Filed 8/17/06 (This opinion follows companion case, S133343, also filed 8/17/06)
IN THE SUPREME COURT OF CALIFORNIA
GENERAL MOTORS CORPORATION
et al.,
Plaintiffs
and
Appellants,
S127086
v.
Ct.App. 2/2 B165665
FRANCHISE TAX BOARD,
Los Angeles County
Defendant and Appellant.
Super. Ct. No. BC269404
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),1 which
California has adopted (Rev. & Tax. Code, § 25120 et seq.)2 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
1
Uniform Division of Income for Tax Purposes Act, 7A part 1 West’s
Uniform Laws Annotated (2002) page 141.
2
All further statutory references are to the Revenue and Taxation Code
unless otherwise indicated.
1
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.
(Aug. 17, 2006, S133343) __ Cal.4th ___ (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 of its proceeds through repurchase agreements, commonly referred to as
“repos.” (See generally Bewley v. Franchise Tax Bd. (1995) 9 Cal.4th 526, 529.)
In this case, we must decide how repos should be treated under the UDITPA: in
particular, what portion of the proceeds from a repo should be treated as gross
receipts for purposes of allocating a company’s income among the various states?
The consequences of the answer are significant; here, for example, the answer may
effect a nearly twofold change in the amount of state income tax due. We
conclude a repo is analogous to a secured loan for UDITPA purposes and thus
only the interest received should be treated as gross receipts.
This case also poses a second question. Like the federal government and
many states, California subsidizes new research through a partial tax credit for
increases in research spending. When research is performed by one member of a
corporate family, does the credit go only to that member or may it be spread
among the other members of the corporate family? Here, under the terms of the
governing statutes, we conclude only the taxpaying corporation that performed the
research is entitled to the credit.
THE UDITPA
We explained the relevant principles of the UDITPA in detail in Microsoft
Corporation, supra, __ Cal.4th at pages ___-___ [pp. 2-4], and summarize them
only briefly here. The UDITPA is designed to determine what portion of a
2
business’s income is properly attributable to its activities in a given state and thus
what portion of that income the state may tax. Under the UDITPA, a unitary
business’s3 income is divided into “business” and “nonbusiness” income, each
subject to different attribution rules. (§ 25120, subds. (a), (d).) Here, we are
concerned only with business income. Business income is allocated to each state
according to a three-factor formula that considers the amount of property, payroll,
and sales a company has in each state. (§ 25128.) As in Microsoft Corporation,
only the sales factor is at issue. That factor measures the portion of income
attributable to a given state by dividing in-state “gross receipts” by all worldwide
gross receipts. (§§ 25120, subd. (e), 25134.) The size of this fraction can vary
greatly depending on what qualifies as gross receipts. Therein lies the heart of the
dispute here.
FACTUAL AND PROCEDURAL BACKGROUND
General Motors Corporation and certain affiliated corporations
(collectively, General Motors) engage in a unitary business that operates partially
within California. General Motors is engaged principally in manufacturing motor
vehicles and motor vehicle parts.
General Motors maintains a treasury department in New York. The
treasury department manages General Motors’ excess cash from its motor vehicle
sales. The investment activities of the treasury department often produce a
significant portion of General Motors’ net income. During the tax years at issue,
3
A unitary business is one that receives income “from or attributable to
sources both within and without the state . . . .” (§ 25101.) “A unitary business is
generally defined as two or more business entities that are commonly owned and
integrated in a way that transfers value among the affiliated entities.” (Citicorp
North America, Inc. v. Franchise Tax Bd. (2000) 83 Cal.App.4th 1403, 1411, fn.
5.)
3
1986-1988, General Motors’ net corporate income totaled approximately
$7 billion, of which the treasury department generated over $550 million.
During the years at issue, the treasury department used its excess cash to
invest in various marketable securities. These included United States Treasury
bonds, notes, and bills, and bank certificates of deposit, generally on a very short-
term basis.4 Income from these investments derived from (1) direct sales,
(2) redemptions, and (3) repos. Direct sales of securities, i.e., sales before
maturity other than pursuant to a repurchase agreement, accounted for 4 percent of
treasury department proceeds. Redemptions, i.e., redemptions on maturity of the
security, accounted for 6 percent of proceeds. The bulk of treasury department
proceeds, 90 percent, derived from repos.
Defendant Franchise Tax Board (the Board) audited General Motors’ 1986-
1988 income tax returns. In its initial California tax returns, General Motors
treated the majority of the treasury department income as nonbusiness income, not
subject to taxation in California. On audit, the Board treated all of General
Motors’ treasury income as business income subject to California apportionment
and taxation. In calculating income to be apportioned to California, the Board
included as gross receipts only General Motors’ net proceeds from the treasury
department’s securities transactions. General Motors argued that the gross
proceeds from these transactions, totaling almost $1 trillion over the three-year
period, were all gross receipts. The Board’s inclusion of only net proceeds
resulted in almost twice as much income being apportioned to California for 1986
4
On average, General Motors rolled over its capital from one investment to
the next every 3.25 days.
4
through 1988.5 General Motors paid all taxes involved, filed claims for refund,
and filed protests as the result of certain adjustments made during and after the
audit. The Board denied relief.
After exhausting its administrative remedies, General Motors filed a refund
complaint for 1986-1988 in the superior court. As relevant here, General Motors
raised two issues. First, it challenged the Board’s exclusion of the treasury
department’s gross proceeds from the sales factor (the gross receipts issue).
Second, it claimed that a $2.8 million research credit earned for research expenses
incurred in the 1988 tax year (see § 23609) should be applied to the tax liabilities
of all corporations in its unitary business group that had California tax liability
(the research credit issue). The Board allowed only Delco, the member of the
General Motors unitary business group that originally incurred qualifying
expenses, to use the credit. Because the credit exceeded Delco’s tax liability, the
Board allowed Delco a credit of approximately $1 million for 1988 and required
that the remaining credit be rolled over to future years.
The trial court denied General Motors’ motion for summary adjudication on
both the gross receipts issue and the research credit issue, and granted the Board’s
cross-motion for summary adjudication on the research credit issue. Thereafter,
the parties agreed a trial would be unnecessary and entered a series of stipulations
resolving disputed issues. As relevant here, they agreed that approximately $497
million of treasury department income would be treated as apportionable business
income, and gross proceeds from direct sales would be treated as gross receipts.
5
Under General Motors’ approach, 1.7 percent of its sales and 1.7 percent of
its income, approximately $111 million, would be apportioned to California.
Under the Board’s approach, 5.6 percent of General Motors’ sales and 3.0 percent
of its income, approximately $206 million, would be apportioned to California.
5
Based on its rulings on the motions for summary adjudication and on the parties’
stipulation to judgment, the trial court entered a judgment finding that General
Motors had overpaid its California franchise taxes and awarding General Motors a
refund of approximately $7.4 million.
The Court of Appeal affirmed. It ruled that redemptions and repos were in
essence secured loans and that only the net proceeds from these transactions were
includible in General Motors’ sales factor. It further held that only Delco, and not
any other member of the unitary reporting group, was entitled to use the research
tax credit. We granted review.
DISCUSSION
I. Gross Receipts
A. Redemptions
Here, as in the companion case Microsoft Corporation, supra, ___ Cal.4th
___, General Motors held some marketable securities until maturity. In Microsoft
Corporation, we held the entire redemption price of a marketable security is
includible as gross receipts in the sales factor. That conclusion applies equally to
the marketable securities held to maturity by General Motors. Thus, we conclude
the Court of Appeal erred to the extent it excluded the full price of these securities
from General Motors’ gross receipts.
