{ "id": 1900984, "name": "James C. PLEDGER, Commissioner of Revenues, Dep't of Finance and Administration, State of Arkansas v. ILLINOIS TOOL WORKS, INC.", "name_abbreviation": "Pledger v. Illinois Tool Works, Inc.", "decision_date": "1991-06-24", "docket_number": "90-242", "first_page": "134", "last_page": "146", "citations": [ { "type": "official", "cite": "306 Ark. 134" }, { "type": "parallel", "cite": "812 S.W.2d 101" } ], "court": { "name_abbreviation": "Ark.", "id": 8808, "name": "Arkansas Supreme Court" }, "jurisdiction": { "id": 34, "name_long": "Arkansas", "name": "Ark." }, "cites_to": [ { "cite": "278 Ark. 387", "category": "reporters:state", "reporter": "Ark.", "case_ids": [ 1748037 ], "weight": 2, "year": 1983, "opinion_index": 0, "case_paths": [ "/ark/278/0387-01" ] }, { "cite": "402 S.E.2d 35", "category": "reporters:state_regional", "reporter": "S.E.2d", "year": 1991, "opinion_index": 0 }, { "cite": "551 N.E.2d 201", "category": "reporters:state_regional", "reporter": "N.E.2d", "year": 1990, "opinion_index": 0 }, { "cite": "49 Ohio St. 3d 158", "category": "reporters:state", "reporter": "Ohio St. 3d", "case_ids": [ 1422558 ], "year": 1990, "opinion_index": 0, "case_paths": [ "/ohio-st-3d/49/0158-01" ] }, { "cite": "654 S.W.2d 865", "category": "reporters:state_regional", "reporter": "S.W.2d", "case_ids": [ 9956802 ], "year": 1983, "opinion_index": 0, "case_paths": [ "/sw2d/654/0865-01" ] }, { "cite": "463 U.S. 159", "category": "reporters:federal", "reporter": "U.S.", "case_ids": [ 6192779 ], "weight": 2, "year": 1983, "opinion_index": 0, "case_paths": [ "/us/463/0159-01" ] }, { "cite": "458 U.S. 354", "category": "reporters:federal", "reporter": "U.S.", "case_ids": [ 636541 ], "weight": 2, "year": 1982, "opinion_index": 0, "case_paths": [ "/us/458/0354-01" ] }, { "cite": "458 U.S. 307", "category": "reporters:federal", "reporter": "U.S.", "case_ids": [ 636598 ], "year": 1982, "opinion_index": 0, "case_paths": [ "/us/458/0307-01" ] }, { "cite": "447 U.S. 207", "category": "reporters:federal", "reporter": "U.S.", "case_ids": [ 6182773 ], "year": 1980, "opinion_index": 0, "case_paths": [ "/us/447/0207-01" ] }, { "cite": "445 U.S. 425", "category": "reporters:federal", "reporter": "U.S.", "case_ids": [ 1777870 ], "year": 1980, "opinion_index": 0, "case_paths": [ "/us/445/0425-01" ] }, { "cite": "266 Ark. 207", "category": "reporters:state", "reporter": "Ark.", "case_ids": [ 8717950 ], "weight": 4, "year": 1979, "opinion_index": 0, "case_paths": [ "/ark/266/0207-01" ] }, { "cite": "Ark. Code Ann. \u00a7 26-51-709", "category": "laws:leg_statute", "reporter": "Ark. Code Ann.", "year": 1987, "opinion_index": 0 }, { "cite": "Ark. Code Ann. \u00a7\u00a7 26-51-701", "category": "laws:leg_statute", "reporter": "Ark. Code Ann.", "weight": 2, "pin_cites": [ { "parenthetical": "a" } ], "opinion_index": 0 }, { "cite": "297 Ark. 96", "category": "reporters:state", "reporter": "Ark.", "case_ids": [ 1891419 ], "weight": 2, "year": 1988, "opinion_index": 1, "case_paths": [ "/ark/297/0096-01" ] }, { "cite": "299 Ark. 227", "category": "reporters:state", "reporter": "Ark.", "case_ids": [ 1888419 ], "weight": 2, "year": 1989, "opinion_index": 1, "case_paths": [ "/ark/299/0227-01" ] }, { "cite": "669 P.2d 916", "category": "reporters:state_regional", "reporter": "P.2d", "year": 1983, "opinion_index": 1 }, { "cite": "515 A.2d 911", "category": "reporters:state_regional", "reporter": "A.2d", "year": 1986, "opinion_index": 1 }, { "cite": "313 Md. 118", "category": "reporters:state", "reporter": "Md.", "case_ids": [ 2075861 ], "weight": 2, "year": 1988, "opinion_index": 1, "case_paths": [ "/md/313/0118-01" ] }, { "cite": "568 A.2d 59", "category": "reporters:state_regional", "reporter": "A.2d", "year": 1989, "opinion_index": 1 }, { "cite": "96 Harv. L. Rev. 62", "category": "journals:journal", "reporter": "Harv. L. Rev.", "year": 1982, "opinion_index": 1 }, { "cite": "278 Ark. 387", "category": "reporters:state", "reporter": "Ark.", "case_ids": [ 1748037 ], "year": 1983, "pin_cites": [ { "page": "396" } ], "opinion_index": 1, "case_paths": [ "/ark/278/0387-01" ] }, { "cite": "463 U.S. 159", "category": "reporters:federal", "reporter": "U.S.", "case_ids": [ 6192779 ], "year": 1983, "opinion_index": 1, "case_paths": [ "/us/463/0159-01" ] }, { "cite": "458 U.S. 