U.S. Supreme Court Issues "GVR" Order in First Marblehead Massachusetts Apportionment Case

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 financial institution's income under Massachusetts' financial institutions excise tax under the dormant Commerce Clause. The taxpayer claimed the apportionment formula, as applied by the Massachusetts Supreme Judicial Court ("MSJC"), violated dormant Commerce Clause because it was not fairly apportioned under the internal and external consistency tests.

The MSJC acknowledged the existence and role of the internal consistency test. However, rather than applying the required hypothetical replication of the challenged tax, the MSJC addressed whether actual multiple taxation was present and concluded internal consistency was satisfied because the taxpayer's cumulative tax burden was less than 100 percent.  The MSJC 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 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 support of First Marblehead urging the Court to issue a "GVR order" granting the taxpayer's petition, vacating the MSJC's judgment, and remanding the action back to the MSJC to apply the internal consistency test articulated in Wynne. The Court's GVR order followed TEI's recommendation and directed the MSJC 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.

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