On October 11, 2016, the US Supreme Court (the USSC) denied certiorari in Gillette Co. v. Franchise Tax Board.¹ Accordingly, the California Supreme Court's ruling in Gillette, which prohibited corporate taxpayers from electing to use the equally weighted three-factor apportionment formula under the Multistate Tax Compact (Compact) for reporting income to California in lieu of the statutorily mandated formula (e.g., double-weighted sales or single sales factor formulae), will stand, as it cannot be further appealed. For more on the California Supreme Court ruling in Gillette, see Tax Alert 2016-24.

Implications

This past February, the Franchise Tax Board (FTB) issued Notice 2016-01, advising taxpayers and their representatives of its intended course of action following the California Supreme Court's ruling in Gillette regarding the use of the Compact apportionment election. The FTB paused action on any refund claims while the case was pending before the USSC. Since the case has been finally resolved by the USSC's denial of certiorari, the FTB will take action on these claims.

While the Compact apportionment election litigation has been resolved in California, similar litigation is on-going in Colorado, Michigan, Minnesota, Oregon and Texas. Taxpayers involved with the Michigan litigation, which is now addressing whether the state's retroactive repeal of the Compact is constitutional, have until November 21, 2016, to file a certiorari petition with the USSC. The taxpayer in the Minnesota litigation has as until October 20, 2016, to file its certiorari petition with the USSC.

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ENDNOTES

¹ The Gillette Co. v. Franchise Tax Board, No. S206587 (Cal. S. Ct. Dec. 31, 2015), petition for cert. denied, Dk. No. 15-1442 (US S. Ct. Oct. 3, 2016).