307", "category": "reporters:federal", "reporter": "U.S.", "case_ids": [ 636598 ], "year": 1982, "opinion_index": 1, "case_paths": [ "/us/458/0307-01" ] }, { "cite": "447 U.S. 207", "category": "reporters:federal", "reporter": "U.S.", "case_ids": [ 6182773 ], "year": 1980, "opinion_index": 1, "case_paths": [ "/us/447/0207-01" ] }, { "cite": "266 Ark. 207", "category": "reporters:state", "reporter": "Ark.", "case_ids": [ 8717950 ], "weight": 2, "year": 1979, "opinion_index": 1, "case_paths": [ "/ark/266/0207-01" ] } ], "analysis": { "cardinality": 988, "char_count": 23337, "ocr_confidence": 0.894, "pagerank": { "raw": 1.1049649564684126e-07, "percentile": 0.5693075156119141 }, "sha256": "c29c9141a9db86268de9f6ba5a76cfb249600c1a4515c58c83ede1adb6d3e82c", "simhash": "1:039b0002673f2fa7", "word_count": 3727 }, "last_updated": "2023-07-14T15:19:57.276738+00:00", "provenance": { "date_added": "2019-08-29", "source": "Harvard", "batch": "2018" }, "casebody": { "judges": [ "Hays, J., dissents." ], "parties": [ "James C. PLEDGER, Commissioner of Revenues, Dep\u2019t of Finance and Administration, State of Arkansas v. ILLINOIS TOOL WORKS, INC." ], "opinions": [ { "text": "Tom Glaze, Justice.\nThis tax case addresses for the first time the effect of the \u201cunitary business principle\u201d on Arkansas\u2019s Uniform Division of Income for Tax Purposes Act (UDITPA), Ark. Code Ann. \u00a7\u00a7 26-51-701 \u2014to\u2014 723 (1987, Supp. 1989). This Act governs how Arkansas imposes its respective corporate and franchise taxes on the earnings of corporations that have multistate and multinational entities. UDITPA is designed to fairly apportion among the states in which a corporation conducts its multistate business a fair amount of value or business income earned by the corporations\u2019 activities in each state. Generally, under UDITPA, net taxable \u201cbusiness income\u201d of a corporate taxpayer involved in a multistate business is apportioned upon a well-recognized three factor formula of tangible property, sales, and payroll.\nAppellee, Illinois Tool Works (ITW), is a multistate and multinational corporation having a worldwide business in the manufacturing of tools, fasteners, packaging products and the leasing of machinery. ITW has operating divisions in seventeen places in the United States and conducts business in several foreign countries. One of ITW\u2019s manufacturing plants is located in Pine Bluff, Arkansas. Its corporate headquarters or \u201ccommercial domicile\u201d is in Chicago, Illinois.\nITW determined that, for UDITPA purposes, certain capital gains income it had earned in 1981 through 1983 from six different capital assets was \u201cnonbusiness income;\u201d thus it excluded this income when calculating its allocation of taxes to this state. Instead, ITW allocated the income from the sale of these capital assets to its \u201ccommercial domicile,\u201d in Chicago and the income was taxed under the Illinois corporate income tax laws. ITW\u2019s six capital assets were stock in two Japanese manufacturing companies, NISCO and NIFCO; stock in Computer Products, Inc.; undeveloped real property located near ITW\u2019s headquarters in Chicago; U.S. Treasury Notes and foreign currency transactions.\nThe appellant, Arkansas Department of Finance and Administration, disagreed with ITW\u2019s classification of this income, asserting that the income constituted \u201cbusiness income\u201d for purposes of Arkansas\u2019s UDITPA. Accordingly, appellant assessed ITW additional taxes of approximately $45,164 for the years 1981-1983. After losing an appeal in an administrative hearing, ITW paid the additional taxes under protest and appealed to the chancery court.\nThe chancery court, relying on five United States Supreme Court cases decided in the 1980\u2019s, held that the \u201cunitary business principle\u201d must be utilized in determining whether or not intangible income of multistate or multinational corporate taxpayer is to be classified as \u201cbusiness income\u201d or \u201cnonbusiness income\u201d for UDITPA purposes. In applying the principle in this case, the chancellor further concluded that ITW\u2019s aforementioned income from the sale of its six capital assets was not taxable by the state because the income was in no way connected with ITW\u2019s Arkansas business activities. The appellant appeals from the lower court\u2019s holding, arguing that the chancellor misapplied the law and made erroneous findings of fact. We find no error and therefore affirm.