MEADWESTVACO CORP., successor in interest to MEAD CORP. v. ILLINOIS DEPARTMENT OF REVENUE et al.

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Syllabus
MEADWESTVACO CORP., successor in interest to
MEAD CORP. v. ILLINOIS DEPARTMENT OF
REVENUE et al.
certiorari to the appellate court of illinois, first
district
No. 06–1413. Argued January 16, 2008—Decided April 15, 2008
A State may tax an apportioned share of the value generated by a multi
state enterprise’s intrastate and extrastate activities that form part of
a “ ‘unitary business.’ ” Hunt-Wesson, Inc. v. Franchise Tax Bd. of
Cal., 528 U. S. 458, 460. Illinois taxed a capital gain realized by Mead,
an Ohio corporation that is a wholly owned subsidiary of petitioner,
when Mead sold its Lexis business division. Mead paid the tax and
sued in state court. The trial court found that Lexis and Mead were
not unitary because they were not functionally integrated or centrally
managed and enjoyed no economies of scale. It nevertheless concluded
that Illinois could tax an apportioned share of Mead’s capital gain be
cause Lexis served an operational purpose in Mead’s business. Affirm
ing, the State Appellate Court found that Lexis served an operational
function in Mead’s business and thus did not address whether Mead and
Lexis formed a unitary business.
Held:
1. The state courts erred in considering whether Lexis served an “op
erational purpose” in Mead’s business after determining that Lexis and
Mead were not unitary. Pp. 24–30.
(a) The Commerce and Due Process Clauses impose distinct but
parallel limitations on a State’s power to tax out-of-state activities, and
each subsumes the “broad inquiry” “ ‘whether the taxing power exerted
by the state bears fiscal relation to protection, opportunities and benefits
given by the state,’ ” ASARCO Inc. v. Idaho Tax Comm’n, 458 U. S. 307,
315. Because the taxpayer here did business in the taxing State, the
inquiry shifts from whether the State may tax to what it may tax.
Under the unitary business principle developed to answer that question,
a State need not “isolate the intrastate income-producing activities from
the rest of the business” but “may tax an apportioned sum of the corpo
ration’s multistate business if the business is unitary.” Allied-Signal,
Inc. v. Director, Div. of Taxation, 504 U. S. 768, 772. Pp. 24–25.
(b) To address the problem arising from the emergence of multi
state business enterprises such as railroad and telegraph companies—
namely, that a State could not tax its fair share of such a business’ value

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Syllabus
by simply taxing the capital within its borders—the unitary business
principle shifted the constitutional inquiry from the niceties of geo
graphic accounting to the determination of a taxpayer’s business unit.
If the value the State wished to tax derived from a “unitary business”
operated within and without the State, the State could tax an appor
tioned share of that business’ value instead of isolating the value attrib
utable to the intrastate operation. E. g., Exxon Corp. v. Department
of Revenue of Wis., 447 U. S. 207, 223. But if the value derived from a
“discrete business enterprise,” Mobil Oil Corp. v. Commissioner of
Taxes of Vt., 445 U. S. 425, 439, the State could not tax even an appor
tioned share. E. g., Container Corp. of America v. Franchise Tax Bd.,
463 U. S. 159, 165–166. This principle was extended to a multistate
business that lacked the “physical unity” of wires or rails but exhibited
the “same unity in the use of the entire property for the specific pur
pose,” with “the same elements of value arising from such use,” Adams
Express Co. v. Ohio State Auditor, 165 U. S. 194, 221; and it has justified
apportioned taxation of net income, dividends, capital gain, and other
intangibles. Confronting the problem of how to determine exactly
when a business is unitary, this Court found in Allied-Signal that the
“principle is not so inflexible that as new [finance] methods . . . and new
[business] forms . . . evolve it cannot be modified or supplemented where
appropriate,” 504 U. S., at 786, and explained that situations could occur
in which apportionment might be constitutional even though “the payee
and the payor [were] not . . . engaged in the same unitary business,” id.,
at 787. In that context, the Court observed that an asset could form
part of a taxpayer’s unitary business if it served an “operational rather
than an investment function” in the business, ibid.; and noted that Con
tainer Corp., supra, at 180, n. 19, made the same point. Pp. 25–29.
(c) Thus, the “operational function” references in Container Corp.
and Allied-Signal were not intended to modify the unitary business
principle by adding a new apportionment ground. The operational
function concept simply recognizes that an asset can be a part of a tax
payer’s unitary business even without a “unitary relationship” between
the “payor and payee.” In Allied-Signal and in Corn Products Refin
ing Co. v. Commissioner, 350 U. S. 46, the conclusion that an asset
served an operational function was merely instrumental to the constitu
tionally relevant conclusion that the asset was a unitary part of the
business conducted in the taxing State rather than a discrete asset to
which the State had no claim. Container Corp. and Allied-Signal did
not announce a new ground for constitutional apportionment, and the
Illinois Appellate Court erred in concluding otherwise. Here, where
the asset is another business, a unitary relationship’s “hallmarks” are
functional integration, centralized management, and economies of scale.

