The Minnesota Supreme Court held that the gain from a corporation’s sale of its majority interest in a limited liability company (LLC) was apportionable business income subject to Minnesota corporate income tax. The Court explained that the corporation conducted its business through operating subsidiaries that were owned by the LLC, and that the corporation and
Minnesota
All-or-Nothing: Minnesota Supreme Court Rules Taxpayer Not Entitled To Exemption for Online Computer Data Retrieval Equipment
The Minnesota Supreme Court held that a taxpayer that sold data technology services was not eligible for Minnesota’s sales tax exemption for computer equipment used in online data retrieval systems because the underlying information was “not equally accessible to all of its customers.”
Minnesota provides a sales tax exemption for, among other things, “machinery and…
Tangled Up in Internal Consistency: Minnesota Legend Drug Tax Held Constitutional
The Minnesota Supreme Court held that the state’s gross receipts tax on prescription drugs did not violate the Due Process or Commerce Clauses when applied to transactions between out-of-state pharmacies and in-state customers, reversing the Minnesota Tax Court. After concluding that Minnesota’s “legend drug tax” legally applied to the taxpayer under the imposition statute (Minn.…
Eversheds Sutherland SALT Scoreboard Publication–Third Quarter 2018
This is the eleventh edition of the Eversheds Sutherland SALT Scoreboard, and the third edition of 2018. Each quarter, we tally the results of what we deem to be significant taxpayer wins and losses and analyze those results. This edition of the SALT Scoreboard includes a discussion of California combined reporting, insights regarding the Washington…
Minnesota Tax Court Clarifies R&D Credit Calculation in Identical Cases
In two cases, the Minnesota Tax Court clarified the extent to which the Minnesota research and development (R&D) credit is calculated based on the Internal Revenue Code’s defined terms. Minnesota law incorporates the Internal Revenue Code’s definition of “base amount” for purposes of calculating the Minnesota R&D credit. The proportion of qualified research expenditures to…
Minnesota Tax Court Declares Separately Stating Tax a Winner in Tobacco Tax Dispute
The Minnesota Tax Court held that a tobacco distributor was entitled to a refund of Minnesota tobacco tax that it paid on federal excise tax (FET) that was passed through by the tobacco manufacturer, but only if the FET was separately stated on the manufacturer’s invoice. The court looked to the plain language of the…
Minnesota Supreme Court Upholds Commissioner’s Use of Alternative Apportionment for Financial Institution
The Minnesota Supreme Court held that the state’s standard apportionment method did not fairly reflect the taxpayer’s net income allocable to the state, reversing the Tax Court’s ruling. The taxpayer, a national financial institution, transferred its loan portfolios to two newly formed partnerships. For apportionment purposes, Minnesota requires financial institutions to include loan interest in…
Surrender: Minnesota Department of Revenue Gives Away NOL Limitation Case
By Charles Capouet and Charlie Kearns
On November 6, 2017, the Minnesota Department of Revenue issued a Revenue Notice advising taxpayers that it acquiesces to the Minnesota Tax Court’s decision in Sinclair Broadcast Group, Inc. v. Commissioner of Revenue. As a result, the Department now takes the position that Minnesota’s version of the …
Minnesota Tax Court: Net Operating Loss Limitation is Applied Solely on a Pre-Apportioned Basis
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…
Minnesota Supreme Court Respects Federal Check-the-Box Election for Minnesota Combined Reporting Purposes
By Samantha Trencs and Jeff Friedman
The Minnesota Supreme Court respected a foreign entity’s federal check-the-box election for the purpose of determining which entities were included in the Minnesota combined franchise tax reports. The court held that including the income and apportionment factors of a foreign entity that elects under federal tax law to be…