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Minnesota Supreme Court: Tax Court’s decision to stay its order does not extend the statutory time to appeal

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A Tax Court decision holding that Minnesota could not apportion a Sec. 382 limitation has been rendered final, because the appeal was judged to be untimely by Minnesota Supreme Court. The court has …

A Tax Court decision holding that Minnesota could not apportion a Sec. 382 limitation has been rendered final, because the appeal was judged to be untimely by Minnesota Supreme Court. The court has explained that a request for review of a final order needs to be filed within 60 days of the initial decision, and not the date to which any decision is stayed. Whether Minnesota will require taxpayers to apportion the IRC sec. 382 limit is unclear.

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  • 1. MyStateTaxOffice Minnesota Supreme Court - Tax Court's decision to stay its order does not extend the statutory time to appeal January 25, 2013 In brief On January 18, 2013, the Minnesota Supreme Court concluded that the appeal of a Tax Court decision, holding that the Department could not apportion an IRC sec. 382 limitation, was not timely, effectively rendering the Tax Court's decision final. The Tax Court's decision was initially issued on August 20, 2012, but that decision was stayed until September 4, 2012 (click here for our summary of the Tax Court's decision). In concluding that the appeal was untimely, the Minnesota Supreme Court explained that the deadline for seeking review was measured from the date of the initial decision, not the date to which the decision was stayed. [Express Scripts, Inc. v. Commissioner of Revenue, No. A12-1966, Minn. Sup. Ct. (1/18/13)]. In detail Tax Court The Minnesota Tax Court reviewed the taxpayer's corporate acquisition, which triggered an approximate $30 million IRC Sec. 382 limitation of the acquired company's net operating loss carryovers. The Minnesota Department of Revenue apportioned that limitation using the apportionment ratio of the income years, which reduced the amount of available loss to approximately $120,000. The Tax Court found that, despite Department guidance to the contrary, there was no statutory authority for the Department's position to apportion the section 382 limitation. The Tax Court also found that the taxpayer was not unitary with its LLC subsidiary because the investor oversight and intercompany transactions involved did not support a flow of value, nor was there sufficient control over the subsidiary. On August 20, 2012, the Tax Court issued its decision and Order for Judgment. Included in the order was a statement that a "stay of fifteen days is hereby ordered. This is a final order." The stay was issued to allow the parties to consider whether to move for rehearing, amended filings, or a new trial. On September 4, 2012, the Tax Court issued a Notice of Entry of Order that included the following statement: "the Tax Court filed and entered the attached [August 20, 2012 ] Order on September 4, 2012." 60 day deadline for seeking review starts from initial order's filing Minnesota statutes provide that a party may seek review of a final order within "60 days after notice of the making and filing of the order of the Tax Court." www.pwc.com
  • 2. MyStateTaxOffice The Minnesota Supreme Court recognized that the date on which the parties had 'notice' or the 'making and filing' of the Tax Court's order was August 20. Even though the Tax Court's September 4 notice indicates that the August 20 order was 'filed again,' that second filing did not change the fact that the Tax Court's order was made and was filed on August 20. While the Tax Court stayed the August 20 order for 15 days, "the stay cannot extend the statutory appeal period beyond 60 days." Court opinions, the decision notably renders the Tax Court's decision final. Accordingly, the Minnesota Supreme Court denied the petition of review as untimely because it was not filed within 60 days of the initial August 20, 2012, Tax Court order. Since the Minnesota Department of Revenue intended to appeal the decision to the Minnesota Supreme Court but was barred due to the untimely filing of the appeal, it is unclear whether the Department will follow the Tax Court's decision or continue to require taxpayers to apportion the IRC sec. 382 limit. The takeaway While Express Scripts provides guidance to taxpayers regarding the timing of requesting review of Tax Let’s talk If you have any questions regarding the Express Scripts decision, please contact either of the following individuals: State and local tax services Sue Haffield Partner, Minneapolis +1 (612) 596-4842 susan.haffield@us.pwc.com Gina Ceola Director, Minneapolis +1 (612) 596-4827 gina.ceola@us.pwc.com Michael Santoro Director, Chicago +1 (312) 298-2917 michael.v.santoro@us.pwc.com © 2013 PricewaterhouseCoopers LLP. All rights reserved. In this document, PwC refers to PricewaterhouseCoopers (a Delaware limited liability partnership), which is a member firm of PricewaterhouseCoopers International Limited, each member firm of which is a separate legal entity. 2 pwc

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