Kimberly-Clark Corp. v. Alabama Department of Revenue

Summary

The Alabama Supreme Court held that gains from Kimberly-Clark’s sale of the Coosa pulp and paper mill and related timberland were nonbusiness income under Alabama’s version of the Multistate Tax Compact. Applying the transactional test, the Court concluded that the extraordinary divestiture was not conducted in the regular course of the companies’ trade or business. The Court reversed the Court of Civil Appeals and remanded for reinstatement of the circuit court’s judgment upholding the Department of Revenue’s assessments.

Holdings

1. The gain from the sale of the Coosa mill and timberland was not business income under Alabama's transactional test because the sale was an extraordinary divestiture of long-held major assets undertaken as part of a fundamental change in corporate strategy, rather than a transaction in the regular course of the companies' trade or business.
2. When the material facts are undisputed and the issue is the application of law to those facts, appellate review is de novo and the trial court's decision receives no presumption of correctness.

Questions Presented

1. Whether the gain from the sale of the Coosa mill and approximately 375,000 acres of timberland constituted business income under Article IV, section 1(a), of the Multistate Tax Compact.
2. Whether the proper standard of review was de novo because the relevant facts were undisputed and the issue involved applying law to those facts.

Disposition

reversed_and_remanded