The California Supreme Court has scheduled for October 6, 2015, oral arguments in a case concerning whether a taxpayer could avail itself of the election available in Article III of the Multistate Tax Compact and choose to apportion its income to California using the evenly weighted three factor formula provided for in Article IV of the Compact, despite contrary statutory language mandating the use of a double-weighted sales factor for general corporations.
It has been almost three years since the California Court of Appeal issued its decision in Gillette Co. v. Franchise Tax Board. In that October 2012 opinion, the appeals court held that a taxpayer could avail itself of the election available in Article III of the Multistate Tax Compact (Compact) and choose to apportion its income to California using the evenly weighted three factor formula provided for in Article IV of the Compact, despite contrary statutory language mandating the use of a double-weighted sales factor for general corporations. The court’s decision was based entirely on federal case law regarding interstate compacts. In the court’s view, when California became a signatory to the Compact, it entered into a binding agreement with other signatory states and, absent repeal of the Compact in its entirety, California was obligated to offer multistate taxpayers the option of electing the Compact’s allocation and apportionment methodology.
Following the appeals court’s decision, the Franchise Tax Board petitioned for review before the California Supreme Court. Review was granted on January 16, 2013.
For the last several months, the case has been fully briefed, awaiting the state high court to schedule oral arguments. It has been announced that oral arguments will be held on October 6, 2015, in San Francisco.
After oral arguments, the California high court must issue its written opinion within 90 days, and the court’s decision will become final 30 days after it is issued.
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