Document: 112 S.Ct. 2251 504 U.S. 768 119 L.Ed.2d 533 ALLIED-SIGNAL, INC., as Successor-in-Interest to the Bendix Corporation, Petitionerv.DIRECTOR, DIVISION OF TAXATION. No. 91-615. Argued March 4, 1992. Reargued April 22, Decided June 15, Syllabus In order for a State tax multistate income of nondomiciliary corporation, there must be, inter alia, minimal connection between interstate activities and taxing State, Mobil Oil Corp. v. Commissioner Taxes Vt., 445 425, 436-437, 100 1223, 1231-1232, 63 510, rational relation attributed intrastate value corporate business, id., at 437, S.Ct., 1231. Rather than isolating income-producing from rest may corporation on an apportioned sum corporation's business if is unitary. E.g., ASARCO Inc. Idaho Tax Comm'n, 458 307, 317, 102 3103, 3109, 73 787. However not it derived unrelated activity which constitutes discrete enterprise. Exxon Wisconsin Dept. Revenue, 447 207, 224, 2109, 2120, 65 66. Petitioner successor-in-interest Delaware corporation. late 1970's acquired 20.6% stock Inc., New Jersey resold in 1981, generating $211.5 gain. After respondent official assessed taxes amount included base gain realized disposition, sued refund Court. The parties stipulated that during period held its investment, were enterprises each whose had nothing do with other, that, although two seats ASARCO's board, exerted no control over ASARCO. Based this record, court assessment was proper, Appellate Division Supreme Court both affirmed. latter stated tests determining unitary are controlled by relationship taxpayer recipient affiliate generator subject tax, concluded essentially function acquisitions divestitures integral operational activity. Held: 1. principle remains appropriate device ascertaining whether has transgressed constitutional limitations Pp. 777-788. (a) earned outside borders rests Due Process Commerce Clause requirements. rule recognition States' wide authority devise formulae accurate or necessary limit cannot fairly be taxpayer's within State. indicia functional integration, centralization management, economies scale. F.W. Woolworth Co. Taxation Revenue N.M., 354, 364, 3128, 3135, 819; Container America Franchise Bd., 463 U.S., 159, 179, 103 2933, 2947, 77 545. 777-783. (b) several amici have persuaded depart doctrine stare decisis overruling cases announce follow standard. Jersey's sweeping theory—that all doing any is, virtue common ownership, part apportionable reconciled concept Constitution places limits State's power borders, far removed latitude granted States fashion apportionment. This Court's precedents workable practice. Any divergent results applying exist because variations theme logically consistent underlying principles motivating approach test quite fact-sensitive. contrast, proposal would disrupt settled expectations area law demands national economy require stability. 783-786. (c) argument other apportionment should turn arises transactions regular course trade such including tangible intangible property acquisition, disposition constitute parts operations does benefit here. While payor payee need engaged same capital transaction serve rather investment function. Corp., supra, 180, n. 19, 2948, 19. existence but one justification 786-788. 2. factual record case makes clear under precedents, permitted include sale Bendix's base. There serious contention three factors present. Functional integration scale could because, stipulated, companies enterprises. Moreover, since did own enough potential operate integrated division single even insufficient. Woolworth, 362, 3134. Contrary view, fact asset pursuant long-term strategy otherwise passive into operation one. See undertaken purpose change character. Little revealed about run intended use proceeds acquire another company. Nor can maintained shares amounted short-term working analogous bank account certificate deposit. ibid. 788-790. 125 N.J. 20, 592 A.2d 536 (1991), reversed remanded. KENNEDY, J., delivered opinion Court, WHITE, STEVENS, SCALIA, SOUTER, JJ., joined. O'CONNOR, filed dissenting opinion, REHNQUIST, C.J., BLACKMUN THOMAS, Walter Hellerstein, Athens, Ga., petitioner. Mary R. Hamill, Trenton, N.J., respondent. Justice KENNEDY 1 Among sets multi-state these: "a 'minimal connection' State," 510 (1980) (quoting Moorman Mfg. Bair, 437 267, 273, 98 2340, 2344, 57 197 (1978)), business. Under our attempt isolate business; E.g. 787 (1982). A income, however, "derive[d] 'unrelated activity' 'discrete enterprise.' " 66 Oil, 442, 439, 1234, 1232). presents questions: (1) limitations; so, (2) whether, principle, petitioner's certain which, petitioner maintains, generated 2 * Allied-Signal, Corporation (Bendix). present dispute concerns liability fiscal year ending September 30, 1981. Although items contested earlier, controversy involves only item: million interest (ASARCO). submitted below facts, we begin summary. 