AI Generated Opinion Summaries

This summary was computer-generated without any editorial revision. It is not official, has not been checked for accuracy, and is NOT citable.

Facts

• Apache Corporation, a multinational oil and gas production company, and its foreign subsidiaries were assessed for corporate income tax by the New Mexico Taxation and Revenue Department for the 2015 reporting period. The foreign subsidiaries, incorporated in various countries and not engaged in trade or business in the United States, paid dividends and generated income attributed to Apache Corporation on its federal tax return. The issue revolves around whether these foreign subsidiaries could be included in a "unitary corporation" for taxation under New Mexico’s Corporate Income and Franchise Tax Act (CIT) (paras 2-3).

Procedural History

• Administrative Hearings Office: The Administrative Hearing Officer (AHO) concluded that Apache Corporation and its foreign subsidiaries constituted a unitary corporation under Section 7-2A-2(Q) of the CIT, subjecting the dividends and other income attributed to the foreign subsidiaries to the CIT (para 4).

Parties' Submissions

• Protestant-Appellant (Apache Corporation): Argued that the foreign source dividends were not unitary income apportionable to New Mexico, were not business income apportionable to New Mexico, that New Mexico’s treatment of foreign dividends was discriminatory and unconstitutional, and that the assessment of penalties was not supportable. Additionally, Apache Corporation contended that Section 7-2A-2(Q) excluded foreign corporations not engaged in trade or business in the United States from the definition of a “unitary corporation” (para 3).
• Respondent-Appellee (New Mexico Taxation & Revenue Department): [Not applicable or not found]

Legal Issues

• Whether Apache Corporation’s foreign subsidiaries can be deemed a “unitary corporation” with Apache Corporation under Section 7-2A-2(Q) of the CIT, thereby subjecting their income to New Mexico corporate income tax (paras 1, 7-10).

Disposition

• The Court of Appeals reversed the decision of the Administrative Hearing Officer, concluding that foreign subsidiaries not engaged in trade or business in the United States should not be included in the unitary corporation for purposes of apportionment of income under the CIT (para 23).

Reasons

• Per Bustamante, J., retired, sitting by designation, with concurrence from Yohalem, J., and Wray, J.:
  The Court conducted a comprehensive review of case law and prior AHO orders, finding no precedent for including foreign subsidiaries in a unitary corporation under the circumstances presented. The Court agreed with Apache Corporation that the statutory definition of "unitary corporation" excludes foreign subsidiaries not engaged in trade or business in the United States (paras 7-8).
  The Court applied a de novo standard of review for questions of law, focusing on the intent of the Legislature and the plain language of the statute. It concluded that the plain language of Section 7-2A-2(Q) clearly excludes foreign subsidiaries from the definition of a unitary corporation if they are not engaged in trade or business in the United States (paras 5-6, 10-11).
  The Court disagreed with the AHO's interpretation of the statute, stating that such an interpretation negates the existence of the carve-out for foreign corporations and renders part of the statute superfluous. The Court emphasized that statutes must be construed to give effect to every part, avoiding interpretations that render any portion surplusage or superfluous (paras 13-14).
  The Court's interpretation aligns with the history of the United States Supreme Court’s jurisprudence on state taxation of extraterritorial income and New Mexico’s legislative response to it, particularly in light of the Kraft decision. The Court concluded that the Legislature intended to exclude foreign subsidiaries from the definition of "unitary corporation" to avoid unconstitutional discrimination against foreign commerce (paras 15-22).