The following excerpt is from Paul Williams’ article, “Energy Co. Urges Justices To Review Mich. Tax On Asset Sale,” published by Law 360 on October 27, 2023. Read the full article on Law 360’s website here (subscription required).
An energy company, MMN Infrastructure Services LLC, has requested that the U.S. Supreme Court reverse a Michigan high court ruling. The company argues that Michigan's approach to taxing the gain from the purchase of a Minnesota-based company resulted in a "grossly distorted" outcome.
Michigan's apportionment method, based on a three-month short-year period, led to the state's taxing 70% of MMN's income instead of about 15% of the company's sales. MMN argues that the justices should take the case to clarify how to apportion gain when a company's value may have increased over time due to out-of-state activities.
"The result here is so distortive," said Jordan M. Goodman, Partner in HMB’s State and Local Tax Group. "This is a prime example of the case the court should take."
Jordan added that although the question of how to apportion and source sales of partnership interest is not a direct issue in the case, the court could address that if it decides to hear the dispute. He noted several recent state tax cases around the country have upheld the investee apportionment method, which sources sales of pass-through interest to the location of the investee while ignoring the investor's activities. Jordan said the issue in MMN implicates that and he hopes amicus briefs could draw attention to it.