On March 20, the California Court of Appeal for the Second District ruled against Abbott Laboratories in Abbott's challenge to the Franchise Tax Board's Farmer Brothers remedy.

Back in 2003, the same Court of Appeal had held that Cal. Rev. & Tax § 24402, which allowed a deduction only for the portion of a dividend paid out of income that had already been taxed by California, was unconstitutional because it discriminated against interstate commerce.¹ For years ending after Nov. 30, 1999, the FTB's Farmer Brothers remedy has been to disallow any dividend-received deduction under Cal. Rev. & Tax § 24402.