UNITED DOMINION INDUSTRIES v. UNITED STATES

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Case Basics
Docket No. 
00-157
Petitioner 
United Dominion Industries
Respondent 
United States
Advocates
(Department of Justice, argued the cause for the respondent)
(Argued the cause for the petitioner)
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Facts of the Case 

Under the Internal Revenue Code of 1954, a taxpayer may carry back its "product liability loss" up to 10 years in order to offset prior years' income. United Dominion Industries, Inc. predecessor in interest, AMCA International Corporation, was the parent of an affiliated group filing consolidated returns for the years 1983 through 1986. AMCA calculated its product liability loss (PPL) on a consolidated basis, or a "single-entity" approach. The government's "separate-member" approach would have prohibited 5 of AMCA's 26 members from contributing to the group's total PPL. In 1986 and 1987, AMCA petitioned the Internal Revenue Service for a refund based on its PPL calculations. Ultimately, the District Court applied AMCA's single-entity approach, concluding that if the affiliated group's consolidated return reflects consolidated net operating losses in excess of the group's aggregate product liability expenses, the total of those expenses is a PLL that may be carried back. In reversing, the Court of Appeals applied the separate-member approach.

Question 

Must an affiliated group of corporations' product liability loss be figured on a consolidated, single-entity basis?

Conclusion 
Decision: 8 votes for United Dominion Industries, 1 vote(s) against
Legal provision: Internal Revenue Code

Yes. In an 8-1 opinion delivered by Justice David H. Souter, the Court held that an affiliated group's product liability loss must be figured on a consolidated, single-entity basis, and not by aggregating product liability losses separately determined company by company. Justice Souter wrote for the Court that "'the Internal Revenue Code vests ample authority in the Treasury to adopt consolidated return regulations to effect a binding resolution of the question presented in this in this case.' To the extent that the Government has exercised that authority, its actions point to the single-entity approach as the better answer. To the extent the Government disagrees, it may amend its regulations to provide for a different one."

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UNITED DOMINION INDUSTRIES v. UNITED STATES. The Oyez Project at IIT Chicago-Kent College of Law. 05 April 2014. <http://www.oyez.org/cases/2000-2009/2000/2000_00_157>.
UNITED DOMINION INDUSTRIES v. UNITED STATES, The Oyez Project at IIT Chicago-Kent College of Law, http://www.oyez.org/cases/2000-2009/2000/2000_00_157 (last visited April 5, 2014).
"UNITED DOMINION INDUSTRIES v. UNITED STATES," The Oyez Project at IIT Chicago-Kent College of Law, accessed April 5, 2014, http://www.oyez.org/cases/2000-2009/2000/2000_00_157.