2005-668, GENERAL ELECTRIC CO., INC. v. COMMISSIONER, NH DEPARTMENT OF REVENUE

The plaintiff, General Electric Company, Inc. (GE), appeals the

for the defendant. general, on the brief and orally), and Kathleen J. Sher, of Concord, on the brief, Kelly A. Ayotte, attorney general (Karen A. Schlitzer, assistant attorney

of Athens, Georgia, on the brief, for the plaintiff. Andrew W. Serell on the brief, and Mr. Ardinger orally), and Walter Hellerstein, Rath, Young and Pignatelli, P.A., of Concord (William F. J. Ardinger and to press. Errors may be reported by E-mail at the following address:

COMMISSIONER, NEW HAMPSHIRE DEPARTMENT OF REVENUE

editorial errors in order that corrections may be made before the opinion goes No. 2005-668 Hampshire, One Charles Doe Drive, Concord, New Hampshire 03301, of any Merrimack Readers are requested to notify the Reporter, Supreme Court of New ___________________________

THE SUPREME COURT OF NEW HAMPSHIRE

page is: http://www.courts.state.nh.us/supreme. a.m. on the morning of their release. The direct address of the court's home reporter@courts.state.nh.us. Opinions are available on the Internet by 9:00

well as formal revision before publication in the New Hampshire Reports. NOTICE: This opinion is subject to motions for rehearing under Rule 22 as p. 2 Commerce Clause of the Federal Constitution. 77-A:4, IV does not discriminate against foreign commerce in violation of the that, even if GE had standing to challenge the statute, the deduction in RSA alternatively granted the department’s motion for summary judgment finding

ground that GE lacked standing to challenge RSA 77-A:4, IV. The trial court New Hampshire.

judgment. The trial court granted the department’s motion to dismiss on the the state and therefore their gross business profits were not subject to tax in

unitary business. 77-A:1, XIV. Neither party disputes that GE and its subsidiaries operate as a

summary judgment and the department moved to dismiss and for summary received from its foreign subsidiaries, since they did not transact business in pursuant to RSA 21-J:28-b, IV (2000) (amended 2003). GE moved for constitutionality of RSA 77-A:4, IV, GE petitioned the superior court for review

ownership, operation, and use; or an interdependence in their functions.” RSA activity both within and without this state among which there exists a unity of business” is “one or more related business organizations engaged in business business is “unitary” within the meaning of RSA 77-A:1, XIV (2003). A “unitary The department denied GE’s requests to use this deduction for dividends it profits of the subsidiaries have already been subject to tax in New Hampshire. the department’s hearings officer lacked the authority to determine the 2 for dividends received from its corporate subsidiaries when the gross business

Hampshire during the tax years. business’s tax liability requires an initial determination of whether the We begin with a review of New Hampshire’s BPT regime. Calculation of a for redetermination and reconsideration regarding its BPT returns. Because RSA 77-A:4, IV (2003), which permits a parent corporation to take a deduction GE subsequently filed with the department requests for refunds and petitions million should the foreign dividend deduction issue be resolved in GE’s favor.

foreign affiliates was domiciled in or transacted business within New

resulting in overpayment. Specifically, GE challenges the constitutionality of during the tax years, but maintains that its tax liability was miscalculated among other things, that GE would receive a refund of approximately $3.15 RSA 77-A:1, I (2003) (amended 2004), :2 (2003), :6, I (2003). GE paid the BPT GE and the department executed two settlement agreements agreeing,

numerous affiliated corporations both domestic and foreign. None of GE’s business in Somersworth, New Hampshire. GE is the parent corporation of York corporation with its principal offices in Connecticut, and with a place of

a “business organization” and was subject to the business profits tax (BPT). During the tax years, GE transacted business within New Hampshire as

profits taxes paid by GE from 1990 through 1999 (the tax years). GE is a New The record supports the following facts. This case involves business contests in this appeal. p. 3 these foreign dividends in calculating GE’s taxable business profits that GE subsidiaries remained subject to an apportioned tax. It is the inclusion of

may still qualify as a unitary member. RSA 77-A:1, XIV, XV. Although an OBO is not considered part of the water’s edge combined group, it outside the 50 states and the District of Columbia.” RSA 77-A:1, XIX (2003).

However, pursuant to RSA 77-A:3, II(b), the dividends paid to GE by its foreign

and taxed. more of the average of their payroll and property assignable to a location

years because each was an OBO within the meaning of RSA 77-A:1, XIX. subsidiaries was excluded from the calculation of GE’s tax liability for the tax 3 the meaning of RSA 77-A:1, XV. As such, the income of GE’s foreign

profits: RSA 77-A:4, IV provides for the following deduction from gross business

of the unitary group to domestic members are apportioned to New Hampshire organizations” (OBOs) are those business organizations “with 80 percent or as an “overseas business organization[ ].” RSA 77-A:1, XV. “Overseas business business is excluded from the combined report if the foreign members qualify

unitary affiliates are to be treated as one water’s edge combined group within Pursuant to the parties’ settlement agreement, GE and its domestic

the “New Hampshire water’s edge taxable business profits” of the group. property, payroll and sales. RSA 77-A:3, I. The resulting amount constitutes due. RSA 77-A:2 (2003). In this manner, dividends paid by a foreign member 77-A:3, II(b)(6). The applicable tax rate is then applied, resulting in the tax business profits” to produce “New Hampshire taxable business profits.” RSA report. RSA 77-A:1, XVI. The income of foreign members of the unitary business profits” are then added to the “New Hampshire water’s edge taxable Rules, Rev 311.24(a), (f). The “New Hampshire foreign dividends taxable dividends taxable business profits.” RSA 77-A:3, II(b) (2003); N.H. Admin. and are apportioned separately to determine the “New Hampshire foreign combined group are initially excluded from the group’s gross business profits the dividends of an OBO that are paid to a member of the water’s edge RSA 77-A:1, IV, XV, XVI; N.H. Admin. Rules, Rev 301.02. In this calculation,

business profits” are then apportioned to the state using three factors: N.H. Admin. Rules, Rev 302.10(b); see RSA 77-A:3, I (2003). The “gross or royalties is excluded in determining the “gross business profits” of the group. “water’s edge combined group,” RSA 77-A:1, XV, is aggregated in the combined combined, any domestic “intergroup activity” such as the payment of dividends members of the unitary business, which are collectively referred to as the Once the net income from all members of the water’s edge group is state. RSA 77-A:1, XIII, XV, XVI (2003). The income from all domestic

reporting method that apportions the income of the unitary business to the The tax liability of a unitary business is calculated using a combined conclusions of law.

p. 4 plaintiff's complaint, however, which are merely need not assume the truth of statements in the

inferences drawn therefrom most favorably to it. We pleadings to be true and construe all reasonable 4 that would permit recovery. We assume the plaintiff’s pleadings are reasonably susceptible of a construction

facts, this appeal presents a question of law that we review de novo. Id. omitted). Since the trial court applied RSA 77-A:4, IV to an undisputed set of In re Juvenile 2004-789, 153 N.H. 332, 334 (2006) (quotation and brackets

corporations and its parents. review is whether the allegations in the plaintiff's business profits of a controlled corporation or group of In considering a motion to dismiss, our standard of statute. RSA 77-A:4, IV. to prevent double taxation on the identical gross

accordingly, pay no BPT, do not qualify for the deduction allowed by the I. Motion to Dismiss from foreign subsidiaries that do not conduct business in the state and, upon a lack of standing. appeals the trial court’s grant of the department’s motion to dismiss based violation of the Commerce Clause of the United States Constitution. GE also the state, the statute facially discriminates against foreign commerce in received deduction to those parents whose subsidiaries conduct business in department’s motion for summary judgment and that by limiting the dividends- On appeal, GE argues that the trial court improperly granted the

same taxable period. The purpose of this deduction is been subject to taxation under this chapter during the

the state and were therefore subject to a separate BPT. The dividends received subsidiaries whose gross business profits have already paid to taxable parent corporations by subsidiaries that conducted business in dividends paid to the parent by a subsidiary or method. In such instances, RSA 77-A:4, IV allows a deduction for dividends or subsidiaries that file separately, and not under the combined reporting RSA 77-A:4, IV has traditionally been used by corporations with affiliates

amounts of gross business profits as are derived from as defined in RSA 77-A:1, XX, a deduction of such chapter 6 of the United States Internal Revenue Code of an affiliated group pursuant to the provisions of In the case of a corporation which is the parent parent having

p. 5 However, we express no opinion as to whether the statute would apply to a that GE qualifies as a “parent of an affiliated group” under RSA 77-A:4, IV. subsidiaries that are also members of the affiliated group. Therefore, we hold 5 New Hampshire. terms, the deduction is not necessarily limited to parents with dividend-paying considered “includable.” the parent and its affiliates and to limit the type of corporations that are RSA 77-A:4, IV does not apply and/or affect the way in which GE was taxed in in the statute to require minimum stock ownership of eighty percent between standing to challenge RSA 77-A:4, IV because “GE is a unitary business and The department also argues, and the trial court agreed, that GE lacks

us.

only foreign subsidiaries, as that is not the case presently before

double taxation” and GE’s foreign subsidiaries were never subject to taxation in in order to receive the dividend-received deduction, which GE does. By its regard to an includable subsidiary, it satisfies the first condition of the statute subsidiaries. In other words, as long as the stock requirements are met with common parent.” 26 U.S.C. § 1504(a)(1)(A) (2000). This term is further defined an affiliated group” refers to the parent company’s status, and not that of the chains of includable corporations connected through stock ownership with a The plain language of RSA 77-A:4, IV shows that the phrase “parent of Section 1504(a) of the IRC defines “affiliated group,” in part, as: “1 or more defined by the United States Internal Revenue Code (IRC). RSA 77-A:4, IV. disagree. A:4, IV because GE’s challenge relates only to its foreign subsidiaries. We that GE does not have standing to challenge the constitutionality of RSA 77- § 1504(b)(3) (2000). The trial court relied in part upon this exclusion to find specifically excluded from the definition of “includable corporation.” Id.

to parents with foreign subsidiaries. The court also found that RSA 77-A:4, IV application argument, the court found that the statute did not apply generally

that the dividend recipient must qualify as a “parent of an affiliated group” as be directly affected. To qualify for the dividend-received deduction, RSA 77-A:4, IV requires raise a constitutional issue only when the party’s own rights have been or will

and specifically affect[ed] its rights.” Adopting the department’s statutory The trial court found that GE failed to show that “RSA 77-A:4, IV directly

(2005).

899 (1991). The general rule in New Hampshire is that a party has standing to assert the claim. Appeal of Richards, 134 N.H. 148, 154, cert. denied, 502 U.S. For a court to hear a party’s complaint, the party must have standing to consider the affidavits and other evidence submitted below, and any reasonable

p. 6 entitled to judgment as a matter of law. affects GE’s rights as a parent corporation paying BPT in the state.

(1999). In determining whether summary judgment should be granted, we

only where no genuine issue of material fact is present and the moving party is derived from domestic members of the unitary group. RSA 77-A:1, XV. constitutionally permissible. Such an adjudication directly and specifically judgment to the department. A motion for summary judgment may be granted water’s edge method of apportionment, the combined income is limited to that for a determination of whether the basis upon which it is ineligible is Next, we consider whether the trial court properly granted summary dividend-received deduction in RSA 77-A:4, IV is a proper party to bring suit corporate parent that pays BPT in New Hampshire but is ineligible for the II. Summary Judgment

department’s motion to dismiss. challenge to RSA 77-A:4, IV. Accordingly, we reverse the order granting the has sufficient interest in the outcome of this litigation to bring a constitutional Hughes, 152 N.H. at 35; Appeal of Richards, 134 N.H. at 154. We hold that GE

received deduction. combined and apportioned. However, because New Hampshire uses the were not taxed twice, and therefore were not entitled to receive the dividendseparate returns in New Hampshire, were never subject to income taxation, is not applicable to GE’s tax status because its foreign subsidiaries did not file a unitary business does not preclude GE from challenging RSA 77-A:4, IV. Any within the state and thus filed no separate BPT returns or that GE operates as statute’s benefit. The fact that none of GE’s subsidiaries conducted business upon GE to challenge the statute for the very reason that it was denied the usage of the water’s edge combined reporting method – standing is conferred IV does not apply to GE’s foreign dividends because of GE’s unitary status and Even if we were to accept the department’s argument – that RSA 77-A:4,

or out-of-state because the income from every member of the unitary group is makes no difference whether a corporation’s subsidiaries do business in-state 77-A:1, XIII-XVI, :3, I-III (2003). Under the combined reporting method, it since the purpose of RSA 77-A:4, IV is “to prevent double taxation,” the statute separate tax returns with the state. The department argues on appeal that foreign subsidiaries did any business in New Hampshire, they did not file from GE’s combined report and was not taxed. Further, because none of GE’s Any income from a foreign member of GE’s unitary group was excluded

