Unitary Business Taxation Principles

For at least the last two decades, law firms have continually expanded their operations across state lines (and national boundaries as well). Even with the current downturn, this trend may slow down, but it most certainly will not abate. Thus, much like any other multistate enterprise, today's law firms have to confront the intriguing and difficult questions of the power of the several states to tax operations that extend across state lines. The controversy is magnified because these are no mere issues of rates and calculations; rather, they take on great significance because they raise constitutional questions. See Sabino, “For Whom The South Central Bell Tolls,” 189 Journal of Accountancy 73 (January 2000) (Alabama's uneven taxation of an out-of-state enterprise violated Commerce Clause of the U.S. Constitution).

The U.S. Supreme Court recently added another crucial landmark on this constitutional quagmire, in the aspect of the “unitary business” taxation of a multistate enterprise. To be sure, this is only the newest in a long line of cases on the subject, but as such it makes fertile ground for discussion. With that in mind, let us turn to what the High Court now instructs us.

The MeadWestvaco Corporation Facts

The case is titled MeadWestvaco Corporation v. Illinois Department of Revenue, 128 S.Ct. 1498 (2008), and the opinion is authored by the High Court's newest member, Associate Justice Samuel A. Alito, Jr. The unanimous opinion relates the following facts. MeadWestvaco is the successor of the Mead Corporation of Ohio, founded in 1846 as a paper, packaging, and school supplies manufacturer. Indeed, countless generations of American schoolchildren have carried around Mead notebooks. But the focus brings us to 1968, when Mead's interest in acquiring a certain inkjet printing technology led it to acquire a smaller company. Included in the $6 million purchase price was an electronic information retrieval system developed for the U.S. Air Force.

That supposed “throw in” turned out to be the far more valuable asset; over the years, Mead developed it into the now-ubiquitous LEXIS/NEXIS, well-known to the readers of this journal as a vital source of all types of legal and business data. Mead sold LEXIS/NEXIS in 1994 for $1.5 billion, and booked a handsome $1 billion in capital gains.

Mead did not report any of the gain on its Illinois tax returns for 1994, asserting that the money was non-business income, allocated solely to its domiciliary state of Ohio, and not taxable under Illinois' own tax regulations. The tax officials of the Prairie State disagreed, issued a deficiency notice, and haled the taxpayer into Illinois state court.

Turning to the proceedings below, the Supreme Court relates that the controversy was subjected to a bench trial, and, most helpfully, the parties had put aside their differences to stipulate to most, if not all, of the pertinent facts. First launched in 1973, LEXIS initially lost money, but as more professionals began to use the latest electronic wonder, the service became remarkably profitable. Between 1988 and 1993 (the year before Mead sold LEXIS/NEXIS), the data retrieval service accounted for $800 million out of the $3.8 billion in income that Mead reported on its Illinois tax returns. Conversely, $680 million in business expense deductions was attributed to LEXIS, out of $4.5 billion in deductions Mead claimed to Illinois for those same tax years.

Other facts pertinent to the case (and also benchmarks for future planning on this issue) reveal that LEXIS operated with a great deal of autonomy from its parent. Mead did not run LEXIS day-to-day from its Ohio headquarters; rather, the unit enjoyed a separate management team based in Illinois. Everything was separate; manufacturing, sales, and distribution operations, as well as (significantly) accounting, legal, human resources, credit, and marketing functions. Mead would bless its subsidiary's annual business plan, approve extraordinary corporate transactions, and make a daily sweep of the unit's cash into the parent's bank accounts. But the dichotomy was such that Mead would lease new office equipment to LEXIS instead of buying it outright for the division. Finally, the gulf between the parent and subsidiary was such that LEXIS did not even buy its paper from Mead; ironic, since the latter has been primarily a paper company since before the American Civil War.

With regard to tax planning, LEXIS was incorporated as one of Mead's wholly owned subsidiaries until 1980, when it was merged into the parent. Mead so engineered this change in order to exploit the division's net operating loss carry-forwards. LEXIS was reincorporated separately in 1985, merged back into Mead in 1993, and then sold in 1994. Tax considerations motivated each and every one of these moves, and Mead also treated LEXIS as a unitary business on its consolidated Illinois returns for 1988 through 1994, albeit to avoid a lawsuit with an insistent state tax authority.