B. Repos
1. The Nature of a Repo
“Repurchase agreements, commonly known as ‘repos,’ sound esoteric and
can be quite complicated. They are, however, in essence nothing more than
financing arrangements by which one party provides funds to another for a short
period of time. There are two parties to a repurchase agreement: one has money
to lend, the other needs cash and has securities. The repurchase agreement itself
consists of two transactions that are agreed to simultaneously, but are performed at
6
different times: (1) the seller-borrower agrees to transfer securities to the buyer-
lender in exchange for cash; and (2) the seller-borrower agrees to repurchase the
securities from the buyer-lender at the original price plus ‘interest’ on a specified
future date or upon demand.” (Bewley v. Franchise Tax Bd., supra, 9 Cal.4th at
p. 529.)
The seller-borrower who transfers the securities and agrees to buy them
back is said to be engaged in a repo; the buyer-lender who provides the cash and
agrees to sell the securities back is said to be engaged in a reverse repo.
(Resolution Trust Corp. v. Aetna Casualty & Sur. Co. (7th Cir. 1994) 25 F.3d 570,
572; In re Bevill, Bresler & Schulman Asset Management Corp. (D.N.J. 1986) 67
B.R. 557, 567; but see Gov. Code, § 53601, subd. (i)(5)(A), (C) [reversing terms].)
It appears General Motors principally engaged in reverse repos, but the distinction
between the two transactions is unimportant in this case; thus, we will
occasionally refer to both repos and reverse repos generically as “repos.”
Repos serve at least four critical functions. First, the Federal Reserve uses
repos to make short-term adjustments in the money supply and carry out the
government’s monetary policy. To restrict the money supply, it enters repos,
selling securities and withdrawing cash from the economy; conversely, to expand
the money supply, it enters reverse repos, buying securities and injecting cash into
the economy. (Note, Lifting the Cloud of Uncertainty over the Repo Market:
Characterization of Repos as Separate Purchases and Sales of Securities (1984)
37 Vand. L.Rev. 401, 403-404.)
Second, repos are used by securities dealers to finance their underwriting of
new government debt issues. A liquid, well-functioning repo market allows
dealers to sell current securities holdings for cash (as part of the front end of a
repo) and use the cash to acquire new government securities, thereby reducing the
federal government’s financing costs. (Bevill, Bresler & Schulman Asset
7
Management Corp. v. Spencer Sav. & Loan Assn. (3d Cir. 1989) 878 F.2d 742,
746; Granite Partners, L.P. v. Bear Stearns & Co. (S.D.N.Y. 1998) 17 F.Supp.2d
275, 299 (Granite Partners).)
Third, repos contribute to the domestic housing market. Mortgage-backed
securities guaranteed by government agencies such as the Federal National
Mortgage Association (Fannie Mae) and Federal Home Loan Mortgage
Corporation (Freddie Mac) become more attractive to investors when they can be
repackaged and resold in an active repo market. These agencies can thus raise
funds more cheaply, which in turn means residential home buyers can obtain
lower rate mortgages. (Granite Partners, supra, 17 F.Supp.2d at p. 299; In re
Bevill, Bresler & Schulman Asset Management Corp., supra, 67 B.R. at p. 568.)
Fourth, repos are a valuable investment tool for the public, institutional
investors, large corporations, and state and local governments. Because repos can
be structured with a maturity date tailored to the needs of the individual investor,
they provide a high degree of liquidity and flexibility. (Securities & Exchange
Com. v. Miller (S.D.N.Y. 1980) 495 F.Supp. 465, 471.) This liquidity and
flexibility, combined with high yields, makes them an attractive financial
management tool for entities (such as General Motors here) with large amounts of
idle cash seeking secure short-term investments. (See Granite Partners, supra, 17
F.Supp.2d at pp. 299, 302; Securities & Exchange Com. v. Miller, at p. 471;
Comment, The Need for a Uniform Classification of Repurchase Agreements:
Reconciling Investor Protection with Economic Reality (1987) 36 Am. U. L.Rev.
669, 670-671.)
2. Characterizing Repos as Sales or Secured Loans
As in Microsoft Corporation, supra, ___ Cal.4th ___, the issue here is what
portion of the money received by the taxpayer in the course of its securities
transactions qualifies as “gross receipts.” Also as in Microsoft Corporation, we
8
begin by considering how the plain language of the UDITPA applies to these
transactions.
The plain language offers little immediate assistance. The statute does not
define gross receipts. (See § 25120.) While the term “gross receipts” generally
refers to the whole amount received, without deduction (Microsoft Corporation,
supra, __ Cal.4th at p. ___ [pp. 7-8] & fn. 7), how this concept should apply to a
transaction like a repo is not readily apparent.
Agency interpretation similarly does not decide the question. General
Motors relies on two agency decisions, Appeals of Pacific Telephone & Telegraph
(May 4, 1978) [1978-1981 Transfer Binder] Cal.Tax Rptr. (CCH) ¶ 205-858, page
14,907-36, and Appeal of Merrill, Lynch, Pierce, Fenner & Smith, Inc. (June 2,
1989) [1986-1990 Transfer Binder] Cal.Tax Rptr. (CCH) ¶ 401-740, page 25,549,
as supporting its position. However, these decisions offer no insight here; in
neither case was the tax treatment of repos at issue.
The regulations interpreting the UDITPA are likewise unhelpful concerning
the proper treatment of repos. General Motors cites out of context to one
regulation that defines the term “loan” to exclude repos (see Cal. Code Regs., tit.
18, § 25137-4.2, subd. (b)(7)), but this citation is unavailing for two reasons.
First, the definition expressly applies only within the regulation (id., § 25137-4.2,
subd. (b)), and the regulation is a special one governing application of the
UDITPA to banks and financial institutions; it has no application to General
Motors. Second, the regulation goes on to address the treatment of repos under the
gross receipts factor and provides that only the interest (net gain) from repo sales
is to be included—precisely the treatment the Board advocates, and contrary to
General Motors’ position. (Id., § 25137-4.2, subd. (c)(2)(A).)
Finding no dispositive answer in either the plain language of the statute or
agency interpretations of that language, we turn to a closer examination of the
9
economic reality of repo transactions. (See Frank Lyon Co. v. United States
(1978) 435 U.S. 561, 573 [in deciding transaction’s tax treatment, court should
look to transaction’s economic reality]; Microsoft Corporation, supra, __ Cal.4th
at pp. ___-___ [pp. 10-11] [examining economic reality of redemptions to decide
their tax treatment under the UDITPA]; Bewley v. Franchise Tax Bd., supra, 9
Cal.4th at pp. 531-532 [examining economic reality of repos to decide their
treatment under federal tax law].)
We begin with two baseline observations. First, as both parties agree, in a
sale of marketable securities the entire sale price constitutes gross receipts, just as
it would for the sale of any other commodity. Second, under the ordinary meaning
of gross receipts, “the repayment of a loan is never considered a receipt.”
(Marshall v. Commissioner (10th Cir. 1975) 510 F.2d 259, 262; see also 26 C.F.R.
§§ 1.41-3(c)(2)(iii) (2006) [gross receipts exclude “repayment of the principal
amount of a loan”], 1.263A-3(b)(2)(ii)(D) [same], 1.448-1T(f)(2)(iv)(A) [same].)
Thus, in a secured loan transaction, where A loans money to B and B provides A a
marketable security as collateral to secure the loan, the loan principal B repays A
is not a gross receipt; only the loan interest constitutes such.
Given these baselines, the Board analogizes a repo to a secured loan or,
alternatively, to the simple repeated deposit and withdrawal of cash from a bank
account. The Court of Appeal did likewise. To support its analogy, the Board
points to prior decisions of the United States Supreme Court and this court that
expressly characterized a repo as a secured loan.
