States often do what they can, and sometimes exceed their authority, to tax companies doing business in many states and around the world. The Due Process and Commerce Clauses of the Constitution are designed in part to prevent state interference with interstate commerce, and the Supreme Court has applied the "unitary-business principle" to allow multiple states to tax a portion of a multistate corporation's business.
This case arose when Alabama tried to tax the full value of the proceeds of the disposal of timberland and a pulp mill located in that state, even though the assets were part of a vertically integrated business in many states. An Alabama court approved the tax, but other states may still tax their share of the transaction, since it is part of the unitary business that is subject to tax in those states. This will mean multiple taxation of the same transaction.
The company appealed to the Supreme Court, and the NAM filed an amicus brief 11/1/2012 urging the Court to review the Alabama decision. The ruling ignores the long-standing rules governing the apportionment of unitary income, which allow a state to tax activities that occur outside the state as long as the tax is properly apportioned by the taxing state. We argued that the issue in this case is of national significance, and the Supreme Court must step in to ensure compliance with its precedents regarding apportionable income.
The Court denied the petition on Jan. 14, 2013.