NIHC, Inc. v. Comptroller of the Treasury

Summary

The Maryland Court of Appeals held that a subsidiary lacking economic substance separate from its parent had a sufficient nexus with Maryland for taxation of income shifted through trademark licensing transactions. The court also held that Maryland’s separate corporate reporting requirement did not prevent the Comptroller from assessing tax on income the subsidiary had reported on its 2002 and 2003 Maryland returns, despite the subsidiary’s later contention that the income should have been reported in an earlier year.

Holdings

1. Maryland's requirement that affiliated corporations file separate returns did not prohibit the Comptroller from assessing tax on the portion of NIHC's deferred gain that NIHC reported as Maryland modified income for 2002 and 2003, where the income was related to Nordstrom's Maryland activities, was properly subject to Maryland taxation, and had not otherwise been taxed.

Questions Presented

1. Whether Maryland's requirement that affiliated corporations file separate income-tax returns prohibited the Comptroller from assessing tax on income that NIHC actually reported as Maryland modified income on its 2002 and 2003 returns.
2. Whether NIHC carried its burden of showing that the Comptroller's assessment of Maryland income tax on that reported income was erroneous.

Disposition

affirmed