Greenberg Traurig Secures Appellate Victory for Texas Radiologist in California Income Tax Dispute

SAN FRANCISCO - May 5, 2026 - A Greenberg Traurig, LLP team led by State & Local Tax (SALT) Shareholder Bradley R. Marsh and Associate Jennifer A. Vincent prevailed in a tax dispute against the California Franchise Tax Board (FTB) on appeal May 1. The decision reverses a trial court ruling that had erroneously upheld California income tax assessments under a "unitary business" theory - a significant victory that narrows California's reach in taxing nonresidents who provide professional services remotely.

The taxpayer, Greenberg Traurig client Xavier Garcia-Rojas, is a radiologist who works remotely from Texas for a national radiology services company. In Garcia-Rojas v. Franchise Tax Board, the California Court of Appeal held that the FTB failed to establish that the taxpayer operated a unitary business within and outside California. A unitary business is one overall business made up of multiple parts and segments that are closely connected and work together, rather than separate, independent operations. The appellate court agreed with Greenberg Traurig that a taxpayer conducting a single activity - in this case, interpreting medical imaging studies - cannot be a unitary business. As a result, the appellate court reversed summary judgment previously granted in favor of the state and remanded the matter back to San Francisco Superior Court.

By doing so, the appellate court implicitly overturned the controversial Bindley decision from 2019. In that case, a freelance screenwriter living in Arizona unsuccessfully argued that he was not subject to California state taxes, but the California Office of Tax Appeals said out-of-state contractors and service providers can still owe California taxes if they work for California-based clients. In Garcia-Rojas, by rejecting the FTB's attempt to apply the unitary business doctrine to a single-person, single-activity practice, the court has now limited California's ability to automatically apportion income earned by out-of-state service providers.

"This decision reinforces important limits on California's ability to stretch the unitary business doctrine beyond its intended scope," Marsh and Vincent said in a joint statement. "The appeals court made clear that a nonresident providing remote professional services does not automatically become part of a unitary business that is then subject to California taxation."

In addition to Marsh and Vincent, the Greenberg Traurig team included Litigation Associates Shauna E. Imanaka and Brian C. Gee.