News and Insights

U.S. Supreme Court Declines Review of Massachusetts First Marblehead Corp. Decision

Tax Development Feb 23, 2017

The U.S. Supreme Court denied the request to review the apportionment decision in First Marblehead Corp. v. Massachusetts Commissioner of Revenue.1 In First Marblehead, the issue is whether Massachusetts could source student loans to Massachusetts under financial excise tax apportionment provisions when the taxpayer had its commercial domicile in Massachusetts, with no other physical location. In 2015, the Massachusetts Supreme Judicial Court had ruled against the taxpayer,2 and after Supreme Court review of this decision, the case was remanded to Massachusetts to be reviewed under the decision rendered in Wynne.3

In Wynne, the Court examined the “internal consistency” test under the dormant commerce clause. Under Massachusetts law, 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 is  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 had again petitioned the Court to examine the 2016 decision and answer the following: 1) whether the application of the Massachusetts apportionment formula passes the “external consistency” test as to a fair relationship to the activities undertaken in the taxing state, and 2) 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.

A review of this case would have given the Court the opportunity to determine if the Massachusetts court correctly interpreted and applied the Wynne decision.

1 First Marblehead Corp. v. Massachusetts Commissioner of Revenue, No. SJC-11609 (Mass. Jan. 28, 2015).
2 First Marblehead Corp. v. Commissioner of Revenue, 470 Mass. 497, 498 (2015).
3 Comptroller of the Treasury of Md. v. Wynne, 135 S. Ct. 1787 (2015).


Mary Bernard