\nUnder the UDITPA, \u201cbusiness income\u201d is defined as follows:\nIncome arising from transactions and activity in the regular course of the taxpayer\u2019s trade or business includes income from tangible and intangible property if the acquisition, management, and disposition of the property constitute integral parts of the taxpayer\u2019s regular trade or business operations.\nArk. Code Ann. \u00a7 26-51-701 (a) (Supp. 1989). As we noted previously, all \u201cbusiness income\u201d is apportioned to this state using an established formula. Ark. Code Ann. \u00a7 26-51-709 (1987). Also, under the Act, \u201cnonbusiness income\u201d is defined as all income other than \u201cbusiness income,\u201d \u00a7 26-51-701 (e), and is allocated specifically to the state having the most logical nexus with the asset producing the \u201cnonbusiness income\u201d (usually its \u201ccommercial domicile\u201d) rather than being apportioned among the states where the corporation conducts its business.\nIn the mid-1970\u2019s, the Revenue Division of the Arkansas Department of Finance and Administration adopted certain corporate income tax regulations to implement the provisions of Arkansas\u2019s UDITPA. Arkansas is a member of the Multistate Tax Compact and the regulations it (and other states) adopted were suggested by the Multistate Tax Commission (MTC). These regulations were generally referred to as \u201cfull apportionment\u201d regulations because they broadly construed the concept of \u201cbusiness income\u201d and very narrowly construed the concept of \u201cnonbusiness income\u201d for UDITPA purposes.\nIn Qualls v. Montgomery Ward & Company, 266 Ark. 207, 585 S.W.2d 18 (1979), this court adopted the \u201cfull apportionment\u201d rationale. In Qualls, Montgomery Ward received interest from loans made to subsidiary and related corporations none of which were located or did business in Arkansas. Because there was no activity in Arkansas in relation to the loans, Montgomery Ward contended that the interest was \u201cnonbusiness income\u201d taxable in its \u201ccommercial domicile\u201d in Illinois. This court disagreed and held that Montgomery Ward\u2019s interest income was \u201cbusiness income,\u201d not \u201cnonbusiness income,\u201d based upon the fact that the interest income was commingled with the company\u2019s other general funds to be used for general corporate purposes, which included its business activities in Arkansas.\nAfter the Qualls decision, the U.S. Supreme Court changed the \u201cfull apportionment\u201d rationale by adding the following two requirements under the Due Process Clause of the fourteenth amendment: 1) a minimal connection or nexus between the interstate activities and the taxing state; and 2) a rational relationship between the income attributed to the state and the intrastate values of the enterprise. Mobile Oil Corp. v. Commissioner of Taxes, 445 U.S. 425 (1980). The first nexus requirement is met if the corporation avails itself of the substantial privilege of carrying on business within the state. The Supreme Court labeled the second due process requirement, the \u201cunitary business principle,\u201d and explained the application as follows:\n(T)he linchpin of apportionability in the field of state income taxation is the unitary business principle. In accord with this principle, what appellant (taxpayer) must show, in order to establish that its dividend income is not subject to an apportioned tax in Vermont, is that the income was earned in the course of activities unrelated to the sale of petroleum products in that state.\nThe cases following Mobil all cited the above language and utilized the \u201cunitary business principle\u201d analysis. Exxon Corp. v. Wisconsin Dept. of Revenue, 447 U.S. 207 (1980); ASARCO, Inc. v. Idaho State Tax Comm\u2019n, 458 U.S. 307 (1982); F.W. Woolworth Co. v. Taxation & Revenue Dept., 458 U.S. 354 (1982); Container Corp. v. Franchise Tax Board, 463 U.S. 159 (1983). Under the \u201cunitary business\u201d rationale, as expressed in these decisions, the general test for determining whether a diversified group of businesses had a \u201cunitary business\u201d relationship was to determine whether the income that the state was attempting to tax resulted from functional integration, centralization of management, and economies of scale utilized by the corporate group.