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18 MEADWESTVACO CORP. v. ILLINOIS DEPT. OF
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Syllabus
See Mobil Oil Corp., supra, at 438. The trial court found each hallmark
lacking in finding that Lexis was not a unitary part of Mead’s business.
However, the appellate court made no such determination. Relying on
its operational function test, it reserved the unitary business question,
which it may take up on remand. Pp. 29–30.
2. Because the alternative ground for affirmance urged by the State
and its amici—that the record amply demonstrates that Lexis did sub
stantial business in Illinois and that Lexis’ own contacts with the State
suffice to justify the apportionment of Mead’s capital gain—was neither
raised nor passed upon in the state courts, it will not be addressed here.
The case for restraint is particularly compelling here, since the question
may impact other jurisdictions’ laws. Pp. 30–31.
371 Ill. App. 3d 108, 861 N. E. 2d 1131, vacated and remanded.
Alito, J., delivered the opinion for a unanimous Court. Thomas, J.,
filed a concurring opinion, post, p. 32.
Beth S. Brinkmann argued the cause for petitioner. With
her on the briefs were Brian R. Matsui, Paul H. Frankel,
Craig B. Fields, and Roberta Moseley Nero.
Brian F. Barov, Assistant Attorney General of Illinois, ar
gued the cause for respondents. With him on the brief
were Lisa Madigan, Attorney General, Michael A. Scodro,
Solicitor General, and Jane Elinor Notz, Deputy Solicitor
General.*
*Briefs of amici curiae urging reversal were filed for the Council on
State Taxation et al. by Todd A. Lard, Douglas L. Lindholm, Jan S.
Amundson, and Quentin Riegel; for Gannett Co. by Scott D. Smith; for
the Tax Executives Institute, Inc., by Eli J. Dicker, Shirley S. Grimmett,
and Timothy J. McCormally; and for the Walt Disney Co. by Paul R. Q.
Wolfson, Michael H. Salama, and Brandee A. Tilman.
Briefs of amici curiae urging affirmance were filed for the State of
California et al. by Edmund G. Brown, Jr., Attorney General of California,
Manuel M. Medeiros, State Solicitor General, David Chaney, Chief Assist
ant Attorney General, Paul Gifford, Senior Assistant Attorney General,
Gordon Burns, Deputy Solicitor General, and Anne Michelle Burr and
George Spanos, Deputy Attorneys General, by Roberto J. Sa´ nchez-Ramos,
Secretary of Justice of Puerto Rico, and by the Attorneys General for
their respective States as follows: Dustin McDaniel of Arkansas, Richard
Blumenthal of Connecticut, Bill McCollum of Florida, Lawrence G. Was
den of Idaho, Steve Carter of Indiana, Thomas J. Miller of Iowa, Paul J.

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Opinion of the Court
Justice Alito delivered the opinion of the Court.
The Due Process and Commerce Clauses forbid the States
to tax “ ‘extraterritorial values. ’ ” Container Corp. of
America v. Franchise Tax Bd., 463 U. S. 159, 164 (1983); see
also Allied-Signal, Inc. v. Director, Div. of Taxation, 504
U. S. 768, 777 (1992); Mobil Oil Corp. v. Commissioner of
Taxes of Vt., 445 U. S. 425, 441–442 (1980). A State may,
however, tax an apportioned share of the value generated by
the intrastate and extrastate activities of a multistate enter
prise if those activities form part of a “ ‘unitary business.’ ”
Hunt-Wesson, Inc. v. Franchise Tax Bd. of Cal., 528 U. S.
458, 460 (2000); Mobil Oil Corp., supra, at 438. We have
been asked in this case to decide whether the State of Illinois
constitutionally taxed an apportioned share of the capital
gain realized by an out-of-state corporation on the sale of
one of its business divisions. The Appellate Court of Illinois
upheld the tax and affirmed a judgment in the State’s favor.
Because we conclude that the state courts misapprehended
the principles that we have developed for determining
whether a multistate business is unitary, we vacate the deci
sion of the Appellate Court of Illinois.
I
A
Mead Corporation (Mead), an Ohio corporation, is the
predecessor in interest and a wholly owned subsidiary of
petitioner MeadWestvaco Corporation. From its founding
Morrison of Kansas, G. Steven Rowe of Maine, Douglas F. Gansler of
Maryland, Michael A. Cox of Michigan, Lori Swanson of Minnesota, Jere
miah W. (Jay) Nixon of Missouri, Catherine Cortez Masto of Nevada,
Kelly A. Ayotte of New Hampshire, Wayne Stenehjem of North Dakota,
W. A. Drew Edmondson of Oklahoma, Hardy Myers of Oregon, Thomas
W. Corbett, Jr., of Pennsylvania, Henry McMaster of South Carolina, Rob
ert E. Cooper, Jr., of Tennessee, Mark L. Shurtleff of Utah, William H.
Sorrell of Vermont, and Darrell V. McGraw, Jr., of West Virginia; and for
the Multistate Tax Commission by Sheldon H. Laskin.

