Should You File a Protective Refund Claim in California?

In light of a recent decision handed down by the Court of Appeal of California (the Court) regarding California’s mandated apportionment methodology, taxpayers are being advised of an opportunity to amend prior-year corporate income/franchise tax returns and file protective claims for refund.

In summary, the Court determined that because California was signatory to the Multistate Tax Compact (MTC), California must allow multistate taxpayers the option of utilizing the equally weighted three-factor formula to apportion income. Current California law requires taxpayers to utilize a double-weighted sales factor in the apportionment formula. At issue is the fact that California never removed its conformity with the MTC from the California tax code, or otherwise formally withdrew from the MTC, and therefore should be bound by the MTC’s provisions.

Please contact a member of our State and Local Tax (SALT) group for assistance with filing a protective claim in order to retain your ability to secure a refund of any overpaid tax paid should the impending litigation ultimately result in a decision that renders California’s mandatory double-weighted sales factor unconstitutional.

© 2012 Schneider Downs. All rights-reserved. All content on this site is property of Schneider Downs unless otherwise noted and should not be used without written permission.

This advice is not intended or written to be used for, and it cannot be used for, the purpose of avoiding any federal tax penalties that may be imposed, or for promoting, marketing or recommending to another person, any tax related matter.

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Material discussed is meant for informational purposes only, and it is not to be construed as investment, tax, or legal advice. Please note that individual situations can vary. Therefore, this information should be relied upon when coordinated with individual professional advice.

© 2019 Schneider Downs. All rights-reserved. All content on this site is property of Schneider Downs unless otherwise noted and should not be used without written permission.

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