General Motors Corp. v. Franchise Tax Board

Like many large companies, plaintiff General Motors Corporation has an active treasury department. Its treasury department supplements the company’s other income-generating activities by investing the company’s idle cash in short-term marketable securities. These investments present special analytical problems under the Uniform Division of Income for Tax Purposes Act (UDITPA), which California has adopted (Rev. & Tax. Code, § 25120 et seq.) and which it uses to determine what portion of a multistate company’s corporate income it may tax. A key part of the UDITPA, the sales factor, helps allocate a company’s income to various states in accordance with the amount of gross receipts the company generates in each state. In turn, this raises the question what proceeds qualify as gross receipts.

Unlike Microsoft Corporation, whose treasury department activities we addressed in the companion case Microsoft Corporation v. Franchise Tax Bd. (2006) 39 Cal.4th 750 [ 47 Cal.Rptr.3d 216 ] (Microsoft Corporation), General Motors Corporation’s treasury department preferred not simply to hold its investments until maturity during the tax years in question. Rather, it generated the bulk…