Brief of Amici Curiae On Remand From The United States Supreme Court First Marblehead, Inc., v. Comm’r
Amici respectfully submit that neither party has squarely addressed the essential question that this Court must decide in order to determine whether the Massachusetts apportionment scheme at issue here in fact discriminates against interstate commerce in violation of the U.S. Constitution. The key question here is whether and how Massachusetts would apportion the loan-derived income of a nondomiciliary financial institution similarly situated to the taxpayer, Gate Holdings, Inc. ("Gate"), with respect to the property factor under Mass. Gen. Laws ch. 63, § 2A (e) ("Section 2A") The Court must answer that question in order to correctly apply the internal consistency test under the U.S. Supreme Court's decision in Comptroller of the Treasury v. Wynne. That landmark decision revitalized the internal consistency test by making clear that it is no mere hypothetical exercise. Rather, as the U.S. Supreme Court recognized, the As demonstrated by the economic analysis that was adopted and endorsed by the Supreme Court in Wynne, the internal consistency test succeeds because it captures an essential truth about taxation of crossborder activity. Interstate commerce flows in inbound and outbound directions across state lines. Domiciliaries engage in commerce outside the state, and nondomiciliaries engage in commerce within the state. To determine whether a given tax scheme discriminates against interstate commerce, one must compare (a) the allocation of domiciliaries' income based on domestic factors, with (b) the sum of (1) the allocation of nondomiciliaries' income based on inbound factors and (2) the allocation of domiciliaries' income based on outbound factors. If the combined allocation based on inbound and outbound factors exceeds the allocation based on domestic factors, then the tax scheme is discriminatory and should be struck down.