Glatfelter Pulpwood Co. v. Commonwealth, 61 A.3d 993

Glatfelter Pulpwood Company (Appellant), a Maryland corporation and subsidiary of a Pennsylvania-based Parent, procured pulpwood for Parent’s Pennsylvania paper mill, sourcing timber from multiple states and reporting pulpwood income as apportionable business income in Pennsylvania.
In 2004 Appellant sold 4,882 Delaware timberland acres for about $56.6 million, realizing a net gain of ~$55.36 million, which it distributed to Parent.
Delaware taxed the gain under Delaware law; Pennsylvania initially taxed the gain as business income, then Appellant sought to classify the gain as non-business income allocated to Delaware, reducing Pennsylvania tax.
The Pennsylvania Department of Revenue (DOR) determined the gain was $52,327,343 of business income subject to Pennsylvania apportionment; Appellant appealed through the Board of Appeals, then BF&R, which upheld taxation as business income.
Commonwealth Court affirmed, concluding the Delaware timberland sale satisfied the functional test for business income and that Appellant operated a unitary business integrally linked to Pennsylvania operations.
This Court (Pennsylvania) affirmed, holding that the 2001 amendments to the definitions of business and non-business income use a disjunctive “either/or” approach, and the acquisition/management/disposition of property can independently render income as business income; the Delaware timberland sale was an integral part of Appellant’s unitary business.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether the Delaware timberland sale gains are non-business income or business income	Glatfelter argues the sale was a liquidation of a unique asset and not an ordinary part of its pulpwood business	Glatfelter’s timberlands, including Delaware, were integral to its unitary pulpwood business and the disposition was part of regular operations	Business income under the statutory definition (disposition can render as business income).
Whether the Delaware timberland sale was an unrelated asset/second enterprise	Delaware timberland sale constituted a separate enterprise unrelated to Pennsylvania pulpwood operations	Timberlands were integral to unitary business; sale did not create a separate enterprise	Timberland was integrally related; no separate enterprise; sale part of unitary business.
Whether Pennsylvania may fairly apportion the gain despite Delaware taxation (Due Process/Commerce Clause)	Apportionment overstates Pennsylvania share and risks duplicative taxation with Delaware	Unitary business allows fair apportionment; Pennsylvania benefits from the integrated enterprise; double taxation not required to be avoided in all cases	Fair apportionment under unitary business doctrine; no Due Process/Commerce Clause violation.

Laurel Pipe Line Co. v. Commonwealth of Pennsylvania, Board of Finance and Revenue, 642 A.2d 472; 537 Pa. 205 (Pa. 1994) (pre-2001 definition; held income from disposal of idle pipeline non-business)
Welded Tube Company of America v. Commonwealth of Pennsylvania, 515 A.2d 988; 101 Pa.Cmwlth. 32 (Pa.Cmwlth. 1986) (integration of asset into business supported business income)
Ross-Araco Corp. v. Commonwealth of Pennsylvania, Board of Finance and Revenue, 674 A.2d 691; 544 Pa. 74 (Pa. 1996) (adopted transactional and functional tests for business income)
Container Corporation of America v. Franchise Tax Board, 463 U.S. 159 (U.S. 1983) (unitary business and formulary apportionment; due process/commerce limits)
MeadWestvaco Corp. v. Illinois Dept. of Revenue, 553 U.S. 16; 128 S. Ct. 1498 (U.S. 2008) (unitary business; limits of apportionment; value of multi-state enterprise)
Allied-Signal, Inc. v. Director, Division of Taxation, 504 U.S. 768 (U.S. 1992) (unrelated assets vs. unitary enterprise; investment vs. operational asset)
Moorman Manufacturing Co. v. Bair, 437 U.S. 267 (U.S. 1978) (due process constraints on state taxation of interstate activity)
Exxon Corp. v. Wisconsin Dept. of Revenue, 447 U.S. 207 (U.S. 1980) (unitary business framework and apportionment principles)
Canteen Corp. v. Commonwealth of Pennsylvania, 818 A.2d 594 (Pa.Cmwlth. 2003) (definition of business vs non-business income; apportionment basics)