{ "id": 2840991, "name": "CHAMPION INTERNATIONAL CORPORATION, Appellant, v. BUREAU OF REVENUE, State of New Mexico, Appellee", "name_abbreviation": "Champion International Corp. v. Bureau of Revenue", "decision_date": "1975-08-13", "docket_number": "No. 1746", "first_page": "411", "last_page": "419", "citations": [ { "type": "official", "cite": "88 N.M. 411" }, { "type": "parallel", "cite": "540 P.2d 1300" } ], "court": { "name_abbreviation": "N.M. Ct. App.", "id": 9025, "name": "Court of Appeals of New Mexico" }, "jurisdiction": { "id": 52, "name_long": "New Mexico", "name": "N.M." }, "cites_to": [ { "cite": "30 N.E.2d 726", "category": "reporters:state_regional", "reporter": "N.E.2d", "year": 1940, "opinion_index": 0 }, { "cite": "284 N.Y. 688", "category": "reporters:state", "reporter": "N.Y.", "case_ids": [ 2043671 ], "year": 1940, "opinion_index": 0, "case_paths": [ "/ny/284/0688-01" ] }, { "cite": "20 N.Y.S.2d 123", "category": "reporters:state", "reporter": "N.Y.S.2d", "year": 1940, "opinion_index": 0 }, { "cite": "259 App.Div. 427", "category": "reporters:state", "reporter": "A.D.", "case_ids": [ 5792746 ], "year": 1940, "opinion_index": 0, "case_paths": [ "/ad/259/0427-01" ] }, { "cite": "67 A.2d 105", "category": "reporters:state_regional", "reporter": "A.2d", "year": 1949, "opinion_index": 0 }, { "cite": "362 Pa. 333", "category": "reporters:state", "reporter": "Pa.", "case_ids": [ 477315 ], "year": 1949, "opinion_index": 0, "case_paths": [ "/pa/362/0333-01" ] }, { "cite": "291 A.2d 489", "category": "reporters:state_regional", "reporter": "A.2d", "year": 1972, "opinion_index": 0 }, { "cite": "265 Md. 669", "category": "reporters:state", "reporter": "Md.", "case_ids": [ 1899633 ], "year": 1972, "opinion_index": 0, "case_paths": [ "/md/265/0669-01" ] }, { "cite": "42 A.L.R.2d 797", "category": "reporters:specialty", "reporter": "A.L.R. 2d", "year": 1955, "opinion_index": 0 }, { "cite": "166 A.L.R. 516", "category": "reporters:specialty", "reporter": "A.L.R.", "year": 1947, "opinion_index": 0 }, { "cite": "250 N.E.2d 633", "category": "reporters:state_regional", "reporter": "N.E.2d", "year": 1969, "opinion_index": 0 }, { "cite": "43 Ill.2d 36", "category": "reporters:state", "reporter": "Ill. 2d", "case_ids": [ 2842430 ], "year": 1969, "opinion_index": 0, "case_paths": [ "/ill-2d/43/0036-01" ] }, { "cite": "359 N.Y.S.2d 552", "category": "reporters:state", "reporter": "N.Y.S.2d", "year": 1974, "opinion_index": 0 }, { "cite": "34 N.Y.2d 921", "category": "reporters:state", "reporter": "N.Y.2d", "case_ids": [ 2312014 ], "year": 1974, "opinion_index": 0, "case_paths": [ "/ny-2d/34/0921-01" ] }, { "cite": "273 N.Y.S.2d 374", "category": "reporters:state", "reporter": "N.Y.S.2d", "year": 1966, "opinion_index": 0 }, { "cite": "51 Misc.2d 477", "category": "reporters:state", "reporter": "Misc. 2d", "case_ids": [ 1174267 ], "year": 1966, "opinion_index": 0, "case_paths": [ "/misc2d/51/0477-01" ] }, { "cite": "26 U.S.C.A. \u00a7 631", "category": "laws:leg_statute", "reporter": "U.S.C.", "opinion_index": 0 }, { "cite": "527 P.2d 729", "category": "reporters:state_regional", "reporter": "P.2d", "case_ids": [ 2124713 ], "opinion_index": 0, "case_paths": [ "/or/270/0329-01" ] }, { "cite": "202 Kan. 98", "category": "reporters:state", "reporter": "Kan.", "case_ids": [ 547188 ], "weight": 3, "year": 1968, "opinion_index": 0, "case_paths": [ "/kan/202/0098-01" ] }, { "cite": "87 N.M. 240", "category": "reporters:state", "reporter": "N.M.", "case_ids": [ 2832376 ], "weight": 2, "opinion_index": 0, "case_paths": [ "/nm/87/0240-01" ] }, { "cite": "83 N.M. 386", "category": "reporters:state", "reporter": "N.M.", "case_ids": [ 5341369 ], "weight": 2, "pin_cites": [ { "page": "387-88" }, { "page": "1004-05" } ], "opinion_index": 0, "case_paths": [ "/nm/83/0386-01" ] }, { "cite": "25 Tax L.Rev. 171", "category": "journals:journal", "reporter": "Tax L. Rev.", "year": 1970, "opinion_index": 0 }, { "cite": "271 A.2d 273", "category": "reporters:state_regional", "reporter": "A.2d", "year": 1970, "pin_cites": [ { "page": "280" } ], "opinion_index": 0 }, { "cite": "441 Pa. 129", "category": "reporters:state", "reporter": "Pa.", "case_ids": [ 1933918 ], "year": 1970, "opinion_index": 0, "case_paths": [ "/pa/441/0129-01" ] }, { "cite": "194 