Allied-Signal, Inc. v. Director, Division of Taxation

PETITIONER: Allied-Signal, Inc.
RESPONDENT: Director, Division of Taxation
LOCATION: Northern District Court of New York

DOCKET NO.: 91-615
DECIDED BY: Rehnquist Court (1991-1993)
LOWER COURT: New Jersey Supreme Court

CITATION: 504 US 768 (1992)
REARGUED: Apr 22, 1992
DECIDED: Jun 15, 1992
ARGUED: Mar 04, 1992

Mary R. Hamill - on behalf of the Respondent
Walter Hellerstein - on behalf of the Petitioner

Facts of the case


Media for Allied-Signal, Inc. v. Director, Division of Taxation

Audio Transcription for Oral Argument - March 04, 1992 in Allied-Signal, Inc. v. Director, Division of Taxation
Audio Transcription for Oral Reargument - April 22, 1992 in Allied-Signal, Inc. v. Director, Division of Taxation

Audio Transcription for Opinion Announcement - June 15, 1992 in Allied-Signal, Inc. v. Director, Division of Taxation

William H. Rehnquist:

The opinion of the Court in No. 91-615, Allied-Signal, Inc. versus the Director of the Division of Taxation will be announced by Justice Kennedy.

Anthony M. Kennedy:

This case comes to us on writ of certiorari to the Supreme Court of New Jersey.

The petitioner is a corporation.

It is called Allied-Signal and it is the successor in interest to the Bendix Corporation.

It is a Delaware Corporation with its commercial domicile in its corporate headquarters in Michigan.

The dispute concerns Bendix's business tax liability to the State of New Jersey for the fiscal year ending September 30, 1981.

That was the year that Bendix sold something over a 20% interest in a corporation called ASARCO.

It realized a gain of $211 million.

The Director of the New Jersey Division of Taxation sought to include that $211 million in Bendix's apportionable tax base.

Based on a stipulated record, the Sate Tax Court held that a disputed gain was properly included and the Appellate Division affirmed that decision as to the Supreme Court of New Jersey.

The State Supreme Court held that the gain was earned in the course of Bendix's so-called unitary business.

We granted certiorari.

In an opinion filed today, we reverse.

Both the Due Process and Commerce Clauses of the Constitution forbid a state from taxing value earned outside its borders.

Because of the complications and uncertainties in allocating the income of multistate business to this several states, we permit the states to tax a corporation on an apportionable share of the multistate business that is carried on in the taxing state.

This is the unitary business principle and it has been a part of our jurisprudence for over a century.

Our precedents established that the existence of the unitary business depends on functional integration, centralization of management, and economies of scale.

We adhere to those decisions.

New Jersey argues that all income earned by a corporation should be treated as income earned in the course of a unitary business.

Principles of stare decisis prevent us from adapting the sweeping doctrinal change.

It is not in accord with a well-established and substantial case law in the subject.

The stipulated record in this case makes quite clear that none of the criteria of a unitary business were present.

Bendix had no capacity to control ASARCO and they were run as separate businesses.

While we agree with the suggestion of several amici that a short term investment of idol funds which serves an operational function maybe apportionable even absent a unitary relation between the payer and he payee.

The record in this case makes it clear that Bendix's acquisition and disposition of its ASARCO shares cannot be characterized this way.

Therefore, we reverse the judgment of the New Jersey Supreme Court and remand for further proceedings not inconsistent with our opinion.

Justice O'Connor has filed a dissenting opinion in which the Chief Justice, Justice Blackmun, and Justice Thomas join.