The Colorado Court of Appeals, affirming a decision of the Denver District Court, has held that the Colorado Department of Revenue cannot forcibly combine a corporation’s subsidiary, a holding company that derived its income solely from investments in foreign entities, in Agilent Technologies, Inc. v. Department of Revenue of the State of Colorado, et al. (Nov. 2, 2017). The appellate court held that the application of the Department of Revenue’s regulation, which provides that a corporation without any property or payroll of its own cannot be included in a Colorado combined return, was not limited to foreign sales corporations. The court also ruled that neither a Colorado anti-abuse statute, nor the economic substance doctrine, gave the Department the authority to include the subsidiary in its parent’s combined return.

Morrison & Foerster LLP was lead counsel in this case. Please contact Craig B. Fields, Irwin M. Slomka, or Kara M. Kraman with questions regarding the decision.

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