Max Factor & Co. v. Franchise Tax Board

This is an appeal from a judgment denying appellant’s claims for refund of California franchise taxes paid for the years 1952 through 1960. Accepting respondent Franchise Tax Board’s own interpretation of applicable law as embodied in its operations work sheet 1075, we reverse the judgment.

The controversy, which is the case at bench, involves the narrow but complex problem of the determination of the extent of taxability of made by foreign subsidiaries to a California-based parent where income of the subsidiaries has already been included within the measure of California tax by reason of a statutory allocation to this state, and where the subsidiaries have also paid taxes measured by the same *9 income to the nations of their domicile. Commendably, the parties have assisted in the resolution of this problem by a comprehensive stipulation of facts embodied in part in a pretrial order.

Appellant (Taxpayer) is a Delaware corporation doing business in In the years in question, it had three subsidiary corporations in foreign countries which, for the purpose of convenience, are identified as “London,” “Italy,” and “France.” In determining the measure of California franchise…

I dissent. I would follow the decision in Safeway Stores, Inc. v. Franchise Tax Board, 3 Cal.3d 745 [ 91 Cal.Rptr. 616 , 478 P.2d 48 ], and would affirm the judgment of the trial court herein. In that case dividends were received from subsidiaries in a foreign country (Canada) and “Most of such dividends were received from Canadian subsidiaries, which did business only outside California.” In the present case, dividends were received from subsidiaries in foreign countries, including England. The factual background of the Safeway decision (i.e., single unitary and foreign dividends) was the same as the factual background of the present case. The Safeway decision set forth a detailed apportionment formula for computing taxes under the factual circumstances of that case which included dividends, of a single unitary business, received from in a foreign country. In the majority opinion in the present case it is stated that in the Safeway case the issue of what impact taxes paid by a foreign subsidiary has upon the dividend deduction of Revenue and Taxation Code section 24402, or its predecessor section, was not before the Supreme Court and apparently was not considered by it. Since the…

This is an appeal from a judgment denying appellant's claims for refund of California franchise taxes paid for the years 1952 through 1960. Accepting respondent Franchise Tax Board's own administrative interpretation of applicable law as embodied in its operations division work sheet 1075, we reverse the judgment.

The controversy, which is the case at bench, involves the narrow but complex problem of the determination of the extent of taxability of distributions made by foreign subsidiaries to a California-based parent corporation where income of the subsidiaries has already been included within the measure of California tax by reason of a statutory allocation to this state, and where the subsidiaries have also paid taxes measured by the same income to the nations of their domicile. Commendably, the parties have assisted in the resolution of this problem by a comprehensive stipulation of facts embodied in part in a pretrial order.

Appellant (Taxpayer) is a Delaware corporation doing business in California. In the years in question, it had three subsidiary corporations operating in foreign countries which, for the purpose of convenience, are identified as…