Section 17942 of California’s Revenue & Taxation Code; The San Francisco Superior Court in Northwest Energetic Services, LLC v. Franchise Tax Board [3] (“Northwest”) found the unapportioned levy unconstitutional, and awarded Northwest Energetic Services a full refund of the

amounts it had paid under section 17942; And, Similarly, another case challenging the constitutionality of section 17942 under different facts, Ventas Finance I, LLC v. Franchise Tax Board [4] (“Ventas”), was recently decided by the San Francisco Superior Court. As in Northwest, the San Francisco Superior Court in Ventas ruled that section 17942 is unconstitutional because it is not apportioned.

This article describes the challenges to section 17942 raised by the taxpayers in Northwest and Ventas, and discusses whether the legislature’s proposed amendments to section 17942 would have been an adequate solution in light of the Court of Appeal's decision in NMI.