State ex rel. Arizona Department of Revenue v. Arizona Sand & Rock Co.

MOELLER, Justice.

BACKGROUND AND ISSUE

Under Arizona income tax law, Arizona taxpayers are allowed to deduct from their state taxable income federal income taxes paid or accrued for that tax year. A.R.S. §§ 43-1022(11) and 43-1043(A)(5) (formerly A.R.S. §§ 43-123(C) and 43-123.05). In this case, we must fashion a method by which Arizona taxpayer Arizona Sand & Rock Company (AS & R) may calculate this deduction.

Our task is complicated by two factors. First, AS & R belongs to a group of affiliated corporations which join together to file a single, consolidated federal tax return under 26 U.S.C.A.…