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Petitioner contends that it may use the December 31 accrual
date resulting in a deduction for its 1989 Federal tax year
because section 461(d)(1) was intended to address situations only
where a post-1960 change in State franchise tax law would result
in a double deduction in 1 tax year. Because petitioner was
permitted to deduct the 1988 short year California franchise tax
for its 1988 Federal tax year, the acceleration (caused by the
1972 amendments) of the 1989 franchise tax to petitioner’s 1989
Federal tax year does not result in two deductions in any one
taxable period. To understand why the 1972 amendments do not
result in more than one deduction in any of petitioner’s tax
years, we must review California’s franchise tax regime.
California’s first Bank and Corporation Franchise Tax Act
(promulgated in 1929) levied a tax “for the privilege of doing
business in the state during a given year, which year of
privilege is designated the ‘taxable year.’” Central Inv. Corp.
v. Commissioner, 9 T.C. 128, 131 (1947), affd. per curiam 167
F.2d 1000 (9th Cir. 1948); Filoli, Inc. v. Johnson, 51 P.2d 1093,
1094 (Cal. 1935); see also Cal. Rev. & Tax. Code sec. 23151(a)
(West 1992). Under the successor to that statute, the franchise
tax was payable for the “taxable year” as measured by the net
income earned by a corporate taxpayer during the preceding year,
which is referred to as the “income year”. Cal. Rev. & Tax. Code
secs. 23041(a), 23042(a) (West 1992). The only statutorily
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