Magazine article American Banker

High Court Throws out Tax Appeal by Barclays

Magazine article American Banker

High Court Throws out Tax Appeal by Barclays

Article excerpt

The U.S. Supreme Court has ended more than 17 years of litigation by ruling against Barclays Bank of London in a California tax dispute.

The court's ruling on Monday, by a 7-2 vote, upheld a California Supreme Court decision allowing the state to impose a so-called unitary tax on multinational corporations.

A unitary tax is based on a company's worldwide operations, according to a complex formula taking into account global revenues, payroll, employees, and volume of business within the state.

Practice Is Ended

Even though California discontinued unitary taxation several years ago and has been taxing multinationals only on domestic activity, Barclays continued to seek damages and led a crusade to prevent a possible return to the old policy.

The dispute had diplomatic implications. The British government and European Community had filed briefs supporting Barclay's argument that unitary taxation was unconstitutional.

The British government last year approved retaliatory legislation that would similarly tax California-based corporations with operations in Britain.

Barclays, which has $249 billion of assets and ranks among the world's largest banks, hoped to avoid paying back taxes and sought to recover a portion of taxes already paid. The taxes were imposed by California's Franchise Tax Board, the defendant in Barclays' appeal to the Supreme Court, on Barclays Bank of California, a subsidiary that subsequently has been sold to Wells Fargo & Co. …

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