The First Marblehead Corporation, et al. v. Commissioner of Revenue (Lawyers Weekly No. 10-010-15)

NOTICE:  All slip opinions and orders are subject to formal revision and are superseded by the advance sheets and bound volumes of the Official Reports.  If you find a typographical error or other formal error, please notify the Reporter of Decisions, Supreme Judicial Court, John Adams Courthouse, 1 Pemberton Square, Suite 2500, Boston, MA, 02108-1750; (617) 557-1030; SJCReporter@sjc.state.ma.us   SJC-11609   THE FIRST MARBLEHEAD CORPORATION & another[1]  vs.  COMMISSIONER OF REVENUE. Suffolk.     October 7, 2014. – January 28, 2015.   Present:  Gants, C.J., Spina, Cordy, Botsford, Duffly, Lenk, & Hines, JJ.     Financial Institution.  Taxation, Excise, Apportionment of tax burden.  Constitutional Law, Taxation.  Notice, Tax taking.       Appeal from a decision of the Appellate Tax Board.   The Supreme Judicial Court on its own initiative transferred the case from the Appeals Court.     John S. Brown (Donald-Bruce Abrams with him) for the taxpayer. Brett M. Goldberg (Daniel J. Hammond, Assistant Attorney General, with him) for Commissioner of Revenue. Helen Hecht, Bruce Fort, Sheldon Laskin, & Lila Disque, of the District of Columbia, for Multistate Tax Commission, amicus curiae, submitted a brief.     BOTSFORD, J.  The taxpayers appeal from a decision of the Appellate Tax Board (board) issued pursuant to G. L. c. 58A, § 7, and G. L. c. 62C, § 39 (c); their focus is on the financial institution excise tax (FIET) liability of the taxpayer GATE Holdings, Inc. (Gate), that was at all relevant times a wholly owned subsidiary of the taxpayer The First Marblehead Corporation (FMC).[2]  In its decision, the board accepted Gate’s position that it qualified as a “financial institution” under G. L. c. 63, § 1, and was entitled to apportion its income pursuant to G. L. c. 63, § 2A (§ 2A).  The board, however, disagreed with Gate that in applying the apportionment rules of § 2A, all of Gate’s taxable property, which consisted of securitized student loans, should be assigned to States outside the Commonwealth.  Rather, the board determined that all such property was properly assigned to Massachusetts, resulting in a greater FIET liability than Gate had calculated.  We affirm the board’s decision.[3] Facts.[4]  At issue here are the tax years ending June 30, 2004; June 30, 2005; and June 30, 2006 (tax years at issue).  FMC was a publicly traded Delaware corporation with its principal offices in Boston, and during the tax years at issue was the principal tax-reporting corporation for itself, Gate, and a number of other subsidiaries.  FMC was involved in the growing industry facilitating private loans to students seeking to finance the cost of their postsecondary education.FMC did not make any loans directly to student borrowers, but rather brought together various parties involved in lending, including postsecondary schools, banks that issued loans […]

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