Hoffmann-LaRoche, Inc. v. Franchise Tax Board

The central issue on this appeal is the constitutionality of Revenue and Taxation Code section 23135 as a part of the formula by which the California franchise tax is computed for a New Jersey corporation which manufactures in California and sells its products in other states.

Hoffmann-LaRoche, Inc. (hereinafter taxpayer) brought this suit against the California Franchise Tax Board (hereinafter the Board) for recovery of franchise taxes paid under protest for the taxable years 1968, 1969 and 1970. The parties stipulated in the trial court “that no issues of fact exist and that the only issues are those of law.” The court then gave judgment on the pleadings in favor of the Board, from which the taxpayer has appealed.

The questioned section is part of the Uniform Division of Income for Tax Purposes Act (U.D.I.T.P.A.) which was adopted by California in 1966. (Rev. & Tax. Code, § 25120 et seq.; Stats. 1966, ch. 2, § 7, p. 177.) The U.D.I.T.P.A. provides a uniform method for the allocation of a multistate corporation’s total taxable income among those states which have taxing jurisdiction over the corporation. (See Keesling & Warren, California’s Uniform Division of Income…