P.M. BRIEFING : Tax Setback for Multinationals

A unanimous Supreme Court today limited the ability of multinational corporations to challenge state taxes in federal court.

The justices ruled that a law generally barring federal courts from handling lawsuits that attack a state tax applies to foreign-based multinational businesses.

A federal appeals court had ruled that the law did not apply, drawing a distinction between multinational businesses based in this country and those based in foreign countries. Today’s decision means two foreign-based corporations will have to turn to California courts to challenge that state’s business tax.

The justices in 1984 gave states a major victory when ruling that California could tax multinational corporations doing business in the state based on the businesses’ worldwide dealings.