By Michael Herbert, State and Local Tax Partner and Bryan Mayster, State and Local Managing Director
In 2012, the California Court of Appeals held in Gillette v. Franchise Tax Board that the Multistate Tax Compact is a valid interstate compact and that California is bound by its provisions, including the election to use the equally weighted three factor apportionment formula. The court stated that having entered into the Multistate Tax Compact, California cannot, by subsequent legislation, unilaterally alter or amend its terms. California can avoid the application of the apportionment election only by repealing the statutory provision adopting the Compact, thereby withdrawing from the Compact.
Similar cases have been brought in many Compact member states, including Michigan, Minnesota, Oregon and Texas resulting in some states repealing their membership in the Compact (see below for a list of states). As these cases wind their way through state court houses around the country, we invite you to visit our blog to read our insights into these developments.
We also look forward to hearing from you to learn about your experiences with the Compact and the Multistate Tax Commission. We’d like to get your thoughts on the Compact cases, legislation impacting membership in the Compact, the rewrite of UDITPA or any other MTC matter. Please let us know what you think by posting in the Comments section below.
To paraphrase John F. Kennedy, all this will not be finished in the first one hundred days. Nor will it be finished in the first thousand days, nor in the life of this administration, but let us begin.
States that have repealed Compact membership:
Minnesota (Bill language)
South Dakota (Bill language)