Kimberly-Clark Corporation & Subsidiaries, Relators/Cross-Respondents v. Commissioner of Revenue, Respondent/Cross-Appellant.
2016 Minn. LEXIS 347
| Minn. | 2016Background
- Kimberly-Clark (a unitary, multistate combined group) filed amended Minnesota franchise tax returns for 2007–2009 seeking refunds based on an optional apportionment formula that had been enacted in Minn. Stat. § 290.171 (1983) and repealed (Articles III & IV) in 1987.
- The 1983 enactment incorporated parts of the Multistate Tax Compact (including an equally weighted three-factor apportionment formula in Article IV and an election provision in Article III) into Minnesota law.
- The Commissioner denied the refund claims; the Tax Court (en banc) held the 1987 repeal constitutional and denied Kimberly-Clark’s claims. Kimberly-Clark appealed to the Minnesota Supreme Court.
- Kimberly-Clark argued the 1983 enactment created a binding contractual obligation (a surrender or restriction of Minnesota’s legislative power) preventing repeal of Articles III and IV except by full withdrawal from the Compact, and that the 1987 partial repeal unconstitutionally impaired that contract under the federal and state Contract Clauses.
- The Commissioner (and the Tax Court) argued the statute did not unmistakably surrender sovereign power and that the Legislature retained the authority to amend or repeal the statutory adoption of the Compact or portions thereof.
- The Minnesota Supreme Court affirmed: the enactment did not contain an unmistakable surrender of sovereign authority and, in any event, the state cannot constitutionally contract away its taxing power.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Minn. Stat. § 290.171 (1983) created a binding contractual obligation preventing repeal of Articles III & IV except by full withdrawal from the Compact | Kimberly-Clark: enactment was a contractual commitment that bound the State to the Compact’s terms until full statutory withdrawal | Commissioner: statute did not create an unmistakable surrender of sovereign power; Legislature retained authority to amend or repeal | Held: No. The statute did not unmistakably promise to refrain from repeal; no contractual bar to amending/repealing Articles III & IV |
| Whether repeal of Articles III & IV (1987) unconstitutionally impaired a contract under the Contract Clauses | Kimberly-Clark: repeal impaired its contractual rights and thus violated federal and state Contract Clauses | Commissioner: no contract was created; even if there were, the Legislature cannot contract away taxing power; Contract Clause challenge fails | Held: Not reached on impairment because no clear contractual obligation existed; additionally state constitution bars contracting away taxing power |
| Whether the unmistakability doctrine required explicit terms to surrender sovereign taxing authority | Kimberly-Clark: statutory language (enactment, implementing directives) sufficed to bind the State | Commissioner: silence/ordinary implementation language insufficient; unmistakability requires clear, express waiver | Held: The unmistakability doctrine requires plain, explicit language; § 290.171 lacked such language |
| Whether statutory enactment of an interstate compact limits later legislative amendment absent express withdrawal | Kimberly-Clark: partial repeal was inconsistent with compact membership and required full withdrawal to terminate option | Commissioner: legislature may amend or repeal statutory provisions adopting compact terms | Held: Legislature may amend or repeal adopted compact provisions unless there is an unmistakable surrender of authority; none here |
Key Cases Cited
- Caterpillar, Inc. v. Comm’r of Revenue, 568 N.W.2d 695 (Minn. 1997) (explaining unitary-business/formula-apportionment method)
- Firstar Corp. v. Comm’r of Revenue, 575 N.W.2d 835 (Minn. 1998) (noting Article IV contained an optional apportionment formula)
- U.S. Steel Corp. v. MultiState Tax Comm’n, 434 U.S. 452 (1978) (discussing origins and nature of the Multistate Tax Compact)
- Northwestern States Portland Cement Co. v. Minnesota, 358 U.S. 450 (1959) (background Supreme Court decision prompting multistate tax uniformity efforts)
- Winstar Corp. v. United States, 518 U.S. 839 (1996) (unmistakability doctrine and limits on reading sovereign waivers into contracts)
- State ex rel. Humphrey v. Philip Morris USA, Inc., 713 N.W.2d 350 (Minn. 2006) (applying unmistakability doctrine to determine whether state waived future taxing authority)
- Texas v. New Mexico, 482 U.S. 124 (1987) (treating interstate compacts as contracts that must be construed according to their terms)