*1 Nadine R. Austin CHAPMAN Relators,
Chapman, REVENUE, OF
COMMISSIONER
Respondent.
No. C5-02-245. of Minnesota.
Supreme Court
Aug. 2002.
Rehearing Denied Oct. *3 General, Hatch, Barry R. Attorney
Mike General, Greller, St. Attorney Assistant MN, Paul, for Relator’s. Nelson, Hanson, Clause, Ann Martin Gary Equal
Sue Commerce Protection Clause, III, Stewart, Uniformity or the Oppen- A. Culhane Robert J. Clause. We LLP, Donnelly part part. affirm in and reverse in heimer Wolff & Minne- MN, apolis, for Respondent. R. Chapman Austin Nadine relators,
Chapman, established donor- Fidelity advised fund account with the In- Boston, vestments Charitable Gift Fund 1994, 1995, Massachusetts. OPINION made contributions to this *4 their computing fund. Minnesota ANDERSON, A., RUSSELL Justice. AMT1 liabilities for each of these three subject taxpayers Individual to the years, Chapmans deducted the amount (AMT) alternative minimum tax Minnesota of their contribution to the fund for that permitted are a charitable contribution de- year. duction if the contribution is made “to or organization respondent for the use of’ a charitable The Commissioner of in carrying substantially subsequently “located and on Revenue disallowed these de all of in grounds [State its activities of Minneso- ductions on the that the Fidelity 290.091, 2(f), §§ Minn.Stat. in ta].” subd. fund was not locatеd Minnesota and did 3(b) (1994). 290.21, case, carry subd. In this substantially activity on all of its we are asked to determine whether in rela- Minnesota. The Commissioner as tors’ contributions to a liability Massachusetts do- sessed additional tax and interest gift nor-advised charitable qualified against Chapmans fund for the relevant' tax .the $145,006.34. for deduction pro- years under Minnesota’s AMT After the Commis and, not, if visions whether Minnesota’s sioner’s decision upheld was on administra violate the appeal, Chapmans Commerce tive challenged the Equal Clause and Protection Clause of the decision in the Minnesota Tax Court. The United States Constitution and Chapmans argued the Unifor- that their contributions mity Clause of the Minnesota Fidelity Constitution. fund were made “for the The Tax Minnesota Court determined that use of’ Minnesota charities within the 290.091, qualify §§ relators’ contributions did not for meaning of Minn.Stat. subd. 2(f) 3(b). deduction because were neither made They subd. also ar qualifying to nor gued charities made restriction of the Minnesota in for qualifying trust Minnesota charities. AMT charitable deduction Minnesota The tax court also determined that Minne- charities violates the Commerce Clause sota’s AMT allowing Equal a deduc- and the Protection Clause of the tion for contributions to Minnesota chari- U.S. Constitution and violates the Unifor ties but not for mity contributions to non- Clause of the Minnesota Constitut Minnesota charities do not violate Chapmans sought ion.2 The reversal of 1. appears The federal alternative minimum tax was mum intended to serve the same on, purpose, patterned though as it is opportunity enacted to reduce the for individ- to, identical the federal law. high uals with income to achieve minimal exclusions, liability through income tax use of original juris- tax court The does not have provided deductions and credits in federal tax diction to decide constitutional issues. Erie law. See Michael D. Rose C. and John Chom- Revenue, Mining Co. v. Comm’r 343 N.W.2d mie, (3d Federal Income Taxation 3.38 (Minn.1984). acquires The tax court ed.1988). The Minnesota alternаtive mini- jurisdiction particular to decide all issues in summary judgment. interest the Commissioner taxes and assessed the additional court explained The that under Minneso- Commissioner. provisions, taxpayers ta’s AMT individual stipulated the facts parties The then permitted charitable contribution de- summary judgment from the and sought if duction is made “to (1) stipulated that parties court. qualifying for the of’ charitable orga- use Fund Gift is a trust Fidelity Charitable cases, Drawing nizations. on federal tax and a public formed in Massachusetts the court concluded that the term “for the charity the Internal Revenue Code under 1986, (2) provi- fund of’ contributions made use under-the Minnesota AMT 1996 were in through “irrevocably from 1994 deductible sions means trust for.” under the Code and make Because the did not char- (3) (2000), Fidelity’s in “irrevocably itable contributions trust charitable, (4) Massachusetts, principal office is organizations, for” Minnesota $313,200 to the Chapmans contributed they did not for the AMT qualify deduc- $462,100 fund fund tion. $838,000 to the fund *5 The tax court also held that Minnesota’s the fund wеre made to distributions from provisions AMT contribution charitable do (6) 1996, through any charity from 1994 not violate and