One Technologies, LLC v. Franchise Tax Bd.
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Proposition 39 established a program to promote the creation of clean energy jobs. Under Proposition 39, a multistate business must apportion its tax based on a single factor—in-state sales. The proposition further provided for cable companies spending $250 million or more in California on certain expenditures to exclude half of their in-state sales when apportioning, thus lowering their tax burden under the single factor tax regime. Paintiff One Technologies, LLC, a Texas-based provider of credit score and credit reporting services, paid tax to California calculated under the single-factor method. Plaintiff then filed a complaint for refund against Defendant Franchise Tax Board (the Board). Plaintiff alleged Proposition 39 was invalid under the single-subject rule for ballot initiatives. The trial court disagreed and sustained the Board’s demurrer.
The Second Appellate District affirmed. The court held that Proposition 39 did not violate the single-subject rule. The purpose of the proposition was to fund a clean energy job creation program by raising taxes on some multistate businesses. The provisions of the proposition were both reasonably germane and functionally related to that purpose because those provisions established a funding mechanism and the means of directing that funding to clean energy job creation. The special rules for cable companies reflect a determination by the proposition’s drafters that some businesses should bear the funding burden more than others, but that is still within the scope of the proposition’s purpose.
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