California Tax Law Undoing Microsoft Win Faces Another Challenge

The California Taxpayers Association filed the second challenge to a new state law that undercut an administrative tribunal win for Microsoft Corp. on the tax treatment of dividends that multinational companies receive from foreign affiliates.

The law (S.B. 167), which took effect June 27, “is a significant change in California’s income tax apportionment laws—which have been in place for more than 57 years,” not the mere clarification it purports to be, the group argued in a complaint filed Thursday in the California Superior Court, Fresno County.

The change conflicts with the Office of Tax Appeals’ Microsoft decision in ...