Weekly Round-Up: California Court Reconsiders Its Ruling on Apportionment, Multistate Tax Compact


On its own motion, a state appellate court said it will revisit its July 24 ruling that California must allow taxpayers to apportion multistate income based on a formula in the Multistate Tax Compact despite a subsequent state law intended to eliminate that formula, Bloomberg BNA Correspondent Laura Mahoney writes in this week’s issue of the Weekly State Tax Report.

The Court of Appeal for the First Appellate District issued the order one day after the Franchise Tax Board (FTB) petitioned for a rehearing, and attorneys for the taxpayer, Gillette Co., asked the court to modify the original opinion in the case.

“On its own motion and for good cause, this court hereby orders rehearing in this case,” the court said. “The decision and opinion in this case are hereby vacated. Pending any further order by the court, additional briefing from any party or any amicus curiae is not requested.”

In their Aug. 8 filings with the court, the FTB and Gillette each raised different questions about the clarity of the court's July 24 ruling, which has the potential to upend the foundations of the compact.

In its letter to the court, an attorney for Gillette asked the panel to modify the opinion to reflect the fact that California lawmakers repealed the Multistate Tax Compact June 27. Lawmakers enacted S.B. 1015, signed by Gov. Jerry Brown (D), as a hedge against a potential loss of at least $500 million in tax revenue from an unfavorable ruling in Gillette.

In its petition for rehearing, the FTB said the court did not state clearly why California's 1993 law adopting a double-weighted sales factor is invalid. The lack of clarity is confusing for the parties to the case and any court that reviews it, the FTB said.

For Mahoney’s complete coverage of this development, check out this week’s issue of the Weekly State Tax Report.

In other developments…

Average Tax Savings from One Year Extension of Bush Tax Cuts, by Nick Kasprak, of the Tax Foundation

Nelson A. Rockefeller Institute of Government issues its August 2012 editionof its State Revenue Report.

Gillette Ruling Could Impact Alabama, Bradley Arant Boult Cummings reports.

Compiled by Priya D. Nair
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