General Motors v. Franchise Tax Bd. 6/30/04 CA2/2

State: California

Court: 1st District Court of Appeal 1st District Court of Appeal

Docket No: B165665

Case Date: 06/30/2004

Preview:Filed 6/30/04

CERTIFIED FOR PUBLICATION IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA SECOND APPELLATE DISTRICT DIVISION TWO GENERAL MOTORS CORPORATION et al., Plaintiffs and Appellants, v. FRANCHISE TAX BOARD, Defendant and Appellant. B165665 (Los Angeles County Super. Ct. No. BC269404)

APPEAL from a judgment of the Superior Court of Los Angeles County. Mary Ann Murphy, Judge. Affirmed. Ajalat, Polley & Ayoob, Charles R. Ajalat, Christopher J. Matarese for Plaintiffs and Appellants. Bill Lockyer, Attorney General, W. Dean Freeman, Lead Supervising Deputy Attorney General, Stephen Lew, Deputy Attorney General, for Defendant and Appellant. ___________________________________________________

In this action for a refund of taxes, General Motors Corporation and its affiliated corporations appeal from the superior court's judgment. The California Franchise Tax Board also appeals. We affirm the trial court's judgment. We conclude that, in calculating the amount of income apportionable to California, the Franchise Tax Board properly excluded gross receipts from certain sales of securities. We also conclude that only Delco, a member of General Motors California unitary group, was entitled to a research credit against its taxes, and that General Motors is not entitled to certain deductions related to foreign taxes. As to the Franchise Tax Board's cross-appeal, we conclude that the superior court correctly found unconstitutional Revenue and Taxation Code section 24402,1 which provides an income tax deduction for certain dividends received from other corporations. FACTUAL BACKGROUND General Motors Corporation is a Delaware corporation, and its commercial domicile is located in the State of Michigan. General Motors and certain affiliated corporations (collectively, GM) engage in a "unitary business" that operates partially within California. A unitary business is one that receives income "from or attributable to sources both within and without the state . . . ." (

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