required to file under the combined reporting method discussed above. RSA New Hampshire during the applicable tax years.” As a unitary business, GE is p. 7 RSA 77-A:4, IV. return, and any dividends paid to the parent would be deducted pursuant to conducting business in the state would be required to file a separate BPT

the taxing regime does not operate in this manner and that foreign subsidiaries

never enters the analysis in a combined reporting regime.” GE counters that constitutional law.” The department concludes from this that “RSA 77-A:4, IV excluded gross business profits related to those expenses “pursuant to federal addition of expenses to gross business profits where a corporation has

department cites only to RSA 77-A:4, X (2003), which merely provides for the business in the state. It is uncertain, therefore, exactly how the state taxing in violation of the Federal Constitution. To support this assertion, the We note that GE does not have any foreign subsidiaries that conduct excluded from the taxable business profits in order to prevent double taxation deduction. domestic unitary group that have been subject to taxation will already be conduct business in the state, thereby allowing use of the dividend-received

not conduct business in the state. discriminates against parents of dividend-paying foreign subsidiaries which do

dividends from a foreign unitary group member paid to a member of the Clause of the Federal Constitution is a question of law that we review water’s edge combined group, they must file a separate BPT return if they The department addresses this scenario summarily, asserting that any parties and the question of whether RSA 77-A:4, IV violates the Commerce violate the United States Commerce Clause.” The facts are not disputed by the

argument below, focuses specifically upon whether RSA 77-A:4, IV facially A (2003). subsidiaries. However, the issue on appeal, which is consistent with GE’s entire brief upon a comparison of domestic subsidiaries and foreign return). The department largely ignores this argument, focusing nearly its (imposing BPT on every business organization); RSA 77-A:6, I (requiring a BPT

See RSA 77-A:1, I (defining business organization); RSA 77-A:2

GE argues that since foreign subsidiaries are not included as part of the

IV does not discriminate against foreign commerce and therefore, does not A. Statutory Construction

first address GE’s statutory construction argument regarding RSA chapter 77- Before we address the underlying issue of facial discrimination, we must

cert. denied, 529 U.S. 1021 (2000). Caterpillar Inc. v. N.H. Dep’t of Revenue Admin., 144 N.H. 253, 255 (1999),

The trial court based its ruling upon a determination that “RSA 77-A:4,

moving party. Id. inferences to be drawn from them, in the light most favorable to the nonof income already taxed in New Hampshire.

p. 8 allow for a dividend-received deduction, the deduction is limited by the amount continue our analysis with the understanding that when RSA 77-A:4, IV does received in some situations, this will not always be the case. We therefore

subsidiary may allow the parent to deduct the full amount of the dividend

result. Although the amount of business conducted in the state by the state and thus was only taxed on a small amount of its profits yields an absurd 8 parent when the subsidiary conducted only a small amount of business in the

77-A:4, IV;

A:4, IV (emphasis added). Allowing a full deduction for dividends paid to a the identical gross business profits” of a subsidiary and its parent. RSA 77purpose of the dividend-received deduction is “to prevent double taxation on (1981); Concord Inv. Corp. v. N.H. Tax Comm’n, 114 N.H. 105, 109 (1974). The received deduction in RSA 77-A:4, IV. cf. First Financial Group of N.H., Inc. v. State, 121 N.H. 381, 385 deduction for the amount of business profits already taxed by the state. RSA department that the statute, by its terms, only allows a limited dividend well run afoul of the Commerce Clause. However, we agree with the deduction” regardless of the amount of the tax paid in New Hampshire, might New Hampshire.” The statutory construction urged by GE, which would allow a “hyperdeduction for a dividend received from a foreign subsidiary doing business in profits already taxed. In contrast, GE argues that RSA 77-A:4, IV allows a “full are used. Dupont v. Chagnon, 119 N.H. 792, 794 (1979). meaning unless a different meaning is indicated from the context in which they statutory construction that all words used should be given their ordinary statutory language. Id. We are also mindful of the well-established principle of statutory construction, we begin our analysis with an examination of the in the state might, under certain circumstances, be entitled to the dividend- 150 N.H. 315, 318 (2003). When the issue raised presents a new question of assume without deciding that the parent of a foreign subsidiary doing business in the words of a statute considered as a whole. Appeal of Ann Miles Builder, order to reach the merits of this claim, we accept GE’s hypothetical and This court is the final arbiter of the intent of the legislature as expressed raise broad constitutional concerns and is likely to come before us again. In

