Wednesday, September 30, 2009

Court reviews constitutionality of a tax assessment based a subsidiary and a parent corporation's relationship to one another

BLUE BELL CREAMERIES, L.P. v. LOREN CHUMLEY, COMMISSIONER DEPARTMENT OF REVENUE, STATE OF TENNESSEE (Tenn. Ct. App. September 30, 2009)

The Tennessee Department of Revenue assessed an excise tax on a nondomiciliary subsidiary corporation which conducted business in the state based on income earned outside the state as a result of the parent corporation's redemption of outstanding stock held by the subsidiary. The Department's tax assessment was based on a determination that the income was taxable as "business earnings" under the Tennessee Excise Tax Law. The trial court found that the subsidiary and its parent corporation were not part of a unitary business relationship and, consequently, that the tax assessment was unconstitutional. Finding that the entities were not part of a unitary business relationship, the judgment of the trial court is affirmed.

Opinion may be found at:
http://www.tba2.org/tba_files/TCA/2009/bluebell_093009.pdf