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State & Local Tax Bulletin (July 2000)

Appellate Court in Unpublished Opinion
Affirms Trial Court Decision that Solar
Energy Tax Credit Is Limited to the
Separate Tax Liability of the Company
that Held an Ownership Interest




By Jeffrey M. Vesely, a tax partner in the San Francisco office of Pillsbury Winthrop Shaw Pittman LLP. If you have or can obtain the Acrobat Reader, or have an Acrobat-enabled web browser, you may wish to download or view our July 2000 State & Local Tax Bulletin (a 127K pdf file), containing a printed version of this article and also available via ftp at ftp.pmstax.com/state/bull0007.pdf.

This bulletin concerning California state and local tax matters is part of the Pillsbury Winthrop Shaw Pittman LLP Tax Page, a World Wide Web demonstration project, no portion of which is intended and cannot be construed as legal or tax advice. Comments are welcome on the design or content of this material.


On June 12, 2000, in Guy F. Atkinson Company of California v. Franchise Tax Board (A085075), the First Appellant District, Division Three, in an unpublished opinion, rejected the taxpayer's contention that a solar energy tax credit should apply to the combined tax liability of the entire unitary group of companies of which it was a part. Revenue and Taxation Code section 23601 provided a tax credit to the taxpayer who owned the premises on which the solar energy system was installed. The statute defined owner as duly recorded holders of legal title, etc. WBL Solar (through its partnership interest in Luz, the owner of the premises) was the only member of the unitary group that technically held an ownership interest in the premises on which the solar energy system was installed. Thus, the Court concluded WBL was the only member of the unitary group entitled to utilize the solar energy tax credit and apply it against its own separate tax liability.

In ruling for the Franchise Tax Board, the Court concluded that the statute was unambiguous on its face and therefore, there was no need to go beyond the words of the statute to extrinsic aids such as legislative history. Also, the Court concluded that neither the Uniform Division of Income for Tax Purposes Act (UDITPA) nor the policies underlying UDITPA mandated a different result. It concluded that even in a unitary setting, the ultimate tax liability remains that of the individual company and it is this ultimate tax liability to which tax credits are applied.

Since the decision is presently unpublished, it is not precedential and cannot be cited as authority. Nevertheless, the Court's decision sustains the FTB's position that credits, even in a unitary setting, are entity specific and may not be used to offset the tax liability of other members of the unitary group. While Atkinson only addresses the solar energy tax credit and possibly could be distinguished on that basis, if published, it would most likely be applied to other tax credits.

As of the date of this writing, the decision is not yet final. The Court of Appeal has rejected the FTB's request to have the opinion published. That request is now before the California Supreme Court. Finally, it is uncertain whether the taxpayer will seek review by the California Supreme Court.


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