In a precedential ruling, the California Office of Tax Appeals held that the research and development tax credit is only available for activities “engaging in the scientific method.” The decision, In re Swat-Fame, Inc., 2020-0TA-046P (June 1, 2020), found that trial-and-error modifications to garments did not constitute “qualified research” under R&TC section 23609.
In City & County of San Francisco v. All Persons Interested in the Matter of Proposition C, Dkt. A158645 (Cal. App., June 30, 2020), the California Court of Appeal upheld Proposition C—a voter initiative that created a new local business tax in San Francisco. The court upheld the initiative that was enacted by a simple majority of electors. This ruling answers a question that was been heavily debated since the California Supreme Court’s decision in California Cannabis Coalition v. City of Upland, 3 Cal. 5th 924 (Cal. 2017). That is, do special taxes proposed by voter initiative require a supermajority of voters to pass? This decision expressly narrows the supermajority requirement to only those tax measures proposed directly by local governments and will likely trigger more tax initiatives proposed and passed by citizen groups.
In the closely watched “Paula Trust” case, the California Court of Appeal, First Appellate District held that all of a trust’s California source income is subject to California income tax even though one of the trustees was a nonresident. Steuer v. Franchise Tax Board, No. A154691 (Cal. Ct. App. 1st Dist. June 29, 2020). The trust’s non-California source income would be apportionable. California imposes income tax on 100% of a trust’s income if all trustees…
Given the positive feedback from our weekly webinar series, the Baker McKenzie SALT Team is launching a monthly webinar that will cover coast-to-coast state and local tax developments. The purpose of this webinar is to keep you informed of updates and trends that may impact your business. Our first session will take place on Wednesday, July 8, 2020 from 1:00 – 2:00 pm ET. Presenters will include Lindsay LaCava, Stephen Long, Mike Shaikh, and Roman…