Business Income


In an order released in July 2021, the Illinois Tax Tribunal denied a taxpayer’s motion for summary judgment in a “unitary business” case, finding that there were disputed issues of fact as to whether the taxpayer was engaged in a unitary business with a company that the taxpayer sold.  See Christopher v. Illinois Dep’t of Rev., 19 TT 131 (Ill. Tax Trib. Nov. 24, 2020, released July 2021).  The taxpayer, T. Christopher Holding Company (“Holding Company”), claimed that it was not unitary with Vogue International, LLC (“Operating Company”), and thus its gain from the sale of Operating Company could not be included in Holding Company’s Illinois business income under U.S. constitutional principles and Illinois law.  However, the Tribunal found that the Illinois Department of Revenue (“Department”) had presented sufficient evidence to establish a disputed issue of material fact that rendered summary judgment on this issue inappropriate.

The Idaho Supreme Court recently affirmed a District Court’s judgment that the gain from the sale of a 78.54% membership interest in a limited liability company did not constitute “business income” under Idaho Code section 63-3027.  In Noell Indus. Inc. v. Idaho State Tax Comm’n, Docket No. 46941 (Idaho 2020), the court determined that “this type of gain does not meet the definition of ‘business income’ under either the transactional test or functional test (including the unitary business test),” and was therefore not apportionable income.

In ComCon Prod. Servs. I, Inc. v. Cal. Franchise Tax Bd., Cal. Ct. App., No. B259619 (December 14, 2016), the California Court of Appeals, Second Appellate District, affirmed the lower court’s judgment, holding that Comcast Corporation and its then majority-owned subsidiary, QVC, Inc., were not unitary, but that a $1.5 billion termination fee that Comcast received in its failed merger with MediaOne Group, Inc. was apportionable business income.  The Appellate Court also addressed two issues not discussed by the lower court concluding that (1) the taxation of the termination fee was proper under the Due Process Clause, finding a “definite link” between the termination payment and California (as the MediaOne merger failure impacted the value of every aspect of Comcast’s business); and (2) Comcast forfeited its right to argue, as it failed to raise the issue in its refund claim, that the termination fee should have been included in its sales factor denominator.