Procedural History

The Illinois trial court held that LEXIS and Mead did not constitute a unitary business, primarily because Mead and LEXIS were not functionally integrated, centrally managed, nor did they enjoy economies of scale. Nevertheless, the trial judge found that the unit factored into the parent's strategic planning, particularly in the allocation of resources. Holding that LEXIS served an “operational purpose” in Mead's business, the court ruled that Illinois could tax an apportioned share of the parent's capital gain from the LEXIS sale.

An intermediate court affirmed for the state, finding that LEXIS served an “operational function” within Mead's business, for reasons that: 1) the parent wholly owned the subsidiary; 2) Mead exercised control over LEXIS via “manipulating” its corporate form, approving capital outlays, and “sweeping” its excess cash into the parent's accounts, and 3) Mead described itself in its annual reports as the operator of the world's foremost electronic retrieval service, i.e., LEXIS. To be sure, the appellate court disregarded the unitary business issue. When Illinois' highest state tribunal refused to intercede, the matter found itself before the U.S. Supreme Court.

The Supreme Court Decision

Justice Alito did not hesitate in acknowledging the constitutional implications of this controversy, doing so in the opening sentence of the opinion: “The Due Process and Commerce Clauses forbid the States to tax 'extraterritorial value.'” See Container Corp. of America v. Franchise Tax Board, 463 U.S. 159, 164 (1983). Rather, the states are permitted to tax “an apportioned share of the value generated by the intrastate and extrastate activities of a multistate enterprise if those activities form part of a 'unitary business.'” See Hunt-Wesson, Inc. v. Franchise Tax Board of California, 528 U.S. 458, 460 (2000). The High Court postulated the question before it as Illinois' constitutional right to tax an apportioned share of the capital gain of Mead, an admittedly out-of-state entity, when it sold LEXIS, one of its divisions.

Not holding anyone in suspense, Justice Alito clearly stated that “[b]ecause we conclude that the [Illinois] courts misapprehended the principles that we have developed for determining whether a multistate's business is unitary,” the state court decision was overturned. Further defining this misapprehension by the judges below, the justices “perceive[d] a more fundamental error ' [T]he state courts erred in considering whether Lexis served an 'operational purpose' in Mead's business after determining that Lexis and Mead were not unitary.”

The constitutional aspects of this case are what concerned the nation's highest court. Justice Alito wrote that the Commerce Clause and the Due Process Clause “impose distinct but parallel limitations on a State's power to tax out-of-state activities.” See Quill Corp. v. North Dakota, 504 U.S. 298, 305-06 (1992). The former demands that there be some definitive link, at least some minimum connection, between the state and the person or property it seeks to tax, as well as a rational relationship between the tax itself and the values connected with the taxing state. The latter constitutional proviso forbids the states from levying taxes that discriminate against interstate commerce or unfairly burden it with multiple or unfairly apportioned taxation. See Sabino, supra (analyzing South Central Bell). Justice Alito reminds us that both constitutional strictures subsume a broad inquiry as to whether or not the taxing power wielded by the state bears fiscal relationship to the opportunities and benefits given by that same state to the one it seeks to tax. See Wisconsin v. J.C. Penney Co., 311 U.S. 435, 444 (1940).

When, as is the case here, the taxpayer has done some business in the taxing state, the inquiry shifts from whether the state can tax to what it may tax. “To answer that question, we have developed the unitary business principle,” which provides that a state may tax an apportioned sum of the corporation's multistate business if the business is indeed unitary. Adjudicators must determine whether in-state and out-of-state activities were part of a single, unified endeavor. In contradistinction, if extrastate values are derived from a distinctive activity within a discrete business enterprise, then the state is powerless to tax revenue so gained from outside its borders.

Some 15 years ago, the High Court had traced the history of “this venerable principle” in the case of Allied-Signal, Inc. v. Director, Divison of Taxation, 504 U.S. 768, 778-83 (1992), “and, because it figures prominently in this case, we retrace it briefly here.” Notably, the history of the pertinent legal axiom closely mirrors the nation's economic development. With the coming of the Industrial Revolution, the United States witnessed the emergence of its first truly multistate businesses, first and foremost among them the railroads. For the first time, the states confronted the dilemma of being unable to tax a fair share of the value of an interstate business by simply taxing the capital within their own borders.