\nIn response to the Supreme Court cases cited above, the Arkansas Revenue Department adopted Regulation 1984-2, which recognized the Supreme Court\u2019s due process limitation but applied the \u201cunitary business principle\u201d only to dividend income. In this appeal, the appellant relies on this regulation to argue that since ITW\u2019s capital gains were not derived from dividend income, the income is still taxable. We do not agree with the appellant\u2019s reading of these Supreme Court cases as limiting the \u201cunitary business principle\u201d analysis only to dividend income.\nIn ASARCO, the Supreme Court addressed Idaho\u2019s argument that dividend income received by ASARCO should be considered a part of a \u201cunitary business\u201d if the intangible property is acquired, managed or disposed of for purposes relating or contributing to the taxpayers\u2019 business. The Court rejected Idaho\u2019s \u201cfull apportionment\u201d argument and held that the dividend income of ASARCO was not taxable by Idaho. In so holding, the Court stated the following:\nThis definition of unitary business would destroy the concept. The business of a corporation requires that it earn money to continue operations and to provide a return on its invested capital. Consequently, all of its operations, including any investment made, in some sense can be said to be \u201cfor purposes related to or contributing to the [corporation\u2019s] business.\u201d When pressed to its logical limit, this conception of \u201cunitary business\u201d limitation becomes no limitation at all.\nAlthough the main dispute in ASARCO concerned dividend income, Idaho also attempted to tax certain ASARCO interest and capital gains from stock sales. However, Idaho and ASARCO had agreed that interest and capital gains derived from these sales should be treated in the same manner as the dividend income. The Supreme Court concurred with the parties\u2019 agreement, stating that \u201cOne must look principally at the underlying activity, not at the form of investment to determine the propriety of apportionability.\u201d The Supreme Court then proceeded to hold that Idaho\u2019s attempt to tax this other income also violated the due process clauses.\nClearly from reading ASARCO, the Supreme court did not intend for the \u201cunitary business principle\u201d to apply to dividend income only. Accordingly, we hold that the chancellor here was correct in applying the \u201cunitary business principle\u201d analysis to the facts of this case. In sum, we believe the appellant\u2019s reading of the Supreme Court cases is much too narrow, and those cases in no way can be construed to uphold the constitutionality of appellant\u2019s Regulation 1984-2.\nWe note the appellant\u2019s suggestion that the Supreme Court backed off of its ASARCO holding in its most recent case, Container Corp. v. Franchise Tax Board, 463 U.S. 159 (1983). In Container, the Court stated that there was a requirement that the out-of-state activities of the purported \u201cunitary business\u201d be related in some concrete way to the in-state activities. The Court explained that the functional meaning of this requirement is that there be some sharing or exchange of value not capable of precise identification or measurement \u2014 beyond the mere flow of funds arising out of a passive investment or a distinct business operation \u2014 which renders formula apportionment a reasonable method of taxation.\nAgain, we disagree with the appellant\u2019s reading of this Supreme Court case. We do not see how the \u201cflow of value\u201d analysis in Container benefits the appellant\u2019s case here. It appears to be just a rewording of principles set out in the earlier cases. Further, we do not read the Container case as limiting the Court\u2019s holding in AS ARCO. To the contrary, AS ARCO is cited with approval throughout the Container case.