Abbott Laboratories v. Franchise Tax Board

INTRODUCTION

This appeal concerns the effect of Farmer Bros. Co. v. Franchise Tax Bd. (2003) 108 Cal.App.4th 976 [ 134 Cal.Rptr.2d 390 ] (Farmer Bros.) on Revenue and Taxation Code section 24402. Farmer Bros, held that section 24402 violated the commerce clause of the United States Constitution by allowing a tax deduction to a corporation which received a dividend declared from income of a corporation subject to California tax, while not allowing a tax deduction to a corporation receiving a dividend declared from income of a corporation not subject to California tax.

Plaintiff Abbott Laboratories (Abbott) owned a 50 percent interest in TAP Pharmaceutical Products, Inc. (TAP), part of whose income was subject to California tax and which declared a dividend. Based on Farmer Bros., defendant Franchise Tax Board (FTB) denied the dividends received deduction to Abbott, which paid the tax on the TAP dividend it received and sued FTB for a refund of that tax paid. Abbott appeals from an order dismissing its action after the trial court sustained the FTB’s demurrer without leave to amend.

In this appeal Abbott proposes that this court rewrite section 24402, subdivision (a) to…