On October 13, 2015, the U.S. Supreme Court issued an order following TEI’s recommendation to issue a “GVR order” in First Marblehead v. Massachusetts Commissioner of Revenue. First Marblehead involves the proper apportionment of a financial institution’s income under Massachusetts’ financial institutions excise tax. The taxpayer claimed that the apportionment formula, as applied by the Massachusetts Supreme Judicial Court (SJC), violated the dormant Commerce Clause because it was not fairly apportioned under the internal and external consistency tests. The SJC acknowledged the existence and role of both tests. However, rather than applying the required hypothetical replication of the challenged tax required by the internal consistency test, the SJC addressed whether actual multiple taxation was present, and it concluded internal consistency was satisfied because the taxpayer’s cumulative tax burden was less than 100 percent.
The SJC issued its decision three months before the U.S. Supreme Court issued its opinion in Comptroller of the Treasury of Maryland v. Wynne. Wynne confirms that the internal consistency test requires courts to hypothetically assume every state has the same tax structure and provides a clear and comprehensive example of how courts must evaluate a challenged tax scheme. TEI filed an amicus brief in First Marblehead that urged the Court to issue a GVR order granting the taxpayer’s petition, vacating the SJC’s judgment, and remanding the action back to the SJC to apply the internal consistency test articulated in Wynne. The Court’s GVR order followed TEI’s recommendation and directed the SJC to reconsider First Marblehead’s case.
TEI’s brief was prepared under the aegis of TEI’s State & Local Tax Committee, whose chair is Jamie Fenwick. Pilar Mata coordinated and is the principal author of the brief.