\nIn sum, we agree with the chancellor that, in complying with the holdings in the foregoing Supreme Court cases, he was obliged to utilize the \u201cunitary business principle\u201d in this case. Those holdings also require us to overrule the case of Qualls v. Montgomery Ward, 266 Ark. 207, 585 SW.2d 18 (1979), and to declare appellant\u2019s Regulation 1984-2 to be unconstitutional. As a side comment, we note that Arkansas is not the first state to have to reevaluate its taxation of multistate corporations after the above Supreme Court cases were decided. See, e.g., James v. Intern. Tel. & Tel. Corp, 654 S.W.2d 865 (Mo. banc 1983); American Homes Products Corp. v. Limbach, 49 Ohio St. 3d 158, 551 N.E.2d 201 (1990); Corning Glass Works v. Va. Dept. of Tax, 402 S.E.2d 35 (Va. 1991). Now that we have affirmed the chancellor\u2019s application of the law in this case, we must address the appellant\u2019s challenge that the chancellor\u2019s findings of fact in regard to ITW\u2019s capital assets are clearly erroneous.\nFirst, in applying the \u201cunitary business principle,\u201d the chancellor found that ITW\u2019s capital gains income from the sale of its stock interest in NISCO, NIFCO, and CPI was \u201cnonbusiness income\u201d for Arkansas UDITPA purposes. We agree. At no time did ITW hold the majority of the stock in these companies, and while ITW had two or three directors on the companies\u2019 boards, there is no showing that ITW had a controlling interest or part. The potential to operate a company as part of a \u201cunitary business\u201d is not dispositive, when in fact there is a discrete business enterprise. F.W. Woolworth Co. v. Taxation & Revenue Dept., 458 U.S. 354 (1982). There were no common employees or officers, and ITW did not provide any administrative services to the companies. While NISCO and NIFCO did utilize some of ITW\u2019s patented technology, they paid a royalty to ITW for the use of that technology and that royalty income was taxed by ITW as \u201cbusiness income.\u201d In sum, the record shows that these companies were operated as discrete and separate businesses and not as a part of a \u201cunitary business.\u201d\nFurther, the record also clearly supports the chancellor\u2019s finding that ITW\u2019s capital gains from the redemption of U.S. Treasury Notes, foreign currency transactions, and the installment sale of undeveloped land located in Chicago were not an integral part of ITW\u2019s regular manufacturing and leasing businesses carried on at the Pine Bluff plant. Instead, we agree with the chancellor\u2019s classification of these assets as normal or passive investments of ITW. As pointed out so clearly in AS ARCO, the business of a corporation requires that it earn money to continue its operations and to provide a return on its invested capital but the use of this money for the business does not fit the \u201cunitary business principle\u201d test.\nFor the foregoing reasons, we affirm the chancellor\u2019s findings of fact and conclusions of law in applying the \u201cunitary business principle\u201d to the facts of this case. In conclusion, we briefly mention ITW\u2019s argument that the chancellor erred in denying its request for attorneys\u2019 fees. We simply are unable to reach this issue because ITW failed to file a notice of a cross appeal as required under ARAP Rule 3(d). See Independence Fed\u2019l S&L Ass\u2019n v. Davis, 278 Ark. 387, 646 S.W.2d 336 (1983).\nAffirmed.\nHays, J., dissents.\nWe note that there were originally seven capital assets in dispute, but the appellant conceded that income from the sale of preferred stock was \u201cnonbusiness income\u201d under UDITPA.", "type": "majority", "author": "Tom Glaze, Justice." }, { "text": "Steele Hays, Justice,\ndissenting. I respectfully disagree with the majority, as I believe it has rushed to judgment in an area that will have substantial impact upon our state, and is at the same time, complex, transitional and, above all, abstruse. See P. Hartman, Federal Limitations on State and Local Taxation \u00a7 9:30 (Supp. 1990).