Caterpillar petitioned the U.S. Supreme Court to review a New Hampshire Supreme Court decision which upheld the refusal of the Department of Revenue Administration to redetermine Caterpillar’s business profits tax liability for three years. The Department determined that Caterpillar should have included interest and royalties that it received from its non-U.S. subsidiaries in its "gross business profits." Under New Hampshire law, income earned by foreign subsidiaries is excluded from the calculation of a unitary business’ combined net income that is subject to apportionment. In the tax year in which income from foreign subsidiaries is returned to Caterpillar in the U.S. as interest and royalty payments, it is included in Caterpillar’s unitary business income. Under New Hampshire’s "water’s edge" approach, none of the property, payroll and sales expenses that generated that income are considered. Caterpillar contended that, unless a portion of these expenses is included in the apportionment formula, the fraction vastly overstates its New Hampshire income and is unconstitutional.
On behalf of the Business and Industry Association of New Hampshire, NELF filed an amicus brief in the U.S. Supreme Court urging the Court to grant Caterpillar’s petition. NELF argued that, contrary to the New Hampshire Court’s holding, Caterpillar’s foreign subsidiaries are not unrelated business entities and should not be treated as such. They should be treated consistently with Caterpillar’s domestic subsidiaries and an appropriate portion of the foreign subsidiaries’ payroll, property and sales expenses should be included in the apportionment formula. Without any consideration of these expenses, NELF contended that New Hampshire discriminates against foreign commerce and discourages foreign investment. The Supreme Court denied cert.