Colgate-Palmolive Co. v. Franchise Tax Board

The principal issue in this appeal is whether California’s worldwide unitary .method of taxation (based on Rev. & Tax. Code, §§25101, 25120-25139), as applied to domestic-parent unitary corporate groups, is unconstitutional under the foreign commerce clause of the United States Constitution. (U.S. Const., art. I, § 8, cl. 3.) Using the dormant foreign commerce clause analytical framework set forth in Japan Line, Ltd. v. County of Los Angeles (1979) 441 U.S. 434 [ 60 L.Ed.2d 336 , 99 S.Ct. 1813 ] and Container Corp. v. Franchise Tax Bd. (1983) 463 U.S. 159 [ 77 L.Ed.2d 545 , 103 S.Ct. 2933 ], we originally concluded that the tax method does not violate that clause. Several months after we issued our decision, the California Supreme Court issued its decision in Barclays Bank Internal, Ltd. v. Franchise Tax Bd. (1992) 2 Cal.4th 708 [ 8 Cal.Rptr.2d 31 , 829 P.2d 279 ] (Barclays). On June 18, 1992, the Supreme Court directed us to vacate our original decision in this case and refile it after modification in light of Barclays. The parties then filed supplemental briefs. As we explain, Barclays effects a substantial change in our foreign commerce clause analysis but no change in…