3 During times question, commercial domicile headquarters Michigan. conducted 50 22 foreign countries. App. 154. Having started 1929 manufacturer aviation automotive parts, 1970 through organized four major operating groups: automotive; aerospace/electronics; industrial/energy; forest products. Id., 154-155. Each group separate chief executive reported chairman officer Bendix. 155. primary development manufacture aerospace 161. 4 principal offices York. It world's leading producers nonferrous metals, treating ore taken mines obtains others. 163-164. From December 1977 November 1978, purchases open market. 165. first half sold back ASARCO, million. 172. issue before us income. 5 Our determination question called "unitary," see infra, ---- - ----, terms stipulation They stipulated: "During other." 169. Furthermore, 6 "[p]rior after (in otherwise), either directly indirectly (other itself), involved metal production otherwise) involved. On part, indirectly, businesses None activities, related connected otherwise)." 164-165. 7 gives following examples independence businesses: 8 "There officers, employees Asarco. Asarco's plant, facilities Asarco facilities. rent lease responsible providing their legal services, contracting finance services insurance. personnel hiring policies . pension employee plans. lend monies joint borrowings guaranty debt debt. representative Board Directors. pledge stock. As determined sales product itself ordinary subsidiaries these minute compared total sales. These market arms length prices come due transfers Asarco." 169-171. 9 stock, agreed recommend 14-member Directors filled representatives. W.M. Agee director. 168. Nonetheless, "Bendix exert ASARCO." Ibid. upon decided based described, proper. Div. Director, 10 N.J.Tax 46 (1988). affirmed, Taxation, 237 N.J.Super. 328, 568 59 (1989), turn, (1991). consider drawing decision 166, 2940, 545 (1983), "the context exists has, overriding consideration, exchange transfer value, evidenced scale." 34, A.2d, 543-544. went state: "The controlled, becomes tax." 35, 544. documents setting out strategy, found acquisition "went well beyond investments enterprises," 36, 544, "essentially activity." support conclusion attributable relied those what later proved unsuccessful bid Martin Marietta, company hoped, complement aerospace/electronics 11 We certiorari. 502 632, 116 602 At initial oral advanced proposition To understand better consequences theory requested rebriefing reargument. asked address 12 "1. Should overrule 307 [102 787] (1982), Mexico, 354 819] (1982)? 13 "2. If overruled, apply retroactively? 14 "3. govern state taxation corporations states?" 503 1461, 117 530 (1992). 15 Because give negative answer second third. II 16 fundamental requirement Clauses "some definite link, some minimum connection, person, seeks Miller Bros. Maryland, 347 340, 344-345, 74 535, 539, L.Ed. 744 (1954). reason includes self-evident: Union States, permit drastic economy, subjected severe multiple taxation. But also underlies decisions area. modern process jurisprudence rejects rigid, formalistic definition Quill North Dakota, 1904, --- (1992), abandoned activity, itself, actor tax. Bros., 539). all. inquiry, focuses guidelines circumscribe reach legitimate guided basic individual's justified "protection, opportunities benefits" confers activities. J.C. Penney Co., 311 435, 444, 61 246, 250, 85 267 (1940). 17 complications uncertainties allocating share carried That principle. novel construct, approved short time passage Fourteenth Amendment's Clause. now brief summary development. 18 When attempted railroad telegraph purposes, they encountered difficulty valuable enterprise whole, track wires happen located borders. Clause, assessments proportionate resulting combination means on, existing appreciable extent throughout entire domain operation." Adams Express Ohio Auditor, 165 194, 220-221, 305, 309, 41 683 (1897) (citing Western Telegraph Massachusetts, 530, 961, 31 790 (1888); Massachusetts 141 40, 889, 35 628 (1891); Maine Grand Trunk 142 217, 121, 163, 994 Pittsburgh, C., & S.L. Backus, 154 421, 1114, 38 1031 (1894); Cleveland, 1122, 1041 Taggart, 163 1, 1054, 49 (1896); Pullman's Palace Car Pennsylvania, 18, 876, 613 (1891). 