The fate of the Multistate Tax Compact (“the Compact”) elective apportionment formula for Michigan now rests solely in the hands of the U.S. Supreme Court, after the Michigan Supreme Court denied leave to appeal in several pending cases. The U.S. Supreme Court recently turned down a request to review the California Supreme Court’s decision in The Gillette Company and Subs. v. California Franchise Tax Board.1 The plaintiffs in the Minnesota Supreme Court decision Kimberly-Clark Corp. v. Comm'r of Revenue have also appealed to the U.S. Supreme Court to contest the finding that the Compact was not binding under the “unmistakability doctrine.”2
The issues in each state that have been appealed to the Supreme Court slightly differ in each state. In Michigan, five separate petitions have been filed. Three of the petitions for Michigan ask the Court to determine whether the Compact was a binding agreement. All of the petitions question the retroactivity of the repeal of the Compact. The questions take a variety of forms. The petitioners ask whether the retroactive legislation 1) violates the Due Process clause of the U.S. Constitution, 2) violates the Commerce Clause and dormant Commerce Clause of the Constitution, and 3) violates an impairment of contract principle.
A review by the Supreme Court could potentially finally determine the appropriate treatment among all the Compact states currently reviewing appeals regarding the elective apportionment factor, or it could only answer the retroactive legislation in Michigan. It will be interesting to see if the Court takes these petitions in light of its denial of certiorari in Gillette and the pending petition for Kimberly-Clark.