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Maryland Tax Court holds intangible holding company had corporate income tax nexus

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The Maryland Tax Court has held that an out-of-state intangible holding company had corporate income tax nexus with Maryland because it was considered to have no real economic substance as a business entity separate from its parent company. According to the Tax Court, the imposition of tax on the intangible holding company satisfied both the Due Process and Commerce Clauses of the U.S. Constitution. Because the holding company’s income was produced from the parent company’s business in Maryland, sufficient nexus was established to tax the holding company. The Tax Court also held that the Maryland Comptroller properly used a blended apportionment factor based on the income tax returns of the related entities that filed in Maryland.

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