The Supreme Court has issued unanimous rulings in two tax cases, MeadWestvaco Corp. v. Illinois Department of Revenue and U.S. v. Clintwood Elkhorn Mining Co.In the MeadWestvaco case, the Supreme Court vacated and remanded the decision of the Illinois Appellate Court, which had allowed Illinois to tax a capital gain realized by Mead, an Ohio-based subsidiary of MeadWestvaco, when Mead sold its LexisNexis business division. Mead paid the tax and later sued in state court.

The trial court found that Lexis and Mead were not unitary because they were not functionally integrated or centrally managed and enjoyed no economies of scale. It nevertheless concluded that Illinois could tax an apportioned share of Mead’s capital gain, because Lexis served an operational purpose in Mead’s business. The State Appellate Court in affirming found that Lexis served an operational function in Mead’s business and thus did not address whether Mead and Lexis formed a unitary business.

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