News and Insights

U.S. Supreme Court Denies Certiorari Request in Kimberly-Clark

Tax Development Dec 15, 2016

In October 2016, the court declined to review Gillette v. California Franchise Board. Now, the denial of Kimberly-Clark Corp. v. Minnesota Commissioner of Revenue puts another nail in the coffin of the availability of the elective three-factor apportionment election under the Multistate Tax Compact in states where the Compact had been approved. Taxpayers have repeatedly challenged the validity of refund denials when invoking the elective apportionment in several states. 

Unlike other Compact apportionment cases, Minnesota’s Kimberly-Clark case involved the decades old repeal of the Article III apportionment election. The taxpayer challenged the binding contract involved with adopting the Compact. The Minnesota Supreme Court, however, held, under the unmistakability doctrine, that there was no contractual obligation that prohibited the Legislature from later repealing selected Articles.1 

The Supreme Court’s denial of certiorari dictates that the Minnesota Supreme Court’s ruling stands. The Department of Revenue will begin processing all claims pending resolution of this case. The state stands to be spared refunding an estimated $700 million in claims filed under the Compact election. 

The remaining cases on this issue pending certiorari at the U.S. Supreme Court are the five petitions filed to appeal the Supreme Court of Michigan’s ruling. Those petitions challenge the retroactive repeal of the Compact, as well as whether the Compact was a binding agreement. Challenges to the Compact are still working their way through the courts in Colorado, Oregon, and Texas. 

1 See Ryan release dated November 3, 2016.


Mary Bernard