicial judgment for agency judgment. The Tax Court found that under Diebold's amended returns for the years 1966-1969, to Diebold's Maryland business would be attributed 1.3155%, 1.5915%, 1.5538% and 1.3222% of its total income, respectively, for the years in question. Accepting the Comptroller's view would have developed figures of 3.65%, 4.11% and 4.07% for the years 1966, 1967 and 1968. After reviewing the cases relied on by both parties, the Tax Court concluded that Diebold and Young & Selden did not comprise a unitary business, because unity of use, management, ownership and purchasing was lacking, but rather that there were two separate businesses and that the application of the unitary approach would produce an exaggerated tax liability to the State of Maryland. Returning again to the narrow limits imposed upon our review, we cannot say that a reasoning mind could not have reasonably reached this factual conclusion on the evidence, nor do we perceive any error of law. We shall therefore affirm the Tax Court's order as to the 1968 and 1969 returns.