Kan. 758", "category": "reporters:state", "reporter": "Kan.", "case_ids": [ 520644 ], "weight": 2, "year": 1965, "pin_cites": [ { "page": "766" }, { "page": "886" } ], "opinion_index": 0, "case_paths": [ "/kan/194/0758-01" ] }, { "cite": "272 Minn. 403", "category": "reporters:state", "reporter": "Minn.", "case_ids": [ 351978 ], "weight": 3, "year": 1965, "opinion_index": 0, "case_paths": [ "/minn/272/0403-01" ] }, { "cite": "253 Or. 602", "category": "reporters:state", "reporter": "Or.", "case_ids": [ 2117507 ], "weight": 2, "year": 1969, "opinion_index": 1, "case_paths": [ "/or/253/0602-01" ] }, { "cite": "315 U.S. 501", "category": "reporters:federal", "reporter": "U.S.", "case_ids": [ 374776 ], "weight": 3, "year": 1942, "opinion_index": 1, "case_paths": [ "/us/315/0501-01" ] }, { "cite": "85 N.M. 134", "category": "reporters:state", "reporter": "N.M.", "case_ids": [ 2773571 ], "weight": 2, "year": 1973, "opinion_index": 1, "case_paths": [ "/nm/85/0134-01" ] }, { "cite": "527 P.2d 729", "category": "reporters:state_regional", "reporter": "P.2d", "case_ids": [ 2124713 ], "opinion_index": 1, "case_paths": [ "/or/270/0329-01" ] }, { "cite": "202 Kan. 98", "category": "reporters:state", "reporter": "Kan.", "case_ids": [ 547188 ], "weight": 2, "year": 1968, "opinion_index": 1, "case_paths": [ "/kan/202/0098-01" ] }, { "cite": "25 Tax L.Rev. 171", "category": "journals:journal", "reporter": "Tax L. Rev.", "year": 1970, "pin_cites": [ { "page": "183-84" } ], "opinion_index": 1 }, { "cite": "271 A.2d 273", "category": "reporters:state_regional", "reporter": "A.2d", "year": 1970, "opinion_index": 1 }, { "cite": "441 Pa. 129", "category": "reporters:state", "reporter": "Pa.", "case_ids": [ 1933918 ], "year": 1970, "opinion_index": 1, "case_paths": [ "/pa/441/0129-01" ] } ], "analysis": { "cardinality": 1051, "char_count": 25933, "ocr_confidence": 0.818, "pagerank": { "raw": 2.7961782099918616e-07, "percentile": 0.8364128565024448 }, "sha256": "a699dda81ed470e3d75bf02c53e4164cdd4c61d6148d6844dbde5b1b2c6ed247", "simhash": "1:ce5d50caabac89c3", "word_count": 4175 }, "last_updated": "2023-07-14T21:34:46.516747+00:00", "provenance": { "date_added": "2019-08-29", "source": "Harvard", "batch": "2018" }, "casebody": { "judges": [ "WOOD, C. J., and LOPEZ, J\u201e specially concur." ], "parties": [ "CHAMPION INTERNATIONAL CORPORATION, Appellant, v. BUREAU OF REVENUE, State of New Mexico, Appellee." ], "opinions": [ { "text": "OPINION\nSUTIN, Judge.\nChampion International Corporation (Champion) appeals the Decision and Order of the Commissioner of Revenue (Commissioner) which assessed additional corporate income tax for the year 1972.\nThe Commissioner found that Champion erroneously allocated as \u201cnonbusiness income\u201d the income it received in the form of interest, rent, and gains from the sale of assets. The Commissioner found that such income was properly classified as \u201cbusiness income\u201d under \u00a7 72-15A-17(A), N.M.S.A.1953 (Repl.Vol. 10, pt. 2, 1973 Supp.). This section falls within the Uniform Division of Income for Tax Purposes Act, \u201cUDITPA\u201d, [\u00a7\u00a7 72-15A-16 to 72-15A-36], which provides the uniform division for income tax purposes, among the states participating in the Multistate Tax Compact, of the income of a multistate business. See \u00a7 72-15A-37.\nChampion is a New York corporation engaged, in fifty states, in manufacturing and selling a variety of wood products, including building materials, paper, pulp, packaging, and home furnishings.\nChampion protested the assessment made. At the hearing on Champion\u2019s protest of the assessment, Champion was represented solely by an employee, a tax consultant. He had not prepared the tax returns. He evidenced no knowledge of the conglomerate business operation of Champion. However, Champion relied solely on this tax consultant at the hearing. Champion tendered no business records, documents or other exhibits to support its claims.\nThis case can be decided by affirmance in two ways: (A) The record leaves us no basis on which to make any determination whether all of. Champion\u2019s activities were an integral part of their New Mexico operations and (B) an analysis of the statute and its application to Champion\u2019s income.