Blue Bell Creameries, LP v. Roberts
333 S.W.3d 59
Tenn.2011Background
- Blue Bell Creameries, LP, a Delaware limited partnership, produced and sold ice cream in Tennessee.
- Stock Transaction on January 1, 2001 involved the reorganization of BBC USA's assets through Taxpayer; BBC USA redeemed 1,131 shares for $142,506,000.
- Taxpayer reported $119,909,317 capital gains on its 2001 federal return; pass-through to partners led to distributions for taxes.
- Tennessee excise tax assessed capital gains as business earnings under the functional test; Taxpayer sought refund in chancery court.
- Chancery granted Taxpayer summary judgment; Court of Appeals affirmed; the Supreme Court granted review.
- Undisputed facts are reviewed to determine statutory and constitutional validity of the excise tax under Tennessee law and the unitary business principle.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether capital gains from the Stock Transaction are business earnings under §67-4-2004(1). | Blue Bell argues gains are non-business earnings. | Department contends gains are business earnings via the functional test. | Gains are business earnings under the functional test. |
| Whether the tax assessment is constitutional under the unitary business principle. | Taxpayer challenges due process and commerce clause requirements. | Tax is permissible as an apportioned share of unitary income. | Tax is constitutional; Stock Transaction is unitary with the ice cream business. |
| Whether BBC USA and Taxpayer form a unitary business for unitary-tax purposes. | BBC USA is a separate entity with no operations; cannot be unitary. | Underlying activity is the same single ice cream business; BBC USA is unitary with Taxpayer. | BBC USA is unitary with Taxpayer; the tax is consistent with unitary principle. |
Key Cases Cited
- Gen. Care Corp. v. Olsen, 705 S.W.2d 642 (Tenn. 1986) (UDITPA framework; apportionment for business earnings)
- Newell Window Furnishing, Inc. v. Johnson, 311 S.W.3d 441 (Tenn.Ct.App.2008) (functional test application under Tennessee law)
- MeadWestvaco Corp. v. Ill. Dept. of Revenue, 553 U.S. 16 (S. Ct. 2008) (unitary business principle and apportionment framework)
- Allied-Signal, Inc. v. Dir., Div. of Taxation, 504 U.S. 768 (U.S. 1992) (due process and unitary principles for multistate taxation)
- Exxon Corp. v. Dept. of Rev., 447 U.S. 207 (U.S. 1980) (unitary/allocable income and nexus)