Which Laws Apply to Broker-Dealers? Federal Laws? State Laws? Both? General Principles Leading to an Answer

TAMAR FRANKEL

BU Law emerita professor Tamar Frankel explains the law of preemption as it pertains to broker-dealers and their investor clients. She predicts, among other things, that either the clients will demand that broker-dealers adhere to a fiduciary duty, or else that states will impose that duty on them.

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North Carolina Department of Revenue v. Graybar Electric Co.

Court: North Carolina Supreme Court

Docket: 153A19

Opinion Date: February 28, 2020

Judge: Bledsoe

Areas of Law: Government & Administrative Law, Tax Law

In this tax dispute, the Supreme Court reversed the final decision of the Office of Administrative Hearings (OAH) entering summary judgment in favor of Graybar Electric Company, Inc., holding that dividends deducted on a corporation's federal corporate income tax return under the dividends-received deduction (DRD) of section 243 of the Internal Revenue Code do constitute "income not taxable" for purposes of calculating the corporation's net economic loss (NEL) deduction under N.C. Gen. Stat. 105-130.8(a) for North Carolina corporate income tax purposes. The Department found that the dividends received constituted "income not taxable" and that, therefore, Graybar was required to reduce its NEL deductions by the amount of the dividends apportioned to North Carolina. On appeal, (OAH) entered summary judgment for Graybar, holding that the dividends were taxable as a matter of law and were not "income not taxable." The Supreme Court reversed, holding (1) the dividends deducted pursuant too I.R.C. 243(a)(3) were "income not taxable" under section 105-130.8(a)(3); and (2) therefore, Graybar failed to bring itself within the statutory provisions authorizing the NEL deduction calculation it sought.

PRSI Trading, LLC v. Harris County, Texas

Court: Supreme Court of Texas

Docket: 18-0664

Opinion Date: February 28, 2020

Judge: Hecht

Areas of Law: Tax Law

The Supreme Court reversed the judgment of the court of appeals holding that the federal Foreign-Trade Zones Act's exemption of goods imported from outside the United States and held within a zone for certain purposes from state and local ad valorem taxation did not apply to Petitioner's imported crude oil and refinery products, holding that the exemption did apply in this case. The Act provides for the designation of duty-free areas of operation in or near the United States ports of entry. The court of appeals concluded that the Act's exemption at issue in this case did not apply to Petitioner's products because the zone involved was not activated at the time. Harris County petitioned the appraisal review board for a determination that Petitioner's operations in Subzone 84-N were not tax-exempt. The appraisal board denied relief, and Harris County brought this action for judicial review. The trial court granted summary judgment for Petitioner. The court of appeals reversed, concluding that Petitioner's inventory was not entitled to exemption from ad valorem taxation. The Supreme Court affirmed, holding that Subzone 84-R was activated during the tax years at issue, and therefore, the ad valorem tax exemption applied to Petitioner's inventory.