19 recognized levy railroad, telegraph, sleeping car reference allow proportional valuation sorts. explained: physical unity former lacking latter; specific purpose, elements arising use." 221, 309. 20 capital. Thus, Underwood Typewriter Chamberlain, 254 113, 120-121, 45, 47, (1920), 21 profits largely series beginning Connecticut States. typical large manufacturing legislature attempting put fair burden faced impossibility specifically processes It, therefore, adopted method appears reached, meant reach, State." make clear, imperatives: income; fairness component, necessity limiting case. indicated Taxes, 1234: "Where dividend considerations might preclude apportionability, business." "derive[s] 23 made power, until 819 struck down sought 24 concerned Idaho's dividends received from, among companies, Southern Peru Copper 320, 3105, 3111. analysis direct relevance purposes gains treated different dividends. 330, 3116. 1982 Peru's shareholders, owning 51.5% agreement prevented dominating board directors. right appoint directors, while votes required resolution. producing unrefined copper (a ore), shareholders. purchased approximately 35% output, average quoted publication neither nor control. 320-322, 3111-3112. "ASARCO's silver mining autonomous [were] insufficiently classified 322, 3112. 25 day Woolworth. case, domiciled York operated chain retail variety stores United company's base, Mexico earnings chainstore retailing. 356-357, 3131. observed parent divisions significant comprise operations. Following defined inquired objective were: integration; management; (3) 3135. "[e]xcept type occasional oversight—with respect structure, debt, dividends—that subsidiary," 369, 3138, none 26 most recent (1983). vertically manufactured custom-ordered paperboard packaging. 171, 2943. California wholly owned mostly subsidiaries, parent. 171-172, 2943-2944. given degree autonomy: 1% materials rare. 172, recognized, however: 27 "[I]n respects, appellant decidedly close. For example, subsidiaries' directly, guaranteed, appellant. Appellant provided advice consultation regarding techniques, engineering, design, architecture, insurance, cost accounting number entering technical service agreements them informal arrangement. Finally, occasionally assisted procurement equipment, selling used equipment employing purchasing department act agent subsidiaries." 173, 2944. 28 met showing ' "clear cogent evidence" extraterritorial values. 175, 164, 2945, 2939 2119, quoting Butler McColgan, 315 501, 507, 62 701, 704, 86 991 (1942), Norfolk Carolina ex rel. Maxwell, 297 682, 688, 56 625, 628, 80 977 (1936)). 29 reaffirmed 2947 3135; 438, reiterated without flow goods subsidiary, instead entities. 178, 2947. job many subtle unquantifiable take place components enterprise" than, geographical transactional accounting. 164-165, 2940 438-439, 1232-1233). 30 Notwithstanding long experience curiae argue distinguishing without. deciding prior decision, relevant consideration "unsound principle." Garcia San Antonio Metropolitan Transit Authority, 469 528, 546, 105 1005, 1015, 83 1016 (1985). Another "unworkable practice." And, course, reliance interests particular "[a]dherence precedent promotes stability, predictability, judicial authority." Hilton South Public Railways 560, 564, 560 (1991) Vasquez Hillery, 474 254, 265-266, 106 617, 624-625, 88 598 (1986)). (industry's justifies adherence precedent); (SCALIA, concurring judgment) (same). Against background arguments amici. contends entirety, arguing "to apportion taxpayer." Brief Respondent Reargument 27. According Jersey, reflect economic reality, proposed does. convinced. appear apportionable. Tr. Oral Arg. 25-26 (Apr. 1992). sure, designed approximate instate portion produced truly matter how small unprofitable, subjects out-of-state discrete, 32 11, logical distinction term capital, concede apportionable, Reply 4-5 3; 7-8 1992); investments. point dissent 337, 3119 (opinion J.). like regard holdings pools assets, maximum profitability, assets artificial. assume, arguendo, managers cared entry financial statement, mind sheds little light pursuing serving, hand, function, or, characteristics asset's inquiry content, substance economy. short, suggestion accord well-established substantial interpreting Clauses. 