statute based upon a hypothetical factual scenario that is not before us. limited scope, allowing a deduction only up to the amount of gross business The department also argues that the dividend-received deduction is of

context of New Hampshire’s tax system, a facial attack on RSA 77-A:4, IV does England Dragway v. M-O-H Enters., 149 N.H. 188, 192 (2003). However, in the

us to evaluate a hypothetical situation. Typically, we will not invalidate a regime, including RSA 77-A:4, IV, would operate if it did. Essentially, GE asks commerce. p. 9 of discriminatory effect; the taxpayer need only prove discrimination against not show the extent of disparate tax treatment or demonstrate a minimal level

commerce clause because it affords a deduction for dividends received from GE argues that “RSA 77-A:4, IV discriminates in violation of the

President, 152 N.H. 124, 133 (2005) (quotation omitted). State.” only be declared invalid “upon inescapable grounds.” Baines v. N.H. Senate

Id. However, statutes are presumed constitutional, and they will

latter.” prove that a state tax statute violates the Commerce Clause, the taxpayer need out-of-state economic interests that benefits the former and burdens the burden of proving discrimination. Caterpillar Inc., 144 N.H. at 258. In order to The party challenging the constitutionality of a state tax bears the a tax “provid[ed] a direct commercial advantage to local business.” their face are virtually per se invalid.” Id. (quotation omitted). brackets omitted). “State laws discriminating against interstate commerce on State.” Fulton Corp. v. Faulkner, 516 U.S. 325, 331 (1996) (quotation and heavily when it crosses state lines than when it occurs entirely within the interstate commerce”; and (4) be “fairly related to the services provided by the state taxing regime is discriminatory if it “taxes a transaction or incident more Oreg., 511 U.S. 93, 99 (1994). In 1996, the Court upheld the principle that a Oregon Waste Systems, Inc. v. Department of Environmental Quality of

omitted). In 1994, the Court defined it as “differential treatment of in-state and Stock Exchange v. State Tax Comm’n, 429 U.S. 318, 329 (1977) (quotation against or burdening interstate and foreign commerce. Boston “negative aspect” which prohibits states from unjustifiably discriminating numerous ways over the years. In 1977, the Court found discrimination where several states.” U.S. CONST. art. I, § 8, cl. 3. This clause also imputes a The Supreme Court has defined Commerce Clause “discrimination” in

Id. at 279.

with the taxing State”; (2) be “fairly apportioned”; (3) “not discriminate against Commerce Clause. To be valid, the tax must: (1) have a “substantial nexus determining whether a state taxing regime survives a challenge under the U.S. 274 (1977), the United States Supreme Court outlined the test for N.H. at 257 (quotation omitted). In Complete Auto Transit, Inc. v. Brady, 430

Congress the right to “regulate commerce with foreign nations, and among the The Commerce Clause of the United States Constitution reserves to

doing business in New Hampshire. while denying a deduction for dividends received from foreign corporations not dividends received from foreign corporations doing business in New Hampshire, facially discriminates against foreign commerce by permitting a deduction for This brings us to the central issue in this case: Whether RSA 77-A:4, IV

B. Commerce Clause entire earnings, but would tax only the amount of the

p. 10 an apportioned share of the domestic subsidiary’s business with the foreign subsidiary. Iowa would tax difficult to say that Iowa discriminates against the foreign subsidiary doing business abroad, it would be

by Iowa on a unitary business which included a States (including Iowa) with the aggregate tax imposed a subsidiary doing business throughout the United business abroad. imposed by Iowa on a unitary business which included

not permitted to deduct dividends received from its foreign subsidiaries doing If one were to compare the aggregate tax to deduct dividends received from them. In contrast, the in-state parent was many state court decisions over the past fourteen years. It provides: resolution here. In In its analysis, the Court added a footnote that has been the focus of

at 80. members of the unitary group that did not conduct business in the state. Id. things, Iowa taxed neither the income of, nor dividends paid by, domestic Court held that the tax system was discriminatory, because, among other apportioned share of the entire income of a unitary business,” such] . . . constituted income to the domestic recipients.” id. at 74 n.9, the members, deducted on each payor’s foreign income tax return . . . [and as Id. at 74. Noting that “Iowa is not a State that taxes an

conduct business in Iowa was not taxed, and the in-state parent was permitted

one before us, the principles enumerated in that decision are helpful to the Finance, 505 U.S. 71 (1992). Although the tax system in Kraft differs from the decision in Kraft General Foods, Inc. v. Iowa Department of Revenue and We begin our Commerce Clause analysis with the Supreme Court’s