In Nebraska Department of Revenue v. Loewenstein (1994) 513 U.S. 123,
the United States Supreme Court followed Frank Lyon Co. v. United States, supra,
435 U.S. 561, and looked to the economic reality of a repo in deciding how it
should be treated under federal tax law, concluding that “in economic reality, the
[repo Buyer-Lenders] receive interest on cash they have lent to the Seller-
10
Borrower.” (Loewenstein, at p. 134.) Loewenstein thus concluded that in a repo,
the income from the transaction was interest from a private commercial loan and
was not subject to the tax shield applicable to income received from the
government pursuant to the purchase of government securities. (Id. at pp. 130-
133; see 31 U.S.C. § 3124.) The Supreme Court dismissed as irrelevant the
taxpayer’s argument that repos were viewed as sales and repurchases of
government securities for purposes of securities, bankruptcy, and banking law.
(Loewenstein, at p. 134.)
Several months later, in Bewley v. Franchise Tax Bd., supra, 9 Cal.4th 526,
we reached the same conclusion when addressing the identical tax question. Like
the United States Supreme Court, we considered the essential economic reality of
the repos at issue. We concluded that they established a lender-borrower
relationship, that the securities involved served as the functional equivalent of
collateral, and thus that the income from the repos was essentially interest from
private commercial loans. (Id. at pp. 531-532.) Thus, in that tax context, we
characterized repos as secured loans.
In contrast, General Motors characterizes its repo transactions as sales: in a
repo, like any other sale of a commodity, title passes, and thus, General Motors
argues, its sale of a security in the course of a repo is no different than its sale of
an automobile or its sale of any other security. To support this characterization,
General Motors points to numerous decisions that have indeed characterized a
repo as a purchase and sale of a security.6
6
See In re County of Orange (C.D.Cal. 1998) 31 F.Supp.2d 768, 778 (repos
are not secured loans for purposes of debt-limit provisions of California
Constitution); Granite Partners, supra, 17 F.Supp.2d at page 302 (repos are
purchase and sale agreements and thus not subject to Uniform Commercial Code
(UCC) article 9 secured loan obligations); In re Comark (B.A.P. 9th Cir. 1992)
(footnote continued on next page)
11
In truth, neither side’s proffered analogies are precisely accurate, and
neither side’s cases are precisely on point. A repo is a true hybrid; it blends
characteristics of both a sale of securities and a secured loan. (In re Bevill, Bresler
& Schulman Asset Management Corp., supra, 67 B.R. at pp. 596-597; Keycorp v.
Tracy (Ohio 1999) 719 N.E.2d 529, 532.) In some circumstances, it is properly
characterized as a secured loan; in other circumstances, it is properly characterized
as a purchase and sale of a security. Which characterization fits depends heavily
on context; those features of a repo salient in its characterization for bankruptcy
purposes, or securities law purposes, or UCC purposes, or even federal tax
purposes, are not necessarily the features that will be most salient in characterizing
it under the UDITPA. (See In re County of Orange, supra, 31 F.Supp.2d at p. 779
[“Different statutes have distinct purposes which warrant corresponding levels of
examination. Different levels of examination result in different conclusions”
about the correct legal characterization of repos].) Thus, we cannot rely on
superficial analogies, nor on the United States Supreme Court’s or our own prior
decisions that have characterized a repo for other purposes, to decide on which
side of the sale/loan line a repo falls for purposes of section 25120, subdivision
(e). Nor can we simply accept the repo parties’ formal characterizations. Though
General Motors’ master repurchase agreement provides “[T]he parties intend that
all Transactions hereunder be sales and purchases and not loans,” for tax purposes
the economic reality of a transaction, not the form the parties employ, is
(footnote continued from previous page)
145 B.R. 47, 53-54 (repos are securities transactions, not secured loans, under
particular bankruptcy law provisions); In re Residential Resources Mortgage
Investments Corp. (Bankr. D.Ariz. 1989) 98 B.R. 2, 23 (repos involve sale and
repurchase of security); 44 Ops.Cal.Atty.Gen. 140, 143 (1964) (State Treasurer is
authorized to enter repos because they involve sale, not loan).
12
dispositive. (Frank Lyon Co. v. United States, supra, 435 U.S. at p. 573.) Thus,
Granite Partners, supra, 17 F.Supp.2d at pages 302-304, relied on by General
Motors, which found this expression of intent dispositive for UCC purposes, is not
instructive.
To identify the portion of a repo that constitutes gross receipts, we consider
how and why a sale or redemption of a security, on the one hand, and a secured
loan, on the other, are treated differently for gross receipts purposes. Gross
receipts are “[t]he total amount of money or other consideration received by a
business taxpayer for goods sold or services performed in a year, before
deductions.” (Black’s Law Dict. (8th ed. 2004) pp. 722-723, citing 26 U.S.C.
§ 448; see Microsoft Corporation, supra, __ Cal.4th at p. ___ [p. 7], fn. 7.) In
both the sale and redemption of a security, the entire amount is received for the
relinquishment of a commodity. In contrast, in a secured loan, some of the
amount is received for a service, the use of money (interest), while the remainder
is simply a return of the money used (principal). The return of principal does not
fit within the definition of gross receipts.
To better understand this basic distinction and how it applies even in the
case of debt instruments like bonds and Treasury bills, consider the case of a
security (a $10,000 Treasury bill, say) bought on the market from a securities
dealer, then redeemed with the issuer, the United States government. The price
the purchaser/taxpayer receives on redemption, $10,000, is dependent on the value
of the commodity it holds and independent of the price it paid to the broker. The
taxpayer is not being repaid for money it lent; it had, in fact, paid nothing and lent
nothing to the United States government. The entire amount received is properly
treated as gross receipts.
There are in fact four scenarios for acquisition and disposition of this
hypothetical Treasury bill: (1) purchase from a third party/redemption with the
13
issuer; (2) purchase from the issuer/redemption with the issuer; (3) purchase from
the issuer/sale to a third party; and (4) purchase from a third party/sale to a third
party. The dispositions in the first two scenarios are labeled “redemptions” and in
the last two are labeled “sales,” but in each case the two halves of the transaction
are independent, which illustrates a fundamental point: in the dispositional half of
the transaction, the transaction we are analyzing for tax purposes, money is
received for surrendering title to a marketable security and not for a service (i.e.,
the use of money—interest), because the amount received is dependent on the
value of the security and independent of the amount one originally provided the
buyer/issuer.
In contrast, with a secured loan the opposite is true. The amount received is
dependent on the amount originally paid (loaned) and is independent of the
particular value of the securities held as collateral, whose value may rise or fall
during the term of the loan without affecting the amount received. Neither
General Motors nor the Board contends here that the return of money loaned is
money received in payment for goods or services and is includible in gross
receipts.
Viewed this way, it becomes apparent that, for gross receipts purposes, a
repo has the characteristics of a loan, not the sale of a commodity. In a repo, the
amount paid depends not on the value of the surrendered security, but on the
amount of money the repo buyer paid the repo seller in the front end of the
transaction. This can be seen from two key features of a standard repo transaction,
each of which is present in General Motors’ repos.7 First, under a provision
7
General Motors entered repo transactions under a form master agreement,
the Public Securities Association Master Repurchase Agreement. Repo market
(footnote continued on next page)
14
generally referred to in the securities trade as a “mark-to-market” provision,8 if the
value of the securities drops, the buyer may require the seller to provide additional
securities to ensure the value of the securities held exceeds 102 percent of the
agreed-upon repurchase price. Conversely, if the value of the securities rises, the
seller may require the buyer to return securities sufficient to maintain the value of
the amount held at no more than 102 percent. Thus, as with a secured loan,
market fluctuations in value create a right to increase or reduce the amount of
securities (collateral) held; the buyer is protected from fluctuations in the value of
the securities it has acquired. (See In re County of Orange, supra, 31 F.Supp.2d at
p. 777.) Second, the repurchase price is set exclusively by reference to the
purchase price and is independent of any increase or decrease in value the sold
securities may undergo.9 Instead, the repurchase price is the purchase price
increased by an annual percentage rate, adjusted for the number of days between
sale and repurchase. Thus, the repurchase price is dependent on the money
initially paid and independent of the value of the securities surrendered.