Minnesota Consti- the U.S. 2000, distributions from through from 1997 pro- tutions. The that the explained court various the were made to charitable fund implicate visions the Commerce Clause be- by Fidelity foundations organizations and cause donor-advised conduit donations to (7) Chapmans, Fideli- designated by as the activity funds in constitute economic the ty complied every request distribution However, stream of the court commerce. grant by recommendation made the scope decided that limited of the chari- the (8) 1997, $20,000 Chapmans, in all but table deduction does vio- $377,500 by went Fidelity the distributed the because and late Commerce Clause the organizations foundations charitable (9) Minnesota, against located in from 1998 denial does inter- not discriminate 2000, funds through all of the distributed specifically, More state commerce. Fidelity organiza- went to court the- statute allows a reasoned Minnesota, in tiоns located and foundations deduction for contributions conduit calculating their Minnesota and out- funds located both years tax liability for the long as the contributions side Minnesota so through reported con- Chapmans are made made to the conduit funds “for Fidelity each of the tributions made to Finally, charities. the use of’ Minnesota years “Minnesota charitable qualified the court that Minnesota’s determined contribution deductions” Minn.Stat. AMT charitable contribution do. 2(f). 290.091, § subd. Protection Clause or Equal not violate the because those AMT Uniformity Clause Chapmans’ The mo- tax court denied do discriminate summary judgment granted tion for case, issues, district including court constitutional when the constitutional issues case district court transfers to the tax back to the tax and to those issues transfer McCannel, In re court. N.W.2d 919-20 an order of court. The court issued refer ( 1980). In order insure that stay proceedings Minn. and the ral and district jurisdiction tax court would have to decide transferring the case court issued an order issues, Chapmans constitutional back to the court. joint filed a to refer Commissioner motion (Minn.2001).
use of conduit funds located outside N.W.2d We will up Minnesota. hold a statute challenging party unless the demonstrates that it is unconstitutional be Following decision, the tax court yond a reasonable doubt. Olson v. Ford petition filed a for writ of cer- Co., (Minn. Motor 558 N.W.2d tiorari asking our court to evaluate wheth- 1997). er the tax court in interpreting erred statutory Minnesota’s AMT scheme and question The first before us is whether whether the AMT statutory scheme vio- the tax court properly construed chal- lates the U.S. Constitution or the Minneso- lenged provisions to find that the charita- ta Constitution. ble contribution deduction for the AMT must be made to or trust for Minnesota I. organizations. To address this Our review of tax court decisions question, it necessary to examine the is limited to determining whether the tax statutory Minnesota AMT scheme. jurisdiction, court lacked whether the tax computation of an taxpay- individual supрorted by court’s decision is the evi er’s liability Minnesota AMT begins with dence in conformity law, and is with the calculation of taxpayer’s Minnesota al- and whether the tax court committed ternative minimum taxable income other Skyline error of law. Preservation (AMTI). 1(a) Minn.Stat. Polk, County Found. v. 621 N.W.2d (2000). The Minnesota AMTI is deter- (Minn.2001); mined making adjustments various re- subd. 1 We review an grant order *6 290.091, quired by § 2(a), Minn.Stat. subd. ing summary judgment to determine to the taxpayer’s federal AMTI. These ad- whether there are genuine of issues justments include an “add-back” of item- material fact and whether the lower court ized deductions permitted for federal erred in applying the law. Burlington AMTI purposes, meaning that Revenue, N.R.R. v. Comm’r 606 N.W.2d of (Minn.2000). amounts of those deductions remain tax- parties Because the able income for Minnesota AMT stipulated purposes. underlying facts this dis 290.091, 2(a).3 § Minn.Stat. pute, subd. we need consider whether the statute includes applicable exceptions two properly law was this dis- applied. We allowance of federal review de novo the tax itemized court’s deductions— conclusions law, of including the one for the “Minnesota interpretation charitable contri- of stat utes. Id. bution Because states deduction” and the have wide latitude other for the in establishing schemes, expense their medical taxation deduction. and Minn.Stat. 2(a)(2). 