Alabama Foreign Franchise Tax.In a unanimous decision A Unanimous Decision is a winning criterion in several full-contact combat sports, such as boxing, kickboxing, Muay Thai, mixed martial arts and others sports involving striking in which all 3 judges agree on which fighter won the match. , South Central Bell Telephone Co. v. Alabama, 3/23/99, the Supreme Court struck down as unconstitutional Alabama's franchise tax on foreign corporations as violative of the Commerce Clause. According to the Court, the tax facially discriminates against interstate commerce interstate commerce In the U.S., any commercial transaction or traffic that crosses state boundaries or that involves more than one state. Government regulation of interstate commerce is founded on the commerce clause of the Constitution (Article I, section 8), which . Alabama franchise tax is imposed on a domestic corporation based on its capital stock at the rate of 1% of par value. State law does not define "capital stock" but the state has long defined it as par value (for stock with par value) or stated value Stated Value A value that, instead of being par value, is assigned to a corporation's stock for accounting purposes. Stated value has no relation to market price. Notes: (for stock with no par value). Because the par or stated value of a domestic corporation's stock is determined by the corporation itself (regardless of the stock's market or book value), a domestic corporation can minimize its franchise tax liability by assigning to its stock a token par or stated value. On the other hand, a foreign corporation's franchise tax liability is computed as .3% of the actual amount of capital employed Capital Employed 1. The total amount of capital used for the acquisition of profits. 2. The value of all the assets employed in a business. 3. Fixed assets plus working capital. 4. Total assets less current liabilities. in the state. Thus, while the rate of tax is set at 1% of par value for domestic corporations, a corporation's ability to arbitrarily set a low par or stated value has enabled domestic corporations to pay, on average, less than one-fifth of the franchise tax than if they were incorporated outside Alabama. Writing for the Court, Justice Stephen Breyer rejected Alabama's attempt to strip the Court of appellate jurisdiction APPELLATE JURISDICTION. The jurisdiction which a superior court has to bear appeals of causes which have been tried in inferior courts. It differs from original jurisdiction, which is the power to entertain suits instituted in the first in stance. Vide Jurisdiction; Original jurisdiction. on the basis of 11th Amendment restrictions and to claim res judicata res judicata (rēz j  'dĭkā`tə): see jeopardy. stemming from a state supreme court decision (711 So.2d 1005 (1998)) upholding the tax based on the outcome of prior litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute.When a person begins a civil lawsuit, the person enters into a process called litigation. . Alabama had argued that the 11th Amendment applied to bar the exercise of Federal judicial power over suits against one state by citizens of another. According to Breyer, the Court had rejected that argument in McKesson Corp. v. Division of Alcoholic Beverages and Tobacco, 496 US 18 (1990). McKesson "confirmed a long-established and uniform practice of reviewing state-court decisions on federal matters, regardless of whether the State was the plaintiff or the defendant in the trial court" As to the res judicata argument, Breyer wrote that the Alabama courts' application of the doctrine contradicted Richards v. Jefferson County, 517 US 793 (1996). Justices O'Connor and Thomas penned concurring opinions. |
|
||||||||||||||||
Printer friendly
Cite/link
Email
Feedback
Reader Opinion