\n(A) No Basis to Make Determination\nA multistate business is a \u201cunitary business\u201d for income tax purposes when operations conducted in one state benefit and are in turn benefited by operations in another state. Great Lakes Pipe Line Co. v. Commissioner of Taxation, 272 Minn. 403, 138 N.W.2d 612 (1965). \u201cIf its various parts are interdependent and of mutual benefit so as to form one integral business rather than several business entities, it is unitary.\u201d Webb Resources, Inc. v. McCoy, 194 Kan. 758, 766, 401 P.2d 879, 886 (1965).\nOn the other hand, \u201c . . . [I]f a multistate business enterprise is conducted in a way that one, some or all of the business operations outside [New Mexico] are independent of and do not contribute to the business operations within this State, the factors attributable to the outside activity may be excluded.\u201d Commonwealth v. ACF Industries, Incorporated, 441 Pa. 129, 271 A.2d 273, 280 (1970). See, Rudolph, State Taxation of Interstate Business: The Unitary Business Concept and Affiliated Corporate Groups, 25 Tax L.Rev. 171 (1970).\n\u201cAny assessment of taxes made by the bureau is presumed to be correct.\u201d Section 72-13-32(C), N.M.S.A.1953 (Repl. Vol. 10, pt. 2, 1973 Supp.). The duty rests on Champion to present \u201c . . . evidence tending to dispute the factual correctness of the assessments.\u201d McConnell v. State ex rel. Bureau of Revenue, 83 N.M. 386, 387-88, 492 P.2d 1003, 1004-05 (Ct. App.1971). Champion had the burden to overcome this presumption. Mears v. Bureau of Revenue, 87 N.M. 240, 531 P.2d 1213 (Ct.App.1975).\nChampion has failed to produce evidence that its business activity outside of New Mexico was dependent or independent of its instate operations. Champion failed to show that interest, rent, and gains income was not an integral part of its business carried on in New Mexico. On the facts before us, no question is raised whether any of its income is nonbusiness income because there is no evidence that its activities were not part of a unitary business.\nThe state of the record leaves us no basis on which to make any determination as to whether all the business activity of Champion was an integral part of their New Mexico operations.\nBy this conclusion, the assessed additional corporate income tax for the year 1972 is affirmed.\n(B) An Analysis of the Statute and its Application to Champion\u2019s Income\nChampion contends that:\n(1) Its income from interest, rents and the sale of logs constituted \u201cnonbusiness income\u201d which could not lawfully be taxed by the State of New Mexico.\n(2) The amount that was attributable to the cutting of its timber, and that was taxed by the federal government as IRC \u00a7 631(a) gain, was unrealized income that could not lawfully be taxed by the State of New Mexico.\nThese questions are matters of first impression in New Mexico.\n(1) Income from interest, rents and log sales constituted \u201cbusiness income\u201d.\nSection 72-15A-17 defines \u201cbusiness income\u201d and \u201cnonbusiness income\u201d, under UDITPA, as follows:\nA. \u201cBusiness income\u201d means income arising from transactions and activity in the regular course of the taxpayer's trade or business and 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; [Emphasis added] * * * * * *\nD. \u201cNonbusiness income\u201d means all income other than business income;\nWhat is meant by the italicized phrase, \u201ctransactions and activity in the regular course of the taxpayer\u2019s trade or business\u201d ? This is broad terminology.\nWe have been unable to find a technical definition of the phrase. \u201cTransaction\u201d is defined as \u201c . . . something that is transacted: as a: a business deal . \u201d \u201cActivity\u201d is defined as \u201c . . . an organizational unit for performing a specific function; also: its duties or function . . . . \u201d \u201cRegular\u201d is defined as \u201c . . . steady or uniform in course, practice, or occurrence . steadily pursued .... Synonyms: NORMAL, TYPICAL, NATURAL. . .\u201d \u201cCourse\u201d is defined as \u201c. accustomed procedure : customary action: usual method of proceeding . . . policy chosen: manner of conducting oneself way of acting . . . . \u201d Webster\u2019s Third New International Dictionary (Unabridged, 1961), at 2426, 22, 1913, 522.