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20 MEADWESTVACO CORP. v. ILLINOIS DEPT. OF
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in 1846, Mead has been in the business of producing and sell
ing paper, packaging, and school and office supplies.1 In
1968, Mead paid $6 million to acquire a company called Data
Corporation, which owned an inkjet printing technology and
a full-text information retrieval system, the latter of which
had originally been developed for the U. S. Air Force. Mead
was interested in the inkjet printing technology because it
would have complemented Mead’s paper business, but the
information retrieval system proved to be the more valuable
asset. Over the course of many years, Mead developed that
asset into the electronic research service now known as
Lexis/Nexis (Lexis). In 1994, it sold Lexis to a third party
for approximately $1.5 billion, realizing just over $1 billion
in capital gain, which Mead used to repurchase stock, retire
debt, and pay taxes.
Mead did not report any of this gain as business income
on its Illinois tax returns for 1994. It took the position that
the gain qualified as nonbusiness income that should be allo
cated to Mead’s domiciliary State, Ohio, under Illinois’ In
come Tax Act (ITA). See Ill. Comp. Stat., ch. 35, § 5/303(a)
(West 1994). The State audited Mead’s returns and issued
a notice of deficiency. According to the State, the ITA re
quired Mead to treat the capital gain as business income sub
ject to apportionment by Illinois.2 The State assessed Mead
1 See Prospectus of MeadWestvaco Corporation S–3 (Mar. 19, 2003), online
at http://www.sec.gov/Archives/edgar/data/1159297/000119312503085265/
d424b5.htm (as visited Apr. 1, 2008, and available in Clerk of Court’s case
file); App. 9.
2 When the sale of Lexis occurred in 1994, the ITA defined “business
income” as “income arising from transactions and activity in the regular
course of the taxpayer’s trade or business,” as well as “income from tangi
ble and intangible property if the acquisition, management, and disposition
of the property constitute integral parts of the taxpayer’s regular trade or
business operations.” Ill. Comp. Stat., ch. 35, § 5/1501(a)(1) (West 1994).
This language mirrors the definition of “business income” in the Uniform
Division of Income for Tax Purposes Act (UDITPA). See UDITPA § 1(a)

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Opinion of the Court
with approximately $4 million in additional tax and penalties.
Mead paid that amount under protest and then filed this law
suit in state court.
The case was tried to the bench. Although the court
admitted expert testimony, reports, and other exhibits into
evidence, see App. D to Pet. for Cert. 29a–34a, the parties’
stipulations supplied most of the evidence of record re
garding Mead’s relationship with Lexis, see App. 9–20. We
summarize those stipulations here.
B
Lexis was launched in 1973. For the first few years it was
in business, it lost money, and Mead had to keep it afloat
with additional capital contributions. By the late 1970’s, as
more attorneys began to use Lexis, the service finally turned
a profit. That profit quickly became substantial. Between
1988 and 1993, Lexis made more than $800 million of the
$3.8 billion in Illinois income that Mead reported. Lexis
also accounted for $680 million of the $4.5 billion in business
expense deductions that Mead claimed from Illinois during
that period.
Lexis was subject to Mead’s oversight, but Mead did not
manage its day-to-day affairs. Mead was headquartered in
Ohio, while a separate management team ran Lexis out of
its headquarters in Illinois. The two businesses maintained
separate manufacturing, sales, and distribution facilities, as
well as separate accounting, legal, human resources, credit
and collections, purchasing, and marketing departments.
(2002); see also § 9 (subjecting “[a]ll business income” to apportionment).
In 2004, the Illinois General Assembly amended the definition of “business
income” to “all income that may be treated as apportionable business in
come under the Constitution of the United States.” Pub. Act 93–840,
Art. 25, § 25–5 (codified at Ill. Comp. Stat., ch. 35, § 5/1501(a)(1) (West 2004));
cf. Allied-Signal, Inc. v. Director, Div. of Taxation, 504 U. S. 768, 786 (1992)
(declining to adopt UDITPA’s “business income” test as the constitutional
standard for apportionment).

