The Multistate Tax Compact and state formulary apportionment: Whose option?

Taxpayers filed a brief with the California Court of Appeal on May 4, 2011, arguing to enforce their right to elect under Article III of the Multistate Tax Compact to use the original UDITPA apportionment method. The appeal follows from a lower court judgment in favor of the California Franchise Tax Board, which suggests that one simple, arguably ambiguous word -- "notwithstanding" [the Compact] -- operates to repeal the core apportionment provisions of the Compact. On appeal, the court will decide whether taxpayers may invoke the Compact's explicit election to apportion income using an evenly weighted three-factor formula or whether California may unilaterally alter the terms of the Compact and force taxpayers to double-weight their sales factor for apportionment purposes.