News and Insights

U.S. Supreme Court Denies Review of Gillette v. California Franchise Tax Board

Tax Development Oct 14, 2016

On October 11, 2016, the United States Supreme Court denied review of the California Supreme Court’s decision in The Gillette Company and Subs. v. California Franchise Tax Board,1 the leading case among challenges to the Multistate Tax Compact income apportionment formula. The issue was whether Gillette was required to use the state’s four-factor, double-weighted sales apportionment formula or could elect the equally weighted, three-factor apportionment formula under the Multistate Tax Compact.

Gillette was originally successful at the California Court of Appeal, but the decision was later reversed by the California Supreme Court.2 Gillette subsequently filed a petition for writ of certiorari with the United States Supreme Court, but the petition was rejected. For Gillette, this case is over for now.

The Franchise Tax Board will now begin to address the taxpayers who have filed approximately $750 million in refund claims placed on hold while Gillette was pending. According to spokesman Chris Smith, “the Franchise Tax Board is developing guidance for any potentially affected taxpayers and will release that shortly.”

On a national level, four other states are addressing the issue of whether the Multistate Tax Compact is a binding contract. Apportionment election cases are currently pending in Michigan, Minnesota, Oregon, and Texas. The Oregon Supreme Court is still reviewing a decision of the Oregon Tax Court on this issue. If this, or any other state, allows the Multistate Tax Compact election in any decision, the United States Supreme Court may accept a review of this issue to settle the controversy.

Although all appeals have been exhausted in Gillette, other refund claims filed by taxpayers may still have value. Please contact us if you have any questions about a pending claim for this issue.

1 U.S. Supreme Court Dkt. No. 15-1442.
2 Gillette Co. v. Franchise Tax Board, 62 Cal. 4th 468 (2015).


Mary F. Bernard