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Mead’s involvement was generally limited to approving
Lexis’ annual business plan and any significant corporate
transactions (such as capital expenditures, financings, merg
ers and acquisitions, or joint ventures) that Lexis wished to
undertake. In at least one case, Mead procured new equip
ment for Lexis by purchasing the equipment for its own ac
count and then leasing it to Lexis. Mead also managed
Lexis’ free cash, which was swept nightly from Lexis’ bank
accounts into an account maintained by Mead. The cash was
reinvested in Lexis’ business, but Mead decided how to
invest it.
Neither business was required to purchase goods or serv
ices from the other. Lexis, for example, was not required
to purchase its paper supply from Mead, and indeed Lexis
purchased most of its paper from other suppliers. Neither
received any discount on goods or services purchased from
the other, and neither was a significant customer of the other.
Lexis was incorporated as one of Mead’s wholly owned
subsidiaries until 1980, when it was merged into Mead and
became one of Mead’s divisions. Mead engineered the
merger so that it could offset its income with Lexis’ net oper
ating loss carryforwards. Lexis was separately reincorpo
rated in 1985 before being merged back into Mead in 1993.
Once again, tax considerations motivated each transaction.
Mead also treated Lexis as a unitary business in its con
solidated Illinois returns for the years 1988 through 1994,
though it did so at the State’s insistence and then only to
avoid litigation.
Lexis was listed as one of Mead’s “business segment[s]” in
at least some of its annual reports and regulatory filings.
Mead described itself in those reports and filings as “engaged
in the electronic publishing business” and touted itself as the
“developer of the world’s leading electronic information re
trieval services for law, patents, accounting, finance, news
and business information.” Id., at 93, 59; App. D to Pet.
for Cert. 38a.

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C
Based on the stipulated facts and the other exhibits and
expert testimony received into evidence, the Circuit Court
of Cook County concluded that Lexis and Mead did not con
stitute a unitary business. The trial court reasoned that
Lexis and Mead could not be unitary because they were not
functionally integrated or centrally managed and enjoyed no
economies of scale. Id., at 35a–36a, 39a. The court never
theless concluded that the State could tax an apportioned
share of Mead’s capital gain because Lexis served an “opera
tional purpose” in Mead’s business:
“Lexis/Nexis was considered in the strategic planning of
Mead, particularly in the allocation of resources. The
operational purpose allowed Mead to limit the growth of
Lexis/Nexis if only to limit its ability to expand or to
contract through its control of its capital investment.”
Id., at 38a–39a.
The Appellate Court of Illinois affirmed. Mead Corp. v.
Department of Revenue, 371 Ill. App. 3d 108, 861 N. E. 2d
1131 (2007). The court cited several factors as evidence that
Lexis served an operational function in Mead’s business:
(1) Lexis was wholly owned by Mead; (2) Mead had exercised
its control over Lexis in various ways, such as manipulating
its corporate form, approving significant capital expendi
tures, and retaining tax benefits and control over Lexis’ free
cash; and (3) Mead had described itself in its annual reports
and regulatory filings as engaged in electronic publishing
and as the developer of the world’s leading information re
trieval service. See id., at 111–112, 861 N. E. 2d, at 1135–
1136. Because the court found that Lexis served an opera
tional function in Mead’s business, it did not address the
question whether Mead and Lexis formed a unitary business.
See id., at 117–118, 861 N. E. 2d, at 1140.
The Supreme Court of Illinois denied review in January
2007. Mead Corp. v. Illinois Dept. of Revenue, 222 Ill. 2d

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609, 862 N. E. 2d 235 (Table). We granted certiorari. 551
U. S. 1189 (2007).
II
Petitioner contends that the trial court properly found that
Lexis and Mead were not unitary and that the Appellate
Court of Illinois erred in concluding that Lexis served an
operational function in Mead’s business. According to peti
tioner, the exception for apportionment of income from non
unitary businesses serving an operational function is a nar
row one that does not reach a purely passive investment such
as Lexis. We perceive a more fundamental error in the
state courts’ reasoning. In our view, the state courts erred
in considering whether Lexis served an “operational pur
pose” in Mead’s business after determining that Lexis and
Mead were not unitary.
A
The Commerce Clause and the Due Process Clause impose
distinct but parallel limitations on a State’s power to tax
out-of-state activities. See Quill Corp. v. North Dakota, 504
U. S. 298, 305–306 (1992); Mobil Oil Corp., 445 U. S., at 451,
n. 4 (Stevens, J., dissenting); Norfolk & Western R. Co. v.
Missouri Tax Comm’n, 390 U. S. 317, 325, n. 5 (1968). The
Due Process Clause demands that there exist “ ‘some definite
link, some minimum connection, between a state and the per
son, property or transaction it seeks to tax,’ ” as well as a
rational relationship between the tax and the “ ‘ “values con
nected with the taxing State.” ’ ” Quill Corp., supra, at 306
(quoting Miller Brothers Co. v. Maryland, 347 U. S. 340, 344–
345 (1954), and Moorman Mfg. Co. v. Bair, 437 U. S. 267, 273
(1978)). The Commerce Clause forbids the States to levy
taxes that discriminate against interstate commerce or that
burden it by subjecting activities to multiple or unfairly ap
portioned taxation. See Container Corp., 463 U. S., at 170–
171; Armco Inc. v. Hardesty, 467 U. S. 638, 644 (1984). The
“broad inquiry” subsumed in both constitutional require