\nWhile the United States Supreme Court has begun work on the unitary business principle, as the majority discussed, the application and impact of that principle has generated much litigation and very little harmony. Id. at 396. As evidenced just by the complexities of the discussion of this issue, answers are not easily ascertainable and few have been provided by the Supreme Court decisions. See e.g., P. Hartman, Federal Limitations on State and Local Taxation \u00a7 9 (1981 and Supp. 1990); J. Hellerstein, State Taxation, Corporate Income and Franchise Taxes \u00a7\u00a7 8 and 9 (1983 and Supp. 1989); Constitutional Law 96 Harv. L. Rev. 62 (1982); C. Floyd, The Unitary Business inState Taxation: Confusion at the Supreme Court?, 1982 B. Y. U. L. Rev. 465. It has even been suggested that because of its complexities, the issue is one the courts are not equipped to handle:\nGiven the limitations within which the court must operate, it is entirely possible that it would be infeasible for the court to examine all of the intricacies of the unitary business and formula apportionment in order to determine whether a business is unitary and fairly subjected to taxation by a standardized apportionment formula. Fair formula apportionment of divers kinds of business involves a substantial knowledge of the operations of a great variety of industries that are taxed, as well as technical problems of accounting. Courts are hardly equipped satisfactorily to handle such problems. Perhaps the complexities of the problem suggest some broad legislative guidance, fair to the states and the taxpayers, as part of a solution. [Our emphasis.]\nP. Hartman, Federal Limitations on State and Local Taxation, \u00a7 9:29 (1981).\nWith that in mind, I think it improvident to decide, as the majority does, the constitutionality of a question that the Supreme Court itself has not yet passed on, and which still stands as good law. The argument presented by the state in this case is closely related to the issue in Qualls v. Montgomery, 266 Ark. 207, 585 S.W.2d 18 (1979), and has not yet been addressed by the United States Supreme Court, much less overruled, as pronounced by the majority.\nIn Qualls, we addressed the question of interest from loans made by Ward to relative subsidiaries and corporations and whether that should qualify as \u201cbusiness income\u201d and, hence, apportionable. Our current statute provides the same definition relevant in Qualls-.\n26-51-701 (a) \u201cBusiness income\u201d means income arising from transactions and activity in the regular course of the taxpayer\u2019s trade or business and includes income and tangible and intangible property if the acquisition, management and disposition of the property constitue integral parts of the taxpayer\u2019s regular trade or business operations.\nWe held that the interest was business income, not, as the majority states, simply because funds were commingled, but because the loans constituted transactions in the \u201cregular course of Ward\u2019s business,\u201d pursuant to the statutory definition.\nWe addressed Ward\u2019s contention that the corporate relatives were not part of a unitary business, and responded, in essence, that that question need not be answered if the income came from activities that were in the regular course of the taxpayer\u2019s trade or business. Or, to put it in terms the United States Supreme Court would now employ, the fact that the loan transactions were part of Ward\u2019s regular course of business, was sufficient to find these transactions were part of a unitary business. This is essentially what the state is arguing here\u2014that the investment income is part of ITW\u2019s unitary trade or business because the investment activities make up part of ITW\u2019s regular trade and business.\nThe Supreme Court\u2019s discussions in those cases cited by the majority involved only whether there was unity between the taxpayer and the income source on the basis of the extent and quality of interconnectedness of the taxpayer and the questioned operation. The court did not address the question of an income source being part of the taxpayer\u2019s unitary business, solely on the basis of the frequency or regularity of an activity, as was the situation in Qualls, and specifically here, as argued by the state, that investments were a regular and integral part of its business.