Support Grows for Arizona’s Lawsuit Against California’s Unconstitutional Business Tax

PHOENIX --- Attorney General Mark Brnovich announced that five national organizations and a group of law professors have supported the Arizona Attorney General’s Office legal challenge to California’s “doing business” tax that is illegally imposed on Arizona individuals and businesses. The National Taxpayers Union Foundation (NTUF), DRI Voice of Defense Bar (DRI), National Federation of Independent Business (NFIB), Southeastern Legal Foundation, Cato Institute, and Law Professors together filed four amicus briefs in support of Arizona’s lawsuit.

In February, the Arizona Attorney General’s Office filed a lawsuit in the U.S. Supreme Court against the State of California seeking to invalidate California’s extraterritorial tax assessments and seizures, which result from an unconstitutional “doing business” tax against businesses and individuals that don’t actually conduct any business in California.

California continues to assess these "doing business" taxes even though both its state court and tax appeals agency have held that the taxes are illegal under California law. Every year, California assesses an $800 “doing business” tax against Arizona businesses that conduct no actual business in California. Instead, their only connection to California is a mere passive investment in a California company. Arizona estimates its citizens pay over $10 million in these unconstitutional taxes to the State of California every year. Since the “doing business” taxes are deductible, Arizona loses an estimated $484,000 in tax revenue every year.

“California’s approach in this case is deeply concerning," said Arizona Chamber of Commerce President and CEO Glenn Hamer. "We thank Attorney General Brnovich for doing all he can to protect Arizona from an overreaching out-of-state taxing authority."

“Stopping this type of taxpayer abuse from outside our state borders is of keen interest to small businesses," said NFIB Arizona State Director Chad Heinrich.  "We’re thankful General Brnovich is challenging the State of California’s unlawful taxation of Arizona’s small business owners. We’re hopeful that our support of Arizona’s position, through amicus, will provide the Court with the unique perspective of small businesses in this important matter of constitutional jurisprudence.”

Arizona’s suit seeks to end California’s unconstitutional tax encroachments.