Ceridian Corp. v. Franchise Tax Bd

In Ceridian Corp. v. Franchise Tax Bd. (2000) 85 Cal.App.4th 875, the Court of Appeal invalidated former section 24410, which provided a corporate tax deduction for dividends paid to the corporation from the corporation's insurance company subsidiaries because the deduction was limited to dividends paid from income from California sources. (Ceridian, at p. 883.) In considering the discriminatory effect of the statute, the court observed: "a statutory scheme ... that disallows a deduction based on the amount of property and employees that the dividend-declaring insurer has in another state, favors domestic corporations over their foreign competitors in raising capital among California corporations, and tends, at least, to discourage domestic corporations from plying their trade in interstate commerce, from purchasing property or hiring employees in other states, and from purchasing subsidiary insurance corporations that do so." (Id. at p. 887.) Thus, the court concluded the geographic limitation on the dividend deduction was "unquestionably discriminatory on its face." (Ibid.)