States Win Fight to Tax Income From Outer Offshore Oil, Gas
The Supreme Court ruled unanimously today that states may tax some income from oil and natural gas extracted from the Outer Continental Shelf.
The justices upheld an Iowa tax, challenged by Shell Oil Co., that is imposed on that portion of a company’s income derived from doing business in Iowa.
Justice Thurgood Marshall, writing for the court, said the state levy does not violate a 1953 federal law authorizing exploration and production of Outer Continental Shelf oil and gas.
“We reject Shell’s argument that Congress intended . . . to prohibit the inclusion, in a constitutionally permissible apportionment formula, of income from Outer Continental Shelf oil and gas,” Marshall said.
He said the law only prohibits a state next to such offshore land from taxing that land directly. Nothing in the law prohibits a state from imposing a tax such as Iowa’s that is limited to that portion of a company’s income derived from selling Outer Continental Shelf oil and gas within that state.
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