News and Insights

Kimberly-Clark Appeals Minnesota Ruling on MTC Unmistakability Doctrine to the U.S. Supreme Court

Tax Development Nov 03, 2016

On October 20, 2016, Kimberly-Clark filed a petition for certiorari with the United States Supreme Court appealing the decision rendered by the Minnesota Supreme Court that the Multistate Tax Compact (“Compact”) equally weighted three factor apportionment formula was not available to the taxpayer.1 This case differs from the recently denied certiorari appeal in Gillette v. FTB,2 in that the reasoning by the Minnesota Supreme Court has much broader implications than the decision in Gillette. For more information on Gillette, please refer to our previous tax development U.S. Supreme Court Denies Review of Gillette v. California Franchise Tax Board posted on October 14, 2016.

In Kimberly-Clark Corp. v. Comm'r of Revenue, the Minnesota Supreme Court held that the Compact was not binding on the State under the “unmistakability doctrine,” which was developed in United States v. Winstar.Under the doctrine, unless there is an unmistakable provision to the contrary, contractual arrangements, including those to which a state itself is a party, remain subject to subsequent state legislation. The Minnesota Supreme Court found that the Compact did not contain an unmistakable provision that it would not change its apportionment factor. Therefore, the Minnesota legislation that adopted a super-weighted sales factor apportionment formula (in 1983), and repealed the Compact’s equally weighted three factor formula (in 1987) was upheld by the Minnesota Supreme Court.

Several other cases are awaiting state court review. The Oregon decision to deny a refund based on the Compact provisions is on appeal, as well as a Texas decision to the same effect.4 Finally, Sherwin-Williams has filed a claim under the Compact in Colorado and recently filed an appeal of the denial in Denver County District Court.5 Ryan will continue to monitor developments on those cases that affect the Multistate Tax Compact.

1 Kimberly-Clark Corp. v. Comm'r of Revenue, United States Supreme Court, Dkt. No. 16-565.
2 U.S. Supreme Court Dkt. No. 15-1442.
3 Kimberly-Clark Corp. v. Comm'r of Revenue, 880 N.W.2d 844 (Minn. 2016); see United States v. Winstar Corp., 518 U.S. 839 (1996).
4 Health Net, Inc. and Subsidiaries v. Department of Revenue, Oregon Supreme Court, Dkt. No. S063625; Graphic Packaging v. Hegar, Texas Supreme Court, Dkt. No. 15-0669.
5 Sherwin-Williams Co. v. Department of Revenue, Colorado District Court, Case No. 2016CV31072.


Mary Bernard