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ments is “ ‘whether the taxing power exerted by the state
bears fiscal relation to protection, opportunities and benefits
given by the state’ ”—that is, “ ‘whether the state has given
anything for which it can ask return.’ ” ASARCO Inc. v.
Idaho Tax Comm’n, 458 U. S. 307, 315 (1982) (quoting Wis
consin v. J. C. Penney Co., 311 U. S. 435, 444 (1940)).
Where, as here, there is no dispute that the taxpayer has
done some business in the taxing State, the inquiry shifts
from whether the State may tax to what it may tax.
Cf. Allied-Signal, 504 U. S., at 778 (distinguishing Quill
Corp., supra). To answer that question, we have developed
the unitary business principle. Under that principle, a State
need not “isolate the intrastate income-producing activities
from the rest of the business” but “may tax an apportioned
sum of the corporation’s multistate business if the business
is unitary.” Allied-Signal, supra, at 772; accord, Hunt-
Wesson, 528 U. S., at 460; Exxon Corp. v. Department of Rev
enue of Wis., 447 U. S. 207, 224 (1980); Mobil Oil Corp.,
supra, at 442; cf. 1 J. Hellerstein & W. Hellerstein, State Tax
ation ¶ 8.07[1], p. 8–61 (3d ed. 2001–2005) (hereinafter Hel
lerstein & Hellerstein). The court must determine whether
“intrastate and extrastate activities formed part of a single
unitary business,” Mobil Oil Corp., supra, at 438–439, or
whether the out-of-state values that the State seeks to tax
“ ‘derive[d] from “unrelated business activity” which con
stitutes a “discrete business enterprise,” ’ ” Allied-Signal,
supra, at 773 (quoting Exxon Corp., supra, at 224, in turn
quoting Mobil Oil Corp., supra, at 439, 442; alteration in
original). We traced the history of this venerable principle
in Allied-Signal, supra, at 778–783, and, because it figures
prominently in this case, we retrace it briefly here.
B
With the coming of the Industrial Revolution in the 19th
century, the United States witnessed the emergence of its
first truly multistate business enterprises. These railroad,

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telegraph, and express companies presented state taxing au
thorities with a novel problem: A State often cannot tax its
fair share of the value of a multistate business by simply
taxing the capital within its borders. The whole of the en
terprise is generally more valuable than the sum of its parts;
were it not, its owners would simply liquidate it and sell it
off in pieces. As we observed in 1876, “[t]he track of the
road is but one track from one end of it to the other, and,
except in its use as one track, is of little value.” State Rail
road Tax Cases, 92 U. S. 575, 608.
The unitary business principle addressed this problem by
shifting the constitutional inquiry from the niceties of geo
graphic accounting to the determination of the taxpayer’s
business unit. If the value the State wished to tax derived
from a “unitary business” operated within and without the
State, the State could tax an apportioned share of the value
of that business instead of isolating the value attributable to
the operation of the business within the State. E. g., Exxon
Corp., supra, at 223 (citing Moorman Mfg. Co., supra, at
273). Conversely, if the value the State wished to tax de
rived from a “discrete business enterprise,” Mobil Oil Corp.,
supra, at 439, then the State could not tax even an appor
tioned share of that value. E. g., Container Corp., supra,
at 165–166.
We recognized as early as 1876 that the Due Process
Clause did not require the States to assess trackage “in each
county where it lies according to its value there.” State
Railroad Tax Cases, 92 U. S., at 608. We went so far as to
opine that “[i]t may well be doubted whether any better
mode of determining the value of that portion of the track
within any one county has been devised than to ascertain the
value of the whole road, and apportion the value within the
county by its relative length to the whole.” Ibid. We gen
eralized the rule of the State Railroad Tax Cases in Adams
Express Co. v. Ohio State Auditor, 165 U. S. 194 (1897).
There we held that apportionment could permissibly be ap

