Articles Posted in California

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https://seesalt.pillsburylaw.com/files/2020/05/250px-Seal_of_California.svg_.pngThe May Revision of California’s 2024-2025 state budget seeks to block refund claims, worth approximately $1.3 billion for historical tax years, and $200 million per year going forward, by codifying informal guidance recently rejected by the Office of Tax Appeal’s (OTA) decision in the Matter of the Appeal of Microsoft Corporation & Subsidiaries (Appeal of Microsoft) and by granting the Franchise Tax Board’s (FTB) quasi-legislative rulemaking authority exempt from the procedural protections afforded by the Administrative Procedure Act.  The May Revision also proposes to suspend net operating loss (NOL) deductions and limit tax credit utilization to $5 million per year for tax years 2025-2027; however, the legislature proposes to apply the changes to tax years 2024-2026 instead..

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OTAThe California Office of Tax Appeals (OTA), in a decision marked “not precedential” in the Matter of the Appeal of Microsoft Corporation & Subsidiaries, held 100 percent of repatriated dividends under the Tax Cuts and Jobs Act (TCJA) must be included in the taxpayer’s sales factor denominator.

  • First, the OTA rejected the “matching principle” included in FTB Ruling 2006-01, and supported its holding based primarily on the plain language of Cal. Rev. & Tax. Code § 25120(f)(2), and legislative history.
  • Second, the OTA rejected the FTB’s argument that repatriated dividends constitute a substantial and occasional sale of property under FTB Regulation 25137(c)(1)(A).
  • Last, the OTA determined the FTB failed to carry its burden to show the taxpayer’s inclusion of 100 percent of repatriated dividends in the sales factor denominator is distortive under Cal. Rev. & Tax. Code § 25137.
  • Anyone may submit a request to the OTA requesting the decision be marked “precedential.”

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The California Franchise Tax Board (FTB), California Department of Tax and Fee Administration (CDTFA) and California Employment Development Department (EDD) announced tax relief for certain California counties affected by severe winter storms.

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A California trial court denied the Franchise Tax Board’s (FTB) motion to vacate and modify the judgment declaring FTB Technical Advice Memorandum (TAM) 2022-01 and FTB Publication 1050 invalid underground regulations adopted in violation of the Administrative Procedure Act.

 

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The California Office of Tax Appeals (OTA) recently issued two opinions addressing the burden of proof taxpayers must meet to substantiate entitlement to California’s research and development (R&D) tax credit for qualified expenditures under California Revenue and Taxation Code section 23609. In both opinions, the OTA ruled in favor of the California Franchise Tax Board, holding each taxpayer failed to meet its respective burden to substantiate the R&D tax credit claimed.

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A California trial court granted summary adjudication in the American Catalog Mailers Association’s (ACMA) action against the Franchise Tax Board (FTB), invalidating FTB guidance that says certain online activities exceed the protections of Public Law 86-272 for state income tax purposes. This follows the court’s denial of ACMA’s first motion for summary adjudication, which we discussed in detail in an earlier blog post, where the court found ACMA did not carry its burden to show FTB Technical Advice Memorandum (TAM) 2022-01 and amendments to FTB Publication 1050 are facially invalid because they contradict PL 86-272.

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https://seesalt.pillsburylaw.com/files/2020/05/250px-Seal_of_California.svg_.pngIn the Appeal of Southern Minnesota Beet Sugar Cooperative (2023-OTA-342P) (Beet Sugar), the California Office of Tax Appeals (OTA) issued a precedential opinion holding the California Franchise Tax Board (FTB) is not entitled to apply its FTB Legal Ruling 2006-01 (Apr. 28, 2006) to prohibit taxpayers from including in their apportionment factors property, payroll, and sales that generated statutorily deductible income. The OTA’s guidance on the FTB’s interpretation and application of Legal Ruling 2006-01 in this opinion also has implications beyond the specific issue in Beet Sugar, as the FTB has been attempting to expand the application of the limited legal ruling to other inapplicable situations. For example, an opinion by the OTA in the Appeal of Microsoft Corporation & Subsidiaries (OTA Case Number 21037336) is also anticipated to be issued soon, which appeal concerns whether the FTB is entitled to apply Legal Ruling 2006-01 to prohibit taxpayers from including in their apportionment sales factors statutorily deductible foreign dividend amounts.

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The entire Pillsbury State and Local Tax (SALT) Team is very proud to congratulate our practice leader Carley Roberts for receiving the prestigious Benjamin F. Miller award during this year’s California Annual Meeting of the Tax Bar and Tax Policy Conference.

This award is presented annually by the California Lawyers Association’s Taxation Section to recipients recognized for having achieved professional excellence and notable contributions in the field of state and local taxation law akin to the attorney the award is named after, Benjamin F. Miller.

Carley has been achieving professional excellence and notable contributions to SALT, both in California and nationwide, for approximately 25 years and counting.  Throughout this quarter century, Carley has also worked prolifically towards successfully garnering effective collaboration and cooperation between the private and public sectors of SALT.

Congratulations Carley!

Read more: Carley Roberts Honored with Benjamin F. Miller Award by California Lawyers Association

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A California trial court denied summary judgment in the American Catalog Mailers Association’s (ACMA) action that seeks to invalidate Franchise Tax Board (FTB) guidance that says certain online activities exceed the protections of Public Law 86-272 for state income tax purposes.  However, the court signaled it may invalidate the FTB’s guidance on the basis it constitutes underground regulations and violates California’s Administrative Procedure Act.https://seesalt.pillsburylaw.com/files/2020/05/250px-Seal_of_California.svg_.png Continue Reading ›