“foreign commerce is taxed more heavily than intrastate commerce.” Id. at 259. proportionately tax foreign source income and that GE fails to show that Hampshire.” The department responds that it is constitutional for states to 258-59. There, we noted that these payments “were expenses to the foreign Hampshire business filing a combined report. Caterpillar Inc., 144 N.H. at payments made by a foreign subsidiary in the net income calculation of a New in the state. In Caterpillar Inc., we upheld the inclusion of royalty and interest dividend income when the dividend is received by a corporation doing business 425 (1980), the Supreme Court upheld the states’ right to tax foreign-source is not contested. In Mobil Oil Corporation v. Commissioner of Taxes, 445 U.S. As an initial matter, we note that the state’s right to tax foreign dividends

for dividends received from corporations that do not do business in New corporations that do business in New Hampshire, while it denies a deduction whose subsidiaries do not do business in Iowa.

from domestic subsidiaries and the dividends received from foreign more appropriate comparison is between corporations A.2d at 83. The court found that by proportionately taxing the income received not present in the case of the foreign subsidiary. A reasoning of subsidiary provide an independent basis for taxation Thiokol and upheld an analogous taxing formula. Du Pont, 675 Similarly, in In the former case, the Iowa operations of the Du Pont, the Maine Supreme Judicial Court followed the

Id. at p. 11 1186.

be taxed. while only the dividend of the foreign subsidiary would income of the domestic subsidiary would be . . . taxed unitary business with a foreign subsidiary because the burdensome than that imposed by [the state] on a business with a domestic subsidiary would not be less the aggregate tax imposed by [the state] on a unitary

accepted the state’s argument that corporation with a subsidiary doing business abroad. this formula effectively “balanc[ed] the [tax] burdens” of each entity and business in Iowa is not situated similarly to a taxable income. situated.” A corporation with a subsidiary doing Thiokol, 864 P.2d at p. 11 1185. The court essentially held that included dividends received from foreign subsidiaries in the calculation of to compare the taxpayers who are “most similarly state corporations to deduct dividends received from domestic subsidiaries, but Court upheld the state’s combined reporting tax formula which permitted in- Distinguishing its taxing system from that in Kraft, the Kansas Supreme

Tax Assessor, 675 A.2d 82 (Me. 1996). Morton Thiokol, Inc., 864 P.2d p. 11 1175 (Kan. 1993); Du Pont de Nemours v. State provided a combined reporting method is properly used. See, e.g., Appeal of relied upon by some state courts to uphold ostensibly discriminatory taxation domestic income is taxed through apportionment. This distinction has been taxed at all and a combined reporting method system where out-of-state entity filing system where income from out-of-state domestic subsidiaries is not Id. at 80 n.23 (citation omitted). Thus the Court distinguishes between a single under the Commerce Clause, however, it is necessary

In considering claims of discriminatory taxation

parent. foreign subsidiary’s earnings paid as a dividend to the analysis must take the whole scheme of taxation into account.”

p. 12 claim that a tax discriminates in violation of the Commerce Clause: “a proper Supreme Court requires analysis of the aggregate tax burden when reviewing a

enumerated in these cases helpful to the analysis here. The United States business. “A state tax must be assessed in light of its actual effect considered we find the principles of “aggregate tax” burdens and “taxing symmetry” taxing regime as a whole and look at the aggregate tax imposed upon a unitary between foreign subsidiaries doing business in the state and those that do not, Following the reasoning in these cases, we assess New Hampshire’s reporting method but rather focuses only upon the alleged disparate treatment

[a state] on a unitary business”). 505 U.S. at 80-81 & n.23 (speaking in terms of the “aggregate tax imposed by domestic subsidiaries). Well Co. v. Reily, 373 U.S. 64, 69 (1963) (quotation and citation omitted); Kraft,

method), foreign subsidiary income was equally treated under the consolidated reporting

