Taiheiyo Cement U.S.A., Inc. v. Franchise Tax Board

—Taiheiyo Cement U.S.A., Inc. (Taxpayer), appeals from a judgment entered after the trial court granted Franchise Tax Board’s (FTB) motion for judgment on the pleadings on Taxpayer’s complaint for declaratory relief and refund of taxes, interest, and penalties paid for tax years 1998 and 1999 following FTB’s disallowance of enterprise zone sales and use tax credits claimed by Taxpayer under Revenue and Taxation Code section 23612.2 for the purchase of current expense assets.

Taxpayer contends that the trial court erred in granting FTB’s motion for judgment on the pleadings, claiming a plain reading of section 23612.2 authorizes a sales and use tax credit “for all qualified property, whether expensed or depreciated.” Taxpayer also contends that the court erred by granting the motion for judgment on the pleadings on the declaratory relief cause of action, arguing that FTB’s “unstated policy of imposing a capitalization requirement for tax credits” is an invalid “underground regulation.”

Construing section 23612.2 narrowly against Taxpayer, which must show it comes squarely within the statute expressly authorizing the tax credit, we conclude that the sales and use tax…