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plied to a multistate business lacking the “physical unity” of
wires or rails but exhibiting the “same unity in the use of
the entire property for the specific purpose,” with “the same
elements of value arising from such use.” Id., at 221. We
extended the reach of the unitary business principle further
still in later cases, when we relied on it to justify the taxation
by apportionment of net income, dividends, capital gain, and
other intangibles. See Underwood Typewriter Co. v. Cham
berlain, 254 U. S. 113, 117, 120–121 (1920) (net income tax);
Bass, Ratcliff & Gretton, Ltd. v. State Tax Comm’n, 266
U. S. 271, 277, 280, 282–283 (1924) (franchise tax); J. C. Pen
ney Co., supra, at 443–445 (tax on the “privilege of declaring
dividends”); cf. Allied-Signal, supra, at 780 (“[F]or constitu
tional purposes capital gains should be treated as no differ
ent from dividends”); see also 1 Hellerstein & Hellerstein
¶ 8.07[1] (summarizing this history).
As the unitary business principle has evolved in step with
American enterprise, courts have sometimes found it diffi
cult to identify exactly when a business is unitary. We con
fronted this problem most recently in Allied-Signal. The
taxpayer there, a multistate enterprise, had realized capital
gain on the disposition of its minority investment in another
business. The parties’ stipulation left little doubt that the
taxpayer and its investee were not unitary. See 504 U. S.,
at 774 (observing that “the question whether the business
can be called ‘unitary’ . . . is all but controlled by the terms
of a stipulation”). The record revealed, however, that the
taxpayer had used the proceeds from the liquidated invest
ment in an ultimately unsuccessful bid to purchase a new
asset that would have been used in its unitary business.
See id., at 776–777. From that wrinkle in the record, the
New Jersey Supreme Court concluded that the taxpayer’s
minority interest had represented nothing more than a tem
porary investment of working capital awaiting deployment
in the taxpayer’s unitary business. See Bendix Corp. v.
Director, Div. of Taxation, 125 N. J. 20, 37, 592 A. 2d 536,

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545 (1991). The State went even further. It argued that,
because there could be “no logical distinction between
short-term investment of working capital, which all concede
is apportionable, . . . and all other investments,” the unitary
business principle was outdated and should be jettisoned.
504 U. S., at 784.
We rejected both contentions. We concluded that “the
unitary business principle is not so inflexible that as new
methods of finance and new forms of business evolve it can
not be modified or supplemented where appropriate.” Id.,
at 786; see also id., at 785 (“If lower courts have reached
divergent results in applying the unitary business principle
to different factual circumstances, that is because, as we
have said, any number of variations on the unitary business
theme ‘are logically consistent with the underlying principles
motivating the approach’ ” (quoting Container Corp., 463
U. S., at 167)).3 We explained that situations could occur in
which apportionment might be constitutional even though
“the payee and the payor [were] not . . . engaged in the same
unitary business.” 504 U. S., at 787. It was in that context
that we observed that an asset could form part of a taxpay
er’s unitary business if it served an “operational rather than
an investment function” in that business. Ibid. “Hence,
for example, a State may include within the apportionable
income of a nondomiciliary corporation the interest earned
on short-term deposits in a bank located in another State if
that income forms part of the working capital of the corpora
tion’s unitary business, notwithstanding the absence of a uni
tary relationship between the corporation and the bank.”
3 The dissent agreed that the unitary business principle remained sound,
504 U. S., at 790 (opinion of O’Connor, J.), but found merit in New Jersey’s
premise (and the New Jersey Supreme Court’s conclusion) that no logical
distinction could be drawn between short- or long-term investments for
purposes of unitary analysis, id., at 793 (“Any distinction between short
term and long-term investments cannot be of constitutional dimension”).
We need not revisit that question here.

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29 Cite as: 553 U. S. 16 (2008)
Opinion of the Court
Id., at 787–788. We observed that we had made the same
point in Container Corp., where we noted that “capital trans
actions can serve either an investment function or an opera
tional function.” 463 U. S., at 180, n. 19; cf. Corn Products
Refining Co. v. Commissioner, 350 U. S. 46, 50 (1955) (con
cluding that corn futures contracts in the hands of a corn
refiner seeking to hedge itself against increases in corn
prices are operational rather than capital assets), cited in
Container Corp., supra, at 180, n. 19.
C
As the foregoing history confirms, our references to “oper
ational function” in Container Corp. and Allied-Signal were
not intended to modify the unitary business principle by add
ing a new ground for apportionment. The concept of opera
tional function simply recognizes that an asset can be a part
of a taxpayer’s unitary business even if what we may term
a “unitary relationship” does not exist between the “payor
and payee.” See Allied-Signal, supra, at 791–792 (O’Con
nor, J., dissenting); Hellerstein, State Taxation of Corporate
Income From Intangibles: Allied-Signal and Beyond, 48 Tax
L. Rev. 739, 790 (1993) (hereinafter Hellerstein). In the ex
ample given in Allied-Signal, the taxpayer was not unitary
with its banker, but the taxpayer’s deposits (which repre
sented working capital and thus operational assets) were
clearly unitary with the taxpayer’s business. In Corn Prod
ucts, the taxpayer was not unitary with the counterparty to
its hedge, but the taxpayer’s futures contracts (which served
to hedge against the risk of an increase in the price of a key
cost input) were likewise clearly unitary with the taxpayer’s
business. In each case, the “payor” was not a unitary part
of the taxpayer’s business, but the relevant asset was. The
conclusion that the asset served an operational function was
merely instrumental to the constitutionally relevant conclu
sion that the asset was a unitary part of the business being
conducted in the taxing State rather than a discrete asset to

