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NOTICE: This opinion is subject to motions for rehearing under Rule 22 as well as formal revision before publication in the New Hampshire Reports. Readers are requested to notify the Reporter, Supreme Court of New Hampshire, One Charles Doe Drive, Concord, New Hampshire 03301, of any editorial errors in order that corrections may be made before the opinion goes to press. Errors may be reported by E-mail at the following address: reporter@courts.state.nh.us. Opinions are available on the Internet by 9:00 a.m. on the morning of their release. The direct address of the court's home page is: http://www.courts.state.nh.us/supreme. THE SUPREME COURT OF NEW HAMPSHIRE ___________________________ Merrimack No. 2005-668 GENERAL ELECTRIC COMPANY, INC. v. COMMISSIONER, NEW HAMPSHIRE DEPARTMENT OF REVENUE ADMINISTRATION Argued: July 21, 2006 Opinion Issued: December 5, 2006 Rath, Young and Pignatelli, P.A., of Concord (William F. J. Ardinger and Andrew W. Serell on the brief, and Mr. Ardinger orally), and Walter Hellerstein, of Athens, Georgia, on the brief, for the plaintiff. Kelly A. Ayotte, attorney general (Karen A. Schlitzer, assistant attorney general, on the brief and orally), and Kathleen J. Sher, of Concord, on the brief, for the defendant. HICKS, J. The plaintiff, General Electric Company, Inc. (GE), appeals the decision of the Superior Court (Fitzgerald, J.) granting motions filed by the defendant, New Hampshire Department of Revenue Administration (department), to dismiss for lack of standing and for summary judgment. We reverse the grant of the motion to dismiss and affirm the grant of the motion for summary judgment.

The record supports the following facts. This case involves business profits taxes paid by GE from 1990 through 1999 (the tax years). GE is a New York corporation with its principal offices in Connecticut, and with a place of business in Somersworth, New Hampshire. GE is the parent corporation of numerous affiliated corporations both domestic and foreign. None of GE's foreign affiliates was domiciled in or transacted business within New Hampshire during the tax years. During the tax years, GE transacted business within New Hampshire as a "business organization" and was subject to the business profits tax (BPT). RSA 77-A:1, I (2003) (amended 2004), :2 (2003), :6, I (2003). GE paid the BPT during the tax years, but maintains that its tax liability was miscalculated resulting in overpayment. Specifically, GE challenges the constitutionality of RSA 77-A:4, IV (2003), which permits a parent corporation to take a deduction for dividends received from its corporate subsidiaries when the gross business profits of the subsidiaries have already been subject to tax in New Hampshire. The department denied GE's requests to use this deduction for dividends it received from its foreign subsidiaries, since they did not transact business in the state and therefore their gross business profits were not subject to tax in New Hampshire. GE and the department executed two settlement agreements agreeing, among other things, that GE would receive a refund of approximately $3.15 million should the foreign dividend deduction issue be resolved in GE's favor. GE subsequently filed with the department requests for refunds and petitions for redetermination and reconsideration regarding its BPT returns. Because the department's hearings officer lacked the authority to determine the constitutionality of RSA 77-A:4, IV, GE petitioned the superior court for review pursuant to RSA 21-J:28-b, IV (2000) (amended 2003). GE moved for summary judgment and the department moved to dismiss and for summary judgment. The trial court granted the department's motion to dismiss on the ground that GE lacked standing to challenge RSA 77-A:4, IV. The trial court alternatively granted the department's motion for summary judgment finding that, even if GE had standing to challenge the statute, the deduction in RSA 77-A:4, IV does not discriminate against foreign commerce in violation of the Commerce Clause of the Federal Constitution. We begin with a review of New Hampshire's BPT regime. Calculation of a business's tax liability requires an initial determination of whether the business is "unitary" within the meaning of RSA 77-A:1, XIV (2003). A "unitary business" is "one or more related business organizations engaged in business activity both within and without this state among which there exists a unity of ownership, operation, and use; or an interdependence in their functions." RSA 77-A:1, XIV. Neither party disputes that GE and its subsidiaries operate as a unitary business.

