State & Local Tax Bulletin (July 2000)
Appellate Court in Unpublished Opinion
Court Decision that Solar
Energy Tax Credit Is Limited to
Separate Tax Liability of the Company
that Held an
By Jeffrey M.
Vesely, a tax partner in the
San Francisco office of Pillsbury Winthrop
Shaw Pittman LLP.
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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Division Three, in an unpublished opinion, rejected the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
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unpublished, it is not precedential and cannot be cited as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
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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