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Opinion of the Court
Charles J. Cooper argued the cause for respondents. With him on the brief were Bill Pryor, Attorney General of Alabama, Ron Bowden and Dan E. Schmaeling, Assistant Attorneys General, Michael W. Kirk, and David H. Thompson.*
Justice Breyer delivered the opinion of the Court. The basic question in this case is whether the franchise tax Alabama assesses on foreign corporations violates the Commerce Clause. We conclude that it does.
I
Alabama requires each corporation doing business in that State to pay a franchise tax based upon the firm's capital. A domestic firm, organized under the laws of Alabama, must pay tax in an amount equal to 1% of the par value of the firm's stock. Ala. Const., Art. XII, § 229; Ala. Code § 40- 14-40 (1993); App. to Pet. for Cert. 50a, 52a, 61a (Stipulated Facts). A foreign firm, organized under the laws of a State other than Alabama, must pay tax in an amount equal to 0.3% of the value of "the actual amount of capital employed" in Alabama. Ala. Const., Art. XII, § 232; Ala. Code § 40-14- 41(a) (Supp. 1998). Alabama law grants domestic firms considerable leeway in controlling their own tax base and tax liability, as a firm may set its stock's par value at a level well below its book or market value. App. to Pet. for Cert. 52a-53a (Stipulated Facts). Alabama law does not grant a foreign firm similar leeway to control its tax base, however, as the value of the "actual" capital upon which Alabama calculates the foreign franchise tax includes not only the value of capital stock but also other accounting items (e. g., long-term debt, surplus), the value of which depends upon the
*Briefs of amici curiae urging reversal were filed for Avon Products, Inc., et al. by William L. Goldman; for Tax Executives Institute, Inc., by Timothy J. McCormally and Mary L. Fahey; and for the Committee on State Taxation by William D. Peltz and Jeffrey A. Friedman.
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