290.091, § because statutes are declared unconstitu subd. statutory This tional only absolutely when necessary, a structure results in the disallowance of taxpayer challenging the constitutionality deductions for all charitable contributions of a state statute a heavy bears bur in computing the Minnesota AMTI except den. Revenue, Stelzner v. Comm’r 621 the “Minnesota charitable contribution de- of issue, years (2) 3. For the tax at provid- the statute taxpayer’s itemized deductions al ed, part: in relevant computing lowed in the federal alternative (a) income, excluding minimum taxable but "Alternative minimum taxable income” means the following sum of the Minnesota charitable for the contribution deduc deduction;* * * *. year: taxable tion expense and the medical taxpayer's federal alternative mini- * * *; 290.091, 2(a) (1994). mum taxable income § Minn.Stat. subd. Therefore, meaning treatment term. its must be It is that differential de- duction.” through statutory termined construction. that is here. at issue object “The interpretation of all The “Minnesota charitable contribution of ascertain and construction laws is to and purposes for of deduction” is defined the legislature.” effectuate intention of as “a charitable contribu- (2000). § Minn.Stat. 645.16 “When the under section 170 of tion deduction application words of a law their to an to or for the use of Internal Revenue Code existing situation are clear and free from 290.21, sub- an section entity described ambiguity, all of the law letter shall (a) (e).” division clauses Minn.Stat. disregarded pretext not be under the of 2(f). sub- Section construing pursuing spirit.” forth, here, cer- as relevant division 3 sets statute, scope meaning words tain allowable deductions for govern givеn of the statute and are their including in the gifts year, or made taxable approved usage. common and Northern taxable contributed within the amounts Revenue, States Power Co. Comm’r of year: (Minn.1997). 571 N.W.2d as (b) community of any for the use to or certaining legislature, the intent of the we trust, chest, organization, corporation, guided by presumption association, fund, or located foundation legislature does not intend to violate the carrying substantially on all that the U.S. Constitution and state, organized its within this activities absurd, not intend a does result exclusively religious, operating execute, impossible to or unreasonable. scientific, charitable, cemetery, public 645.17 artistic, pur- literary, educational opportu- have Although we not had the cruelty to poses, prevention or for the nity interpret “for the phrase use animals no the net part children or of,” federal courts have construed this which to the benefit earnings of inures term the context of charitable contribu- any рrivate stockholder or individual. tion deductions under federal statutes.4 *7 3(b) (emphasis have These courts addressed forms added). may charitable take to contributions provisions, uniformly above charita- for a and have qualify Based on the deduction that the “for the use of’ pur- ble are deductible for concluded term contributions for.” In Davis v. poses Minnesota AMT if made means “in trust United of the 479-84, States, 472, 110 495 “to or use of’ a Minnesota charita- U.S. S.Ct. for the (1990), 2014, L.Ed.2d ble or foundation. con- 109 457 U.S. organization the transfer Supreme trast “to” a charitable or- Court held that to contributions contri- qualify the use of’ funds did not as a ganization, contributions “for charitable than made “for use of’ a charitable refers to forms other bution logically meaning AMT within the of 26 organization direct Minnesota’s contributions. 170 in the absence of evi- provisions do not define the term “for U.S.C. of,” transferred “in interpreted use we have not this dence that funds were See preting the term “for the use of.” Steele 4. Because the Minnesota AMT re- provi- specifically fer to certain County Bldg. federal & Loan v. Comm’r Taxa- Ass’n provi- 506, 176, tion, and because Minnesota sions N.W.2d 263 Minn. 511 law, we are based on federal income tax sions (1962). may guidance to federal law for in inter- refer organization. trust for” the charitable The court properly construed term “for the Court concluded that interpretation of use of’ mean “in trust for.” Because “for the term use of’ was consistent not did make their charita- congressional purpose intent and the ble “to” “in trust for” whole, statute as which was to Minnesota charitable organizations, we af- benefits to charitable organiza firm the tax ruling Chap- court’s that the Davis, 483-84, 110 tions. 495 U.S. at S.Ct. mans’ qualify contributions fail to for the 2014. The Court requiring reasoned that Minnesota AMT deduction.
contributions to be made in trust inor legal arrangement
some similar
would fos
II.
giving
ter charitable
because the beneficia
Chapman’s
Because the
contributions do
ry
legal power
would have the
and incen
qualify
deduction,
for the AMT
we
tive to insure that donated funds were must addrеss their argument that the stat-
designated
used for the
pur
ute so construed is unconstitutional. We
poses.
