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California Court of Appeal Upholds Taxpayer Right to Make Three-Factor MTC Election


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On July 24, 2012, the California Court of Appeal for the First District held in The Gillette Company, et al., v. California Franchise Tax Board (“Gillette”) that California taxpayers may elect to apportion income pursuant to the Multistate Tax Compact (“Compact”) provisions codified in California Revenue and Taxation Code Section (“Section”) 38006, with the primary beneficial result of applying the Compact’s equally-weighted three-factor apportionment formula (property, payroll and sales) and eliminating the double weighting of the sales factor applicable to most taxpayers.[1] As a result of the taxpayer favorable decision in Gillette, other taxpayers may want to consider making elections to apply the Compact’s equally-weighted three-factor apportionment formula or certain other Compact provisions that differ from California’s standard allocation and apportionment regime.

For more on this proposed California law change, please see the attached Tax Alert.

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