Recognizing this as early as 1876 in the State Railroad Cases, 92 U.S. 575 (1876), the Supreme Court devised the unitary business principle, which addresses the problem by shifting the constitutional inquiry from taxing based upon mere geography to assessments determined by the taxpayer's actual business. So, if a state wished to tax value rooted in a combined in-state/out-of-state enterprise, it could tax an apportioned share of the value of that unitary business (as opposed to artificially segregating the taxpayer's intrastate operations). “Conversely,” Justice Alito carefully pointed out, “if the value the State wished to tax derived from a 'discrete business enterprise,' then the State could not tax even an apportioned share of that value.” See Mobil Oil Corp. v. Commissioner of Taxes of Vermont, 445 U.S. 425, 439 (1980); Container Corp., supra, 463 U.S. at 165-66.

Against this history, Justice Alito refined the Court's earlier pronouncements by declaring that previous references to “operational functions” did not signal the creation of a new ground for apportionment. “The concept of operational function simply recognizes that an asset can be a part of a taxpayer's unitary business even if what we may term a 'unitary relationship' does not exist.” To the contrary, concluding that a taxable asset fulfills an operational function is “merely instrumental to the constitutionally relevant conclusion that the asset was a unitary part of the business being conducted in the taxing State rather than a discrete asset to which the State had no claim.” (emphasis supplied). Simply put, explained the High Court, recent precedents on this issue “did not announce a new ground for constitutional apportionment of extrastate values in the absence of a unitary business.” Because the Illinois state courts interpreted those maxims to the contrary, they erred and reversal was mandated.

Nearing its conclusion, the Supreme Court reconfirmed its standing instructions on the subject. In cases such as this, where the asset in issue is a distinct business unit, “we have described the 'hallmarks' of a unitary relationship as functional integration, centralized management, and economies of scale.” The Illinois trial court found these touchstones lacking, while the state appellate panel did not even determine that discrete issue. These errors warranted a remand so that the Illinois appeals court could take up that very question.

How Do Modern Law Firms Compare?

In reviewing MeadWestvaco, we come away with a fair degree of comfort, surprising because this is such a tumultuous and controversial area of the law. Indeed, as current economic woes continue, states suffering from decreasing tax revenues are more likely than not to be more aggressive in taxing anything and everything they can get their hands on. The instant case should give them pause, and compel greater adherence to legal principles already espoused.

Notwithstanding, we have to contrast how this mulitstate corporate entity did business with how a national law firm manages its own affairs. Crucial to the High Court's decision was the high degree of autonomy LEXIS enjoyed during its life as Mead's affiliate: independent management, separate facilities, minimal oversight, minimal cross-dealings. Again, the mere fact that the ostensible subsidiary did not even purchase its paper from a parent that has been a paper manufacturer for a century and a half speaks volumes that these businesses were truly divided.

How do modern law firms compare? In some instances, not well at all. Many firms maintain mere outposts, relatively lightly staffed, and mere extensions of the primary office. Moreover, note well the exertion of quality control from the home office or a firm committee on professional responsibility. This lack of autonomy stands in sharp contradistinction to the independence LEXIS enjoyed, and therefore opens up the doors to entirely different tax treatment. Law firms might fare better when (as some do) with a structure that fosters autonomy between offices, establishes independent profit centers, and otherwise aligns their law practice a little bit more closely to that of the typical corporate operation as identified in the High Court's latest pronouncement.

Returning to the safer and more sober ground of the higher legal principles we find in MeadWestvaco, we see the High Court carefully shepherding the modern evolution of unitary business taxation principles. The justices' careful inspection of the axioms of constitutionally limited state taxation demonstrates that the Court will not condone the states' ranging far afield in search of permissible tax revenue. In short, the Supreme Court is apparently well pleased with how it has fostered the logical and necessary adaptation of the unitary business principle, and it will confine the states to operate well within the borders the High Court proscribes.

To be sure, the Supreme Court has assured the solidity of the limitations upon the taxing powers of the several states. But given the diverse styles in which modern law firms manage their multistate network of offices, it is difficult to forecast exactly how this will impact the profession. Therefore, two penultimate points need to be kept in mind: 1) management style affects taxes to be paid; and 2) in the years to come we will no doubt have yet another landmark case to give us something new to think about.

Anthony Michael Sabino is a Professor of Law at St. John's University, Tobin Business College and a Partner at Sabino & Sabino, P.C. He specializes in complex business litigation, and his numerous published articles have been cited by federal courts across the nation. He frequently appears in the media as an expert on legal and business issues. Prof. Sabino dedicates this article to the memory of his late wife and partner, Mary Jane C. Sabino.