33 practice; indeed, conceded much. 37-38 lower courts reached circumstances, said, "are approach," 167, 2941, 34 Indeed, anything unworkable practice, abandon defining legislatures enacting codes allocate nonbusiness domiciliary 1a-7a (collecting statutes). Were adopt theory, invalidate statutes authorize double defeat structured paid rules here confirm. Difficult questions respecting retroactive effect presented. James B. Beam Distilling Georgia, 501 111 2439, 115 481 Not willing go so urge modify, abandon, See, e.g., Multistate Commission Amicus Curiae; Curiae Reargument; Chevron Curiae. hold receives payor. Rather, standard set forth section 1(a) Uniform Income Purposes Act (UDITPA), 7A U.L.A. 331, 336 UDITPA, "business income," apportioned, as: "income management operations." UDITPA § 1(a). "Non-business allocated, "all income." 1(e). 36 abstract, definitions compatible 2941 (noting provisions statute sustained challenged UDITPA). inflexible new methods forms evolve modified supplemented where appropriate. follow, though, mere presence State; offers more 37 agree prerequisite cases. says What Hence, rejected dissent's constituted "interim uses idle funds 'accumulated future [the taxpayer's] [operation],' been 325, 21, 3113, 21. meeting requirement. focused relation. purport, establish general justify apportionment, today. 39 "[i]n exclude formula, prove 'the [those taxing] State.' 223, 1232, (1980). deposits notwithstanding absence bank. circumstance, presented ----. III 40 Application foregoing yields result: weaker basis inferring existed making fortiori sufficient. management. contrary view expressed 36-37, 544-545, dispositions convert noted important serves Corn Products Refining Commissioner, 350 46, 50-53, 76 23-25, (1955)). retain vitality, then, 326, 3114. argued 'acquired, managed disposed relating contributing business.' Appellee 4). rejecting observed: 42 "This destroy concept. requires earn money continue provide return invested Consequently operations, made, sense said 'for [corporation's] pressed limit, conception 'unitary business' limitation all." 43 Apart semantics, "purpose" "ingrained acquisition-divestiture policy" hallmarks clarified essentials respectively shown by: arm's length, 19; role grounded expertise ibid.; line undisputed circumstances 44 erred relying Marietta. Even assume once acquired, reveals years, 45 sum, agreed-upon facts former's judgment reversed, remanded further proceedings inconsistent opinion. 47 ordered. 48 whom CHIEF JUSTICE, BLACKMUN, THOMAS join, dissenting. my operationally Jersey. Corp (internal quotation marks omitted). Though I am analysis, application replaced allowing there. ante, 784. depend identity alone, suggests, become fictional, identities fracture shell game avoid having taxed simply establishing subsidiary insure reasonably claim helped something manipulations structure. Vermont, 440, ("the form organization diversity enterprise"); Fargo Hart, 193 490, 498, 761 (1904) (refusing find though owner); 222, 51 suggests presume mutually interdependent ownership will stabilize commonly businesses, flows unity. true diversify cycles, refused in-state benefits being larger multi-state, multi-business simple: diversification entity necessarily affecting requiring (1940) (State "given ask return"). 52 invests "[A]ctive control" certainly required, 343, 3123, (1982) (dissenting opinion). Insofar suggested concedes "doctrinal foot fault." 4. suffice relate necessary. sufficiently Only when combined reporting, 169, 7, 2942, key realized, operates 53 serving taxed. particular, 'interim "accumulated [operation]," Ante, 21). leaves "operational function" undefined. allows least allowed (UDITPA). 786. counts "tangible 1(a), (1985) (emphasis added). Presumably, examples, anticipated payments; expanding replacing plants equipment; acquiring stable sources supply demand, generate savings administration. 54 diverge analysis. explains "interest State" "if business," longer-term finds "short-term deposit." 790. 55 dimension. Whether long-term, matters interim retained commitment project merely recapitulates grander daily needs company." 338, 3120 investing build and, "leas[ing] years areas office buildings intends ultimately expand," hardly claimed up "separate leasing 6, 3120, 6. link closer suggests. just entity. points out, general. 789. proper rather: Was part? heavy evidence 2945. comes Instead, industry. 70-71, 81, 193. succeeded, 194. found: "[T]he Marietta aerospace-electronics facets takeover never came fruition, served goal nurtures premise ingrained policy projected 38, 536, will, possible, defer failed show able holds not, respectfully dissent.

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