Dep't of Revenue v. Agilent Techs., Inc.
2019 CO 41
Colo.2019Background
- Agilent Technologies, a Delaware parent with Colorado operations, owned World Trade, a Delaware holding company that held stock of four foreign subsidiaries and had no U.S. property or payroll.
- For tax years 2000–2007 Agilent filed separate Colorado corporate returns and excluded World Trade; the Department audited and assessed ~ $13.7M, requiring combined returns including World Trade.
- The Department relied on Colo. Rev. Stat. §§ 39-22-303(11)–(12) (the three-of-six test and "includable C corporation" definition) and alternatively § 39-22-303(6) (allocation to avoid abuse).
- The district court granted summary judgment for Agilent, holding World Trade was not an "includable C corporation" under § 39-22-303(12)(c) and that § 39-22-303(6) did not authorize allocation; the court relied on Department regulations excluding corporations without property/payroll.
- The court of appeals affirmed; the Colorado Supreme Court granted certiorari and affirmed the lower courts.
Issues
| Issue | Plaintiff's Argument (Department) | Defendant's Argument (Agilent) | Held |
|---|---|---|---|
| Whether Dept. can force inclusion of World Trade under §§ 39-22-303(11)–(12) | Director may require combined reporting for affiliated C groups and include World Trade if statutory tests met | World Trade lacks >20% property/payroll in U.S.; thus not an "includable C corporation" and cannot be forced into combined return | Held: No. World Trade has no U.S. property/payroll and is not an includable C corporation; §§ 11–12 do not authorize inclusion. |
| Whether Dept. may allocate World Trade’s income to Agilent under § 39-22-303(6) to "avoid abuse" and "clearly reflect income" | § 303(6) permits allocation when necessary to avoid abuse; may be used here to tax World Trade’s income | § 303(6) was superseded by § 303(11) as the mechanism for combining affiliated C corps; and facts show no abuse requiring allocation | Held: No. § 303(6) cannot be used to override the objective tests in § 303(11); and on undisputed facts no allocation was necessary to avoid abuse. |
| Whether Department regulations or federal "check-the-box" elections compel treating the foreign subsidiaries as divisions for Colorado purposes | Dept. argued check-the-box and regulatory interpretation supported inclusion or allocation | Agilent argued check-the-box need not be followed for Colorado combined reporting and that regulations bar including entities without their own property/payroll | Held: Court did not decide check-the-box issue; relied on regulation excluding corporations without property/payroll and declined to apply allocation based on check-the-box. |
Key Cases Cited
- Hardegger v. Clark, 403 P.3d 176 (summary judgment standard and de novo review)
- UMB Bank, N.A. v. Landmark Towers Ass’n, 408 P.3d 836 (statutory interpretation principles)
- Oakwood Holdings, LLC v. Mortg. Invs. Enter. LLC, 410 P.3d 1249 (apply statute as written; respect legislative language)
- Am. Fam. Mut. Ins. Co. v. Barriga, 418 P.3d 1181 (avoid interpretations that render words superfluous)
- BP Am. Prod. Co. v. Colo. Dep’t of Revenue, 369 P.3d 281 (agency interpretation not binding if contrary to statute)
- Rags Over the Ark. River, Inc. v. Colo. Parks & Wildlife Bd., 360 P.3d 186 (agencies bound by their own regulations)