Tax News

CCH (cch.taxgroup.com) reports:

  The U.S. Supreme Court has denied a taxpayer's request to evaluate an Alabama statute requiring that certain royalty payments to related parties be added back to income subject to the state's corporate income tax. The statute includes an exception to the addback requirement for otherwise deductible intangibles expenses when the corresponding income is subject to a tax based on net income in Alabama or any other state.

  The taxpayer challenged the addback statute in state court on state statutory and federal constitutional grounds. The challenge was successful at the trial court level on the statutory grounds. However, the Alabama Court of Civil Appeals reversed. In addressing the constitutional challenges, the appellate court held that the addback statute does not discriminate against interstate commerce because the subject-to-tax exception does not benefit in-state corporations to the detriment of out-of-state corporations. Also, the court held the taxpayer had not demonstrated that the addback statute resulted in taxation of income that is not fairly attributable to Alabama. The Alabama Supreme Court affirmed, adopting the appellate court's opinion as its own. (TAXDAY, 2008/09/23, S.1)

VFJ Ventures, Inc. v. Surtees, U.S. Supreme Court, Dkt. 08-916, petition for certiorari denied April 27, 2009