Weekly Round-Up: The Multistate Tax Compact on Trial


The California Franchise Tax Board recently filed a petition with the California Supreme Court requesting review of the California Court of Appeal's decision in Gillette Co. v. Franchise Tax Board, J. Pat Powers and Amanda Kottke, both with Baker & McKenzie, write in this week's issue of the Bloomberg BNA Weekly State Tax Report[WSTR].

Reflecting the far-reaching impact of the case, tax authorities from three other states (Utah, Oregon, and Idaho) submitted letters to the California Supreme Court supporting the FTB's petition for review, they write.

Taxpayers filed their answer to the petition for review Dec. 3, laying out the reasons why the California Supreme Court should not grant review of the "thorough, well-reasoned and unanimous opinion" of the Court of Appeal.

Taxpayers' answer defends the reasoning of each of the three independent grounds upon which the Court of Appeal opinion rests: well-settled compact law; impairment of contacts; and the reenactment clause of the California Constitution. According to taxpayers' answer, the FTB's petition "raises no serious question that any of these holdings was incorrect or that review is necessary."

The final resolution in Gillette has huge implications for California taxpayers. According to the FTB, more than $750 million in refund claims may exist and approximately 80,000 tax returns per year could be affected.

The California Supreme Court has 90 days from the receipt of the FTB's petition to grant or deny review. If at least four of the seven justices vote in favor of review, the case will be heard by the court.

The FTB's petition follows other recent developments in California's apportionment law, including the passage of Proposition 39 on Nov. 6 and California's withdrawal from the Multistate Tax Compact during the summer. Unfortunately, these developments leave taxpayers with more questions than answers.

Given the uncertain landscape of apportionment law in California, taxpayers must take care to preserve their rights to California tax refunds, while remaining mindful of their options for future filings.

In this week's WSTR, Powers and Kottke, attempt to make sense of the recent developments in California's apportionment law, and piece together the consequences for California taxpayers. [full text article here]

In other developments…

Monday Map: Federal aid to state budgets , by the Tax Foundation.

Alston + Bird LLP issues new unclaimed property advisory: The Delaware Secretary of State Promulgates Important Unclaimed Property VDA Guidance.

Morrison & Foerster LLP issues its December 2012 issue of New York Tax Insights, which contains, among other things, a look at a court decision which holds television programming is included in the property factor regardless of delivery method.

Oregon lawmakers to vote on Nike expansion plan , according to U.S. News and World Report.

Compiled by Priya D. Nair
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