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Kraft GEN. Foods, Inc. v. Iowa Dept. Of Rev., 505 U.S. 71 (1992)
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General SummaryThis case is from a collection containing the full text of over 16,000 Supreme Court cases from 1793 to the present. The body of Supreme Court decisions are, effectively, the final interpretation of the Constitution. Only an amendment to the Constitution can permanently overturn an interpretation and this has happened only four times in American history.
Kraft GEN. Foods, Inc. v. Iowa Dept. Of Rev., 505 U.S. 71 (1992)
Kraft General Foods, Inc. v. Iowa Department of Revenue & Finance No. 90-1918 Argued April 22, 1992 Decided June 18, 1992 505 U.S. 71
CERTIORARI TO THE SUPREME COURT OF IOWA
Syllabus
The Iowa statute that imposes a business tax on corporations uses the federal tax code’s definition of "net income" with certain adjustments. Like the federal scheme, Iowa allows corporations to take deduction for dividends received from domestic, but not foreign, subsidiaries. However, unlike the federal scheme, Iowa does not allow a credit for taxes paid to foreign countries. Petitioner Kraft General Foods, Inc., a unitary business with operations in the United States and several foreign countries, deducted its foreign subsidiary dividends from its taxable income on its 1981 Iowa return, notwithstanding the contrary provisions of Iowa law. Respondent Iowa Department of Revenue and Finance (Iowa) assessed a deficiency, which Kraft challenged in administrative proceedings and subsequently in Iowa courts. The Iowa Supreme Court rejected Kraft’s argument that the disparate treatment of domestic and foreign subsidiary dividends violated the Commerce Clause of the Federal Constitution, holding that Kraft failed to demonstrate that the taxing scheme gave Iowa businesses a commercial advantage over foreign commerce.
Held: The Iowa statute facially discriminates against foreign commerce in violation of the Foreign Commerce Clause. It is indisputable that the statute treats dividends received from foreign subsidiaries less favorably than those received from domestic subsidiaries by including the former, but not the latter, in taxable income. None of the several arguments made by Iowa and its amici -- that, since a corporation’s domicile does not necessarily establish that it is engaged in either foreign or domestic commerce, the disparate treatment is not discrimination based on the business activity’s location or nature; that a taxpayer can avoid the discrimination by changing a subsidiary’s domicile from a foreign to a domestic location; that the statute does not treat Iowa subsidiaries more favorably than those located elsewhere; that the benefit to domestic subsidiaries might be offset by the taxes imposed on them by other States and the Federal Government; and that the statute is intended to promote administrative convenience rather than economic protectionism -- justifies Iowa’s differential treatment of foreign commerce. Pp. 75-82.
465 N.W.2d 664 (Iowa 1991), reversed and remanded.
STEVENS, J., delivered the opinion of the Court, in which WHITE, O’CONNOR, SCALIA, KENNEDY, SOUTER, and THOMAS, JJ., joined. REHNQUIST, C.J., filed a dissenting opinion, in which BLACKMUN, J., joined, post, p. 82.
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Chicago: U.S. Supreme Court, "Syllabus," Kraft GEN. Foods, Inc. v. Iowa Dept. Of Rev., 505 U.S. 71 (1992) in 505 U.S. 71 505 U.S. 72. Original Sources, accessed November 25, 2024, http://originalsources.com/Document.aspx?DocID=NQT5HFMVKJU6LD2.
MLA: U.S. Supreme Court. "Syllabus." Kraft GEN. Foods, Inc. v. Iowa Dept. Of Rev., 505 U.S. 71 (1992), in 505 U.S. 71, page 505 U.S. 72. Original Sources. 25 Nov. 2024. http://originalsources.com/Document.aspx?DocID=NQT5HFMVKJU6LD2.
Harvard: U.S. Supreme Court, 'Syllabus' in Kraft GEN. Foods, Inc. v. Iowa Dept. Of Rev., 505 U.S. 71 (1992). cited in 1992, 505 U.S. 71, pp.505 U.S. 72. Original Sources, retrieved 25 November 2024, from http://originalsources.com/Document.aspx?DocID=NQT5HFMVKJU6LD2.
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