Brief of Tax Executives Institute as amicus curiae in support of the petitioner, MBNA America Bank, N.A.

On May 8, 2007, Tax Executives Institute filed the following brief amicus curiae with the Supreme Court of the United States in a case involving a decision of the West Virginia Supreme Court of Appeals relating to the nexus requirement of the Constitution's Commerse Clause.

INTEREST OF AMICUS CURIAE

Pursuant to Rule 37 of the Rules of this Court, Tax Executives Institute, Inc. respectfully submits this brief as amicus curiae in support of the petition for a writ of certiorari. (1) Tax Executives Institute (hereinafter "TEI" or "the Institute") is a voluntary, non-profit association of corporate and other business executives, managers, and administrators who are responsible for the tax affairs of their employers. TEI was organized in 1944 under the laws of the State of New York and is exempt from taxation under section 501(c)(6) of the Internal Revenue Code (26 U.S.C.). The Institute is dedicated to promoting the uniform and equitable enforcement of the tax laws, reducing the costs and burdens of administration and compliance to the benefit of both the government and taxpayers, and vindicating the Commerce Clause and other constitutional rights of all business taxpayers.

The issue presented is whether the imposition of the West Virginia Business Franchise and Corporate Net Income Taxes on an out-of-state corporation having no physical presence within West Virginia violates the Commerce Clause of the Constitution by unduly burdening interstate commerce. Specifically, this case involves the application and continuing vitality of the Court's holding in Complete Auto Transit v. Brady, 430 U.S. 274 (1977), that a corporation must have "substantial nexus" in a state before it may be subject to a tax and, more fundamentally, the breadth of this Court's holding in Quill Corp. v. North Dakota, 504 U.S. 298 (1992), that the putative taxpayer's physical presence in the state is required to satisfy the Constitution's nexus requirement.

TEI has more than 7,000 members who represent more than 3,000 of the leading corporations in the United States, Canada, Europe, and Asia. TEI's members represent a cross-section of the business community whose employers are, almost without exception, engaged in interstate commerce. Therefore, TEI members have a keen interest in the issues raised by the decision of the West Virginia Supreme Court of Appeals in this case and will be materially affected by the Court's disposition of these issues.

SUMMARY OF ARGUMENT

1. Fifteen years ago, the Court in Quill Corp. v. North Dakota, 504 U.S. 298 (1992), affirmed the constitutional imperative of a specific bright-line test for determining whether an out-of-state corporation may be subjected to a state's tax authority: Unless the corporation has a physical presence in the state, the imposition of a sales and use tax collection obligation is illegitimate because a "substantial nexus" does not exist between the corporation and the state, as required by Complete Auto Transit, Inc. v. Brady, 430 U.S. 274 (1977).

2. Quill expressly reaffirmed the physical presence standard for sales and use tax purposes, but had no occasion in that case to affirm that the same standard applies to other types of taxes. Since the objectives of the Commerce Clause are the same regardless of the type of tax, the lack of a clearly articulated, separate standard for income tax cases should be laid to the widespread historical acceptance of the principle that the same physical presence standard governs all tax cases.

3. This Court's ambiguous failure to affirm the application of the physical presence standard to income-based taxes has subjected interstate businesses to a broad range of tests by the States. Some States have interpreted Quill as implicitly permitting them to fashion their own, State-specific requirements. The proliferation of "standards," however, makes it difficult if not impossible to accurately determine the extent of their income tax obligations.

4. The uncertainty caused by this absence of a clearly articulated bright-line standard for income tax nexus heavily burdens interstate commerce. Many corporations often are unable to divine the scope of many States' authority to tax them, and so must expend considerable resources litigating the issue and addressing a variety of alternate possible compliance scenarios.

5. Different nexus "standards" have emerged from State legislatures, which frustrate the purposes of the Commerce Clause by unduly burdening out-of-state businesses. What is or may be a "standard" in one State is wholly different in another, leaving corporations to speculate and surmise what the law is and how to comply with it. These varied and uncertain standards impermissibly burden interstate commerce.

6. Existing tax compliance burdens shouldered by multi-state corporations reach breaking-point proportions when the complexities of navigating the income tax nexus labyrinth are added. The uncertainty spawned by the absence of a clear nexus standard threatens to become the straw that breaks the back of interstate commerce.

7. The lack of an unequivocal nexus standard has the potential to impair the quality and accuracy of financial statements issued by corporations subject to the reporting and disclosure requirements of the Financial Accounting Standards Board. In the absence of a clear nexus standard, companies may interpret State statutes and judicial decisions inconsistently and thus reach different results concerning the certainty or uncertainty of their tax positions. These differences may obscure, especially on a comparative basis, a company's true financial statement picture.

8. The limitations of a State's taxing authority over out-of-state businesses must be clean The absence of a clearly articulated bright-line standard to govern a State's power to tax an out-of-state corporation's income significantly burdens interstate commerce. Affirming that the Quill physical presence standard applies to all tax types, including income and franchise taxes, is thus essential to a vital and free flowing economy.

   ARGUMENT

1. Overview

   Petitioner MBNA is a nationally chartered bank with its principal place of business and commercial domicile in Wilmington, Delaware. It is engaged in the business of issuing and servicing VISA and MasterCard credit cards for cardholder customers nationwide. During the years in dispute, 1998 and 1999, MBNA had no employees, real prop- erty, tangible property, or representatives in West Virginia. Its nationwide credit card business was conducted solely by U.S. mail and telephone solicitations, including direct mail and telephone solicitation to residents of West Virginia, none of which originated in West Virginia. In addition, although MBNA derived certain receipts from customers who are West Virginia residents, it neither received nor processed any accounts receivable in West Virginia.

   For tax years 1998 and 1999, MBNA paid the West Virginia Business Franchise and Corporate Net Income Taxes based on income attributable to customers with West Virginia addresses...