Charles Schwab Corp. v. Commissioner

This dispute concerns when the taxpayer may deduct on its federal return payment of its California state franchise tax. The appellant taxpayer is the Charles Schwab Corporation and its subsidiaries, Schwab Holdings, Inc. and Charles Schwab & Co., Inc. (referred to collectively as “Schwab”). Schwab’s California income has grown greatly since it began doing business in the state in April 1987. It would like to deduct its franchise tax payments earlier than the Tax Court ruled it could.

Schwab uses the accrual method of accounting and thus may deduct expenses on its federal tax return for the…