Vanderbilt Law Review

First Page



In determining whether income from intangible investments should be subject to general apportionment rules or assigned to the commercial domicile or elsewhere the challenge to the states currently is to ascertain the true facts surrounding large corporate investments in intangible properties. The distinctions in UDITPA between business and nonbusiness income mandate this kind of factual inquiry. It is questionable, however, whether this distinction should continue to be given any significant effect, since it lacks substance and leads to endless conflict between large multistate and multinational corporations and each state in which they do business. Furthermore, in determining the state income tax liability of each member of a group of corporations carrying on a unitary or integrated business, it is unrealistic to treat each member as completely distinct. For this reason, full apportionment of income from intangibles should be coupled with combined reporting. This eliminates tax results flowing from the corporate shell game and places competing states and businesses on a tax parity. Under full apportionment and combined reporting, "nowhere income" and duplicate taxation are avoided, producing state income taxation that is constitutionally permissible and equitable. These are proper and achievable tax objectives.