While we recognize that GE does not challenge the state’s combined

regime which taxed foreign dividend income but excluded dividend income from (adopting the “taxing symmetry” principle in Du Pont, and upholding a taxing Holdings v. Franchise Tax Bd., 15 Cal. Rptr. 3d 473, 489-90 (Ct. App. 2004) interest and royalty payments), cert. denied, 522 U.S. 1112 (1998); Fujitsu IT N.W.2d 695, 701 (Minn. 1997) (adopting similar analysis as applied to foreign

cert. denied, 534 U.S. 995 (2001); Caterpillar, Inc. v. C.I.R., 568

(upholding similar taxing regime as constitutional because domestic and State, Dept. of Rev., 769 So. 2d 1060, 1061 (Fla. Dist. Ct. App. 2000) (N.M. 1996) (same), cert. denied, 521 U.S. 1112 (1997); Bernard Egan & Co. v. both taxed once); discriminated against foreign commerce. Conoco, Inc. v. Taxation & Revenue Dept., 931 P.2d 730, 735 of the “taxing symmetry” principle where domestic and foreign subsidiaries are Elec. Co. v. Tracy, 735 N.E.2d 445, 448-49 (Ohio 2000) (recognizing the validity received deduction would compensate here is federal tax liability”); Emerson intended to compensate, the additional tax liability for which the dividendtaxes imposed by the same state for which the dividend-received deduction was contrast to the circumstances in Morton Thiokol and Du Pont, which involved Technology v. Com’r of Revenue, 698 N.W.2d 1, 17 (Minn. 2005) (“But in discriminatory for other reasons not applicable here. See Hutchinson Thiokol and Du Pont, although some have invalidated taxing regimes as 675 A.2d at 88. Several other courts have upheld the principles outlined in

upon the unitary business to determine whether the general taxing formula The Thiokol and Du Pont courts looked at the overall tax burden placed

foreign commerce.” Id. foreign subsidiaries does not constitute . . . facial discrimination against Id. at 88. The court further held that “the inclusion of dividends paid by subsidiaries, the state’s taxing system “provid[ed] a type of ‘taxing symmetry.’” the latter,

p. 13 once, there is no “differential treatment” that benefits the former and burdens

GE cites several decisions to support this claim. 77-A:4, IV has struck down the provisions as violating the Commerce Clause.” examined dividends received deduction statutes substantially the same as RSA In spite of these decisions, GE argues that “[e]very court that has the foreign subsidiary not operating in New Hampshire are each only taxed foreign subsidiary operating in New Hampshire and the unitary business with N.H. at 262 (quotations omitted). offensive to the Commerce Clause. Since both the unitary business with the mathematical exactitude, only a rough approximation.” Caterpillar Inc., 144 apportion income perfectly[;] the Federal Constitution does not require exactly equal, we have noted before that the state’s taxation methods need “not 329 (quotation omitted). Although the total tax assessed in the end may not be that the parent ultimately pays the BPT of its subsidiary. commercial advantage” over the latter, Boston Stock Exchange, 429 U.S. at the parent and its subsidiary are considered a single business entity, it follows than the former, Fulton, 516 U.S. at 331; and the former is not given a “direct

Oregon Waste, 511 U.S. at 99; the latter is not taxed more heavily

conclude that RSA 77-A:4, IV does not facially discriminate by any means Furthermore, by viewing the state’s taxing regime as a whole, we

Corp., 114 N.H. at 109; Caterpillar Inc., 144 N.H. at 259.

first example given above, because by nature of the unitary business concept affirmed in A:4, IV up to the amount of business profits already taxed. RSA 77-A:4, IV; Thiokol. Although the in-state parent is not taxed directly in the symmetry” upheld in corporation also located within the state may be deducted pursuant to RSA 77- Du Pont and the “balancing the burdens” formula Accordingly, the New Hampshire BPT regime contains the type of “taxing the state. RSA 77-A:1, IV; RSA 77-A:3, I. Any dividends paid to a parent

has been taxed only once. not subject to a deduction under RSA 77-A:4, IV because that dividend income an in-state parent corporation are apportioned and taxed as income; they are therefore not directly taxed. RSA 77-A:1, I. Therefore, any dividends paid to conduct business in the state is not subject to the BPT and its income is entity is taxed only once. Id. In contrast, a foreign subsidiary that does not First Financial, 121 N.H. at 385. This ensures that the income of the business

chapter 77-A and must pay a tax apportioned upon its profits attributable to conducting business in New Hampshire is subject to the BPT under RSA treatment. For purposes of this appeal, we assume that a foreign subsidiary but as a part of a larger taxing system, we find no improper discriminatory Louisiana, 451 U.S. 725, 756 (1981). Viewing RSA 77-A:4, IV not in isolation, in conjunction with other provisions of the State's tax scheme.” Maryland v. favorably than stock held in out-of-state corporations.

