Department of Revenue of State of Colorado v. Oracle Corporation And Subsidiaries

          Certiorari to the Colorado Court of Appeals Court of Appeals Case No. 16CA1316

          Attorneys for Petitioners: Philip J. Weiser, Attorney General Terence C. Gill, First Assistant Attorney General Noah C. Patterson, Senior Assistant Attorney General Denver, Colorado

          Attorneys for Respondent: Silverstein & Pomerantz LLP Neil I. Pomerantz Mark E. Medina Michelle Bush Denver, Colorado

          Attorneys for Amicus Curiae Colorado Association of Commerce and Industry: The Poe Law Office LLC Alan Poe Rachel Poe Centennial, Colorado

          Attorneys for Amicus Curiae Council on State Taxation: Holland & Hart LLP Christina F. Gomez Jonathan S. Bender Denver, Colorado

          Attorneys for Amicus Curiae Multistate Tax Commission: Ruegsegger Simons Smith & Stern, LLC Anthony E. Derwinski Jeffrey C. Staudenmayer Denver, Colorado

          Attorney for Amici Curiae Professors David Gamage, Hayes Holderness, and Darien Shanske: Isaac L. Lodico Denver, Colorado

          OPINION

          GABRIEL, JUSTICE

         ¶1 This case, like Department of Revenue v. Agilent Technologies, Inc., 2019 CO __, P.3d__, which we are also announcing today, principally requires us to decide two questions. First, we must determine whether the Colorado Department of Revenue and Michael Hartman, in his official capacity as the Executive Director of the Department (the "Director" and collectively with the Department, the "Department"), can require Oracle Corporation ("Oracle") to include its holding company, Oracle Japan Holding, Inc. ("OJH"), in its Colorado combined income tax return for the tax year ending May 31, 2000. Second, if the answer to that question is no, then we must consider whether the Department may nevertheless allocate OJH's gain from the sale of shares that it held in Oracle Corporation Japan ("Oracle Japan") to Oracle in order to avoid abuse and to clearly reflect income.^[1]

         ¶2 For the reasons set forth in Agilent Technologies, we conclude that the pertinent statutory provisions and regulations do not permit the Department either to require Oracle to include OJH in its combined tax return for the tax year at issue or to allocate OJH's capital gains income to Oracle. Accordingly, we conclude that the district court properly granted summary judgment in Oracle's favor, and we therefore affirm the judgment of the division below.^[2]

         I. Facts and Procedural History

         ¶3 Oracle is a Delaware corporation headquartered in California, and it is the parent of a worldwide group of affiliated corporations.

         ¶4 OJH is a Delaware corporation and a wholly-owned subsidiary of Oracle. Oracle formed OJH in 1991, pursuant to the terms of a loan secured by Oracle from Nippon Steel, an unaffiliated Japanese entity. During the time period at issue, OJH owned no real or tangible personal property, had no payroll, and conducted no activities of any kind in Colorado. Rather, it existed solely as a holding company.

         ¶5 As pertinent here, during the period at issue, OJH held stock in Oracle Japan, and in April 2000, it sold 8.7 million shares of that stock on the Tokyo Stock Exchange, realizing capital gains of approximately $6.4 billion. The tax ...