The Delaware Supreme Court upheld a Superior Court rejecting a state corporate income tax claim for $1.7 million.
Verisign, which for a time operated a site in the New Castle area, had reported losses in 2015 and 2016 tax returns and claimed it had no tax liability in Delaware.
Under a state policy, a corporate taxpayer that filed its federal tax returns with a consolidated group was prohibited from claiming a net operating loss deduction in Delaware that exceeded the consolidated net operating loss deduction on the federal return.
The state applied the policy and determined that Verisign had underreported its Delaware income, and assessed the company $1.7 million in unpaid taxes and fees.
The Superior Court ruling determined that the policy violated the state Constitution.
The Supreme Court did not accept the Constitutional argument and instead determined the Director of Revenue had exceeded the authority granted by the General Assembly.
The court decisions determined that the policy was never part of a statute.
The high court decision noted that the General Assembly recently passed legislation that contains some of the provisions of Revenue Department’s policy.