we've called the case somebody so invited to beg government's position in this case is that schwab's deductions for its california franchise tax liabilities should be reduced under section four sixty one d four sixty one the applies when an earlier taxable year before i get to the demonstration that in fact there was no acceleration in this case i'd like to jump through the other end of the equation and focus on what would happen directions if in fact there were an acceleration because i believe i can demonstrate that in fact if there were sixty one d did apply the schwab there would be no material reduction liability so this is this is both about timing and about permanent differences and i think the appropriate place to start is the seventy four words of section four sixty one d itself those of here at page thirteen of our opening brief but i have taken the liberty with quotes for sixty one do you want as far as i can see  prerequisites that if the first being that there be an accrual method tax payers you've got that right yes the second being that there have been at the time for  honor the statute was enacted in response to efforts of several states to create that situation with respect to their state real estate taxes and the evil that the congress saw was that  that's not our situation it seems to be you're trying to get a bigger deduction against revenue by moving the deduction from one period to the other but your honor i believe i think you answered yes or no no your honor we're not may draw the court's attention to the again to the chart that we circulated and that is on this placard you know it becomes an eye exam i can't read anything on the chart from here we have copies on the bench i think  midway through the state it would have owed only a pro rata portion of the tax so it was a it was a in fact a true franchise tax not a tax on income under one nine hundred sixty law it's very clear that economically the state hasn't really earned the tax until the taxpayer had performed its activities over the full course of the year none the less because the statute because the crow was triggered by the the franchise for federal tax purposes the courts have held consistently that the tax accrued at the beginning of the year in which the franchise was exercised you know again there would have been a refund  that they could manipulate the california law which did not impose i had to stand up but i hear you saying that in this context it doesn't make any difference because before or after it would have we would have gotten the same result for federal tax purposes you  i believe that's correct and literally under the statute so you're saying that one nine hundred seventy two change has no effect on you know that's that's what for sixty one sounds right yes the so just so you're trying to tell us that this is how the deduction system works for federal law you don't like to say yes or no let me let me ask it again you operate and on a profit in one nine hundred eighty eight because you operate on a profit in one thousand eighty eight you owe money to the state of california but under the product of the fact that if you only work if you only if you're only at this for part of the year then you don't have to pay the tax until you've been business for a year sixty law that amount accrued was not in ninety one when you're on the money but in january one ninety two is that correct a simple question does the amount that you owe to the state of california accrue on january one of the following year the corporate franchise it could not accrue until the taxpayer actually exercised the franchise by being in business in one nine hundred forty four and that's why california changed its law in one nine hundred seventy two because under this system if a corporation went out of business for example on the very last day for its income garnering year and was not in operation on the next year didn't exercise the franchise tax on focused on whether there's any contingency that makes the liability leaves a liability up in the year and under the old system until the corporation was in business in the so called taxable or franchise exercise any of the restrictions or qualifications that council would like to council for the taxpayer would like to lead into and so yes that that is a case if i understand for federal purposes which they changed the year so that was all very confusing and the commissioners counsel were confused by it and the upshot of it is that the for the very first year of operation under old law that is an exception and the tax actually cruise on december thirty first of that year under old california law and that's actu year for itself as of december thirty first and then again for the next year so that's why you have nine thirty two twice and that's a the end result of the taps court's decision is a correct application of the nineteen sixty laws including the exceptions and i will state quite frankly the commissioner was confused about the application of those exceptions and schwab won it was arguing for the general rule you especially since you apparently survived to bark this morning on your way here just to have the experience of being out in downtown oakland trying desperately to flag cab to get hundred eighty nine tax secondly a severe blow in judge gerber's opinion is that he managed in effect he turned a statute that has only to do with timing into a computational statute as as we saw from the from the words of four sixty one d it affects only the timing of the tabs yet judge gerber held that the amount of the tax was limited to the amount that would have been computed under one nine hundred sixty law and that has the result