\nAccordingly, we define the phrase \u201ctransactions and activity in the regular course of the taxpayer\u2019s trade or business\u201d in \u00a7 72-15A-17(A) as: .\nBusiness deals and the performance of a specific function in the normal, typical, customary or accustomed policy or procedure of the taxpayer\u2019s trade or business.\nCf. Western Natural Gas Company v. McDonald, 202 Kan. 98, 446 P.2d 781 (1968).\n(a) Interest Income\nThe tax consultant for Champion testified that interest income was derived from capital earned in the business. Rather than have a large cash balance in the bank, Champion purchased short-term investments and highly liquid assets from which interest income was derived. This was a specific function of Champion. The money from these short-term investments was needed for future business activity. It was usual and customary in Champion\u2019s business to follow this practice, whenever there was enough money or business income that was not immediately needed in the business.\nChampion contends that the determining factor is the nature of the transaction from which the interest income was derived, and its relationship to Champion\u2019s business. The interest income was derived from investments. Champion argues that this is not \u201cbusiness income\u201d because Champion is not in the investment business.\nWe disagree. Champion\u2019s representative testified that a normal and customary practice by Champion was to invest excess capital, not needed for business purposes, in short-term securities. Following our definition, supra, this was a specific function done in the regular course of Champion\u2019s business. Therefore, Champion\u2019s investment income is \u201cbusiness income\u201d.\nChampion\u2019s reliance on Western Natural Gas Company, supra, is misplaced. It deals, not with recurring, customary investments, but with a one-time liquidation sale of all of the taxpayer\u2019s oil and gas leases.\nSperry and Hutchinson Co. v. Department of Revenue, 527 P.2d 729 (Ore.1974) interprets the reach of a statute almost identical to \u00a7 72-15A-17(A). Oregon is a party to the Multistate Tax Compact. The court distinguished, (1) income from short-term investments held to satisfy the corporation\u2019s need for capital from (2) long-term investment income that is used for other purposes. The former, the court held, arises from the transactions and activity in the regular course of the taxpayer\u2019s trade or business, and, therefore is business income. Champion has failed to distinguish their investments from those found by the Oregon court to be business income.\nIn the instant case, Champion introduced no evidence as to the use to which it put its short-term investment income. This income was needed for future business activity. It necessarily follows that the income was used for this purpose. Great Lakes Pipe Line Co. v. Commissioner of Taxation, supra. In the light of Sperry and Great Lakes, that the use to which it put this income determines whether it is \u201cbusiness income\u201d, we affirm the Commissioner as to Champion\u2019s short-term investment income.\n(b) Rents\nChampion rented out approximately five percent of its total office space. It claims that the income derived from rent is not \u201cbusiness income\u201d because Champion was not in the business of renting real estate.\nLike \u201cinterest\u201d income, supra, the most reasonable inference to be drawn from the record is that rental of available office space was a customary procedure, done in the regular course of Champion\u2019s business. We find no evidence in the record which contradicts this inference. Rental income was, therefore, \u201cbusiness income\u201d.\nThere was offered in evidence, without objection, I.T. Regulation 17(b). Subsection (1) is entitled Rents from real and tangible personal property, and reads :\nRental income from real and tangible property is business income if the property with respect to which the rental income was received is used in the taxpayer\u2019s trade or business or is incidental thereto and therefore is includable in the property factor under I.T. Regulation 26.