Weekly BNA Insights: There Is Still Hope for Relief from Overreaching DORs


From the 12/09/16 edition of the Weekly State Tax Report:

While it has not been uncommon for state tax auditors to “stretch” the law to develop theories to propose tax assessments, recently, many courts, including state supreme courts, have followed this path. These decisions appear to be more concerned with the fiscal impact to the state resulting from a decision in favor of a taxpayer. Most of these decisions concern the application of statutory apportionment formulas or nexus-creating activities.

The most recent decision that appears to have a fiscal bias as to the outcome of the proceedings is Kimberly-Clark Corp. & Subsidiaries v. Commissioner of Revenue, Minnesota Supreme Court, No. A15-1322, June 22, 2016. In Kimberly Clark, the Minnesota Supreme Court held that the Multistate Tax Compact (the compact) was not a valid binding agreement. The issue, which has been and is being considered by several other states, is whether a taxpayer may elect an equally weighted three-factor apportionment formula based on the adoption of the compact. In 1983, Minnesota adopted the compact by incorporating its provisions into the Minnesota tax statutes. The compact contains an elective apportionment formula in Articles III and IV, which allows taxpayers to apportion their multistate income by using an equally weighted three-factor apportionment formula. Once the compact has been adopted by a particular state and that state becomes a party to the compact, the only way for the state to repeal any provision is to repeal and withdraw from the compact in its entirety and readopt only those provisions that the state wishes to retain.

Mary F. Bernard, director at Ryan LLC, and Mark L. Nachbar, principal at Ryan LLC, discuss recent court decisions that appear to be more concerned with the fiscal impact to the state resulting from a decision in favor of a taxpayer in this week’s BNA Insights article, available here (subscription required). Or sign up for a free trial to the Weekly State Tax Report.

Compiled by Chreasea Dickerson