Consequently, the repurchase price is payment for the interim use of the repo
buyer’s money, not payment for the securities the repo buyer is “returning.” This
(footnote continued from previous page)
participants have adopted that agreement as the industry standard. (Granite
Partners, supra, 17 F.Supp.2d at p. 303.)
8
See Resolution Trust Corp. v. Aetna Casualty & Sur. Co., supra, 25 F.3d at
page 574; In re Bevill, Bresler & Schulman Asset Management Corp., supra, 67
B.R. at page 585.
9
Indeed, both the purchase and repurchase price may be set without
reference to market rates for the securities involved. (See In re County of Orange,
supra, 31 F.Supp.2d at p. 772, fn. 4 [“The original sale and repurchase price is
typically less than the prevailing market value of the securities”]; 44
Ops.Cal.Atty.Gen. 140, supra, at p. 142.)
15
means, in a repo, the seller is “buying” cash (i.e., receiving a loan), while in a sale
or redemption, the buyer/issuer is paying for a commodity. Thus, a repo is
properly characterized as a secured loan for gross receipts purposes.
To summarize: For tax purposes, we care why money is being received. If
it is received in exchange for a commodity, we treat the full price as gross receipts.
If it is received in exchange for the use of money, only the interest, not the
principal, is a gross receipt. In a securities sale or redemption, the price paid the
seller is a function of the securities held and is independent of the initial cost. In a
secured loan, the price paid is tied to the initial cost (the amount loaned) and is
independent of fluctuations in the value of the securities held. In a repo, the price
paid is also tied to the initial cost and is independent of fluctuations in the type or
value of the securities held. Thus, a repo has the characteristics of a loan, and only
the interest received is a gross receipt for purposes of the UDITPA.
The only out-of-state case to consider the question, H.J. Heinz Co. v.
Revenue Division (Mich.Ct.App. 1992) 494 N.W.2d 850, reached the same result.
There, as here, the court rejected the parties’ characterizations of their transactions
as purchases and sales and emphasized it “must consider the real nature of the
transactions without regard to the terms applied to them by the parties.” (Id. at
p. 853.) The taxpayer was engaged in reverse repos; it purchased securities from
various financial institutions with its excess cash and resold them the next day,
although “[t]he securities, themselves, never changed hands.” (Id. at p. 851.)
Rather, the taxpayer received its cash back, plus one day’s earnings at the quoted
yield. (Ibid.) On these facts, the court concluded the repo transactions should be
treated like secured loans. (Id. at p. 853; see also 18-125 Me. Code Reg. 801.08,
subd. (B)(2) [treating repos as loans for gross receipts purposes]; Va. Dept. of Tax.
public doc. ruling 91-212 (Sept. 6, 1991) [same].) As we have previously noted,
when interpreting the UDITPA, we will strive to achieve uniformity with sister
16
states when possible. (Microsoft Corporation, __ Cal.4th at p. ___ [p. 19];
Hoechst Celanese Corp. v. Franchise Tax Bd. (2001) 25 Cal.4th 508, 526; see also
§ 25138 [the UDITPA “shall be so construed as to effectuate its general purpose to
make uniform the law of those states which enact it”].)
This interpretation does no harm to the aforementioned essential role repos
play in the national economy. The key features that make repos valuable for
short-term investments, short-term capital acquisition, and control of monetary
policy are their liquidity, security, high yields, and efficient default remedies.10
Treating them as secured loans solely for UDITPA purposes does nothing to
impair these essential features.
Thus, we hold that only the interest from repo transactions should be
included as gross receipts.
3. Regulatory and Constitutional Objections
General Motors argues that the Board’s exclusion of some of its investment
proceeds in this case constitutes a regulation subject to the requirements of
California’s Administrative Procedure Act. (See Gov. Code, § 11340 et seq.) An
agency action is subject to that act, however, only if it adopts a rule applicable to a
range of cases. (Morning Star v. State Board of Equalization (2006) 38 Cal.4th
324, 333-334; Tidewater Marine Western, Inc. v. Bradshaw (1996) 14 Cal.4th
557, 571.) The Board’s decision concerning how the tax laws should apply to
General Motors’ transactions is not such a rule.
10
See Securities & Exchange Com. v. Miller, supra, 495 F.Supp. at page 471;
Comment, The Need for a Uniform Classification of Repurchase Agreements:
Reconciling Investor Protection with Economic Reality, supra, 36 Am. U. L.Rev.
at pages 670-671; Schroeder, Repo Madness: The Characterization of Repurchase
Agreements Under the Bankruptcy Code and the U.C.C. (1996) 46 Syracuse
L.Rev. 999, 1007-1009.
17
General Motors further argues that refusal to include the entire proceeds
involved in repo transactions is unconstitutional, in violation of the due process
and commerce clauses.11 To establish this, it has the burden of showing “ ‘by
“clear and cogent evidence” that the income attributed to [California] is in fact
“out of all appropriate proportions to the business transacted . . . in that State,”
[citation], or has “led to a grossly distorted result,” [citation].’ ” (Container Corp.
v. Franchise Tax Bd. (1983) 463 U.S. 159, 170.) It has not done so. General
Motors’ argument focuses instead on the effect exclusion of gross proceeds would
have on the attribution of income to New York. As California’s tax law is not
being used to calculate tax on New York income, and as General Motors has failed
to demonstrate any grossly disproportionate attribution of income to California,
the argument fails.
C. Application of Section 25137
As we discussed in depth in Microsoft Corporation, supra, __ Cal.4th at
pages ___-___ [pp. 16-24], the UDITPA contains a relief provision, section
25137, pursuant to which either the taxpayer or the Board may argue (1) the
standand formula fails to fairly represent the extent of the taxpayer’s California
business activity, and (2) the taxpayer’s or Board’s proposed alternative method of
calculation is reasonable. Here, in the parties’ stipulation prior to entry of
judgment, the Board expressly reserved the right to argue that any gross securities
proceeds included in the sales factor produced distortion and should be excluded
under section 25137. Neither the trial court nor the Court of Appeal had occasion
to address application of this relief provision. Because the full proceeds from
11
As we agree that exclusion of the entire price of a redemption is incorrect
as a statutory matter, we need not address the further contention that its exclusion
contributes to an unconstitutional distortion.
18
General Motors’ redemptions should have been treated as gross receipts, we
remand for further proceedings to allow the Board to make its section 25137 case
in accordance with the principles set out in Microsoft Corporation.
II. Section 23609: California’s Research Tax Credit
General Motors is a unitary business group consisting of more than 100
corporations. Only 38 members of the group incurred 1988 California tax
liability. One, Delco, incurred slightly more than $2.8 million in research
expenses that qualified for a research tax credit. (See § 23609.) The Board
allowed Delco to apply this credit to its 1988 tax liability and, because the credit
exceeded Delco’s 1988 liability, to roll over the credit to subsequent years.
(§ 23609, subd. (f) [unused portions of credit may be carried forward].) General
Motors argues the Board should instead have allowed the credit to be shared
among all members of its unitary reporting group that incurred 1988 California tax
liability. Like the trial court and Court of Appeal, we conclude the Board is
correct and only Delco is entitled to use the tax credit.