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30 MEADWESTVACO CORP. v. ILLINOIS DEPT. OF
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Opinion of the Court
which the State had no claim. Our decisions in Container
Corp. and Allied-Signal did not announce a new ground for
the constitutional apportionment of extrastate values in the
absence of a unitary business. Because the Appellate Court
of Illinois interpreted those decisions to the contrary, it
erred.
Where, as here, the asset in question is another business,
we have described the “hallmarks” of a unitary relationship
as functional integration, centralized management, and econ
omies of scale. See Mobil Oil Corp., 445 U. S., at 438 (citing
Butler Brothers v. McColgan, 315 U. S. 501, 506–508 (1942));
see also Allied-Signal, supra, at 783 (same); Container
Corp., supra, at 179 (same); F. W. Woolworth Co. v. Taxation
and Revenue Dept. of N. M., 458 U. S. 354, 364 (1982) (same).
The trial court found each of these hallmarks lacking and
concluded that Lexis was not a unitary part of Mead’s busi
ness. The appellate court, however, made no such determi
nation. Relying on its operational function test, it reserved
judgment on whether Mead and Lexis formed a unitary busi
ness. The appellate court may take up that question on re
mand, and we express no opinion on it now.
III
The State and its amici argue that vacatur is not required
because the judgment of the Appellate Court of Illinois may
be affirmed on an alternative ground. They contend that
the record amply demonstrates that Lexis did substantial
business in Illinois and that Lexis’ own contacts with the
State suffice to justify the apportionment of Mead’s capital
gain. See Brief for Respondents 18–25, 46–49; Brief for
Multistate Tax Commission as Amicus Curiae 19–29. The
State and its amici invite us to recognize a new ground for
the constitutional apportionment of intangibles based on the
taxing State’s contacts with the capital asset rather than
the taxpayer.

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31 Cite as: 553 U. S. 16 (2008)
Opinion of the Court
We decline this invitation because the question that the
State and its amici call upon us to answer was neither raised
nor passed upon in the state courts. It also was not ad
dressed in the State’s brief in opposition to the petition. We
typically will not address a question under these circum
stances even if the answer would afford an alternative
ground for affirmance. See Glover v. United States, 531
U. S. 198, 205 (2001) (citing Taylor v. Freeland & Kronz, 503
U. S. 638, 646 (1992)); Lorillard Tobacco Co. v. Reilly, 533
U. S. 525, 578 (2001) (Thomas, J., concurring in part and con
curring in judgment).
The case for restraint is particularly compelling here, since
the question may impact the law of other jurisdictions. The
States of Ohio and New York, for example, have both
adopted the rationale for apportionment that respondents
urge us to recognize today. See Ohio Rev. Code Ann.
§§ 5733.051(E)–(F) (West 2007); N. Y. Tax Law Ann. § 210,
subd. 3, par. (b) (West Supp. 2008); see also Allied-Signal
Inc. v. Department of Taxation & Finance, 229 App. Div. 2d
759, 762, 645 N. Y. S. 2d 895, 898 (3d Dept. 1996) (find
ing that a “sufficient nexus existed between New York and
the dividend and capital gain income” of the nondomiciliary
parent because “the corporations generating the income
taxed . . . each have their own connection with the taxing
jurisdiction”); 1 Hellerstein & Hellerstein ¶ 9.11[2][a]. Nei
ther Ohio nor New York has appeared as an amicus in this
case, and neither was on notice that the constitutionality of
its tax scheme was at issue, the question having been raised
for the first time in the State’s brief on the merits. So pos
tured, the question is best left for another day.4
4 Resolving this question now probably would not spare the State a re
mand. The State calculated petitioner’s tax liability by applying the
State’s tax rate to Mead’s apportioned business income, which in turn was
calculated by applying Mead’s apportionment percentage to its apportion
able business income. See App. 28; Ill. Comp. Stat., ch. 35, § 5/304(a) (West

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Thomas, J., concurring
IV
The judgment of the Appellate Court of Illinois is vacated,
and this case is remanded for further proceedings not incon
sistent with this opinion.
It is so ordered.
Justice Thomas, concurring.
Although I join the Court’s opinion, I write separately to
express my serious doubt that the Constitution permits us to
adjudicate cases in this area. Despite the Court’s repeated
holdings that “[t]he Due Process and Commerce Clauses for
bid the States to tax ‘extraterritorial values,’ ” ante, at 19
(quoting Container Corp. of America v. Franchise Tax Bd.,
463 U. S. 159, 164 (1983)), I am not fully convinced of that
proposition.
To the extent that our decisions addressing state taxation
of multistate enterprises rely on the negative Commerce
1994). But if a constitutionally sufficient link between the State and the
value it wishes to tax is founded on the State’s contacts with Lexis rather
than Mead, then presumably the apportioned tax base should be deter
mined by applying the State’s four-factor apportionment formula not to
Mead but to Lexis. Naturally, applying the formula to Lexis rather than
Mead would yield a different apportionment percentage. See Brief for
Multistate Tax Commission as Amicus Curiae 18–19, and n. 9; see also
Hellerstein 802–803.
The Multistate Tax Commission seems to argue that the difference would
not affect the result because application of the formula to Lexis would have
yielded a higher apportionment percentage. See Brief for Multistate Tax
Commission 18–19. Amicus argues, in other words, that petitioner has no
cause to complain because it caught a break in the incorrect application of
a lower apportionment percentage. Amicus’ argument assumes what we
are in no position to decide: that Lexis’ own apportioned tax base was
properly calculated. Had petitioner been on notice that Lexis, rather than
Mead, would supply the relevant apportionment percentage, it might have
persuaded the state courts that Lexis’ apportionment percentage should
have been even lower than Mead’s. The State’s untimely resort to an al
ternative ground for affirmance may have denied petitioner a fair opportu
nity to make that argument.

