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On Aug. 11, the California Franchise Tax Board (FTB) held the latest Interested Parties Meeting (IPM) in its three-year long project to amend the state’s alternative apportionment petition regulation. The meeting covered changes in the latest proposed regulation language (PDF) and provided taxpayers with the opportunity to voice concerns regarding potential gaps and ambiguities with the draft language. Once finalized, the regulation will help settle significant uncertainty regarding how taxpayers can preserve their rights and privacy during the alternative apportionment petition process.
California Revenue and Taxation Code Section 25137 and FTB Regulation 25137 allow for relief where the standard apportionment formula does not result in a fair representation of a corporate taxpayer’s business activity in California (typically an unusual situation). However, neither the statute nor the current regulation offer taxpayers any guidance on the process for petitioning for such relief.
On June 30, 2017, the FTB held its first interested parties meeting to discuss potential amendments to Regulation 25137 to provide more guidance regarding the Section 25137 Petition process. Follow-up meetings were held on Nov. 26, 2018 and Dec. 4, 2019. The meeting held on Aug. 11 was the latest IPM in this years-long process, but signaled progress in clarifying a few significant taxpayer concerns.
Key Takeaways from the Latest Section 25137 Petition IPM
Highlights from the IPM include:
For an in-depth look at California’s alternative apportionment process and the FTB’s efforts to amend the Section 25137 Regulation, please see the recent 3-part series in Bloomberg Tax by Eversheds Sutherland SALT partner Timothy A. Gustafson and associate Justin T. Brown: