Manufacturers’ Brief Argues for State Tax Uniformity

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By Mark Wolski

Dec. 1 — The National Association of Manufacturers has asked the U.S. Supreme Court to re-examine whether states can abandon the requirements of the Multistate Tax Compact without formally withdrawing from it.

The request, which came with the Nov. 28 filing of a brief in support of Kimberly-Clark’s petition for review, is aimed at giving multistate businesses more tax uniformity and predictability ( Kimberly-Clark Corp. v. Minn. Comm’r of Revenue , U.S., No. 16-565, amicus brief filed 11/28/16 ).

The court is scheduled to hear Kimberly-Clark Corp.'s petition at its Dec. 9 conference. The state waived its right to respond to the petition, and the high court hasn’t yet called for a response—as it can do until the date of the conference.

The Dallas-based company is challenging a ruling by the Minnesota Supreme Court that the Minnesota Legislature acted within its rights when it abandoned the Multistate Tax Compact’s equally weighted, three-factor apportionment formula for income taxes in 1987 without formally withdrawing from the compact. The state court held this summer that the compact created no contractual obligation that prevented the Legislature from repealing the state’s use of the apportionment formula.

Kimberly-Clark Seeking Tax Refund

Kimberly-Clark had maintained that the compact’s language only allows member states to rescind its terms by formally withdrawing from the compact. Since Minnesota didn’t formally withdraw from the compact until several years after repealing the apportionment formula, Kimberly-Clark maintained that it and its subsidiaries were owed income tax refunds of millions of dollars.

The company’s petition for certiorari contended that the Minnesota ruling could have far-reaching repercussions, as it called into question the binding nature of compacts. It added that a nationwide tax liability of about $3 billion was at stake.

The NAM’s amicus brief contended that multistate businesses have relied on the compact since it was implemented in 1967. The compact has aided them in making expansion decisions, it wrote, while also ensuring that income was apportioned in a consistent manner among member states.

The association added that the compact was implemented to promote the predictability and uniformity of state taxation. Allowing the Minnesota ruling to stand, it said, would undermine the very things the compact was intended to promote.

Pact Reduces Double Taxation

It argued that another benefit of the compact is that the possibility of double taxation is reduced when states follow identical tax rules.

The association brief said the Minnesota decision threatens to disrupt the settled expectations of businesses that have relied on the apportionment formula.

The brief also argued that Article X of the compact notes that states can only withdraw from its provisions by repealing it in its entirety. The provision ensures that states joining the compact make a true commitment to it, it said, thereby making federal legislation regarding state income taxes unnecessary. Further, the brief said, the article ensures that states don’t enjoy membership benefits without bearing the compact’s obligations. Benefits of membership include being able to influence tax laws and being able to petition the MTC to audit multistate taxpayers, it said.

A Kimberly-Clark spokesman said the company doesn’t comment on pending litigation. Officials with the NAM and the Minnesota Department of Revenue were unavailable for comment.

To contact the reporter on this story: Mark Wolski in St. Paul, Minn. at

To contact the editor responsible for this story: Ryan C. Tuck at

For More Information

Text of the brief is at

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