After over twenty years of litigation, California Franchise Tax Bd. v. Hyatt recently made its second appearance before the U.S. Supreme Court. In this interview, Bradley Marsh, a tax attorney with Greenberg Traurig LLP, discusses the impact of this litigation and weighs the likely outcome and possible consequences of the impending decision.
What was the impact of Hyatt I on state taxation?
The California Franchise Tax Board (FTB) took internal measures to lessen the sting of some of their residency audits, because the FTB realized that it was likely to have other lawsuits if it continued to be as aggressive as it was in the Hyatt case's facts and circumstances. So, while California still has a very robust and detailed in-depth audit procedure, the state did soften its investigative approach a bit more, making it more desk-oriented.
With this second round of Hyatt, what impact could the court's ruling potentially have on interstate cooperation? Additionally, by joining amicus briefs that claim states should enjoy immunity from other states' courts, 45 states have indicated their support for the FTB. What key concerns do you think led these states to support the FTB?
From an academic standpoint, this second round of Hyatt is a more intense argument of the first one, as not a whole lot has changed in terms of the positions of either party. The amici are more intense as well.