Gen. Mills, Inc. v. Comm'r Revenue
931 N.W.2d 791
Minn.2019Background
- General Mills, a Delaware corporation headquartered in Minnesota, claimed Minnesota R&D tax credit for 2011; dispute arose after it amended its return seeking a larger credit/refund.
- Minnesota's R&D credit is based on QREs above a statutory "base amount," which Minnesota defines by reference to I.R.C. § 41(c).
- Federal I.R.C. § 41(c) defines "base amount" as (1) a formula using a taxpayer's fixed-base percentage and average annual gross receipts and (2) a separate "minimum base amount" floor equal to 50% of current-year QREs.
- Fixed-base percentage = (aggregate qualified research expenses for 1984–1988) / (aggregate gross receipts for 1984–1988); "aggregate gross receipts" has a federal (worldwide) meaning under Treasury regs.
- General Mills argued Minnesota law incorporated only I.R.C. § 41(c)(1) and that "aggregate gross receipts" should mean Minnesota receipts; the Commissioner argued Minnesota incorporated the federal minimum-base limitation and that "aggregate gross receipts" are federal (worldwide).
- The Minnesota Tax Court held the minimum-base limitation is incorporated and that "aggregate gross receipts" meant federal receipts for 2011; the Minnesota Supreme Court affirmed.
Issues
| Issue | Plaintiff's Argument (General Mills) | Defendant's Argument (Commissioner) | Held |
|---|---|---|---|
| Whether Minn. Stat. § 290.068's reference to I.R.C. § 41(c) incorporates the federal "minimum base amount" (I.R.C. § 41(c)(2)) | Legislature meant to incorporate only the definitional formula in I.R.C. § 41(c)(1), not the minimum-base floor in (c)(2) | The statutory reference to § 41(c) includes all its provisions as written in 1991, including the minimum-base limitation | Held: The minimum-base amount in I.R.C. § 41(c)(2) is incorporated into Minnesota law for 2011 |
| Whether "aggregate gross receipts" in the fixed-base-percentage formula refers to Minnesota receipts or federal (worldwide) receipts | "Aggregate gross receipts" should carry its federal meaning (worldwide); Legislature limited other terms to Minnesota where intended | The statute should use Minnesota receipts for consistency and policy reasons | Held: "Aggregate gross receipts" refers to federal (worldwide) aggregate gross receipts for the 2011 tax year |
Key Cases Cited
- Manpower, Inc. v. Comm'r of Revenue, 724 N.W.2d 526 (de novo review of tax-law statutory interpretation)
- Hutchinson Tech., Inc. v. Comm'r of Revenue, 698 N.W.2d 1 (give plain meaning to clear statutory text)
- 500, LLC v. City of Minneapolis, 837 N.W.2d 287 (statutory ambiguity defined)
- Marks v. Comm'r of Revenue, 875 N.W.2d 321 (statutory language may be ambiguous despite plain-language arguments)
- Green Giant Co. v. Comm'r of Revenue, 534 N.W.2d 710 (incorporation of federal statute speaks plainly; cannot omit subdivisions arbitrarily)
- Seagate Tech., LLC v. W. Digital Corp., 854 N.W.2d 750 (omission of a condition in one clause indicates legislative intent not to apply it elsewhere)
- Laase v. 2007 Chevrolet Tahoe, 776 N.W.2d 431 (courts cannot rewrite statutes)
- BCBSM, Inc. v. Comm'r of Revenue, 663 N.W.2d 531 (avoid reading policy preferences into plain statutory text)
- Schatz v. Interfaith Care Ctr., 811 N.W.2d 643 (addressing absurdity arguments in statutory interpretation)
- State v. Overweg, 922 N.W.2d 179 (rejecting broad use of absurdity doctrine)
- Under the Rainbow Child Care Ctr. v. County of Goodhue, 741 N.W.2d 880 (policy decisions on tax matters are for the legislature)
- Busch v. Comm'r of Revenue, 713 N.W.2d 337 (strict-construction rule for tax deductions/exemptions may yield to legislative intent)
- Sevcik v. Comm'r of Taxation, 100 N.W.2d 678 (tax exemptions construed narrowly; legislative intent controls)
- A&H Vending Co. v. Comm'r of Revenue, 608 N.W.2d 544 (burden on taxpayer to establish entitlement to tax benefit)
- TCF Bank Sav. FSB v. Comm'r of Revenue, 486 N.W.2d 756 (tax exemptions strictly construed)