Taxation and State Taxation -- 2016

Kimberly-Clark Corp. v. Minnesota Comm'r of Rev.   (U.S. Supreme Court)

Challenging Minnesota's partial withdrawal from Multistate Tax Compact

For the last fifty years, a number of states have been part of the Multistate Tax Compact, which creates a uniform system of taxation for companies with business in multiple states. Minnesota signed onto this agreement and many businesses have since relied on the promise of a reasonable, predictable tax system.

Like any contract, the Multistate Tax Compact places some obligations on states along with the Compact’s many benefits. For example, joining the Compact requires that states provide taxpayers with the option of apportioning their multistate income according to a common three-factor, equally weighted formula. The Compact was developed as an alternative to forestall congressional intervention with federal legislation, and was intended to establish a baseline level of uniformity to facilitate job growth and state tax collections.

Minnesota enacted a statute in 1987 purporting to repudiate some of the Compact's provisions, including one giving taxpayers the option of using the equally weighted formula. This case involves whether the state can do that and still be part of the Compact for other purposes. The Minnesota Supreme Court held that when a state becomes a member of the Compact, it makes no “unmistakable promise” to abide by all of the Compact’s terms. That issue was appealed to the Supreme Court, but the Court declined to hear the appeal on 12/12/16.

The Manufacturers’ Center for Legal Action filed an amicus brief in support of review, opposing Minnesota’s attempt to change the rules in the middle of the game. We argued that long-term tax predictability is of immense business importance, that the Multistate Tax Compact offers such predictability and uniformity, and that Minnesota should honor the agreement it joined.

Related Documents:
NAM amicus brief  (November 28, 2016)


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