News and Insights

First Marblehead Appeals Its Adverse Massachusetts Apportionment Decision to the U.S. Supreme Court

Tax Development Jan 03, 2017

First Marblehead has petitioned the U.S. Supreme Court for certiorari1 for the opinion rendered in First Marblehead Corp. v. Massachusetts Commissioner of Revenue, Massachusetts Supreme Judicial Court, No. SJC-11609, August 12, 2016 (“the 2016 decision”). The question at issue was whether Massachusetts could source student loans to Massachusetts under the financial excise tax apportionment provisions, when the taxpayer had its commercial domicile in Massachusetts and no other physical location. Prior to the 2016 decision by the Massachusetts Supreme Judicial Court, id., the Massachusetts Supreme Judicial Court had previously ruled in favor of the state2, in 2015 (“the 2015 decision”). The U.S. Supreme Court reviewed the 2015 decision and remanded the case to Massachusetts, with the instructions that the case must be analyzed in light of the recent U.S. Supreme Court ruling in Comptroller of the Treasury of Md. v. Wynne, 135 S. Ct. 1787 (2015).

Wynne examined the “internal consistency” test found under the dormant commerce clause. Under Massachusetts law, G. L. c. 63, §2A (e) (vi) (B), if a loan is assigned by the taxpayer to a place outside the Commonwealth that is not a “regular place of business,” the statute creates a presumption, rebuttable by the taxpayer, that the loan is properly assigned to the Commonwealth if, at the time the loan was made, the taxpayer’s “commercial domicile” was in Massachusetts. The 2016 decision held that this provision did not violate the internal consistency test as defined by Wynne. 

First Marblehead has once again petitioned the U.S. Supreme Court to examine the 2016 decision and answer the following questions. One, whether the application of the Massachusetts apportionment formula passes the “external consistency” test, as it related to the question does the tax fairly relate to the activities undertaken by the taxpayer in the taxing state. Two, whether the Massachusetts statute fails the “internal consistency” test, as double taxation could exist if the taxpayer were to source property to other states in which it did not have a regular place of business, and to Massachusetts under the “commercial domicile” provision.

This case is important to watch as it gives the U.S. Supreme Court the opportunity to evaluate whether the Massachusetts court correctly interpreted and applied its decision in Wynne.

1 Petition for certiorari filed December 15, 2016.
2 First Marblehead Corp. v. Commissioner of Revenue, 470 Mass. 497, 498 (2015).


Mary Bernard