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U.S. Supreme Court issues ruling in state tax case
Tax Alert No. 16, 1 May 2008
View the Print Version (pdf, 620K)
On 15 April 2008, the US Supreme Court issued its opinion in MeadWestvaco Corp., vacating and remanding the Illinois Appellate Court’s ruling that a company’s gain from the sale of an operating division was business income. The Supreme Court found that the state courts had misinterpreted the principles the Supreme Court had developed for determining whether a multistate business is unitary by considering whether the sold division served an operational purpose in the seller’s business after determining that the seller and its division were not unitary. This decision will have a significant impact on Canadian companies with operations in the US.
Highlights of our Alert include:
- The Supreme Court’s ruling applies to all states, not just Illinois.
- For state tax purposes, corporations may be required (or allowed to elect) to file corporate income tax returns on a separate-entity , combined, or consolidated basis.
- Canadian companies should consider the analysis in the MeadWestvaco decision when determining the state tax treatment of the resulting gain or loss on the disposition of a US subsidiary.
Read more in our latest Tax Alert (pdf, 620K).
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