Term: 2007
Docket: 06-1413
Meadwestvaco Corporation, Successor In Interest To The Mead Corporation v. Illinois Department Of Revenue Et Al
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06-1413 MEADWESTVACO V. IL DEPT. OF REVENUE DECISION BELOW: 861 NE2d 1131 EXPEDITED BRIEFING SCHEDULE CERT. GRANTED 9/25/2007 QUESTION PRESENTED: Is the attempt by Illinois to tax the approximately $1 billion gain realized by Petitioner when it sold its investment in Lexis/Nexis in 1994 (which it acquired in 1968 for $6 million and which functioned for 26 years as an independent, nonunitary business) in direct conflict with the decisions of the Court in Allied-Signal, Inc. v. Director, Division of Taxation, 504 U.S. 768 (1992), FW. Woolworth Co. v. Taxation & Revenue Department of New Mexico, 458 U.S. 354 (1982) and ASARCO Inc. v. Idaho State Tax Commission, 458 U.S. 307 (1982) and the Due Process and Commerce Clauses of the United States Constitution? LOWER COURT CASE NUMBER: 1-03-1160
In the 2007 case MeadWestvaco Corporation v. Illinois Department of Revenue, the U.S. Supreme Court ruled in favor of MeadWestvaco (formerly The Mead Corporation), stating that Illinois had improperly taxed a portion of the company's capital gain from its sale of LexisNexis. The court found that this violated constitutional limitations on state taxation powers under the Due Process and Commerce Clauses because there was not sufficient connection between LexisNexis’s operations and Mead’s activities in Illinois to justify apportioning some part of the capital gains to that State for tax purposes. This decision clarified how states could tax income generated outside their borders, emphasizing operational function rather than mere ownership as key criteria for determining whether an out-of-state business can be considered part of a parent corporation's unitary business subject to state taxes.
In the dissenting opinion for MeadWestvaco Corp. v. Illinois Department of Revenue, Justice Ginsburg disagreed with the majority's decision to overturn a state court ruling that allowed Illinois to tax a portion of the capital gains realized by an Ohio-based corporation from its sale of a subsidiary company based in Maryland. She argued that states should have more leeway in determining how they allocate and apportion income for taxation purposes under the Due Process and Commerce Clauses. In her view, it was reasonable for Illinois to claim taxing rights over part of those capital gains because there were sufficient connections between the business activities conducted within its borders and those profits. The majority’s approach, she contended, unduly restricted states’ abilities to fairly tax multistate businesses operating within their jurisdictions.
