By David Pope and Andrew Appleby

The New Jersey Tax Court denied three summary judgment motions in the ongoing Whirlpool litigation relating to nexus and the “Throwout Rule.” In 2011, the New Jersey Supreme Court held that New Jersey’s Throwout Rule was facially constitutional but narrowed the application of the rule to untaxed receipts from states that lacked jurisdiction to tax the corporation. The taxpayer, an intangibles holding company, subsequently filed a motion for summary judgment in the Tax Court seeking to define the application of the Throwout Rule under the Supreme Court’s decision. The New Jersey Division of Taxation filed a cross-motion for summary judgment asserting that the taxpayer had nexus in New Jersey and was required to remit tax returns before the court could determine the application of the Throwout Rule. In response, the taxpayer filed its own cross-motion for summary judgment arguing a lack of nexus in New Jersey. The court denied all three motions. Both parties’ nexus-related motions were denied because the court found issues of material fact in dispute. In particular, the court stated that whether the taxpayer (1) earned income properly attributable to the state and (2) had a physical presence in the state or exercised control over its parent company’s activities in the state were material facts that remained in dispute relative to the issue of nexus. The court also denied the taxpayer’s original motion seeking to define the application of the Throwout Rule because the issue was premature. The court determined that the nexus issue must be determined as a threshold matter before reaching the Throwout Rule issue. For those watching the Whirlpool litigation, stay tuned, as there should be some interesting developments relating to economic nexus (the Division’s primary nexus argument) and the application of the Throwout Rule as this litigation progresses. Whirlpool Props., Inc. v. Director, Div. of Taxation, Docket No. 000066-2007 (Oct. 22, 2013).