Recent Changes in California Apportionment

During 2012 some very significant developments emerged in California that will impact California corporations that operate in other states and out-of-state corporations that operate in California. These recent decisions impact how taxable income (or losses) are apportioned for California corporate income tax purposes.

Income apportionment determines the ratio of income that is subject to tax in a particular state. There are several different methods used to determine state apportionment and acceptable methods for determining apportionment vary by the applicable state law. The acceptable methods have changed numerous times over the past couple of years in California due to a law change beginning with the 2011 tax year, the recent court decision in the Gillette Case and the passage of Proposition 39 in November 2012.  Click here for a reference chart showing the different apportionment formulas referred to in this article. Read more