\nExample iii under I.T. Regulation 17(b) (1) reads as follows:\nThe taxpayer operates a multistate chain of men\u2019s clothing stores. The taxpayer purchases a five-story office building for use in connection with its trade or business. It uses the street floor as one of its retail stores and the second and third floors for its general corporate headquarters. The remaining two floors are leased to others. The rental of the two floors is incidental to the operation of the taxpayer\u2019s trade or business. The rental income is business income.\nChampion admits its rental operations fall under this example. However, it claims that the conclusion given \u2014 \u201cthe rental income is business income\u201d \u2014 is \u201cillogical\u201d because an identical Indiana regulation reaches an opposite conclusion.\nIt is not \u201cillogical\u201d because the States of Arkansas, Idaho, Nebraska, North Dakota, Oregon and Utah, all parties to the Multi-state Tax Compact, reach the same conclusion with this example as does New Mexico.\nNevertheless, we reach our holding in favor of the Commissioner without reliance on Regulation 17(b) (1).\n(c) Gains\nChampion obtained the raw materials for its manufacture of wood and paper products from timber on land owned or leased by it. Some of its logs were sold to telephone utilities for use as telephone poles. The gain on the sale of logs was $4,803,652. The tax consultant testified that since total sales were $1,339,000,000 the four million \u201cis a drop in the bucket\u201d. Even \u201ca drop in the bucket\u201d must be apportioned if it is \u201cbusiness income\u201d. Again, however, Champion claims an exemption, because it is not in the business of selling logs for telephone poles. The sale of logs was a normal, customary procedure in the business of Champion for the year 1972 and had been for several years. The income arising therefrom was \u201cincome arising from transactions and activity in the regular course of the taxpayer\u2019s trade or business\u201d. Substantial evidence supports the Commissioner\u2019s decision that this income was business income.\n(2) Champion\u2019s IRC \u00a7 631(a) gain was correctly apportioned as business income.\nSection 631(a) [26 U.S.C.A. \u00a7 631] of the Internal Revenue Code allows a taxpayer to elect to treat the cutting of timber as a sale or exchange, eligible for taxation at capital gains rates, even though the timber which has been cut has not actually been sold.\nOn its 1972 federal tax return, Champion reported as a sale or exchange, the fair market value of $950,669 worth of timber cut during 1972, but which remained unsold at the end of that year.\nNew Mexico does not afford capital gains treatment to taxpayers. Therefore, Champion deducted the fair market value of unsold timber from its business income on its New Mexico tax return because it was not in fact realized by timber sales in 1972. The Commissioner disallowed the deduction. We agree.\nChampion says:\n(a) The cutting of timber which is unsold does not create \u201cincome\u201d within any accepted definition of that term.\n(b) New Mexico is imposing a tax on an out-of-state activity. This is both unconstitutional and beyond the taxing authority of the State.\nWe disagree.\n(a) Timber-cutting gain for federal income tax is subject to New Mexico income tax.\nSection 72-15A-3 of the \u201cIncome Tax Act\u201d says:\nA tax is hereby imposed upon the net income of . every foreign corporation . . . engaged in the transaction of business in . this state.\nSections 72-15A-2(S) and (T)(2) says:\nS. \u201cbase income\u201d means that part of the taxpayer\u2019s income generally defined as federal taxable income and upon which the federal income tax is calculated; and\nT. \u201cnet income\u201d means base income adjusted to exclude:\nijs \u2021 >]? \u2021\n(2) amounts that the state is prohibited from taxing because of the laws or Constitution of this state or the United States . . . . [Emphasis added].