Butler Bros. v. McColgan

In Butler Bros. v. McColgan (1942) 315 U.S. 501, the taxpayer based its constitutional argument upon the premise that California was taxing extraterritorial values. In upholding the California law the court made these pertinent comments: "We read the statute as calling for a method of allocation which is 'fairly calculated' to assign to California that portion of the net income 'reasonably attributable' to the business done there. The test, not here challenged, which has been reflected in prior decisions of this Court, is certainly not more exacting. Hence, if the formula which was employed meets those standards, any constitutional question arising under the Fourteenth Amendment is at an end . . . . para. We cannot say that property, pay roll, and sales are inappropriate ingredients of an apportionment formula. We agree with the Supreme Court of California that these factors may properly be deemed to reflect 'the relative contribution of the activities in the various states to the production of the total unitary income,' so as to allocate to California its just proportion of the profits earned by appellant from this unitary business." (315 U.S. at pp. 506-507, 509.)