Supreme
Id. Before the
Court de
first
challenge
address their
Davis,
cision
several
lower federal Commerce Clause.
similarly
courts had
construed “for the use
The
provides
Commerce Clause
of’ to mean “in trust
for.” See Orr v.
Congress
“[t]he
shall have the Power
States,
(5th Cir.1965);
United
Appleby v.
48 T.C.
1967 WL
represents
Commerce Clause
an affirma-
(1967);
C.I.R.,
O’Brien v.
46 T.C.
grant
tive
of power
Congress,
it has
(1966).
1966WL 1188
long been held to impliedly
nega-
contain a
command,
tive
commonly
federal courts’ longstanding
referred to as
Clause,
construction that
the term “for the
“dormant” Commerce
use of’
that the
may
means “in
states
trust
for”
context of
discriminate
or un-
duly
Quill
burden
per
deductions is
interstate commerce.
Dakota,
Corp.
suasive in
v.
interpreting
our own AMT
North
pro
addition,
visions.
the more
S.Ct.
119 L.Ed.2d
flexible
meaning of “for thе use of’
Chap-
that the
Commerce
challenges
Clause
in
would,
mans advocate
as the tax court
volve
two-step inquiry.
Stelzner
explained,
significant
create
administrative
Revenue,
Comm’r
621 N.W.2d
burdens for the Commissioner in enforcing
*8
(Minn.2001). We first determine whether
the statute. For example, the Chapmans
the challenged
implicates
statute
the Com
designate
did not
beneficiary
a
at the time
and,
does,
merce Clause
if it
then evaluate
they made their contributions to the Fidel
whether the statute violates the Commerce
1996,
ity fund in 1994 through
and none of
Clause. Id.
those contributions were distributed until
at least 1997.
practical
difficulties in
“It is well settléd that actions are
auditing
enforcing
and
a “for the use of’ within the domain of the Commerce Clause
requirement against undirected contribu
if
burden interstate
im
commerce or
may
tions that
in the future be
pede
Carbone,
used for
its free flow.” C & A
Inc.
Clarkstown,
Minnesota charities
383,
are obvious and not
389,
v.
114 S.Ct.
likely
legislature.
intended
the
For
833
commerce and the channels of
of the Commerce
interstate
purview
addition,
(1)
the AMT
of the channels of
commerce.
charita-
the use
Clause:
(2)
commerce,
provisions substantially
the instrumentali
ble contribution
interstate
commerce,
because
persons
or
or
affect
interstate
commerce
ties
interstate
(3)
commerce,
nonprofit organizations they support
ac
things
and
con-
in interstate
economy
effect
inter
stitute &
sector of the
a substantial
on
substantial
having
tivities
Id. For
Lopez,
States v.
interstate commerce.
these
state commerce. United
reasons,'
558-59,
we conclude that
U.S.
S.Ct.
Minnesota’s
-
(1995). Thus,
that AMT
L.Ed.2d
show
charitable contribution
implicate
AMT -charitable contribution
Commerce Clause.
Minnesota’s
Clause,
the Commerce
provisions implicate
The Commissioner contends
must demonstrate
that the AMT charitable
pro
(1) the
those
concern
use of
do
implicate,
visions
Commerce
(2)
commerce,
channels of interstate
(1)
to a
they apply
Clause because
relative
commerce,
instrumentalities
interstate
(2)
ly
taxpayers
small number of
persons
things
or
interstate com
or
directly implicates
deduction
the per
merce,
a
having
or
activities
substantial
tax liability
sonal
of individuals
residing
activity
on
interstate
or market.
effect
an
subject
Minnesota or otherwise
Faasse,
v.
834
Because
AMT provisions
im
that cannot
adequately
be
served by rea-
”
plicate
Clause,
the Commerce
we must
sonable nondiscriminatory alternatives.’
next
provisions
determine whether these
Camps Newfound,
581,
at
U.S.
117
520
(citations omitted).
violate the Commerce
Clause.
