Minnesota

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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…

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…

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.…

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…

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…

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…

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…

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…