GPO-CONAN-2017-10-15.pdf

480 corporate income taxes foreign corporations a tax

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480 Corporate Income Taxes: Foreign Corporations. —A tax based on the income of a foreign corporation may be determined by allo- cating to the state a proportion of the total, 481 unless the income attributed to the state is out of all appropriate proportion to the business transacted in the state. 482 Thus, a franchise tax on a for- 476 Lawrence v. State Tax Comm’n, 286 U.S. 276 (1932). 477 Shaffer v. Carter, 252 U.S. 37 (1920); Travis v. Yale & Towne Mfg. Co., 252 U.S. 60 (1920). 478 New York ex rel. Cohn v. Graves, 300 U.S. 308 (1937). 479 Maguire v. Trefy, 253 U.S. 12 (1920). 480 Guaranty Trust Co. v. Virginia, 305 U.S. 19, 23 (1938). Likewise, even though a nonresident does no business in a state, the state may tax the profits realized by the nonresident upon his sale of a right appurtenant to membership in a stock ex- change within its borders. New York ex rel. Whitney v. Graves, 299 U.S. 366 (1937). 481 Underwood Typewriter Co. v. Chamberlain, 254 U.S. 113 (1920); Bass, Ratcliff & Gretton Ltd. v. Tax Comm’n, 266 U.S. 271 (1924). The Court has recently consid- ered and expanded the ability of the states to use apportionment formulae to allo- cate to each state for taxing purposes a fraction of the income earned by an inte- grated business conducted in several states as well as abroad. Moorman Mfg. Co. v. Bair, 437 U.S. 267 (1978); Mobil Oil Corp. v. Commissioner of Taxes, 445 U.S. 425 (1980); Exxon Corp. v. Department of Revenue, 447 U.S. 207 (1980). Exxon refused to permit a unitary business to use separate accounting techniques that divided its profits among its various functional departments to demonstrate that a state’s for- mulary apportionment taxes extraterritorial income improperly. Moorman Mfg. Co. v. Bair, 437 U.S. at 276–80, implied that a showing of actual multiple taxation was a necessary predicate to a due process challenge but might not be sufficient. 482 Evidence may be submitted that tends to show that a state has applied a method that, although fair on its face, operates so as to reach profits that are in no sense attributable to transactions within its jurisdiction. Hans Rees’ Sons v. North Carolina, 283 U.S. 123 (1931). 1922 AMENDMENT 14—RIGHTS GUARANTEED
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eign corporation may be measured by income, not just from busi- ness within the state, but also on net income from interstate and foreign business. 483 Because the privilege granted by a state to a foreign corporation of carrying on business supports a tax by that state, it followed that a Wisconsin privilege dividend tax could be applied to a Delaware corporation despite its having its principal offices in New York, holding its meetings and voting its dividends in New York, and drawing its dividend checks on New York bank accounts. The tax could be imposed on the “privilege of declaring and receiving dividends” out of income derived from property lo- cated and business transacted in Wisconsin, equal to a specified per- centage of such dividends, the corporation being required to deduct the tax from dividends payable to resident and nonresident share- holders.
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