Com S.Ct. 1590
“This
anis
plete
274,
Brady,
Auto Transit v.
burden,
430 U.S.
extremely difficult
heavy
‘so
1076,
(1977),
97 S.Ct.
merce Clause. Id. stantially all of its activities within this
The state,” focus on the 3(b), Minn.Stat. but prong third of the Complete Auto test and no deduction is allowed for charitable con contend that Minnesota’s AMT charitable tributions to non-Minnesota charities. contribution discriminate face, subd. 2. On its interstate commerce. The dor the statute treats contributions to in-state mant Commerce Clause invalidates organizations state charitable differently from * n n measures that “unjustifiably dis contributions to out-of-state charitаble or criminate against or burden the interstate ganizations. The activities of nonprofit flow of articles of Oregon commerce.” organizations fall within pro Sys., Waste v. Dept. Inc. Quality, tection of the dormant Commerce Clause. of Envtl. 93, 98, 1345, 511 U.S. 114 S.Ct. 128 Camps Newfound, at U.S. (1994).
L.Ed.2d 13
The term “discrimina S.Ct. 1590. Because this
facially
statute is
tion” in the dormant Commerce Clause
discriminatory, it
per
se invalid unless
context means differential treatment of in
the state demonstrates that
the statute
“
state and out-of-state economic interests
legitimate
‘advances a
local purpose that
that benefits the former and burdens the
cannot be adequately
served
reasonable
”
Waste,
Oregon
latter.
at
U.S.
114 nondiscriminatory
Oregon
alternatives.’
S.Ct. 1345.
facially
Waste,
Statutes that are
dis
at
U.S.
that it ‘advances a legitimatе
rule,
local purpose
per
se
we decline to address the
Supreme
per
Court has found
se inval-
nondiscriminatory
reasonable
alternatives
idity was
overcome on this
basis
one
Waste,
Oregon
to the action it had taken.
131, 141,
Taylor,
case. See Maine v.
U.S. at
(discussing
S.Ct. 1345
106 S.Ct.
When court determines that could from the unconstitutional, a statute is it ute must invali to eliminate the add-back of all charita- date as much of the as is ble necessary statute deductions. unconstitutionality. to eliminate the Arch We conclude that the result sought State, er Daniels Midland Co. v. 315 the possible is our (Minn.1982). N.W.2d We look severance which given rules manner in first the intent of the the statute written. The estab- statute remedy fashion consistent that in lishes the rule that general taxpayer’s tent. Id. While we can strike a severable itemized in computing deductions allowed statutory provision if found to be unconsti their federal AMTI must be added back void, tutional and “we cannot add language calculating their Minnesota AMTI. The to a statute order to render it constitu statute exception creates an general this
tionally permissible.” McGuire v. C & L rule, however, by excluding the Minnesota Inc., Restaurant 346 N.W.2d 614 charitable contribution deduction from (Minn.1984); Thompson Estate Pe add-back of itemized deductions. It is this (Minn.1982). troff, 319 N.W.2d exclusion of the Minnesota charitable 1994 AMT Because the statute contribution deduction that offends the exception does that its are not Commerce Because Clause. severable, apply principles we to the general sec rule is the source of statute, infirmity tion 645.20 to the statute. Under section constitutional language establishing the Minnesota alternative mini the exception is the mum taxable language income is defined as the that must be sum severed. Accord- of several year, ingly, items for the taxable in to eliminate the source of the consti- cluding: problem tutional with the AMT provisions,
837 charitable contribution deduc- the “the Minnesota Minnesota language we sever AMTI, tion is in computing excluded the deduction” from contribution charitable 2(a)(2). always was the In 290.091, The case. result subd. section could be stаtute, charitable contribution deduction the the Minnesota is that under excluded in Minn. computing the AMTI. of, things, other the among consists AMTI (1986). § legis- Stat. 290.091 the computing in deductions allowed itemized lature altered the definition the AMTI of AMTI, including for deductions the federal for portion include an exclusion “the to Minnesota charities and contributions the charitable contribution deduction that as well. non-Minnesota charities preference an of tax constitutes item that severance Chapmans argue The 57(a)(6) section Revenue Internal should used to eliminate the principles be 290.091, § Code.” See Minn.Stat. subd. by instead unconstitutional discrimination 57(a)(6) (Supp.1987). provided for Section They allowing all charitable contributions. an appreciated property charitable deduc- necessary to preserve claim this result tion, the defined as amount which “[t]he intent to allow deduction legislature’s the deduction allowable under 170 or section to Minnesota charities. for contributions 642(c) gain reduced if capital would be all AMT Obviously, enacting taken into at its property were account legislature did contribution 57(a)(6) adjusted § basis.” U.S.C. to allow a for contribu- intend deduction (1987). Although this amendment allowed just But Minnesota charities. as tions to from the AMTI char- deduction for some obviously, legislature intended not to contributions, it limited to the itable was contributions to non- allow a deduction for appreciated narrow category property charities