Tax credits are a matter of legislative grace. (Christman v. Franchise Tax
Bd. (1976) 64 Cal.App.3d 751, 757.) The Legislature may grant or deny a tax
credit in any manner it sees fit, aside from constitutional constraints not at issue
here, and the scope, application, and terms of eligibility are entirely for the
Legislature to establish. Our role is confined to ascertaining what the Legislature
has actually done, not assaying whether sound policy might support a different
rule. We construe section 23609, the provision allowing the research tax credit,
strictly against General Motors, resolving any doubts in favor of the Board.
(Miller v. McColgan (1941) 17 Cal.2d 432, 442; William Lyon Co. v. Franchise
Tax Bd. (1992) 4 Cal.App.4th 267, 275.)
Section 23609 grants “a credit against the ‘tax’ (as defined by Section
23036) [in] an amount determined in accordance with Section 41 of the Internal
19
Revenue Code” for research expenses. In turn, section 41 of the Internal Revenue
Code (26 U.S.C. (hereafter IRC)) defines the kind of research, kind of expenses,
and method of calculation to be used in determining a research credit. (IRC
§ 41(b)-(e).) In general terms, the research credit is measured as a percentage (20
percent under federal law, a varying percentage under state law) of the increase in
research expenses in a given year over a taxpayer’s established base level of
research spending. (IRC § 41(a); Rev. & Tax. Code, § 23609, subds. (a)-(b).)
Thus, companies that increase their research spending get a partial subsidy.
Like any other expense, a unitary business group’s qualified research
expenses are initially incurred by a specific member or members of the group—
here, Delco. These expenses are then apportioned among all members of the
group in accordance with unitary business principles.12 In essence, the Board
argues that the research tax credit should be distributed in accordance with each
member’s actual research expenses—based on who actually incurred the
expense—while General Motors argues the tax credit should be distributed in
accordance with each corporation’s apportioned share of the research expenses.
On its face, nothing in section 23609 defines whether the credit should be
distributed according to actual or apportioned research expenses. However, IRC
section 41, incorporated by reference, provides insight into the question.
Subdivision (f)(1)(A) addresses the application of the credit to a controlled group
12
California first determines what portion of a unitary business’s net business
income should be apportioned to California, a process known as interstate
apportionment. The income apportioned to California, which includes gross
income less expenses, is then allocated to each of the individual companies doing
business in California, a process known as intrastate apportionment. (In the
Matter of the Appeal of Huffy Corp. (Apr. 22, 1999) [1995-1999 Transfer Binder]
Cal.Tax Rptr. ¶ 403-031, pp. 29,257, 29,259 & fn. 4.) In this fashion, gross
income and expenses are apportioned among all the members of the unitary group.
20
of corporations: “(A) Controlled group of corporations.—In determining the
amount of the credit under this section—[¶] (i) all members of the same controlled
group of corporations shall be treated as a single taxpayer, and (ii) the credit (if
any) allowable by this section shall be its proportionate shares of the qualified
research expenses and basic research payments giving rise to the credit.” Because
apportionment principles are irrelevant in the federal tax scheme, IRC section
41(f)(1)(A)(ii) necessarily means any research credit should be distributed pro rata
in accordance with the proportionate share of actual expenses and payments; thus,
those corporations that did not increase research expenses and payments should
get no part of the credit. The regulations interpreting IRC section 41 for the
relevant tax years13 confirm this reading: “No amount of credit is allocated to
[those members of the controlled group of corporations whose] research expenses
did not increase in the taxable year.” (Former 26 C.F.R. § 1.41-6(a)(4) (2004)
[example 1] [applicable to pre-1990 tax years].)
The Legislature could have noted its decision to depart from this rule when
it passed section 23609; the text of the section consists almost entirely of a list of
dozens of ways in which it elected to modify IRC section 41 for state purposes.
(See § 23069, subds. (a)-(j).) Yet nowhere in the statute does the Legislature
indicate it wished to apply a different rule and issue credits based on apportioned,
rather than actual, contributions to research. In the absence of a contrary
statement, we must interpret section 23609 consistently with IRC section 41.
13
Federal regulations interpreting the IRC are treated as authoritative state
regulations to the extent they do not conflict with either the express provisions of
the Revenue and Taxation Code or regulations issued by the Board. (§ 23051.5,
subd. (d).)
21
We note as well that when the Legislature wishes to allow corporations that
have not incurred expenses to share in a tax credit, it knows how to say so. In
1976, the Legislature adopted a solar energy tax credit and allowed unitary group
corporations that did not own the premises where the solar energy system was
installed to share in the credit. (Former § 23601, subd. (d), added by Stats. 1976,
ch. 168, § 3, pp. 279-280, and repealed by Stats. 1986, ch. 1200, § 2, p. 4259; In
the Matter of the Appeal of AeroVironment, Inc. (Jan. 10, 1997) [1995-1999
Transfer Binder] Cal.Tax Rptr. (CCH) ¶ 402-906, pp. 28,765, 28,766.) Two years
later, the Legislature apparently changed its mind and amended this provision,
limiting the credit to owners. (Stats. 1978, ch. 1159, § 2, p. 3561.) More recently,
the Legislature passed a low-income housing credit and again included an express
provision authorizing corporations to share the credit with their affiliates.
(§ 23610.5, subd. (q)(1) [“A corporation may elect to assign any portion of any
credit allowed under this section to one or more affiliated corporations for each
taxable year in which the credit is allowed”].) No similar language appears in
section 23609. Finally, in 1992 (after the tax years at issue here), the Legislature
enacted a statute making the default rule explicit: “Unless otherwise provided, if
two or more taxpayers share in costs that would be eligible for a tax credit allowed
under this part, each taxpayer is eligible to receive the tax credit in proportion to
its respective share of the costs paid or incurred.” (§ 23036, subd. (g).) This
parallels the rule already embodied in IRC section 41: the tax credit goes to those
who actually incur research costs. In the absence of any language in section
23609 indicating the Legislature had a different rule in mind, we conclude the
22
research tax credit goes to the corporation that actually incurred research costs—
here, Delco.14
General Motors’ argument that the research credit should flow along with
each affiliate’s share of apportioned research expenses also contains a core illogic.
Were the argument correct, the credit would flow with these apportioned expenses
to every one of the 100 or more corporate affiliates, because (like any other
expense) Delco’s research expenses are apportioned to every member of the
unitary group, not just those in California. But because not all of the corporations
in the General Motors unitary group are subject to taxation in California, a
substantial portion of the tax credit would go to corporations with no California
tax liability. We doubt the Legislature intended such an absurd result. While
General Motors agrees and suggests, somewhat contradictorily, that the credit
should be reapportioned among only those members with California tax liability,
this would require a hybrid “neither fish nor fowl” calculation in which the credit
is issued neither in accordance with actual expenses nor in accordance with
apportioned expenses, but in accordance with those apportioned expenses
attributed only to a subset of the unitary group, renormalized to 100 percent.
Section 23609’s language cannot support such a construction. (Cf. McIntyre,
Mines & Pomp, Designing a Combined Reporting Regime for a State Corporate
Income Tax: A Case Study of Louisiana (2001) 61 La. L.Rev. 699, 742-744
[General Motors’ hybrid approach to tax credit apportionment reflects a “major
14
General Motors and numerous amici curiae express concern that this
interpretation of section 23609 is poor policy and will harm California’s ability to
attract companies doing cutting-edge research. Whether or not this is so, it is not a
matter we are at liberty to consider. Such pleas are properly directed to the
Legislature, which is free to amend the terms of the research tax credit in any
constitutional manner it deems appropriate.
