By Debra Salvato and Scott Wright

The Minnesota Tax Court recently held that the annual limitation on net operating losses of an acquired corporation is to be applied only once to a taxpayer’s pre-apportioned income. The taxpayer, Sinclair Broadcast Group, Inc., acquired a company with significant losses to which Section 382 limitations applied. The Commissioner took the position that Sinclair was required to apply Section 382 limitations twice—once on Sinclair’s state net income before apportionment and again to Sinclair’s state taxable income after apportionment under the new corporation’s present year apportionment ratio. The Tax Court rejected the Commissioner’s interpretation, finding that Minnesota’s net operating loss statute requiring Section 382 limitations to be “applied to net income, before apportionment…” was clear and unambiguous. The taxpayer’s position was also supported by the larger policy purpose behind the adoption of Section 382. Sinclair Broadcast Group, Inc., and Subsidiaries v. Comm’r of Revenue, No. 8919-R (Minn. Tax Ct. Aug. 11, 2017).