to include charita- Minnesota contributions. chari- contributions to non-Minnesota ble the AMT statute was amended calculating AMT. That ties computing that in AMTI the general in the expressed intent is rule taxpayer exclude from the add-back could deductions, adding back federal itemized charitable contribution de- “Minnesota specified exceptions. limited Howev- 290.091, subd. duction.” See Minn.Stat. er, aspects we have concluded both de- The 1990 amendment also cannot be effectuat- legislature’s intent contribu- fined the Minnesota charitable Clause, violating without the Commerce ed tion “a charitable contribution deduction as determine, using therefore we must section the Internal deduction under 170 of principles legisla- out severance set to or for use of an Revenue Code ture, option legislature which would 290.021, entity in section subdivi- described if it it could have chosen had known not do (e).” (a) follow- Id. The sion clauses both. year legislature section ing amended evolution of the again, providing subdivision in- provisions provides AMTI, some an ex- was computing there helpful making this deter- sight that is “Minne- the add-back clusion from for That mination. evolution reveals that the contribution deduction sota charitable has never allowed deductions charitable deductions non-Minnesota AMT for charitable contribu- included in alterna- from the all extent federal tions, sec- past it has disallowed taxable income under yet in the tive minimum 57(a)(6) of the Internal Revenue for contributions to Minnesota tion deductions Although the 1994 of Code.” charities. version See amend- 2(a)(2) The effect of this (Supp.1991). provides
subdivision ment to reinstate the deduction for all was deductions for charitable contributions. hand, appreciated property charitable contribu- On the other the alternative of disal- subject lowing tions that was the the 1987 all charitable *13 amendment, applicable as AMT particularly purposes to was the law in 1986. 1994, non-Minnesota contributions. the Therefore, we cannot discern from this 290.091, legislature again amended section legislative history any indication that the provide subd. an from to exclusion the legislature would choose allow deduc- to for the “Minnesota add-back charitable tions for all charitable if contributions its in computing contribution deduction” the preference for for deduction Minne- 290.091, AMTI. subd. sota were invalid. There- (1994). This version of the Minnesota fore, legislature the intent of the would be charitable contribution add-back exclusion if frustrated even the unconstitutional lan- eliminated the favorable treatment for guage AMT provisions of the could be of appreciat- non-Minnesota contributions an provide severed to exclusion from the ed that property had been reinstated in add-back for all charitable contribution de- 1991. ductions. that un- We therefore conclude history
This of AMT Minnesota’s chari- der the of principles section the 2(a) table contribution illustrates language of section that legislature that the has while vacillated in excludes “the Minnesota charitable contri- its treatment of contributions to charities bution must deduction” be severed from AMTI, calculating it has per- never provisions. valid remaining The result mitted an exclusion from the add-back for is that for all deductions charitable contri- deductions, all charitable contribution as among the butions are itemized deductions the Chapmans Significantly, advocate. that computing must be added back in when previous versions of AMT law AMTI; is, that there is no de- did an from the exclusion add-back duction for charitable contributions for for contributions to non-Minnesota chari- purposes.6 Minnesota AMTI ties, that exclusion was limited ap- TV.
preciated property
deduction
57(a)(6)
section
Although
defined
of the Internal
we have concluded that
Moreover, in
leg-
unconstitutionality
Revenue Code.
1994 the
chari
islature
even that limited
table
deleted
exclusion
contribution
will be cured
for
by severing
language
provides
non-Minnesota charitable contribution
that
fa
Thus,
legislature’s
deductions.
treat-
vorable treatment
for contributions
charities,
ment
of charitable deductions
the AMT Minnesota
the question remains
years
law over the
demonstrates more con- whether this curative interpretation of the
sistently its intent to
applied
disallow deductions
statute should be
prospectively
for
only,
contributions to non-Minnesota chari-
it can
applied
or whether
be
retroac
ties
its intent
tively
than
to allow deductions for
сlaim
Chapman’s
to defeat
Minnesota charities. There is no
sugges-
Commissioner’s assessment of addi
tion in
past
liability
its current or
treatment
tional tax
years
1994-1996
charitable contributions under the AMT should
Chapmans argue
be vacated. The
that would choose to
having
invalidity
allow that
established
prospective interpretation
6. This
of the statute
dormant Commerce Clause and other rele-
is,
course, subject
legislative
modifica-
provisions.
vant constitutional
tion, consistent with the limitations of the
Minnesota-only
exemption.
been favored
unlawful
similarly
at
deduction,
“meaningful
110 S.Ct.
entitled
We
process
backward-looking
requires
under McKesson
conclude that due
relief’
Beverages
provide meaningful
&
back-
Division Alcoholic
Commissioner
Corp. v.
