California Conflict From Undoing Microsoft Tax Refund, Explained

The conflict over California’s rules for the tax treatment of multinational companies’ foreign-affiliate dividends entered its next phase with two lawsuits filed in state trial courts.

The lawsuits, one filed Aug. 14 by the National Taxpayers Union and another from the California Taxpayers Association on Aug. 15, signal the rules won’t be settled for a while.

Companies have argued with the state Franchise Tax Board for decades about the treatment of foreign dividends, because it can make a big difference in their California income tax bills. But the stakes grew exponentially when the 2017 federal tax law offered ...