Genentech v. Commissioner of Revenue (Lawyers Weekly No. 10-012-17)
NOTICE: All slip opinions and orders are subject to formal revision and are superseded by the advance sheets and bound volumes of the Official Reports.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-12083 GENENTECH, INC. vs. COMMISSIONER OF REVENUE. Suffolk. October 7, 2016. – January 12, 2017. Present: Gants, C.J., Botsford, Lenk, Hines, Gaziano, Lowy, & Budd, JJ. Taxation, Corporate excise, Manufacturing corporation. Constitutional Law, Taxation, Commerce clause, Interstate commerce. Appeal from a decision of the Appellate Tax Board. The Supreme Judicial Court on its own initiative transferred the case from the Appeals Court. Catherine A. Battin, of Illinois (Richard C. Call also present) for the taxpayer. Brett M. Goldberg (Jamie E. Szal also present) for Commissioner of Revenue. BOTSFORD, J. Under the Massachusetts corporate excise tax statute, G. L. c. 63, corporations that generate business income in Massachusetts and other States pay taxes on that income according to a statutory formula that seeks to apportion and tax the corporation’s income generated in the Commonwealth. Beginning in 1996, for a “manufacturing corporation,” the apportionment formula has been based solely on the corporation’s sales, see G. L. c. 63, § 38 (l), inserted by St. 1995, c. 280, § 2. The taxpayer Genentech, Inc., is a Delaware corporation with a principal place of business in California and earns business income in the Commonwealth as well as other States. In this appeal from a decision of the Appellate Tax Board (board), Genentech challenges the board’s determination that it qualified as a manufacturing corporation for the tax years 1998 through 2004 (tax years at issue); it also challenges the board’s rejection of its claim that application of § 38 (l)’s single-factor apportionment formula based on sales to the company violated the commerce clause of the United States Constitution. We affirm the decision of the board. Facts. We summarize the findings of fact made by the board. See G. L. c. 58A, § 13 (“The decision of the board shall be final as to findings of fact”). Genentech is a biotechnology company that develops drugs derived from proteins produced by living cells. Through a four-step process, Genentech employees modify the genetic codes of living cells to produce “proteins of interest” with desired pharmacologic effects.[1] First, Genentech scientists and other employees alter the deoxyribonucleic acid (DNA) of the selected cells to instruct them to produce a specific “protein of interest.” Second, employees facilitate the production of the protein of interest by placing the genetically altered […]