Tobacco,
ward-looking
Chapmans.7
110 S.Ct.
relief to the
(1990),
that would allow
L.Ed.2d
question
shape
remains what
the add-back what
to exclude from
them
relief must
take.
McKesson the re-
to be their
have determined
the courts
quirement
did
backward-looking
relief
charitable contribution de
non-Minnesota
mandate a
taxes
necessarily
refund of
*14
contend,
Chapmans
without
duction. The
Rather, the Court
that there
paid.
held
only
that this “is
explanation,
further
the.
backward-looking
were
rem-
types
three
intent,
remedy
preserves legislative
that
rectify
employ
edies that a state could
*
**
feasible,
administratively
is fair
Id. at
the unconstitutional discrimination.
applicable
the same rules as
adopts
40-41,
First,
2238.
it could re-
110 S.Ct.
tax
The Commis
regular
purposes.”
for
paid
fund the
between the tax
difference
contends,
explanation,
also without
sioner
the victim of the discrimination and
Chapmans are not entitled to
that
tax
would have been assessed had
backward-looking relief under
meaningful
taxpayer
granted
unlawful ex-
been
McKesson.
Second, to
consis-
emption.
Id.
the extent
McKesson,
Court ad
tent with other constitutional restrictions
Supreme
could,
law,
and state
it could
and collect
whether Florida
consistent
assess
dressed
provide only prospective
taxes from those favored
the unlawful
process,
with due
footing
them on
paid liquor
put
equal
a
had
discrimination to
taxpayer
where
relief
had been
a law
to violate
those who
discriminated
taxes under
held
Com
Third,
it could
a combi-
by discriminating
against.
apply
favor of
Clause
merce
partial
refund
a
partial
held that the
nation
a
products. The Court
Florida
three
meaningful
retroactive assessment.
Id. These
provide
back
[must]
“State
tax law
options were available because the
ward-looking
rectify
relief to
unconsti
McKesson,
se,
it
per
only
not invalid
but
because
496 U.S. was
deprivation.”
tutional
31, 110
explained
against interstate commerce.
The Court
discriminated
at
S.Ct. 2238.
Therefore,
de-
the Due Process Clause
Due
Four
that the
Process Clause
remedy
only
that the
manded
a
that insured
required
Amendment
state
teenth
actually
during
backwards-looking
remedy
“the resultant tax
assessed
provide
a
a scheme
period
who
the tax
tax
reflects
whereby
paid
those
had
were
contested
against inter-
position
those
had
that does not discriminate
put in the same
who
Therefore,
challenged
process
ing
taxes.
the issue
require
In its discussion of due
McKesson,
here,
indicated that
enti-
Chapmans
the Court
ments
not whether
backward-looking
meaningful
refund,
re
the issue
but
the additional
tled
a
whether
present
taxpayer
a
might not be
if the
had
lief
by the
re-
liability
assessed
Commissioner
opportunity
predeprivation
genuine
relief.
authority
We find no
and dis-
mains valid.