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33 Cite as: 553 U. S. 16 (2008)
Thomas, J., concurring
Clause, I would overrule them. As I have previously ex
plained, this Court’s negative Commerce Clause jurispru
dence “has no basis in the Constitution and has proved
unworkable in practice.” United Haulers Assn., Inc. v.
Oneida-Herkimer Solid Waste Management Authority, 550
U. S. 330, 349 (2007) (Thomas, J., concurring in judgment).
The Court’s cases in this area have not, however, rested
solely on the Commerce Clause. The Court has long recog
nized that the Due Process Clause of the Fourteenth Amend
ment may also limit States’ authority to tax multistate busi
nesses. See Adams Express Co. v. Ohio State Auditor, 165
U. S. 194, 226 (1897) (concluding that because “[t]he property
taxed has its actual situs in the State and is, therefore, sub
ject to the jurisdiction, and . . . regulation by the state legis
lature,” the tax at issue did not “amoun[t] to a taking of prop
erty without due process of law”). I agree that the Due
Process Clause requires a jurisdictional nexus or, as this
Court has stated, “some definite link, some minimum connec
tion, between a state and the person, property or transaction
it seeks to tax.” Miller Brothers Co. v. Maryland, 347 U. S.
340, 344–345 (1954); see ante, at 24. But apart from that
requirement, I am concerned that further constraints—par
ticularly those limiting the degree to which a State may tax
a multistate enterprise—require us to read into the Due
Process Clause yet another unenumerated, substantive right.
Cf. Troxel v. Granville, 530 U. S. 57, 80 (2000) (Thomas, J.,
concurring in judgment) (leaving open the question whether
“our substantive due process cases were wrongly decided
and . . . the original understanding of the Due Process Clause
precludes judicial enforcement of unenumerated rights”).
Today the Court applies the additional requirement that
there exist “a rational relationship between the tax and the
values connected with the taxing State.” Ante, at 24 (inter
nal quotation marks omitted); see also Moorman Mfg. Co. v.
Bair, 437 U. S. 267, 273 (1978) (requiring that “the income
attributed to the State for tax purposes . . . be rationally

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34 MEADWESTVACO CORP. v. ILLINOIS DEPT. OF
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related to ‘values connected with the taxing State’ ” (quot
ing Norfolk & Western R. Co. v. Missouri Tax Comm’n, 390
U. S. 317, 325 (1968))). In my view, however, it is difficult
to characterize this requirement as providing an exclusively
procedural safeguard against the deprivation of property.
Scrutinizing the amount of multistate income a State may
apportion for tax purposes comes perilously close to evaluat
ing the excessiveness of the State’s taxing scheme—a ques
tion the Fourteenth Amendment does not grant us the au
thority to adjudicate. See, e. g., Stewart Dry Goods Co. v.
Lewis, 294 U. S. 550, 562 (1935) (“To condemn a levy on the
sole ground that it is excessive would be to usurp a power
vested not in the courts but in the legislature, and to exercise
the usurped power arbitrarily by substituting our concep
tions of public policy for those of the legislative body”). In
deed, divining from the Fourteenth Amendment a right
against disproportionate taxation bears a striking resem
blance to our long-rejected Lochner-era precedents. See,
e. g., Lochner v. New York, 198 U. S. 45, 56–58 (1905) (invali
dating a state statute as an “unreasonable, unnecessary and
arbitrary interference with the right of the individual . . . to
enter into those contracts . . . which may seem to him appro
priate or necessary”). Moreover, the Court’s involvement in
this area is wholly unnecessary given Congress’ undisputed
authority to resolve income apportionment issues by virtue
of its power to regulate commerce “among the several
States.” See U. S. Const., Art. I, § 8, cl. 3.
Although I believe that the Court should reconsider its
constitutional authority to adjudicate these kinds of cases,
neither party has asked us to do so here, and the Court’s
decision today faithfully applies our precedents. I there
fore concur.