The US Supreme Court has declined to review two notable cases from Disney [Walt Disney Co. v. New York Tax Appeals Tribunal (No. 24-333), and IBM (International Business Machines Corp. v. New York Tax Appeals Tribunal (No. 24-332)] on 21 January 2025, upholding a New York ruling that bars companies from deducting payments to foreign affiliates for intellectual property under a state law from 2003 to 2013.
The case involved a decade-long double taxation dispute over royalties paid to foreign affiliates. The dispute centered on New York’s royalty expense add-back provision (2003–2013), which required taxpayers to include royalty payments in their federal taxable income that will be allocated to New York. An exclusion allowed these payments to be excluded if affiliates weren’t required to add them back under the law.
The companies argued that this approach failed the internal consistency test, which determines if interstate transactions face higher taxes under a uniform tax framework, and the facial discrimination test, which assesses if the tax unfairly burdens out-of-state commerce.
The New York Court of Appeals rejected both claims leading to tax liabilities of USD 4 million for Disney and USD 64 million for IBM.
