Allied-Signal, Inc. v. Director, Div. of Taxation, 504 U.S. 768, 17 (1992)

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Opinion of the Court

New Jersey contends that the unitary business principle must be abandoned in its entirety, arguing that a nondomiciliary State should be permitted "to apportion all the income of a separate multistate corporate taxpayer." Brief for Respondent on Reargument 27. According to New Jersey, the unitary business principle does not reflect economic reality, while its proposed theory does. We are not convinced.

New Jersey does not appear to dispute the basic proposition that a State may not tax value earned outside its borders. It contends instead that all income of a corporation doing any business in a State is, by virtue of common ownership, part of the corporation's unitary business and apportionable. See Tr. of Oral Arg. 25-26 (Apr. 22, 1992). New Jersey's sweeping theory cannot be reconciled with the concept that the Constitution places limits on a State's power to tax value earned outside of its borders. To be sure, our cases give States wide latitude to fashion formulae designed to approximate the in-state portion of value produced by a corporation's truly multistate activity. But that is far removed from New Jersey's theory that any business in the State, no matter how small or unprofitable, subjects all of a corporation's out-of-state income, no matter how discrete, to apportionment.

According to New Jersey, Brief for Respondent on Reargument 11, there is no logical distinction between short-term investment of working capital, which all concede is apportionable, see Reply Brief for Petitioner on Reargument 4-5, and n. 3; Tr. of Oral Arg. 7-8 (Apr. 22, 1992); Container Corp., supra, at 180, n. 19, and all other investments. The same point was advanced by the dissent in ASARCO, 458 U. S., at 337 (opinion of O'Connor, J.). New Jersey's basic theory is that multistate corporations like Bendix regard all of their holdings as pools of assets, used for maximum long-term profitability, and that any distinction between operational and investment assets is artificial. We may assume, arguendo, that the managers of Bendix cared most about the

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