MTC Counsel: Supreme Court Likely to Deny ‘Gillette'

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By Jennifer McLoughlin

May 24 — The U.S. Supreme Court likely will deny certiorari in the California ‘Gillette' decision, legal counsel for the Multistate Tax Commission said.

During a May 24 panel hosted by the D.C. Bar Taxation Section, MTC Counsel Sheldon Laskin said he doesn't find a substantial federal question remains for review in Procter & Gamble Mfg. Co. v. Cal. Franchise Tax Bd.—with Procter & Gamble replacing Gillette as lead plaintiff—where the California Supreme Court found that the Multistate Tax Compact isn't a binding compact. The deadline to file a petition for certiorari is May 29 (61 DTR K-3, 3/30/16).

“I didn't think there was much chance that the Supreme Court would take the case before Justice Scalia died,” Laskin said. “I think now there is absolutely no chance that it will take the case.”

Laskin was joined by several key MTC staff who reflected on ongoing litigation, programs and projects, such as the Arm's-Length Adjustment Service, the Multistate Voluntary Disclosure Program and monitoring the state-specific reach of federal legislation.

‘Gillette' Review Unlikely

Noting that the Supreme Court is limiting certiorari to cases that it feels “are essential for the Court to decide,” Laskin said that “whatever else Gillette is, it isn't essential.”

Harkening back to the high court's 1978 opinion in U.S. Steel Corp. v. Multistate Tax Comm'n, 434 U.S. 452 (1978), Laskin observed that the decision was limited to what the compact was not—it is “not a compact that required congressional approval.” He explained that at that point, “every issue becomes a state issue.”

An “extremely attenuated contract clause issue” may exist, but Laskin noted that federal courts grant significant deference to state courts on whether something is a contract. And with unanimity among state courts recognizing the compact as advisory—with the exception of the reversed decision from the California Court of Appeal—he didn't anticipate Supreme Court review.

Pending Compact Cases

The series of compact cases are coming to a head, with many that Laskin anticipates will become functionally moot should the high court deny certiorari in Gillette.

  •  The Minnesota Supreme Court heard oral argument Jan. 11 in Kimberly-Clark Corp. v. Comm'r of Revenue, Minn., No. A15-1322, oral arguments 1/11/16 . Laskin observed that the justices' questioning indicated potential support for the state. One issue raised was collateral estoppel, as Kimberly-Clark is also a named plaintiff in Gillette. Noting that the Minnesota Supreme Court often takes four months to issue a decision, he said he expects a decision by late June.
  •  An application for discretionary review is pending before the Michigan Supreme Court, with briefing ongoing, arising out of Gillette Commercial Operations N. Am. v. Dep't of Treasury, Mich. Ct. App., No. 325258, 9/29/15 . Laskin explained that the state supreme court could deny review altogether, limit review to the issue of retroactive repeal, or review both the question of retroactive repeal and the nature of the compact. Given the decision in the California Gillette case, and the decision of the Michigan Court of Appeals that found the compact wasn't binding and affirmed retroactive repeal of the compact, he said “there seems to be little reason for the Michigan Supreme Court to review” the compact election issue.
  •  An application for discretionary review is also pending before the Texas Supreme Court, with briefing ongoing, arising out of Graphic Packaging Corp. v. Hegar, Tex. Ct. App., No. 03-14-00197-CV, 7/28/15 , which found the compact election didn't apply to the franchise tax, as it isn't an income tax. Laskin explained that the state supreme court could deny review, limit review to the issue of whether the compact applies to the franchise tax, or incorporate review of whether the compact is binding. He expects that once Gillette is final, the Texas Supreme Court is likely to deny review entirely. He noted that there is no need to reverse the income tax decision unless the court is inclined to favor the taxpayers on the election issue—an unlikely result if the U.S. Supreme Court denies certiorari.
  •  Briefing is ongoing in Health Net, Inc. v. Or. Dep't of Revenue, Or., No. S 0603625,, with a June 16 deadline for the MTC's amicus brief. If the U.S. Supreme Court denies certiorari in Gillette, Laskin also expects the Oregon case will be rendered moot.


Transfer Pricing Program

Marshall Stranburg, MTC deputy executive director, highlighted the Arm's-Length Adjustment Service (ALAS) Committee's ongoing efforts to initiate information sharing among states, with the goal of facilitating case discussions and training by September and October, and potential re-branding with a name change that better reflects the program. In the coming months, the ALAS Committee will discuss several issues, including how best to use experts, how to attract state membership and how to fund the program.

Questioned over the potential fiscal recovery from the ALAS program, Stranburg couldn't identify a specific amount, but noted that there “are significant sums out there.” Alan Levine, chief counsel for the D.C. Office of Tax and Revenue, said from the audience that the D.C. office has eight pending transfer pricing cases with total proposed assessments of over $11 million.

MTC Executive Director Gregory Matson said that taxpayers benefit with states improving their “savviness” in transfer pricing cases, so that states can review and respond to taxpayer transfer pricing studies. Matson also anticipates that as case discussions begin, more states will become interested in participating on the ALAS Committee with the threshold requirements for committee participation less than what was estimated for the program design.

Other News

In addition to the compact cases, the MTC is awaiting decisions after oral arguments in several cases in which it appeared as an amicus party, including Avnet Inc. v. Wash. Dep't of Revenue, Wash., No. 92080, oral arguments 5/12/16 ; First Marblehead Corp. v. Comm'r of Revenue, Mass., No. SJC-11609, oral arguments 5/3/16 ; and the Ohio “CAT” cases (86 DTR K-1, 5/4/16).

Richard Cram, director of the National Nexus Program, reported that the Multistate Voluntary Disclosure Program has recovered $17.9 million in backtax collections as of April, which is already $4 million more than total collection from the prior July-June fiscal year.

Matson said he hopes additional states will join the National Nexus Program, which has 36 member states and the District of Columbia, by the end of 2016.

To contact the reporter on this story: Jennifer McLoughlin in Washington at

To contact the editor responsible for this story: Ryan Tuck at