TEI Files Amicus Brief in Gillette California Multistate Tax Compact Litigation

On June 30, 2016, TEI filed an amicus brief with the U.S. Supreme Court in The Gillette Company v. California Franchise Tax Board, No. 15-1442, also known as the California Multistate Tax Compact ("Compact") litigation. In the 1960s and 1970s, States persuaded Congress and the business community that then-imminent federal legislation mandating uniformity in state taxation was unnecessary because a number of States had enacted the Compact. The Compact is a complex interstate agreement, the most central provision of which entitles taxpayers to divide their income among States for tax purposes using either the State's apportionment formula or the Compact's equally-weighted, three factor apportionment formula. The Compact thus offers taxpayers the opportunity to achieve apportionment uniformity, ensuring multistate taxpayers will not be subject to double taxation caused by inconsistent state apportionment methodologies. California, as well as several other Compact member States, has since claimed the Compact is a model law rather than a binding agreement and sought to unilaterally eliminate taxpayers' right to use the Compact's apportionment election without amending the Compact's terms or individually withdrawing from the Compact.

TEI maintains California's and other States' attempt to deny this right to taxpayers violates the Contract Clause of the U.S. Constitution because it impairs the most central provision of this interstate contract. This federal question will directly impact taxpayers litigating the Compact issue in California, Michigan, Minnesota, Texas, and Oregon. TEI's brief was prepared under the aegis of TEI's State and Local Tax Committee, whose chair is Jamie Fenwick. TEI Tax Counsel Pilar Mata coordinated the preparation of the brief and was its principal author.

Download the brief.

Committee
Close