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The tax liability of a unitary business is calculated using a combined reporting method that apportions the income of the unitary business to the state. RSA 77-A:1, XIII, XV, XVI (2003). The income from all domestic members of the unitary business, which are collectively referred to as the "water's edge combined group," RSA 77-A:1, XV, is aggregated in the combined report. RSA 77-A:1, XVI. The income of foreign members of the unitary business is excluded from the combined report if the foreign members qualify as an "overseas business organization[ ]." RSA 77-A:1, XV. "Overseas business organizations" (OBOs) are those business organizations "with 80 percent or more of the average of their payroll and property assignable to a location outside the 50 states and the District of Columbia." RSA 77-A:1, XIX (2003). Although an OBO is not considered part of the water's edge combined group, it may still qualify as a unitary member. RSA 77-A:1, XIV, XV. Once the net income from all members of the water's edge group is combined, any domestic "intergroup activity" such as the payment of dividends or royalties is excluded in determining the "gross business profits" of the group. N.H. Admin. Rules, Rev 302.10(b); see RSA 77-A:3, I (2003). The "gross business profits" are then apportioned to the state using three factors: property, payroll and sales. RSA 77-A:3, I. The resulting amount constitutes the "New Hampshire water's edge taxable business profits" of the group. See RSA 77-A:1, IV, XV, XVI; N.H. Admin. Rules, Rev 301.02. In this calculation, the dividends of an OBO that are paid to a member of the water's edge combined group are initially excluded from the group's gross business profits and are apportioned separately to determine the "New Hampshire foreign dividends taxable business profits." RSA 77-A:3, II(b) (2003); N.H. Admin. Rules, Rev 311.24(a), (f). The "New Hampshire foreign dividends taxable business profits" are then added to the "New Hampshire water's edge taxable business profits" to produce "New Hampshire taxable business profits." RSA 77-A:3, II(b)(6). The applicable tax rate is then applied, resulting in the tax due. RSA 77-A:2 (2003). In this manner, dividends paid by a foreign member of the unitary group to domestic members are apportioned to New Hampshire and taxed. Pursuant to the parties' settlement agreement, GE and its domestic unitary affiliates are to be treated as one water's edge combined group within the meaning of RSA 77-A:1, XV. As such, the income of GE's foreign subsidiaries was excluded from the calculation of GE's tax liability for the tax years because each was an OBO within the meaning of RSA 77-A:1, XIX. However, pursuant to RSA 77-A:3, II(b), the dividends paid to GE by its foreign subsidiaries remained subject to an apportioned tax. It is the inclusion of these foreign dividends in calculating GE's taxable business profits that GE contests in this appeal. RSA 77-A:4, IV provides for the following deduction from gross business profits: 3

In the case of a corporation which is the parent of an affiliated group pursuant to the provisions of chapter 6 of the United States Internal Revenue Code as defined in RSA 77-A:1, XX, a deduction of such amounts of gross business profits as are derived from dividends paid to the parent by a subsidiary or subsidiaries whose gross business profits have already been subject to taxation under this chapter during the same taxable period. The purpose of this deduction is to prevent double taxation on the identical gross business profits of a controlled corporation or group of corporations and its parents. RSA 77-A:4, IV has traditionally been used by corporations with affiliates or subsidiaries that file separately, and not under the combined reporting method. In such instances, RSA 77-A:4, IV allows a deduction for dividends paid to taxable parent corporations by subsidiaries that conducted business in the state and were therefore subject to a separate BPT. The dividends received from foreign subsidiaries that do not conduct business in the state and, accordingly, pay no BPT, do not qualify for the deduction allowed by the statute. RSA 77-A:4, IV. On appeal, GE argues that the trial court improperly granted the department's motion for summary judgment and that by limiting the dividendsreceived deduction to those parents whose subsidiaries conduct business in the state, the statute facially discriminates against foreign commerce in violation of the Commerce Clause of the United States Constitution. GE also appeals the trial court's grant of the department's motion to dismiss based upon a lack of standing. I. Motion to Dismiss In considering a motion to dismiss, our standard of review is whether the allegations in the plaintiff's pleadings are reasonably susceptible of a construction that would permit recovery. We assume the plaintiff's pleadings to be true and construe all reasonable inferences drawn therefrom most favorably to it. We need not assume the truth of statements in the plaintiff's complaint, however, which are merely conclusions of law. In re Juvenile 2004-789, 153 N.H. 332, 334 (2006) (quotation and brackets omitted). Since the trial court applied RSA 77-A:4, IV to an undisputed set of facts, this appeal presents a question of law that we review de novo. Id. 4

For a court to hear a party's complaint, the party must have standing to assert the claim. Appeal of Richards, 134 N.H. 148, 154, cert. denied, 502 U.S. 899 (1991). The general rule in New Hampshire is that a party has standing to raise a constitutional issue only when the party's own rights have been or will be directly affected. Hughes v. N.H. Div. of Aeronautics, 152 N.H. 30, 35 (2005). The trial court found that GE failed to show that "RSA 77-A:4, IV directly and specifically affect[ed] its rights." Adopting the department's statutory application argument, the court found that the statute did not apply generally to parents with foreign subsidiaries. The court also found that RSA 77-A:4, IV did not apply specifically to GE since "the purpose of the statute is to prevent double taxation" and GE's foreign subsidiaries were never subject to taxation in New Hampshire. To qualify for the dividend-received deduction, RSA 77-A:4, IV requires that the dividend recipient must qualify as a "parent of an affiliated group" as defined by the United States Internal Revenue Code (IRC). RSA 77-A:4, IV. Section 1504(a) of the IRC defines "affiliated group," in part, as: "1 or more chains of includable corporations connected through stock ownership with a common parent." 26 U.S.C.

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