Massachusetts High Court Rules for VAS Holdings in Investee Approach Suit

Tax Notes
May 17, 2022

Richard Jones was quoted in the article, "Massachusetts High Court Rules for VAS Holdings in Investee Approach Suit," published by Tax Notes.

The article discusses the court ruling in  VAS Holdings & Investments LLC v. Commissioner that the constitutional limitations of Massachusetts’s authority to tax the nonresident S corporation could be satisfied by its ownership interest in the in-state LLC, but that Massachusetts law does not authorize the taxation because there is no unitary business between the S corporation and the LLC.

Rich told Tax Notes that neither party had argued at the board level that there was a problem with the statutory authority to impose the tax, adding that there was a question of whether the issue had been waived or stipulated away. Rich submitted an amicus brief on behalf of the American College of Tax Counsel in support of VAS Holdings.

Rich said he was pleased with the court’s decision concerning Massachusetts’s law and agreed with the court that the statutes and regulations adhere to the unitary business principle. But while Rich added that the court’s discussion of the unitary business principle was admirable and well-written, he said he’s still concerned that if the unitary business principle is put aside the analysis no longer concerns the taxpayer’s connections with the state but now relies on another party’s connections with the state.

Rich said the constitutional issue needs to be resolved by there Supreme Court, though he added that this case would not be a vehicle for that because it was decided on statutory grounds.

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