California – In-state affiliates create nexus for financial securitization entities

May 2013


A California superior court found that two corporations with no California physical presence had substantial nexus with California due to the activities of in-state agents. The corporations were established as bankruptcy remote special purpose entities (SPEs) and were engaged in securing loans for their parent and affiliated corporations that did business in California. The court found that the economic inter-dependence among the SPEs and their California affiliates created an agency relationship, which established nexus between California and the out-of-state SPEs. The court also found that the SPEs’ securitization activities qualified them as financial corporations under California law. [Harley-Davidson, Inc. v. California Franchise Tax Board, San Diego County Superior Court, No. 37-2011-00100846-CU-MC-CTL (5/1/13)]

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