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Maryland Tax Court finds out-of-state subsidiary lacked economic substance separate from Maryland-based parent

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The Maryland Tax Court recently upheld the assessment of state corporate income tax on interest income received by an out-of-state subsidiary from its Maryland-based parent because the subsidiary lacked economic substance separate and apart from its parent. In its decision, the Court also upheld the Maryland Comptroller’s use of the parent company’s apportionment factor to determine the Maryland income of the subsidiary. The Court’s holding is notable for its consistency with a series of Maryland court cases that rely on the economic substance test to establish a finding of nexus.