TEI prepares for Annual Canadian liaison meetings; files Supreme Court brief in apportionment case.

• Position: Recent Activities

As the east coast of the United States copes with Hurricane Sandy, the United States held its presidential election, and the world mulled America's speeding toward the fiscal cliff, Tax Executives Institute constructively engaged in advocacy projects in Canada, the United States, and India.

SALT: U.S. Supreme Court Urged to Address Apportionable Business Income

On October 26, 2012, TEI filed a brief as amicus curiae with the Supreme Court of the United States in Kimberly-Clark Corp. v. Alabama Department of Revenue, which involves the characterization of income from the sale of assets as apportionable business income versus allocable nonbusiness income for state tax purposes. The brief, whose development was overseen by TEI's State and Local Tax Committee, urged the Court to hold that gain from the sale of property used in a taxpayer's unitary business constituted nonbusiness income allocable in full to Alabama.

"The multijurisdictional companies represented by the Institute's membership are significantly affected by the rules governing state taxes generally, and especially those governing the allocation and apportionment of income among the various States," explained TEI International President Carita R. Twinem. "As a result, nearly all Institute members will be affected by the resolution of this case."

The taxpayer, Kimberly-Clark, a major producer of paper-related consumer products, sold timberland that it had used for 34 years in its paper-producing business. After several levels of appeals, the Alabama Supreme Court held that the gain from the sale constituted nonbusiness income allocable in full to Alabama, rather than being apportionable across Kimberly-Clark's entire business. In other states, Kimberly-Clark had apportioned the gain from this transaction, resulting in significant double taxation. TEI's brief in support of Kimberly-Clark's appeal to the U.S. Supreme Court argued that the timberland was clearly part of Kimberly-Clark's unitary business, and thus Alabama was constitutionally required to apportion the gain rather than allocate it entirely to Alabama.

"If the decision of the Alabama Supreme Court stands, taxpayers throughout the nation will suffer uncertainty, an increase in the cost and burden of compliance, and enhanced potential for duplicative taxation," Ms. Twinem noted. For this reason, TEI has urged the Court to take this case and resolve this important issue."

TEI's brief is reproduced in this issue of The Tax...