\nWe agree that \u00a7 631(a) gain does not fit into ordinary definitions of income. See 85 C.J.S. Taxation \u00a7 1096a; 71 Am.Jur. 2d State and Local Taxation \u00a7 483. But a state has the power to gauge its income tax by reference to the income on which the taxpayer is required to pay a tax to the United States. The constitutionality of state statutes which refer to the Internal Revenue Code definitions have been upheld by the courts. See, Garlin v. Murphy, 51 Misc.2d 477, 273 N.Y.S.2d 374 (1966), aff\u2019d 34 N.Y.2d 921, 359 N.Y.S.2d 552 (1974); Thorpe v. Mahin, 43 Ill.2d 36, 250 N.E.2d 633 (1969); 85 C.J.S. Taxation \u00a7 1096b; Annot., Constitutionality, construction, and application of provisions of state tax law for conformity with Federal income tax law or administrative and judicial interpretation, 166 A.L.R. 516 (1947), supplemented in 42 A.L.R.2d 797 (1955) and its supplement.\nChampion elected to make this \u00a7 631(a) gain a part of its federal taxable income for 1972. By use of this gain, its federal income tax was calculated. Under the terms of \u00a7 72-15A-2(S), the gain is in-cludable in Champion\u2019s base income for New Mexico income tax purposes.\n(b) New Mexico is not taxing an out-of-state activity.\nNew Mexico has not specifically taxed the \u00a7 631(a) gain. It has included that gain in the apportionable business income of Champion. From this business income, New Mexico can tax a percentage like the other states that are parties to the Multi-state Tax Compact.\nThe tax is not levied on the particular business activity of a taxpayer carried on within the borders of the taxing state. The tax is levied on a percentage of the taxpayer\u2019s business income from all its business activity. The purpose of this scheme is to make uniform the tax laws of the participating states.\nThe Commissioner\u2019s decision does not tax out-of-state activity. Neither does the tax statute. The taxation is not beyond the State\u2019s taxing authority.\nChampion\u2019s claim of unconstitutionality based on taxation of out-of-state activity, and its claim that the imposition of the tax is beyond the taxing authority of New Mexico, are both groundless.\n(c) Courts uphold inclusion of unrealized gain within \"net income\u201d for state taxation.\nThe position we take on state taxation of unrealized gain declared as federal taxable income is upheld by the courts. The unrealized gain can be included in \u201cnet income\u201d for state tax purposes. Garlin v. Murphy, supra; Marco Associates, Inc. v. Comptroller of Treasury, 265 Md. 669, 291 A.2d 489 (1972); Commonwealth v. Electrolux Corporation, 362 Pa. 333, 67 A.2d 105 (1949); Ebling Co. v. Graves, 259 App.Div. 427, 20 N.Y.S.2d 123, aff\u2019d without opinion, 284 N.Y. 688, 30 N.E.2d 726 (1940).\nAffirmed.\nIt is so ordered.\nWOOD, C. J., and LOPEZ, J\u201e specially concur.", "type": "majority", "author": "SUTIN, Judge." }, { "text": "WOOD, Chief Judge (specially concurring).\nI do not join in Judge Sutin\u2019s remarks concerning Champion\u2019s presentation at the administrative hearing. I do not join in the references to I.T. Regulation 17(b) because that regulation does not apply to the tax year in question.\nOne issue in this case is whether income from investments, rentals and sale of logs was business income. Under \u00a7 72-15 A-17(A), supra, it was business income if it arose in the regular course of Champion\u2019s business. I do not agree that \u201cregular course\u201d of business is to be determined by whether the business is \u201cunitary\u201d or \u201cone integral business\u201d. Such an approach ignores the wording of the statute. Thus, I do not join in Part A of Judge Sutin\u2019s opinion.\nMy approach to the meaning of \u201cregular course\u201d of \u201ctrade or business\u201d differs somewhat from the approach taken by Judge Sutin in Part B of his opinion. The taxpayer\u2019s evidence makes it clear that the contested income was acquired in the \u201cregular course\u201d of Champion\u2019s activities. I do not understand Champion to contend otherwise. Champion\u2019s contention is that the contested income was not acquired in the regular course of trade or business.\nChampion takes a narrow view of the meaning of trade or business. It would limit the meaning of trade or business to the main course of its business which it asserts is \u201cmanufacturing and selling finished products\u201d. It contends it is not in the business of investments, of renting property or making occasional sales of logs for use as telephone poles. Support for its view is found in Peters, \u201cThe Distinction Between Business Income and Nonbusiness Income\u201d, 25 S.Cal.Law Center Tax Institute 251 (1973).