\nThis approach is not novel with either Qualls or the appellant. In fact, as pointed out in P. Hartman, Federal Limitations on State and Local Taxation \u00a7 9:30 at 437-439 (Supp. 1990), in ASARCO v. Idaho State Tax Comm\u2019n, 458 U.S. 307 (1982), cited by the majority, ASARCO\u2019s own counsel agreed that while not present in its case, investments could be an \u201cadjunct to the actual conduct of the taxpayer\u2019s own business,\u201d and could be found to be part of a unitary business, and apportionable. And while the United States Supreme Court has not addressed this question, several lower courts have and the inclination is to allow apportionment in those cases. See e.g., Bendix Corp. v. Director Div. of Tax., 568 A.2d 59 (N.J. Super A.D. 1989); NCR Corp. v. Comptroller of the Treasury, 313 Md. 118, 544 A.2d 764 (1988); Welded Tube Co. of America v. Comm., 515 A.2d 911 (Pa. Comwlth 1986); Lone Star Steel Co. v. Dolan, 669 P.2d 916 (Colo. 1983).\nThe other important factor which the majority fails to mention is the burden of proof in these cases. It is not incumbent upon the state to show sufficient nexus between the apportioned income and the taxpayer. Rather, there is no question but that the burden is on the taxpayer. The state\u2019s taxation is of course presumptively constitutional, Fisher v. Perroni, 299 Ark. 227, 771 S.W.2d 766 (1989); Love v. Hill, 297 Ark. 96, 759 S.W.2d 550 (1988), and to overcome this presumption, the taxpayer has the \u201cdistinct burden of showing by clear and cogent evidence,\u201d that the statutory scheme \u201cresults in extraterritorial values being taxes.\u201d Container Corp. of America v. Franchise Tax Bd., 463 U.S. 159 (1983); Exxon Corp. v. Wisconsin Dept. of Revenue, 447 U.S. 207 (1980). The question in this case then, boils down to whether ITW showed by clear and cogent evidence that taxation on the investment income was unconstitutional.\nThere was evidence, as noted by the majority, to show a lack of interconnectedness between ITW and the companies or sources in which it had invested, that is to say, ITW did not have a majority share in its holdings and had no controlling interest, had no common officers or employees and did not provide any administrative services to the companies.\nWhile this may or may not have been clear and cogent evidence of interconnectedness, such a finding is not controlling here. Rather, we look at the evidence in light of the state\u2019s argument that investing was a regular part of the business so as to make the investing operations part of ITW\u2019s unitary business. There is no discussion of such evidence in either the appellee\u2019s brief or the majority opinion, yet a mere glance at the record substantiates the state\u2019s claim. The most critical evidence on this point was given by ITW\u2019s vice president and treasurer, David Byron Smith, who testified that all the management of investments was handled through his office; that it was a significant part of the treasurer\u2019s operations; that he would spend an hour or so each day working on investments, and that such investments were one of four priorities of the company. He further testified the money received from investments was used as working capital, and working capital was used for investment purposes, but the testimony was ultimately inconclusive on this point. In the face of this testimony, it is clear, to me at least, that ITW has failed to meet its burden.\nAs the direction of the United States Supreme Court is unsettled, and the consequences far reaching, I cannot join the majority\u2019s venture in this area, particularly, where the record has not been sufficiently developed on this question and the appellee\u2019s burden of proof was consequently lacking.", "type": "dissent", "author": "Steele Hays, Justice," } ], "attorneys": [ "John Theis, William E. Keadle, Robert L. Jones, Cora Gentry, David Kaufman, Malcolm Bobo, Beth B. Carson, and Joyce Kinkead, by: Rick L. Pruett, for appellant.", "Jack, Lyon & Jones, P.A., by: Eugene G. Sayre, for appellee." ], "corrections": "", "head_matter": "James C. PLEDGER, Commissioner of Revenues, Dep\u2019t of Finance and Administration, State of Arkansas v. ILLINOIS TOOL WORKS, INC.\n90-242\n812 S.W.2d 101\nSupreme Court of Arkansas\nOpinion delivered June 24, 1991\nJohn Theis, William E. Keadle, Robert L. Jones, Cora Gentry, David Kaufman, Malcolm Bobo, Beth B. Carson, and Joyce Kinkead, by: Rick L. Pruett, for appellant.\nJack, Lyon & Jones, P.A., by: Eugene G. Sayre, for appellee." }, "file_name": "0134-01", "first_page_order": 162, "last_page_order": 174 }