For at least the last two decades, law firms have continually expanded their operations across state lines (and national boundaries as well). Even with the current downturn, this trend may slow down, but it most certainly will not abate. Thus, much like any other multistate enterprise, today's law firms have to confront the intriguing and difficult questions of the power of the several states to tax operations that extend across state lines. The controversy is magnified because these are no mere issues of rates and calculations; rather, they take on great significance because they raise constitutional questions. See Sabino, “For Whom The South Central Bell Tolls,” 189 Journal of Accountancy 73 (January 2000) (Alabama's uneven taxation of an out-of-state enterprise violated Commerce Clause of the U.S. Constitution).

The U.S. Supreme Court recently added another crucial landmark on this constitutional quagmire, in the aspect of the “unitary business” taxation of a multistate enterprise. To be sure, this is only the newest in a long line of cases on the subject, but as such it makes fertile ground for discussion. With that in mind, let us turn to what the High Court now instructs us.

The MeadWestvaco Corporation Facts

The case is titled MeadWestvaco Corporation v. Illinois Department of Revenue , 128 S.Ct. 1498 (2008), and the opinion is authored by the High Court's newest member, Associate Justice Samuel A. Alito, Jr. The unanimous opinion relates the following facts. MeadWestvaco is the successor of the Mead Corporation of Ohio, founded in 1846 as a paper, packaging, and school supplies manufacturer. Indeed, countless generations of American schoolchildren have carried around Mead notebooks. But the focus brings us to 1968, when Mead's interest in acquiring a certain inkjet printing technology led it to acquire a smaller company. Included in the $6 million purchase price was an electronic information retrieval system developed for the U.S. Air Force.

That supposed “throw in” turned out to be the far more valuable asset; over the years, Mead developed it into the now-ubiquitous LEXIS/NEXIS, well-known to the readers of this journal as a vital source of all types of legal and business data. Mead sold LEXIS/NEXIS in 1994 for $1.5 billion, and booked a handsome $1 billion in capital gains.

Mead did not report any of the gain on its Illinois tax returns for 1994, asserting that the money was non-business income, allocated solely to its domiciliary state of Ohio, and not taxable under Illinois' own tax regulations. The tax officials of the Prairie State disagreed, issued a deficiency notice, and haled the taxpayer into Illinois state court.

Turning to the proceedings below, the Supreme Court relates that the controversy was subjected to a bench trial, and, most helpfully, the parties had put aside their differences to stipulate to most, if not all, of the pertinent facts. First launched in 1973, LEXIS initially lost money, but as more professionals began to use the latest electronic wonder, the service became remarkably profitable. Between 1988 and 1993 (the year before Mead sold LEXIS/NEXIS), the data retrieval service accounted for $800 million out of the $3.8 billion in income that Mead reported on its Illinois tax returns. Conversely, $680 million in business expense deductions was attributed to LEXIS, out of $4.5 billion in deductions Mead claimed to Illinois for those same tax years.

Other facts pertinent to the case (and also benchmarks for future planning on this issue) reveal that LEXIS operated with a great deal of autonomy from its parent. Mead did not run LEXIS day-to-day from its Ohio headquarters; rather, the unit enjoyed a separate management team based in Illinois. Everything was separate; manufacturing, sales, and distribution operations, as well as (significantly) accounting, legal, human resources, credit, and marketing functions. Mead would bless its subsidiary's annual business plan, approve extraordinary corporate transactions, and make a daily sweep of the unit's cash into the parent's bank accounts. But the dichotomy was such that Mead would lease new office equipment to LEXIS instead of buying it outright for the division. Finally, the gulf between the parent and subsidiary was such that LEXIS did not even buy its paper from Mead; ironic, since the latter has been primarily a paper company since before the American Civil War.

With regard to tax planning, LEXIS was incorporated as one of Mead's wholly owned subsidiaries until 1980, when it was merged into the parent. Mead so engineered this change in order to exploit the division's net operating loss carry-forwards. LEXIS was reincorporated separately in 1985, merged back into Mead in 1993, and then sold in 1994. Tax considerations motivated each and every one of these moves, and Mead also treated LEXIS as a unitary business on its consolidated Illinois returns for 1988 through 1994, albeit to avoid a lawsuit with an insistent state tax authority.

