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Case Basics
Docket No. 
Hunt-Wesson, Inc.
Franchise Tax Board of California
(Argued the cause for the petitioner)
(Oakland, California, argued the cause for the respondent)
Facts of the Case 

California's "unitary business" income-calculation system for determining the State's taxable share of a multistate corporation's business income authorizes a deduction for interest expense. The system, however, permits use of that deduction only to the extent that the amount exceeds certain out-of-state income arising from the unrelated business activity of a discrete business enterprise. Hunt-Wesson, Inc. is a successor in interest to a nondomiciliary corporation that incurred interest expense. California disallowed a deduction for the expense insofar as it had received nonunitary dividend and interest income. Hunt-Wesson challenged the validity of the disallowance. The California Court of Appeal found the disallowance constitutional. The California Supreme Court denied review.


Does California's exception to its interest expense deduction, which it measures by the amount of nonunitary dividend and interest income that a nondomiciliary corporation has received, violate the Due Process and Commerce Clauses?

Decision: 9 votes for Hunt-Wesson, Inc., 0 vote(s) against
Legal provision: Due Process

Yes. In a unanimous opinion delivered by Justice Stephen G. Breyer, the Court held that the provision violates the Due Process and Commerce Clauses. "California's statute does not directly impose a tax on nonunitary income. Rather, it simply denies the taxpayer use of a portion of a deduction from unitary income..., income which does bear a 'rational relationship' or 'nexus' to California," wrote Justice Breyer. "Because California's offset provision is not a reasonable allocation of expense deductions to the income that the expense generates, it constitutes impermissible taxation of income outside its jurisdictional reach," concluded Justice Breyer.

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HUNT-WESSON, INC. v. FRANCHISE TAX BOARD OF CALIFORNIA. The Oyez Project at IIT Chicago-Kent College of Law. 25 August 2015. <>.
HUNT-WESSON, INC. v. FRANCHISE TAX BOARD OF CALIFORNIA, The Oyez Project at IIT Chicago-Kent College of Law, (last visited August 25, 2015).
"HUNT-WESSON, INC. v. FRANCHISE TAX BOARD OF CALIFORNIA," The Oyez Project at IIT Chicago-Kent College of Law, accessed August 25, 2015,