Felt Process Co. v. State Tax Commission

• Court: Supreme Judicial Court of Massachusetts
• Writing for the Court: Before WILKINS; SPALDING
• Citation: Felt Process Co. v. State Tax Commission, 162 N.E.2d 76, 339 Mass. 651 (Mass. 1959)
• Decision Date: 03 November 1959
• Parties: FELT PROCESS COMPANY v. STATE TAX COMMISSION.

Page 76

162 N.E.2d 76

339 Mass. 651

FELT PROCESS COMPANY v. STATE TAX COMMISSION.

Supreme Judicial Court of Massachusetts, Suffolk.

Argued Oct. 8, 1959.

Decided Nov. 3, 1959.

Robert B. Kittredge, Boston, for taxpayer.

Roy F. Teixeira, Asst. Atty. Gen., for State Tax Commission.

Before WILKINS, C. J., and RONAN, SPALDING, WILLIAMS and WHITTEMORE, JJ.

SPALDING, Justice.

Felt Process Company, hereinafter called Felt, is one of five Massachusetts corporations which joined with two foreign corporations in filing a consolidated Federal income tax return for the year 1955. Felt and the other four Massachusetts corporations each seasonably filed separate returns in Massachusetts for the year 1955. Of these five corporations, Felt and three others had net profits for that year, but the fifth corporation, Victory Plastics Company, sustained a loss of $103,197.97. Each of the four corporations paid the tax on the income reported. Subsequently, but within the period permitted for applying for an abatement under G.L. c. 63, § 51, Felt and the three other corporations which had paid taxes for the year 1955 applied for abatements. At the same time all of the five domestic corporations elected to be assessed on their combined net income under the provisions of G.L. c. 63, § 34. By consolidating the net income of the five corporations the aggregate net income reported in the original returns would be reduced by reason of the loss sustained by Victory Plastics Company, and this was the basis of the abatements sought.

The abatements were denied by the State Tax Commission and the four corporations appealed to the Appellate Tax Board. There the cases were submitted together on a statement of agreed facts. The amount of the abatement to which each of the taxpaying corporations would be entitled was not in issue, the parties having stipulated that this would be determined by agreement in the event that it was decided that the corporations were entitled to file a consolidated return.

Before the board the questions presented by Felt and the other corporations by requests for rulings were these: (1) Whether, by G.L. c. 63, § 34, the right of domestic corporations to file returns on a combined net income basis is restricted to those domestic corporations which constituted the entire group filing a Federal consolidated return. (2) If the five domestic corporations which constituted less than the entire group filing the Federal return had the right under § 34 to file returns on a combined basis, did their action in filing separate returns preclude them from later electing to be assessed on their combined income? The board rendered a decision in favor of the commission and ruled that the corporations seeking to be assessed on their combined income must comprise the entire group filing the Federal return, and that by filing separate returns the corporations were precluded from later electing to be assessed on their combined incomes. Felt appealed. The questions for decision here are the same as those presented to the board.

1. General Laws c. 63, § 34, reads: 'If two or more domestic business corporations participated in the filing of a consolidated return of income to the federal government, the tax under paragraph (2) of section thirty-two may, at their option, be assessed upon their combined net income, which tax shall be assessed to all said corporations and collected from any one or more of them.' Felt and the other four domestic corporations clearly come within the literal language of § 34. Felt participated with other domestic corporations 'in the filing of a consolidated return of income to the federal government.' There is no language in § 34 which precludes these corporations from exercising the option to be assessed on their combined income by reason of the fact that...