Procedural History

The Illinois trial court held that LEXIS and Mead did not constitute a unitary business, primarily because Mead and LEXIS were not functionally integrated, centrally managed, nor did they enjoy economies of scale. Nevertheless, the trial judge found that the unit factored into the parent's strategic planning, particularly in the allocation of resources. Holding that LEXIS served an “operational purpose” in Mead's business, the court ruled that Illinois could tax an apportioned share of the parent's capital gain from the LEXIS sale.

An intermediate court affirmed for the state, finding that LEXIS served an “operational function” within Mead's business, for reasons that: 1) the parent wholly owned the subsidiary; 2) Mead exercised control over LEXIS via “manipulating” its corporate form, approving capital outlays, and “sweeping” its excess cash into the parent's accounts, and 3) Mead described itself in its annual reports as the operator of the world's foremost electronic retrieval service, i.e., LEXIS. To be sure, the appellate court disregarded the unitary business issue. When Illinois' highest state tribunal refused to intercede, the matter found itself before the U.S. Supreme Court.

The Supreme Court Decision

Justice Alito did not hesitate in acknowledging the constitutional implications of this controversy, doing so in the opening sentence of the opinion: “The Due Process and Commerce Clauses forbid the States to tax 'extraterritorial value.'” See Container Corp. of America v. Franchise Tax Board , 463 U.S. 159, 164 (1983). Rather, the states are permitted to tax “an apportioned share of the value generated by the intrastate and extrastate activities of a multistate enterprise if those activities form part of a 'unitary business.'” See Hunt-Wesson, Inc. v. Franchise Tax Board of California , 528 U.S. 458, 460 (2000). The High Court postulated the question before it as Illinois' constitutional right to tax an apportioned share of the capital gain of Mead, an admittedly out-of-state entity, when it sold LEXIS, one of its divisions.

Not holding anyone in suspense, Justice Alito clearly stated that “[b]ecause we conclude that the [Illinois] courts misapprehended the principles that we have developed for determining whether a multistate's business is unitary,” the state court decision was overturned. Further defining this misapprehension by the judges below, the justices “perceive[d] a more fundamental error ' [T]he state courts erred in considering whether Lexis served an 'operational purpose' in Mead's business after determining that Lexis and Mead were not unitary.”

The constitutional aspects of this case are what concerned the nation's highest court. Justice Alito wrote that the Commerce Clause and the Due Process Clause “impose distinct but parallel limitations on a State's power to tax out-of-state activities.” See Quill Corp. v. North Dakota , 504 U.S. 298, 305-06 (1992). The former demands that there be some definitive link, at least some minimum connection, between the state and the person or property it seeks to tax, as well as a rational relationship between the tax itself and the values connected with the taxing state. The latter constitutional proviso forbids the states from levying taxes that discriminate against interstate commerce or unfairly burden it with multiple or unfairly apportioned taxation. See Sabino, supra (analyzing South Central Bell). Justice Alito reminds us that both constitutional strictures subsume a broad inquiry as to whether or not the taxing power wielded by the state bears fiscal relationship to the opportunities and benefits given by that same state to the one it seeks to tax. See Wisconsin v. J.C. Penney Co. , 311 U.S. 435, 444 (1940).

When, as is the case here, the taxpayer has done some business in the taxing state, the inquiry shifts from whether the state can tax to what it may tax. “To answer that question, we have developed the unitary business principle,” which provides that a state may tax an apportioned sum of the corporation's multistate business if the business is indeed unitary. Adjudicators must determine whether in-state and out-of-state activities were part of a single, unified endeavor. In contradistinction, if extrastate values are derived from a distinctive activity within a discrete business enterprise, then the state is powerless to tax revenue so gained from outside its borders.

Some 15 years ago, the High Court had traced the history of “this venerable principle” in the case of Allied-Signal, Inc. v. Director, Divison of Taxation , 504 U.S. 768, 778-83 (1992), “and, because it figures prominently in this case, we retrace it briefly here.” Notably, the history of the pertinent legal axiom closely mirrors the nation's economic development. With the coming of the Industrial Revolution, the United States witnessed the emergence of its first truly multistate businesses, first and foremost among them the railroads. For the first time, the states confronted the dilemma of being unable to tax a fair share of the value of an interstate business by simply taxing the capital within their own borders.

