Maryland high court – Nexus attributed to affiliates without economic substance as separate entities, unitary nexus rejected

March 2014


On March 24, 2014, the Maryland Court of Appeals (the state’s highest court) ruled that two subsidiaries of an in-state parent had nexus with Maryland because the subsidiaries had no real economic substance as business entities separate from their parent. In doing so, the court rejected the lower court’s ruling that established nexus between Maryland and the subsidiaries due to their unitary relationship with their in-state parent. Although rejecting unitary nexus, the entities’ unitary relationship justified the state applying to the subsidiaries an alternative apportionment formula that incorporated unitary elements.

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