23
departure from [unitary business] principle[s],” and a legislative intent to adopt
such a scheme should be inferred only in the presence of clear evidence of such an
intent].)
DISPOSITION
For the foregoing reasons, we affirm in part and reverse in part the
judgment of the Court of Appeal and remand the case for further proceedings
consistent with the discussion herein and in Microsoft Corporation, supra, ___
Cal.4th ___.
WERDEGAR, J.
WE CONCUR:
GEORGE. C. J.
KENNARD, J.
BAXTER, J.
MORENO, J.
HUFFMAN, J.∗
HULL, J.∗∗
∗
Honorable Richard D. Huffman, Associate Justice, Court of Appeal, Fourth
Appellate District, Division One, assigned by the Chief Justice pursuant to article
VI, section 6 of the California Constitution.
∗∗
Honorable Harry E. Hull, Jr., Associate Justice, Court of Appeal, Third
Appellate District, assigned by the Chief Justice pursuant to article VI, section 6 of
the California Consitution.
24
See next page for addresses and telephone numbers for counsel who argued in Supreme Court. Name of Opinion General Motors Corporation v. Franchise Tax Board
__________________________________________________________________________________
Unpublished Opinion
Original Appeal
Original Proceeding
Review Granted XXX 120 Cal.App.4th 114
Rehearing Granted
__________________________________________________________________________________
Opinion No.
S127086Date Filed: August 17, 2006
__________________________________________________________________________________
Court:
SuperiorCounty: Los Angeles
Judge: Mary Ann Murphy
__________________________________________________________________________________
Attorneys for Appellant:
Ajalat, Polley & Ayoob, Charles R. Ajalat and Christopher J. Matarese for Plaintiffs and Appellants.Morrison & Foerster, Eric J. Coffill and Carley A. Roberts for Toys “R” Us, Inc., and Affiliates and The
Limited Stores, Inc., and Affiliates as Amici Curiae on behalf of Plaintiffs and Appellants.
Pillsbury Winthrop, Jeffrey M. Vesely, Kerne H. O. Matsubara, Richard E. Nielsen and Annie H. Huang
for Council on State Taxation as Amicus Curiae on behalf of Plaintiffs and Appellants.
Nielsen, Merksamer, Parrinello Mueller & Naylor, John E. Mueller and Eric J. Miethke for California
Business Coalition as Amicus Curiae on behalf of Plaintiffs and Appellants.
Sutherland Asbill & Brennan and Kendall L. Houghton for Tax Executives Institute, Inc., as Amicus Curiae
on behalf of Plaintiffs and Appellants.
Michael P. Boyle, Michael J. Bernard, Kurt A. Lamp; Preston Gates & Ellis, James P. Kleier, Brian W.
Toman, Charles R. Zubryzcki; Baker & McKenzie and J. Pat Powers for Microsoft Corporation as Amicus
Curiae on behalf of Plaintiffs and Appellants.
__________________________________________________________________________________
Attorneys for Respondent:
Bill Lockyer, Attorney General, W. Dean Freeman and Stephen Lew, Deputy Attorneys General, for
Defendant and Appellant.
Frank Katz and Shirley Sicilian for Multistate Tax Commission as Amicus Curiae on behalf of Defendant
and Appellant.
Counsel who argued in Supreme Court (not intended for publication with opinion):
Charles R. AjalatAjalat, Polley & Ayoob
500 North Brand Boulevard, Suite 1670
Glendale, CA 91203
(818) 553-1300
Stephen Lew
Deputy Attorney General
300 South Spring Street, Suite 1702
Los Angeles, CA 90013
(213) 897-8526
Shirley Sicilian
Multistate Tax Commission
444 North Capitol Street, N.W., Suite 425
Washington, D. C. 20001-1538
(202) 624-8699
Date: | Docket Number: |
Thu, 08/17/2006 | S127086 |
1 | General Motors Corporation (Plaintiff and Appellant) Represented by Charles R. Ajalat Ajalat Polley & Ayoob 500 N. Brand Boulevard, Suite 1670 Glandale, CA |
2 | Franchise Tax Board (Defendant and Appellant) Represented by Stephen Lew Office of the Attorney General 300 S. Spring Street, Suite 1702 Los Angeles, CA |
3 | Coalition Of California Business & Taxpayer Organizations (Pub/Depublication Requestor) Represented by John E. Mueller Nielsen Merksamer Parrinello Mueller & Naylor 591 Redwood Highway, Suite 4000 Mill Valley, CA |
4 | Microsoft Corporation (Pub/Depublication Requestor) Represented by Joseph Patton Powers Baker & McKenzie 660 Hansen Way Palo Alto, CA |
5 | Microsoft Corporation (Pub/Depublication Requestor) Represented by James Patrick Kleier Reed Smith, LLP Two Embarcadero Center, Suite 2000 San Francisco, CA |
6 | Toys R Us (Amicus curiae) Represented by Eric J. Coffill Morrison & Foerster, LLP 400 Capitol Mall, Suite 2600 Sacramento, CA |
7 | Toys R Us (Amicus curiae) Represented by Carley A. Roberts Morrison & Foerster, LLP 400 Capitol Mall, Suite 2600 Sacramento, CA |
8 | Limited Stores, Inc. (Amicus curiae) Represented by Eric J. Coffill Morrison & Foerster, LLP 400 Capitol Mall, Suite 2600 Sacramento, CA |
9 | Limited Stores, Inc. (Amicus curiae) Represented by Paul H. Frankel Morrison & Foerster, LLP 1290 Avenue of the Americas New York, NY |
10 | Limited Stores, Inc. (Amicus curiae) Represented by Hollis L. Hyans Morrison & Foerster, LLP 1290 Avenue of the Americas New York, NY |
11 | Limited Stores, Inc. (Amicus curiae) Represented by Carley A. Roberts Morrison & Foerster, LLP 400 Capitol Mall, Suite 2600 Sacramento, CA |
12 | Council On State Taxation (Amicus curiae) Represented by Jeffrey M. Vesely Pillbury Winthrop, LLP P.O. Box 7880 San Francisco, CA |
13 | Multistate Tax Commission (Amicus curiae) Represented by Shirley Sicilian Multistate Tax Commission 444 N. Capitol Street N.W., Suite 425 Washington , DC |
14 | Multistate Tax Commission (Amicus curiae) Represented by Frank David Katz Multistate Tax Commission 444 N. Capitol Street N.W., Suite 425 Washington, DC |
15 | Tax Executive Institute, Inc. (Amicus curiae) Represented by Kendall Lee Houghton Sutherland Asbill & Brennan, LLP 1275 Pennsylvania Avenue N.W. Washington, DC |
16 | California Business Coalition (Amicus curiae) Represented by John E. Mueller Nielsen Merksamer Parrinello Mueller & Naylor 591 Redwood Highway, Suite 4000 Mill Valley, CA |
17 | California Business Coalition (Amicus curiae) Represented by Eric John Miethke Nielsen Merksamer Parrinello Mueller & Naylor 1415 "L" Street, Suite 1200 Sacramento, CA |
18 | Delco Electronic Service Corporation (Plaintiff and Appellant) |
19 | General Motors Overseas Distribution (Plaintiff and Appellant) |
20 | Gm-Di Leasing Corporation (Plaintiff and Appellant) |
21 | General Motors Acceptance Corporation (Plaintiff and Appellant) |
22 | Gmac Leasing Corporation (Plaintiff and Appellant) |
23 | Gm Personnel Service, Inc. (Plaintiff and Appellant) |
24 | Gmac Mortgage Service Of California (Plaintiff and Appellant) |
25 | Gmac Associates (Plaintiff and Appellant) |
26 | Gmac Realty Advisors, Inc. (Plaintiff and Appellant) |
27 | Colonial Mortgage Service Company (Plaintiff and Appellant) |
28 | Colonia Mortgage Distribution Company (Plaintiff and Appellant) |
29 | Cmsc Escrow Company (Plaintiff and Appellant) |
30 | Gmac Mortgage Corporation Of Iowa (Plaintiff and Appellant) |
31 | Cunadata Corporation (Plaintiff and Appellant) |
