California Proposition 39: Single sales factor for most taxpayers and market-based sourcing for all taxpayers

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On November 6, 2012, California voters passed Proposition 39, which requires most taxpayers to apportion their California income using a single sales factor and requires all taxpayers to use market-based sourcing for receipts from the sale of intangibles for tax years beginning on or after January 1, 2013. The scope of Proposition 39 has been subject to some confusion, particularly with regard to whether banks and financial corporations are required to use market-based sourcing for intangibles. We have confirmed with the Franchise Tax Board ("FTB") that banks and financial corporations are required to use market-based sourcing for intangibles unless sourcing for the specific intangible is addressed in the existing special apportionment regulations.



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