In this article J. Hellerstein and W. Hellerstein take issue with arguments made by Pierre Vogelenzang in a special report in Tax Notes that California’s second-stage apportionment of the income of a unitary business amounts to unconstitutional extraterritorial taxation. In the Finnigan case, the California State Board of Equalization held that sales made into California by a corporation that is not itself taxable in California, but is a member of a unitary group that is taxable there, are includable in the numerator of the state’s sales factor in apportioning income. The authors defend this result, arguing that the separate identity of members of a unitary group should not control the tax liability. Vogelenzang, they assert, has confused apportionment of income with jurisdiction to tax. They argue that the result advocated by Vogelenzang would allow tax manipulation of income by related corporations to avoid tax.
Walter Hellerstein and Jerome R. Hellerstein,
The Finnigan case: A Reply to Vogelenzang's Second Stage Apportionment of Unitary Income
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