RIVER GARDEN RETIREMENT HOME v.FRANCHISE TAX BOARD Part-I
For years Revenue and Taxation Code[1] section 24402 allowed California corporate taxpayers to deduct a portion of the dividends they received from another corporation when those dividends were included in the payer's measure of California franchise, income or alternative minimum tax. The court in Farmer Bros. Co. v. Franchise Tax Board (2003) 108 Cal.App.4th 976, 980, 986-987 (Farmer Bros.) held that section 24402 violates the commerce clause of the United States Constitution by allowing the dividends received deduction where the dividend-paying corporation was subject to California tax, but disallowing it where such corporation was not subject to California tax.
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