Recognizing this as early as 1876 in the State Railroad Cases, 92 U.S. 575 (1876), the Supreme Court devised the unitary business principle, which addresses the problem by shifting the constitutional inquiry from taxing based upon mere geography to assessments determined by the taxpayer's actual business. So, if a state wished to tax value rooted in a combined in-state/out-of-state enterprise, it could tax an apportioned share of the value of that unitary business (as opposed to artificially segregating the taxpayer's intrastate operations). “Conversely,” Justice Alito carefully pointed out, “if the value the State wished to tax derived from a 'discrete business enterprise,' then the State could not tax even an apportioned share of that value.” See Mobil Oil Corp. v. Commissioner of Taxes of Vermont , 445 U.S. 425, 439 (1980); Container Corp., supra, 463 U.S. at 165-66.

Against this history, Justice Alito refined the Court's earlier pronouncements by declaring that previous references to “operational functions” did not signal the creation of a new ground for apportionment. “The concept of operational function simply recognizes that an asset can be a part of a taxpayer's unitary business even if what we may term a 'unitary relationship' does not exist.” To the contrary, concluding that a taxable asset fulfills an operational function is “merely instrumental to the constitutionally relevant conclusion that the asset was a unitary part of the business being conducted in the taxing State rather than a discrete asset to which the State had no claim.” (emphasis supplied). Simply put, explained the High Court, recent precedents on this issue “did not announce a new ground for constitutional apportionment of extrastate values in the absence of a unitary business.” Because the Illinois state courts interpreted those maxims to the contrary, they erred and reversal was mandated.

Nearing its conclusion, the Supreme Court reconfirmed its standing instructions on the subject. In cases such as this, where the asset in issue is a distinct business unit, “we have described the 'hallmarks' of a unitary relationship as functional integration, centralized management, and economies of scale.” The Illinois trial court found these touchstones lacking, while the state appellate panel did not even determine that discrete issue. These errors warranted a remand so that the Illinois appeals court could take up that very question.

How Do Modern Law Firms Compare?

In reviewing MeadWestvaco, we come away with a fair degree of comfort, surprising because this is such a tumultuous and controversial area of the law. Indeed, as current economic woes continue, states suffering from decreasing tax revenues are more likely than not to be more aggressive in taxing anything and everything they can get their hands on. The instant case should give them pause, and compel greater adherence to legal principles already espoused.

Notwithstanding, we have to contrast how this mulitstate corporate entity did business with how a national law firm manages its own affairs. Crucial to the High Court's decision was the high degree of autonomy LEXIS enjoyed during its life as Mead's affiliate: independent management, separate facilities, minimal oversight, minimal cross-dealings. Again, the mere fact that the ostensible subsidiary did not even purchase its paper from a parent that has been a paper manufacturer for a century and a half speaks volumes that these businesses were truly divided.

How do modern law firms compare? In some instances, not well at all. Many firms maintain mere outposts, relatively lightly staffed, and mere extensions of the primary office. Moreover, note well the exertion of quality control from the home office or a firm committee on professional responsibility. This lack of autonomy stands in sharp contradistinction to the independence LEXIS enjoyed, and therefore opens up the doors to entirely different tax treatment. Law firms might fare better when (as some do) with a structure that fosters autonomy between offices, establishes independent profit centers, and otherwise aligns their law practice a little bit more closely to that of the typical corporate operation as identified in the High Court's latest pronouncement.

Returning to the safer and more sober ground of the higher legal principles we find in MeadWestvaco, we see the High Court carefully shepherding the modern evolution of unitary business taxation principles. The justices' careful inspection of the axioms of constitutionally limited state taxation demonstrates that the Court will not condone the states' ranging far afield in search of permissible tax revenue. In short, the Supreme Court is apparently well pleased with how it has fostered the logical and necessary adaptation of the unitary business principle, and it will confine the states to operate well within the borders the High Court proscribes.

To be sure, the Supreme Court has assured the solidity of the limitations upon the taxing powers of the several states. But given the diverse styles in which modern law firms manage their multistate network of offices, it is difficult to forecast exactly how this will impact the profession. Therefore, two penultimate points need to be kept in mind: 1) management style affects taxes to be paid; and 2) in the years to come we will no doubt have yet another landmark case to give us something new to think about.

Anthony Michael Sabino is a Professor of Law at St. John's University, Tobin Business College and a Partner at Sabino & Sabino, P.C. He specializes in complex business litigation, and his numerous published articles have been cited by federal courts across the nation. He frequently appears in the media as an expert on legal and business issues. Prof. Sabino dedicates this article to the memory of his late wife and partner, Mary Jane C. Sabino.