present case, the state is instead taxing a proportionate share of dividend

state taxing regime taxed stock ownership and treated in-state stock more discriminatory. Fulton is not analogous to the present case because there, the We do not agree that these cases require a finding that RSA 77-A:4, IV is

income subject to tax in North Carolina.” Id. at 328. limited “percentage deduction equal to the fraction of the issuing corporation’s state corporations, which were subject to tax in North Carolina, to take a was calculated using a formula that allowed taxpayers who owned stock in in- capital among California corporations.” discriminates against interstate commerce.” “favor[ing] domestic corporations over their foreign competitors in raising Fulton, 516 U.S. at 333. The tax assessed against corporate stock owned by state residents “facially since the statute facially discriminated against out-of-state corporations by In Fulton, the Supreme Court held that North Carolina’s “intangibles tax” was not unconstitutional because it “avoids double taxation.” upon Fulton. California.” Farmer Bros., 134 Cal. Rptr. 2d at 398. The court relied, in part, corporations which do not do business in California and pay no taxes in business in California and paying California taxes over dividend-paying discriminatory on its face because it “favors dividend-paying corporations doing Brothers, the court held that the dividend-received deduction was

Cal. Rptr. 2d at 619. The court rejected this argument as inconsequential,

Franchise Tax Board for the State of California (FTB) argued that the provision But see Fujitsu IT Holdings, 15 Cal. Rptr. 3d at 489-90. In Ceridian, the Ceridian Corp. v. Franchise Tax Bd., 102 Cal. Rptr. 2d 611 (Ct. App. 2000). Bd., 134 Cal. Rptr. 2d 390 (Ct. App. 2003), cert. denied, 540 U.S. 1178 (2004); had already been subject to tax in the state. Farmer Bros. Co. v. Franchise Tax statutes that permitted a deduction only for dividends paid out of income that In two cases from California, two separate courts of appeal invalidated

facial discrimination. compensatory tax. Therefore, no further analysis was conducted regarding instead upon the commissioner’s argument that it was constitutional as a the state’s dividends received deduction was discriminatory and focused 228, 231 (N.D. 2003), the court noted that the tax commissioner conceded that Id. at 1066. Similarly, in D.D.I., Inc. v. State ex rel. Clayburgh, 657 N.W.2d foreign corporation less favorably than those paid by domestic corporations.” Kraft, and found that “Rhode Island’s [taxing regime] treats dividends paid by a court held that the statute contained the same “fatal flaw” as the statute in calculation of a corporation’s Rhode Island net income. Id. at 1063-64. The excluded domestic dividends but required inclusion of foreign dividends in the Court of Rhode Island invalidated a statutory provision which effectively In Dart Industries, Inc. v. Clark, 657 A.2d 1062 (R.I. 1995), the Supreme p. 15 15

need not address the compensatory tax issue. Because we hold that RSA 77-A:4, IV is not unconstitutional on its face, we the trial court’s grant of the department’s motion for summary judgment.

concurred. BRODERICK, C.J., and DALIANIS, DUGGAN and GALWAY, JJ.,

cited department being entitled to summary judgment as a matter of law, we affirm There being no genuine issue of material fact in dispute and the

Hampshire. dividend-paying foreign subsidiary that does not conduct business in New We conclude that RSA 77-A:4, IV does not facially discriminate against a at the aggregate tax assessed against the unitary business in New Hampshire. As stated above, we examine our state taxing regime as a whole, and look

domestic corporations. Fujitsu IT Holdings, p. 15 15 Cal. Rptr. 3d at 489. corporations while allowing a full deduction for dividends received from Du Pont, upheld a limited deduction for dividends received from foreign We also note that a more recent California Court of Appeals decision, which symmetry as there is here. Regardless, we do not agree with their analysis. received deduction at issue, it may be that in those cases, there was no taxing invalidated in these cases appear similar to the New Hampshire dividendand in Dart and D.D.I. to be persuasive here. While the deduction provisions In addition, we do not find the decisions of the California appellate courts

property from regime which taxed income); Mobil Oil Corp., 445 U.S. at 446. Bd., 463 U.S. p. 15 159, 187-88 (1983) (distinguishing taxing regime which taxed income coming into the state. See generally Container Corp. v. Franchise Tax