32 | Gmac Mortgage Corporation (Pennsylvania) (Plaintiff and Appellant) |
33 | Mic Services Corporation (Plaintiff and Appellant) |
34 | Saturn Corporation (Plaintiff and Appellant) |
35 | Cadmic Agency Corporation (Plaintiff and Appellant) |
36 | Electronic Data Systems Federal Corporation (Plaintiff and Appellant) |
37 | Electronic Data Systems Federal Corporation (Plaintiff and Appellant) |
38 | Ed Systems Corporation (Plaintiff and Appellant) |
39 | Electronic Data Systems Corporation (Texas) (Plaintiff and Appellant) |
40 | Electronic Data Systems Leasing (Plaintiff and Appellant) |
41 | Eds Realty Corporation (Plaintiff and Appellant) |
42 | Eds Federal Corporation (Plaintiff and Appellant) |
43 | Eds Components Corporation (Plaintiff and Appellant) |
44 | American Network Leasing (Plaintiff and Appellant) |
45 | M Tech Corporation (Plaintiff and Appellant) |
46 | Kalvar Corporation (Plaintiff and Appellant) |
47 | Eds Communication Corporation (Nevada) (Plaintiff and Appellant) |
48 | M Tech Credit Union System Corporation (Plaintiff and Appellant) |
49 | Eds Wholesale Banking System (Plaintiff and Appellant) |
50 | Security Courier Corporation (Plaintiff and Appellant) |
51 | Telecommunication International, Inc. (Plaintiff and Appellant) |
52 | Telecom Mis, Inc. (Plaintiff and Appellant) |
53 | M&Sd Financial Service, Inc. (Plaintiff and Appellant) |
54 | General Data System, Ltd. (Plaintiff and Appellant) |
Disposition | |
Aug 17 2006 | Opinion: Affirmed in part/reversed in part |
Dockets | |
Aug 16 2004 | Petition for review filed By counsel for Plaintiffs/Appellants {General Motors Corp., et al.,} |
Aug 16 2004 | Record requested |
Aug 27 2004 | Request for depublication (petition for review pending) filed by (non-party) Coalition of California business and taxpayer organizations. |
Sep 3 2004 | Record requested |
Sep 7 2004 | Answer to petition for review filed appellant Franchise Tax Board |
Sep 7 2004 | Opposition filed to depublication request>>appellant Franchise Tax Board |
Sep 7 2004 | Received Court of Appeal record one doghouse |
Sep 8 2004 | Request for depublication filed (another request pending) by (non-party) Microsoft Corporation. (40k) |
Sep 16 2004 | Reply to answer to petition filed by appellants. |
Sep 17 2004 | Opposition filed to depub request>>appellant Franchise Tax Board |
Sep 24 2004 | Received: letter dated Sept 20, 2004, from counsel re proof of service to reply to answer. |
Sep 29 2004 | Record requested requested balance of record to ship overnight. |
Sep 30 2004 | Received: letter from appellant Franchise Tax Board |
Sep 30 2004 | Received Court of Appeal record 3 doghouses |
Oct 4 2004 | Received: letter dated 10/3/04 from appellants General Motors Corp. et al., responding to letter from Franchise Tax Board received 9/30/04. |
Oct 13 2004 | Letter sent to: counsel re conflict of interest. |
Oct 13 2004 | Petition for review granted (civil case) Votes: George, C.J., Kennard, Baxter, Werdegar, Chin, Brown, and Moreno, JJ. |
Oct 20 2004 | Certification of interested entities or persons filed appellant Franchise Tax Board |
Oct 25 2004 | Certification of interested entities or persons filed by plaintiff/appellant (General Motors). |
Nov 12 2004 | Opening brief on the merits filed by counsel for Plaintiffs & Appellants (General Motors Corp., et al.) |
Nov 15 2004 | Received application to file Amicus Curiae Brief by Toys"R"Us, Inc. and Affiliattes; and The limited Stores, Inc. and Affiliates in support of plts/aplts General Motors et al. (recv'd in Sacramento) |
Nov 15 2004 | Application to appear as counsel pro hac vice (granted case) by Hollis L. Hyans to appear as amicus counsel for The Limited Stores, Inc. and Affiliates. |
Nov 15 2004 | Application to appear as counsel pro hac vice (granted case) by Paul H. Frankel to appear as amicus counsel for The Limited Stores, Inc. and Affiliates. |
Nov 15 2004 | Received: Application & amicus brief from counsel for amicus Council on State Taxation (Stephen Kranz, 122 C Street, N.W., Suite 330, Washington, D.C. 20001). Counsel to resubmit briefs w/application to appear as counsel pro hac vice (Cal. rules of court, rule 983). **Per the Court - ok to submit amicus briefs at this time pursuant to rule 29.1(f).** |
Nov 22 2004 | Application to appear as counsel pro hac vice granted Paul H. Frankel of the State of New York for admission Pro Hac Vice to appear on behalf of amicus curiae, The Limited Stores, Inc. and Affiliates is herby granted. |
Nov 22 2004 | Application to appear as counsel pro hac vice granted Hollis L. Hyans of the State of New York for admission Pro Hac Vice to appear on behalf of amicus curiae, The Limited Stores, Inc. and Affiliates is herby granted. |
Nov 22 2004 | Permission to file amicus curiae brief granted Toys"R"Us, Inc. and Affiliattes and The Limited Stores, Inc. and Affiliates. |
Nov 22 2004 | Amicus curiae brief filed Toys"R"Us, Inc. and Affiliattes and The limited Stores, Inc. and Affiliates in support of plts/aplts General Motors Corporation, et al. Any party may file a single consolidated answer to all amicus curiae briefs within 20 days after the last date that an application to file an amicus curiae brief may be filed under rule 29.1(f)(2). |
Nov 30 2004 | Request for extension of time filed answer brief/merits to 2-11-05>>respondent Franchise Tax Board |
Dec 2 2004 | Filed: by General Motors - Objection to extension of time filed by Franchise Tax Board. (Fax copy recv'd 12/1/04). |
Dec 3 2004 | Extension of time granted to and including Feb. 11, 2005 for respondent to file the answer brief on the merits. No further extensions will be granted. |
Dec 7 2004 | Received application to file Amicus Curiae Brief by Council on State Taxation in support of pltf/aplt General Motors Corp. |
Dec 10 2004 | Permission to file amicus curiae brief granted Council on State Taxation. |
Dec 10 2004 | Amicus curiae brief filed Council on State Taxation in support of pltf/aplt General Motors Corporation, et al. Any party may file a single consolidated answer to all amicus curiae briefs within 20 days after the last date that an application to file an amicus curiae brief may be filed under rule 29.1(f)(2). |
Feb 10 2005 | Received: oversize answer brief/merits>>appellant Franchise Tax Board |
Feb 10 2005 | Application filed to: file oversize answer brief/merits>>appellant Franchise Tax Board |
Feb 10 2005 | Request for judicial notice filed (granted case) appellant Franchise Tax Board |
Feb 15 2005 | Request for extension of time filed Plaintiffs/appellants (General Motors) requesting 45 day extension to file reply brief in excess of maximum word limit. |
Feb 15 2005 | Answer brief on the merits filed (with permission) by counsel for defendant/appellant (Franchise Tax Board). |
Feb 17 2005 | Extension of time granted to and including April 1, 2005 for appellant General Motors et al. to file reply brief not to exceed 8,400 words. |
Mar 28 2005 | Reply brief filed (case fully briefed) counsel for appellants (GENERAL MOTORS CORPORATION, et al.,) |
