The US Supreme Court ruled in favor of IBM Corp in a case where the Federal government had sought to impose a 4% tax on US businesses for the premiums they pay to foreign insurers for risks that occur at least partly in the US. The IBM case involved a relatively modest $1.5m but the principle is important to many companies doing business internationally. The US Court of Appeals in Washington ruled that the tax violated the Constitution’s Export Clause, which states that no tax or duty shall be laid on articles exported from any state and ruled that the insurance tax – enacted in 1942 to redress the advantage of foreign insurers that don’t pay US income tax – amounted to a levy on exports. The appeals court relied on a 1915 Supreme Court decision, which held unconstitutional a federal tax on policies insuring marine risks when it applied to shipments for export, and the Supreme Court said it would not overturn the 1915 precedent.
