OKLAHOMA CITY (AP) — A Florida-based company cannot claim a capital gains tax break for its Oklahoma business, the Oklahoma Supreme Court ruled on Tuesday.
In a 5-4 decision, the state’s highest court ruled against CDR Systems Corporation, a now-defunct Florida-based company that had claimed the Oklahoma capital gains deduction on its 2008 income tax return for gains realized from a stock purchase agreement for the sale of all of its assets.
The Oklahoma Tax Commission denied the claim because CDR was not headquartered in the state for three years prior to the sale. But the Oklahoma Court of Civil Appeals reversed the commission, ruling that the deduction discriminated against interstate commerce.
The Supreme Court’s majority opinion, written by Justice Noma Gurich of Oklahoma City, found that there was no discrimination against interstate commerce and that the deduction does not have a discriminatory purpose.
“CDR has failed to carry the heavy burden of proving this particular deduction unconstitutionally discriminates against interstate commerce,” the decision says.
A spokeswoman for the Tax Commission, Paula Ross, said the agency was pleased with the Supreme Court’s action. Ross said that if the Court of Civil Appeals ruling was left intact, the state could have faced the loss of up to $400 million in tax revenue if all individuals and companies impacted by its ruling filed amended tax returns.
“We trust this puts an end to the controversy and are happy the decision eliminates any adverse budget results,” Ross said.
CDR’s attorney, Thomas Ferguson of Oklahoma City, did not immediately return a telephone call seeking comment on whether he will request a rehearing in the case.
The law was designed to encourage companies to invest in Oklahoma, but it was challenged by CDR, which owned and sold a manufacturing facility in Waynoka. The company claimed the law unfairly discriminated against non-Oklahoma companies.
The Court of Civil Appeals ruled in January 2013 that the exemption violated the Commerce Clause of the U.S. Constitution because it discriminated against non-Oklahoma companies.
Justice Douglas Combs of Shawnee, one of the four dissenting justices, filed a separate opinion in which he agreed with the appellate court’s finding and said he believes the law is unconstitutionally discriminatory.
“I believe the deduction’s primary headquarters requirement forecloses tax-neutral decision making and imposes an artificial rigidity on economic business patterns,” Combs wrote. “It creates an advantage for companies operating their primary headquarters in Oklahoma as well as a disadvantage for those who operate their primary headquarters elsewhere, regardless of the extent of the company’s investment in Oklahoma.”