\nThe narrow view urged by Champion is not supported by the wording of UDITPA. Statutes are to be given effect as written. Keller v. City of Albuquerque, 85 N.M. 134, 509 P.2d 1329 (1973). Section 72-15A-17(A), supra, makes no reference to \u201cmain business\u201d or \u201cmain course of business\u201d. As I read \u00a7 72-15A-17(A), supra, it makes no difference whether the income derives from the main business, the principal business, the occasional business or the subordinate business so long as the income arises from the \u201cregular course\u201d of business.\nPeters, supra, at 278 states: \u201cAlthough one may quibble with the propriety of referring to income realized by a business organization as nonbusiness income, it is utterly ridiculous to assume that its meaning is limited to gifts or other receipts having no connection with a profit motive.\u201d I agree. In Sperry and Hutchinson Co. v. Department of Revenue, supra, interest on long-term and short-term securities held for investment were non-business income because the interest did not arise from transactions in the regular course of business. In Western Natural Gas Company v. McDonald, supra, income from a liquidation sale of oil and gas leases was nonbusiness income because the sale was not made in the regular course of business. Thus, all income of a business organization is not \u201cbusiness income\u201d; business income must arise from the regular course of business.\nPertinent in determining whether income arises from transactions in the regular course of business is \u201cthe nature of the particular transaction\u201d and \u201cformer practices\u201d of the business entity. Western Natural Gas Company v. McDonald, supra. Also pertinent is how the income is used. Sperry and Hutchinson Co. v. Department of Revenue, supra.\nJudge Sutin\u2019s opinion reviews the evidence. That evidence supports the Commissioner\u2019s conclusion that interest income from short-term investments, income from renting surplus property, and income from sale of logs was income arising in the regular course of Champion\u2019s business. Thus, I concur in the result reached as to these items.\nI join in that part of Judge Sutin\u2019s opinion holding the gain on cut but unsold timber was apportionable as business income because that gain was reported as federal taxable income for the year in question.\nLOPEZ, Judge (specially concurring).\nI agree with Part A of Judge Sutin\u2019s opinion and with the conclusion of Part (B)(2)(a) that the \u00a7 631(a) gain reported by the taxpayer was properly taxed by New Mexico. I do not agree with the reasoning employed in Part B of Judge Su-tin\u2019s opinion, nor with the reasoning employed in Chief Judge Wood\u2019s concurring opinion. My reasons for preferring the approach of Part A of Judge Sutin\u2019s opinion will be outlined below.\nIt is my belief that UDITPA does not require that all income of a multiform business be included in the business income from which a state takes its apportioned share. The issue might best be presented by the example of a corporation which manufactures and distributes shoes in New Mexico, Texas, and Colorado. In addition to this business, the corporation also makes a sizable profit from1 office buildings which it owns and operates for rental purposes in New York. One approach New Mexico could take to the rent received would be to ask whether it was customary for the corporation to rent apartments. On finding that it was customary, the rental income would be classified as business income from which New Mexico would take its proportional share. This would appear to be Judge Sutin\u2019s approach. Chief Judge Wood looks instead to the \u201cregular course\u201d of the taxpayer\u2019s business; since the corporation regularly rents apartments, the same result would be reached. My approach would be to determine whether the business of renting offices in New York is \u201cindependent\u201d of the business of selling shoes. Guidance for the meaning of \u201cindependent\u201d should be sought in the law which has developed around the unitary business concept. See e.g., Commonwealth v. ACF Industries, Inc., 441 Pa. 129, 271 A.2d 273 (1970) and Keesling & Warren, The Unitary Concept in the Allocation of Income, 12 Hast.L.J. 42 (1960).