Allied-Signal, Inc. v. Director, Div. of Taxation, 504 U.S. 768, 25 (1992)

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792

ALLIED-SIGNAL, INC. v. DIRECTOR, DIV. OF TAXATION

O'Connor, J., dissenting

nue Dept. of N. M., 458 U. S. 354 (1982), petitioner concedes that was a "doctrinal foot fault." Reply Brief for Petitioner on Reargument 4. Although a unitary relationship between the investment income payor and payee would suffice to relate the investment income to the in-state business, such a connection is not necessary. Taxation of investment income received from a nondomiciliary taxpayer's investment in another corporation requires only that the investment income be sufficiently related to the taxpayer's in-state business, not that the taxpayer's business and the corporation in which it invests be unitary. Only when the State seeks to tax directly the income of a nondomiciliary taxpayer's subsidiary or affiliate through combined reporting, see Container Corp. of America v. Franchise Tax Bd., 463 U. S. 159, 169, and n. 7 (1983), must the underlying businesses of the taxpayer and its affiliate or subsidiary be unitary. In any case, the key question for purposes of due process is whether the income that the State seeks to tax is, by the time it is realized, sufficiently related to a unitary business, part of which operates in the taxing State.

In this connection, I agree with the Court that out-of-state investments serving an operational function in the nondomiciliary taxpayer's in-state business are sufficiently related to that business to be taxed. In particular, I agree that " 'interim uses of idle funds "accumulated for the future operation of [the taxpayer's] business [operation]," ' " may be taxed. Ante, at 787 (quoting ASARCO, supra, at 325, n. 21). The Court, however, leaves "operational function" largely undefined. I presume that the Court's test allows taxation in at least those circumstances in which it is allowed by the Uniform Division of Income for Tax Purposes Act (UDITPA). Ante, at 786. UDITPA counts as apportionable business income from "tangible and intangible property if the acquisition, management, and disposition of the property constitute integral parts of the taxpayer's regular trade or business operations." UDITPA 1(a), 7A U. L. A. 336

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