THE VIRGINIAN-PILOT
Copyright (c) 1994, Landmark Communications, Inc.
DATE: TUESDAY, June 21, 1994 TAG: 9406210394
SECTION: BUSINESS PAGE: D5 EDITION: FINAL
SOURCE: BY RICHARD CARELLI, ASSOCIATED PRESS
DATELINE: 940621 LENGTH: WASHINGTON
The decision affects both U.S.-based corporations with worldwide markets and foreign-based corporations that do business in this country.
{REST} The justices voted unanimously to uphold the aggressive way California taxed U.S.-based businesses, and split 7-2 in upholding how the state taxed foreign-based corporations.
In other business-related cases, the court:
Made it easier for airline and rail workers who are fired after reporting safety violations to challenge their dismissals.
Made it harder for coal miners and longshoremen or their families to collect disability or death benefits.
The foreign tax ruling took California off the hook - the state won't have to refund an estimated $4 billion in taxes paid by multinational corporations under a so-called ``unitary'' tax formula.
A unitary tax treats a corporation, its subsidiaries and other far-flung activities as one entity. A state calculates the corporation's in-state business as a percentage of its worldwide business to come up with the company's tax liability to the state.
In contrast, the federal government and most other countries treat a multinational corporation's subsidiary as a separate company and tax only its income.
Congress has never banned states from using the controversial ``unitary'' taxing methods, Justice Ruth Bader Ginsburg noted for the court.
She said the challenge to California's tax ``is directed to the wrong forum.''
Jerome Libin, who represented the United Kingdom and 19 other countries in attacking the California law, said, ``This case shows the reluctance of the current Supreme Court to involve itself in what it considers policy matters affecting foreign commerce.''
He said the court ``has very firmly placed the ball in Congress' hands.''
Richard Ruda, chief counsel of the States and Local Legal Center, called the decision ``a very important victory for the states.''
``It allows them, if they choose, to use this tax until Congress says otherwise,'' Ruda said.
At least one member of Congress, Sen. Byron Dorgan, D-N.D., applauded the ruling.
``They were never attempting to overtax multinational corporations. They were using these taxes to make sure that multinational corporations were paying their fair share,'' he said.
The California tax had been challenged by the New York-based Colgate-Palmolive Co. and the British-owned Barclays Bank of California and Barclays Bank International. The companies sought refunds on state tax bills dating back to the 1970s.
Before last year, the unitary tax was mandatory. But California lawmakers voted last year to make the tax optional starting with the 1994 tax year. Now, multinational corporations can choose to pay state taxes under a different formula.
The justices were told that six other states - Idaho, Montana, North Dakota, Alaska, Tennessee and Utah - use some form of unitary tax system.
Previous administrations have opposed unitary taxes as inconsistent with federal law and international practice. However, President Clinton promised during the 1992 campaign that his administration would back California officials' arguments.
Clinton administration lawyers told the court in March it was willing to let states charge unitary taxes.
Britain said it would retaliate if California's tax was imposed in a way that damaged British-owned companies, and German lawmakers also asked their government to retaliate.
Airline and rail employees who say they were wrongfully fired for reporting safety violations can sue in state court instead of submitting to arbitration, the court said.
Ruling unanimously in a Hawaii case, the court said federal law does not require such wrongful-discharge claims to be handled through arbitration, which offers a more limited remedy than a damages lawsuit.
The decision allows Grant T. Norris to sue Hawaiian Airlines over his 1987 firing. At issue was the federal Railway Labor Act, which covers rail and airline employees.
It will be harder for some coal miners and longshoremen, or their survivors, to collect disability or death benefits.
Such people have the burden of proving their claims, the court ruled 6-3.
The justices rejected a liberal standard used by the Labor Department for more than 50 years, which had required that any ``true doubt'' to be resolved in favor of the person seeking benefits when the evidence on both sides was of equal weight.
That rule conflicts with a federal law that says the person seeking an order has the burden of proving it is needed, Justice Sandra Day O'Connor wrote for the court.
{KEYWORDS} U.S. SUPREME COURT DECISION TAX by CNB