Weekly BNA Insights: Gillette: The Case for Review by Those Who Challenged the Compact Four Decades Ago

From the 8/19/16 issue of Weekly State Tax Report:

The time has come for the United States Supreme Court to determine whether states who are parties to the Multistate Tax Compact (compact) can repudiate with impunity their obligation to provide taxpayers the option of apportioning their income using the method afforded to them in the compact.

Gillette's attempt to enforce the compact's apportionment election has received much attention since the beginning of its important litigation in California. In essence, Gillette has correctly tried to avail itself of the standard, three-factor apportionment formula—consisting of equally weighted property, payroll, and sales—that is at the heart of the compact, of which California was (and perhaps still is) a member. The Franchise Tax Board, on the other hand, has wrongly argued that Gillette was required to use the state's modified formula, double-weighting the sales factor, “notwithstanding” California's compact membership.

After winning at the court of appeal, Gillette's fortunes swiftly changed before the California Supreme Court, which—perhaps sensing the substantial impact to the fisc and the disruptive effect upon the status quo—ruled that California was not bound by the terms of the compact. Gillette's bid for review before the U.S. Supreme Court has continued to garner interest from friend and foe alike. Several non-parties have weighed in as friends of the court, each with their own reasons as to why the high court should or should not review the California Supreme Court's decision.

Marty Dakessian, founder of Dakessian Law, Ltd. and Don Griswold, partner at Crowell & Moring, discuss support for Supreme Court review of Gillette in this week’s BNA Insights article, available here (subscription required). Or sign up for a free trial to the Weekly State Tax Report.

Compiled by Chreasea Dickerson