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

504 U.S. 768, 112 S. Ct. 2251 (1992)

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

United States Supreme Court

504 U.S. 768, 112 S. Ct. 2251 (1992)

Facts

Allied-Signal, Inc. (plaintiff) was the successor in interest of Bendix Corporation, a company that produced goods related to the aerospace, automotive, energy, and forestry industries. Bendix operated offices in all 50 states, was incorporated in Delaware, and was headquartered in Michigan. From December 1977 through November 1978, Bendix acquired 20.6 percent of ASARCO stock. ASARCO, a corporation incorporated in New Jersey (defendant) with its main offices in New York, produced nonferrous metals. In 1981 Bendix sold ASARCO’s stock back to ASARCO at a gain of $211.5 million. Bendix attempted to use that gain to acquire an aerospace company, Martin Marietta, but the acquisition was unsuccessful. While Bendix owned the ASARCO stock, the two companies were unrelated business enterprises. New Jersey assessed business taxes on Bendix for an apportioned amount of the gain Bendix realized from its sale of ASARCO stock. Bendix sued for a refund in New Jersey Tax Court. The tax court held that the assessment was valid, and the New Jersey Supreme Court affirmed the tax court. In its decision, the New Jersey Supreme Court held that the gain Bendix realized from its sale of ASARCO stock was part of Bendix’s unitary business because Bendix had attempted to use the gain to purchase an aerospace company that would complement its existing business. The United States Supreme Court granted certiorari. At oral argument, New Jersey suggested that if a corporation does business in a state, that state may apportion all the corporation’s income for tax purposes regardless of the origin of the income.

Rule of Law

Issue

Holding and Reasoning (Kennedy, J.)

Dissent (O’Connor, J.)

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