Buzz on big business
Sales Factor: analytical guidance regarding treasury function receipts
The Franchise Tax Board issued Technical Advice Memorandum (TAM) 2007-3 to staff discussing what information should be collected at Audit with respect to treasury activities as a result of the California Supreme Court decisions in Microsoft and General Motors. The TAM includes a discussion on whether information should be collected relating to repurchase agreements, commonly referred to as "repos." Complete information regarding repos, including returned capital, is necessary to verify the amount of receipts that should be included in the denominator of the sales factor under California Revenue and Taxation Code (CRTC) Section 25120. In the Microsoft decision it was determined that the CRTC Section 25137 distortion analysis of the treasury department activity was needed, including the profit margins on all transactions; thus the need for analysis of the repo activity as well.
It was concluded in TAM 2007-3 that Audit staff should continue to collect information with respect to all treasury activities so that the circumstances of each case can be compared to the analysis and metrics (measuring tools) provided in Microsoft, General Motors, and other cases. Those cases do not establish bright-line tests, or limit the approaches that can be used.
For more information about TAM 2007-3, contact our Disclosure Office at (916) 845-3226.