Ceridian Corp. v. Franchise Tax Board

In this case we hold that Revenue and Taxation Code section 24410 violates the commerce clause of the United States Constitution.

The Franchise Tax Board of the State of California (Board) appeals from a judgment awarding a refund to Ceridian Corporation (Ceridian). The trial court ruled that the statute governing taxation of insurance company dividends paid to major corporate stockholders is unconstitutional. The Board claims this ruling was erroneous, and also contends that even if the statute is invalid, a tax refund is not the proper remedy. We agree with the trial court on both issues and affirm the judgment.

I. Facts

Ceridian, formerly Control Data Corp. (Control Data), sought a refund of corporate franchise taxes imposed upon Control Data for the income years 1978 through 1982, and upon Commercial Credit Company (Commercial Credit) for the income years 1978 and 1979. Ceridian is the successor to all causes of action and rights asserted herein on behalf of Control Data and Commercial Credit. Ceridian is a Delaware corporation, with its commercial domicile in Minnesota. Commercial Credit is a Delaware corporation with its commercial domicile in Maryland. During…