Taxation and State Taxation -- 2017

Sonoco Prods. Co. v. Dep't of Treasury, Michigan   (U.S. Supreme Court)

Challenging retroactive withdrawal from Multistate Tax Compact

Five cases from Michigan were appealed to the Supreme Court challenging Michigan's system of taxing companies that do business in multiple states. These cases come on the heels of 2 other cases from California and Minnesota raising similar challenges, but which were declined review by the Court.

Once again, the NAM urged the Court to hear the issue, involving whether a state can deny companies the opition of using a common three-factor, equal-weighted formula for calculating taxes under the Multistate Tax Compact. The Compact is intended to create a uniform system of taxation for interstate companies, but several states are reneging on their obligations under the agreement.

Like any contract, the Multistate Tax Compact places some obligations on states along with the Compact’s many benefits. It was developed as an alternative to forestall congressional intervention with federal legislation, and was intended to establish a baseline level of uniformity to facilitate job growth and state tax collections.

However, Michigan passed legislation that denies the option to use the standard formula, and applied its new policy retroactively for almost seven years. Our amicus brief argues that the Compact is a binding contract, and that the retroactive denial of use of the standard formula undermines reasonable reliance interests and removes predictability and the rule of law, both violations of the Due Process clause. The change also targets unpopular groups, such as out-of-state businesses who are often without a vote.

On May 22, 2017, the Court declined to hear this appeal.

Related Documents:
NAM amicus brief  (December 23, 2016)


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