On October 28 Florida filed a constitutional challenge against California over how it apportions business income tax. The case targets some of California’s “special rules” governing apportionment, alleging that they unconstitutionally discriminate against interstate commerce.
California has long had a reputation for exporting tax burdens and aggressive tax enforcement against nonresidents, but California has only intensified these dubious legal efforts as its residents leave for greener pastures at a rate of one per minute and 44 seconds.
The fact that Florida has been the primary beneficiary of this flood of outmigration from states like California is a stated factor in its decision to put this issue before the courts.
Florida’s complaint marks the second time in just over a year that California faces legal challenges to business apportionment rules. In August 2024 nonprofit organizations National Taxpayers Union (NTU) and the California Taxpayers Association separately challenged parts of the recently enacted S.B. 167 for retroactively adjusting apportionment rules.
Should the Golden State lose any of these cases, it would provide a much-needed reinforcement of the Complete Auto guardrails that protect against states abusing apportionment rules to unconstitutionally target nonresidents for special tax burdens.
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