Halloween signifies a scary time that’s marked with notions of ghosts and goblins signifying both past and imminent deaths. But with death comes renewal. It’s a never ending cycle. Sort of like state tax litigation—stay with me here.
The epic legal battle over whether taxpayers could elect to apportion income to California under the Multistate Tax Compact’s three-factor formula (as opposed to the state statutory single-sales factor formula) died when the U.S. Supreme Court denied review of the Gillette case Oct. 11.
The demise of the case brings the specter of ghastly penalties for some taxpayers. But the issue the Compact-election issue is still haunting other states and just might rise from the grave.
First, the bad news for California taxpayers. Taxpayers that made the Compact election in tax years after California lawmakers repealed the Multistate Tax Compact in 2012 may face understatement penalties by the California Franchise Tax Board, Carl Joseph, principal in the Indirect and State and Local Tax practice at Ernst & Young LLP in Sacramento told Bloomberg BNA’s Laura Mahoney Oct. 18 in the Weekly State Tax Report. But the Compact-election issue is not quite dead. While the California FTB is assessing penalties, appeals pending from cases in Oregon, Minnesota, Michigan and Texas could come back to the U.S. Supreme Court.
Continue the discussion on LinkedIn: What is the likelihood that the Compact election dispute will continue to haunt state tax departments?
For more information about state tax issues, sign up for a free trial on Bloomberg BNA’s Premier State Tax Library.
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