38-39,
841 Id. at n. 110 nizations “located in and ability option. carrying on sub- stantially all of activities (noting that “the retroactive its within this S.Ct. state,” but denying increase not nec- deductions to non- of a tax does assessment charities, discriminates deny due to those whose essarily process increased, interstate commerce and violates though therefore beyond some taxes the Commerce Clause United States imposition temporal point the retroactive so, doing we Constitution. reverse ‘so significant may tax burden be of a court, but the tax because court held oppressive transgress as to harsh constitutional, law it ”); went no further limitation’ see United constitutional analysis. Thus the of sever- Carlton, concept its S.Ct. States provision ance of unconstitutional (explaining L.Ed.2d remedy the statute were not ad- applicable standard to retroac- process due court, taxation). by the dressed and were neither of the ret- availability tive argued I briefed nor to this court. there- remedy may taxation be lim- roactive also ruling fore dissent from the court’s on law, as ited state such the statute issues, as those I think it is inappropriate limitations on assessment of back taxes. the court address them in ab- Corp., 102 at Cal.Rptr.2d See Ceridian briefing sence of a record and from the refund state statute of (requiring because parties. limitation on tax assessment bars retroac- alternative). tax collection
tive suggestion Relators offer no substantive can how severanсe be achieved Advised the tax court can parties, *16 only make a rem- passing reference to the the fully assess effect of these or other and the edy, Commissioner recommends application limitations on the of the if that this court rules the law unconstitu- options Chap- remedial the McKesson to tional, the tax matter be remanded to the man’s claim. We remand to the tax court to what legislature court determine the the alter- to determine which of McKesson have it known might done had it could remedy the in the cir- proper natives is constitutionally deny the deduction for cumstances of this case. out-of-state charities and at in in and part, part Affirmed reversed the same time allow it for in-state chari- remanded. rec- agree ties. I with the Commissioner’s
ommendation. GILBERT, J., part no took in the majority heavily relies on the statu- or of case. consideration decision this tory of severance set forth principle 645.20: MEYER, J., having a member been provisiоn in the law Unless there is argument this court at the time of and of provisions the shall not be severa- that submission, took part the ble, all be provisions the of laws shall or of consideration decision this case. a law is any provision If of severable. void, to be unconstitutional and found STRINGER, Concurring part, dis- J. of the law shall remaining provisions the senting part. valid, the court finds the remain unless major- the law so essen- agree I conclusion the valid of are of with, connected tially inseparably alternative minimum ity Minnesota’s dependent upon provi- for void provision allowing a tax deduction and so orga- presume that the court cannot charitable contributions sions de- general permitting would have enacted the re- lation—the rule of contributions, maining valid without the void ductions for all charitable one; or court unless the finds the re- special taxpayers denying rule alone, maining provisions, standing valid In the absence of a record deduction. are incomplete incapable of be- issue, on the the court have could well ing leg- executed in accordance with the opposite reached a result from conclu- islative intent. by majority. sion reached My is that further concern while severance, on of principle Based this the majority question raises the whether the majority way concludes that interpretation curative of the statute constitutional render Minnesota’s disallow- only, should it applied prospectively be deductibility ance contributions to question. does not resolve And while charities, while allowing non-Minnesota it rules that the relators are entitled to charities, contributions to Minnesota is to looking relief’ “backward under McKesson strike Minn.Stat. subd. Corp. Beverages Alcoholic & Division of 2(a)(2)(1994), provision permitting the Tobacco, S.Ct. deduction in-state chari- (1990), it ignore L.Ed.2d 17 seems to so, By rules, doing majority ties. fact that in that the ruling offending provi- field playing is leveled because all contri- sion of the is the statute аllowance butions, whether to in-state charities or charities, deduction to in-state charities, are out-of-state denied.1 The severed, this back- must be there is “no majority remedy bases its severance on a ward looking relief’ available to relators. of the legislative history review of the They can’t be allowed the deduction for provision, point- alternative Minnesota their out-of-state contribution because the time, out that it from ing shifted time to provision prohibiting of the statute allow- historically but to favor a concept seemed intact; ance remains and the obverse— of disallowance of the charitable contribu- disallowing their deductions for in- their however, fallacy analysis tion. The state surely contribution —would be the *17 that at legislative best it relates to the perverse most all looking “backward attitude toward allowance or disallowance may relief.” Relators have won the battle span history over broad and is no they surely but wоuld have lost the war. at all in at a arriving presumption value This conundrum seems wholly unneces- whether legislature enacting to sary. A remand to the tax court to fashion current version of section severance under Minn.Stat. 645.20 2(a)(2) in 1994 “would have enacted the consistent with the court’s unconstitution- remaining valid provisions without the void ality ruling parameters will for a set I one.” see no basis for the conclusion of remedy that does relief. relators majority, a matter of great on importance relating policy, to the tax evidentiary
court should hold an hearing to
permit parties produce evidence as actually what tax policy legis- drove the conclusion, notes, reaching majority ing, this as the Commissioner because explain court, notes that relators failed how issue was not before the tax was there get to their that all conclusion kind record of and neither Com- AMT, exempt explain should be from the or to missioner nor relators addressed it to how severance of the statute could be fash- court. surpris- ioned reach that This is not result.