Apr 22 2005 | Application to appear as counsel pro hac vice (granted case) Shirley Sicilian to appear as counsel pro hac vice on behalf of amicus curiae {Multistate Tax Commission}. |
Apr 22 2005 | Received application to file Amicus Curiae Brief by Multistate Tax Commission in support of appellant {Franchise Tax Board}. (appli & brief filed separately) (Pro Hac Vice application for attorney Shirley Sicilian pending) |
Apr 26 2005 | Received application to file Amicus Curiae Brief by California Business Coalition in support of General Motors. |
Apr 26 2005 | Received: Request for judicial notice from amicus California Business Coalition. |
Apr 27 2005 | Received application to file Amicus Curiae Brief by Tax Executives Institute, Inc. in support of General Motors. |
Apr 27 2005 | Received application to file Amicus Curiae Brief by Microsoft Corp in support of General Motors. |
Apr 28 2005 | Application to appear as counsel pro hac vice granted The application of Shirley Sicilian of the State of Kansas for admission Pro Hac Vice to appear on behalf of amicus Multistate Tax Commission is hereby granted. (See Cal. Rules of Court, rule 983.) |
Apr 28 2005 | Permission to file amicus curiae brief granted Multistate Tax Commission |
Apr 28 2005 | Amicus curiae brief filed by Multistate Tax Commission in support of appellant {Franchise Tax Board}. Answer due within 20 days. |
Apr 29 2005 | Permission to file amicus curiae brief granted Tax Executive Institute, Inc., in support of Appellants {General Motors Corp., et al.,}. |
Apr 29 2005 | Amicus curiae brief filed Tax Executive Institute, Inc., in support of appellants {General Motors Corp., et al.,}. Answer is due within twenty days. |
Apr 29 2005 | Permission to file amicus curiae brief granted California Business Coalition in support of Appellants {General Motors Corp., et al.,}. |
Apr 29 2005 | Amicus curiae brief filed California Business Coalition in support of Appellants {General Motors Corp., et al.,}. Answer is due within twenty days. |
Apr 29 2005 | Request for judicial notice filed (granted case) By AC California Business Coalition. |
May 3 2005 | Permission to file amicus curiae brief granted Microsoft Corporation in support of appellants. |
May 3 2005 | Amicus curiae brief filed Microsoft Corporation in support of appellants {General Motors Corp., et al.,}. Answer is due within twnety days. |
May 17 2005 | Response to amicus curiae brief filed consolidated answer to amicus briefs>>appellant Franchise Tax Board |
May 17 2005 | Request for extension of time filed Plaintiffs & Appellants {General Motors Corp., et al.} requesting to May 30, 2005 to file answers to amicus briefs. Also requests the flexibility of filing a single consolidated answer to one or more amici curia. |
May 19 2005 | Extension of time granted to and including May 27, 2005 for Plaintiffs {General Motors Corp., et al} to serve and file answers or a consolidated answer to multiple amicus curiae briefs. |
May 27 2005 | Response to amicus curiae brief filed by counsel for appellants General Motors Corporation, et al. >>>>answer to amicus curiae briefs. |
Jul 1 2005 | Received: letter from appellant Franchise Tax Board |
Mar 30 2006 | Justice pro tempore assigned Justice Richard D. Huffman (4th Appellate Dist., Div. 1) (Chin, J., recused) Justice Harry E. Hull, Jr. (3rd Appellate Dist.) (Corrigan, J., recused) |
Apr 6 2006 | Received: letter from Appellant Franchise Tax Board |
May 2 2006 | Case ordered on calendar June 2, 2006, at 9:00 a.m., in San Francisco |
May 5 2006 | Received: letter, dated May 5, 2006. regarding order modifying opinion from CA/3 (C045386- no change in judgement); [sent o/n] Franchise Tax Board, appellant Stephen Lew, Deputy Attorney General |
May 10 2006 | Received: letter from Appellant Franchise Tax Board re: division of oral argument time Deputy Attorney General Stephen Lew |
May 11 2006 | Request for judicial notice granted Appellant's request for judicial notice, filed february 10, 2005, is granted. The California Business Coalition's request for judicial notice, filed April 29, 2005, is granted. |
May 11 2006 | Application filed to: divide oral argument time. Counsel for defendant/appellant Franchise Tax Board asking to share 10 minutes of time with counsel for amicus curiae Multistate Tax Commission. |
May 15 2006 | Order filed The request of counsel for appellant Franchise Tax Board in the above-referenced cause to allow two counsel to argue on behalf of appellant at oral argument is hereby granted. The request of appellant to allocate to amicus curiae Multistate Tax Commission 10 minutes of appellant's 30-minute allotted time for oral argument is granted. |
May 22 2006 | Filed: document entitled: Plaintiff's and Appellants' supplemental brief on Toys "R" Us v. Franchise Tax Board and FTB Legal Ruling 2006-2 General Motors Corporations, et al, plaintiff and appellants Charles R. Ajalat, counsel |
May 31 2006 | Received: letter, dated May 31, 2006, from Amicus Curiae counsel, Eric J. Miethke, concerning publicly published minutes of the Franchise Tax Board of July 6, 1999. |
Jun 2 2006 | Cause argued and submitted |
Aug 17 2006 | Opinion filed: Affirmed in part, reversed in part the judgement of the Court of Appeal and remand the case for further proceedings consistent with the discussion herein and in Microsoft Corporation, supra., __Cal.4th__. Majority Opinion by Werdegar, J., joined by George, C.J., Kennard, Baxter, and Moreno, JJJ., Richard D. Huffman, Associate Justice, Court of Appeal, Fourth Appellate District, Division One, Harry E. Hull, Jr., Associate Justice, Court of Appeal, Third Appellate District. |
Sep 1 2006 | Rehearing petition filed Franchise Tax Board, defendant Julian O. Standen, Deputy Attorney General |
Sep 7 2006 | Time extended to consider modification or rehearing to and including November 15, 2006, or the date upon which rehearing is either granted or denied, whichever occurs first. |
Sep 11 2006 | Answer to rehearing petition filed General Motors Corp., et al., appellants Charles R. Ajalat, counsel |
Oct 25 2006 | Rehearing denied Chin and Corrigan, JJ., were recused and did not participate. |
Oct 25 2006 | Remittitur issued (civil case) |
Nov 6 2006 | Received: Receipt for Remittitur, Court of Appeal, Second Appellate District, Division two |
Nov 21 2006 | Returned record five doghouses to Second Appellate District, Division 2, via UPS. |
Aug 15 2008 | Returned record to Tommie (3 vols.) |
Aug 18 2008 | Received: |
Briefs | |
Nov 12 2004 | Opening brief on the merits filed |
Nov 22 2004 | Amicus curiae brief filed |
Dec 10 2004 | Amicus curiae brief filed |
Feb 15 2005 | Answer brief on the merits filed |
Mar 28 2005 | Reply brief filed (case fully briefed) |
Apr 28 2005 | Amicus curiae brief filed |
Apr 29 2005 | Amicus curiae brief filed |
Apr 29 2005 | Amicus curiae brief filed |
May 3 2005 | Amicus curiae brief filed |
May 17 2005 | Response to amicus curiae brief filed |
May 27 2005 | Response to amicus curiae brief filed |