In December a three-judge California appellate panel affirmed a superior court ruling finding that Comcast lacked a unitary relationship with OVC, Inc., and was therefore entitled to a $3 million refund. However, the court also affirmed the trial court’s holding that Comcast owed tax on a $1.5 billion termination fee.

The court found that QVC did not engage in a unitary business with Comcast, and that “although commonly owned, the entities were not integrated in a way that transferred value between them.” So while Comcast owned approximately 57 percent of QVC and enjoyed exclusive rights with respect to its management, the FTB was not justified in treating the tax liabilities on a consolidated basis for 1998 and 1999.

With regard to the termination fee, the court held that a $1.5 billion termination fee that MediaOne paid to Comcast following MediaOne’s election not to complete a merger was properly considered to be “apportionable business income.” Accordingly, the FTB’s taxation of a portion of that fee was appropriate and constitutional.

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