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Allied-Signal, Inc. v. Dir., Div. of Taxation

Supreme Court of the United States

March 4, 1992, Argued; April 22, 1992, Reargued ; June 15, 1992, Decided

No. 91-615

Opinion

 [*772]   [***542]   [**2255]  JUSTICE KENNEDY delivered the opinion of the Court.

 ] Among the limitations the Constitution sets on the power of a single State  [****7]  to tax the multistate income of a nondomiciliary corporation are these: There must be "a 'minimal connection' between the interstate activities and the taxing State," Mobil Oil Corp. v. Commissioner of Taxes of Vt., 445 U.S. 425, 436-437, 63 L. Ed. 2d 510, 100 S. Ct. 1223 (1980) (quoting Moorman Mfg. Co. v. Bair, 437 U.S. 267, 273, 57 L. Ed. 2d 197, 98 S. Ct. 2340 (1978)), and there must be a rational relation between the income attributed to the taxing State and the intrastate value of the corporate business. 445 U.S. at 437. Under our precedents, a State need not attempt to isolate the intrastate income-producing activities from the rest of the business; it may tax an apportioned sum of the corporation's multistate business if the business is unitary. E. g., ASARCO Inc. v. Idaho Tax Comm'n, 458 U.S. 307, 317, 73 L. Ed. 2d 787, 102 S. Ct. 3103  [*773]  (1982). ] A State may not tax a nondomiciliary corporation's income, however, if it is "derived from 'unrelated business activity' which constitutes a 'discrete business enterprise.'" Exxon Corp. v. Department of Revenue of Wis., 447 U.S. 207, 224, 100 S. Ct. 2109, 65 L. Ed. 2d 66 (1980) (quoting Mobil Oil, supra, at 442, 439). This case presents the questions:  [****8]  (1) whether the unitary  [***543]  business principle remains an appropriate device for ascertaining whether a State has transgressed its constitutional limitations; and if so, (2) whether, under the unitary business principle, the State of New Jersey has the constitutional power to include in petitioner's apportionable tax base certain income that, petitioner maintains, was not generated in the course of its unitary business.

Petitioner Allied-Signal, Inc., is the successor-in-interest to the Bendix Corporation (Bendix). The present dispute concerns Bendix's corporate business tax liability to the State of New Jersey for the fiscal year ending September 30, 1981. Although three items of income were contested earlier, the controversy in this Court involves only one item: the gain of $ 211.5 million realized by  [**2256]  Bendix on the sale of its 20.6% stock interest in ASARCO Inc. (ASARCO). The case was submitted below on stipulated facts, and we begin with a summary.

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504 U.S. 768 *; 112 S. Ct. 2251 **; 119 L. Ed. 2d 533 ***; 1992 U.S. LEXIS 3682 ****; 60 U.S.L.W. 4554; 92 Cal. Daily Op. Service 5032; 92 Daily Journal DAR 7971; 6 Fla. L. Weekly Fed. S 408

ALLIED-SIGNAL, INC., AS SUCCESSOR-IN-INTEREST TO THE BENDIX CORPORATION, PETITIONER v. DIRECTOR, DIVISION OF TAXATION

Prior History:  [****1]  ON WRIT OF CERTIORARI TO THE SUPREME COURT OF NEW JERSEY.

Disposition: 125 N. J. 20, 592 A. 2d 536, reversed and remanded.

CORE TERMS

unitary business, apportionable, subsidiaries, taxation, stock, unitary, taxed, integration, multistate, in-state, taxpayer, payor, taxing state, enterprise, due process, nondomiciliary, acquisition, short-term, aerospace, purposes, payee, investment income, apportioned, Reargument, intangible, realized, economies of scale, working capital, manufacture, acquire

Energy & Utilities Law, Taxation Issues, Tax Law, State & Local Taxes, Administration & Procedure, General Overview, Income Taxes, Corporations & Unincorporated Associations, Constitutional Law, Fundamental Rights, Procedural Due Process, Scope of Protection, Business & Corporate Compliance, Tax Law, State & Local Taxes, Individuals, Estates & Trusts, Sales Taxes