Companies Ask U.S. Supreme Court to Review ‘Gillette'

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By Laura Mahoney

May 31 — A return to duplicative taxation of multistate businesses is inevitable if the U.S. Supreme Court lets stand the California Supreme Court ruling that the state wasn't bound by the Multistate Tax Compact's income apportionment formula, four parties from the California case said in their request for review ( Gillette Co. v. Cal. Franchise Tax Bd. , U.S., No. 15-1442, cert. petition filed 5/27/16 ).

Attorneys for Gillette Co. and its parent, Procter & Gamble Manufacturing Co., Kimberly-Clark Worldwide Inc. and Sigma-Aldrich Inc. said May 27 that the U.S. Supreme Court should review the California Supreme Court's Dec. 31 ruling because at least $3 billion in corporate tax payments across the country are at stake.

Beyond the tax refunds multistate companies are seeking through litigation in several states, the high court must overturn the California ruling because it took an aberrant approach to interpreting law for multistate compacts and discriminates against out-of-state taxpayers, they said.

Binding or Not Binding

The companies' dispute with the California Franchise Tax Board has centered on competing interpretations of the Multistate Tax Compact as either an advisory compact or a binding agreement—an issue that four other state supreme court appeals are raising (103 DTR H-2, 5/27/16).

In this seminal case on the matter, the companies seek to overturn the California justices' unanimous decision for the state. The justices rejected an appellate court reading of the compact as binding and said the state could enforce its statutory apportionment formula over the compact's formula, despite the state's adoption of the compact.

Echoing arguments they made before the California justices in October 2015, the companies said in their 34-page petition for a writ of certiorari that the questions the case raises transcend the amount of money at stake and go to the meaning of the compact.

Duplicative Taxation

“The Compact's taxpayer protections were put in place specifically to address serious, recurring problems with fairness, consistency, uniformity, and predictability of state tax systems that Congress identified through the Willis Commission more than 50 years ago,” the petition said. “The state's disregard for the Compact's requirements therefore returns them to a regime in which duplicative taxation of multistate businesses is inevitable and where ‘state and local taxation … cannot be made to operate efficiently and equitably.' ”

The petitioners quoted from the 1964 Willis Report, also known as the report from the congressional Special Subcommittee on State Taxation of Interstate Commerce. The report launched the effort to craft and enact the compact to avoid congressional action on the issue.

Gillette, Procter & Gamble, Kimberly-Clark and Sigma-Aldrich are represented by Amy L. Silverstein and Edwin P. Antolin with Silverstein & Pomerantz LLP in San Francisco, and Charles A. Rothfeld, Michael B. Kimberly, E. Brantley Webb and John T. Lewis of Mayer Brown LLP. The lead attorney representing the FTB is California Solicitor General Edward DuMont.

To contact the reporter on this story: Laura Mahoney in Sacramento, Calif., at

To contact the editor responsible for this story: Ryan Tuck at

For More Information

Text of the petition is in TaxCore.

For More Information

Additional information is available in Bloomberg BNA's Supreme Court Docket Watch: 2015-2016 Term Tax Law Cases.

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