\nI find support for the position I have taken in the Oregon case of Sperry and Hutchinson v. Department of Revenue, 527 P.2d 729 (Or.1974). In deciding how interest from investments was to be classified, the court did not dispute that the taxpayer\u2019s \u201ccustomary\u201d and \u201cregular\u201d practice was to make these investments, but rather examined the relationship of these investments to the business that the taxpayer conducted in Oregon.\nThe proposition that businesses are indivisible, and hence that all income from them is business income, goes far beyond the position taken by the Bureau in this case, and in its regulations.\nFor example, at the hearing below, in response to a question from the taxpayer\u2019s representative as to what nonbusiness income was, the Bureau\u2019s representative stated :\n\u201cWell, if you took that money out and invested in yachts for an unrelated purpose or bought property not related to your business of logging or whatever it is and you derived income from it, then it would be non-business income.\u201d\nMore significantly, the Bureau\u2019s regulations, and the examples illustrating them, indicate that there comes a point where the Bureau feels corporate activity is divisible. Thus, in discussing when rental income is business income the Bureau uses the following example:\n\u201cExample (iv): The Taxpayer operates a multistate chain of grocery stores. It purchases as an investment an office building in another state with surplus funds and leases the entire building to others. The net rental income is not business income of the grocery store trade or business. Therefore, the net rental income is nonbusiness income.\u201d I.T. Regulation 17(b)(1).\nFinally, constitutional issues of due process come into play when the abolition of the distinction between unitary and multiform businesses is proposed. Those Supreme Court cases which have upheld for-mulary apportionment have done so on the basis that the business taxed was a unitary business. Rudolph, State Taxation of Interstate Business: The Unitary Business Concept and Affiliated Corporate Groups, 25 Tax L.Rev. 171, 183-84, (1970); see, e. g., Butler Brothers v. McColgan, 315 U.S. 501, 62 S.Ct. 701, 86 L.Ed. 991 (1942). Although I have found no Supreme Court cases stating that the multiform concept must be respected by state taxing authorities (there are state court cases so holding; see, e.g., Hamilton Management Corporation v. State Tax Commission, 253 Or. 602, 457 P.2d 486 (1969) ). I think that a serious constitutional problem is presented by the failure to distinguish between that income of a business, originating in the taxing state, and that income which has no real relationship to that state.\nJudge Sutin correctly states that we simply cannot tell from the record before us which of the contested items have no connection with New Mexico. Therefore, although my different interpretation of UDITPA may lead to disagreement in future cases, I have no quarrel with the result reached today.", "type": "concurrence", "author": "WOOD, Chief Judge (specially concurring). LOPEZ, Judge (specially concurring)." } ], "attorneys": [ "Benjamin J. Phillips, White, Koch, Kelly & McCarthy, Santa Fe, Dennis J. Barron, David A. Beanblossom, Frost & Jacobs, Cincinnati, Ohio, for appellant.", "Toney Anaya, Atty. Gen., Jan E. Unna, Bureau of Revenue, Asst. Atty. Gen., Santa Fe, for appellee." ], "corrections": "", "head_matter": "540 P.2d 1300\nCHAMPION INTERNATIONAL CORPORATION, Appellant, v. BUREAU OF REVENUE, State of New Mexico, Appellee.\nNo. 1746.\nCourt of Appeals of New Mexico.\nAug. 13, 1975.\nRehearing Denied Aug. 13, 1975.\nCertiorari Denied Oct. 6, 1975.\nBenjamin J. Phillips, White, Koch, Kelly & McCarthy, Santa Fe, Dennis J. Barron, David A. Beanblossom, Frost & Jacobs, Cincinnati, Ohio, for appellant.\nToney Anaya, Atty. Gen., Jan E. Unna, Bureau of Revenue, Asst. Atty. Gen., Santa Fe, for appellee." }, "file_name": "0411-01", "first_page_order": 441, "last_page_order": 449 }