Use Exhibit 16.1 to provide the required information for Warbler Corporation, whose Federal taxable income totals $10 million. Warbler apportions 70% of its manufacturing income to State C. Warbler generates $4 million of non-apportionable income each year, and 30% of that income is allocated to C. Applying the state income tax modifications, Warbler’s total business income from the manufacturing operation this year is $12 million.

a. How much of Warbler’s manufacturing income does State C tax?

b. How much of Warbler’s allocable income does State C tax?

c. Explain your results.