Minnesota Supreme Court Decision Could Prompt Alternative Apportionment Examination

A recent Minnesota Supreme Court decision, which upheld the Commissioner of Revenue’s application of alternative apportionment, potentially lays the groundwork for future alternative apportionment petitions and provides opportunities for apportioning Minnesota taxpayers. See E.I. duPont de Nemours and Company & Subsidiaries v. Commissioner of Revenue, Minn., No. A24-1601 (August 27, 2025). 

Background – Hedging Receipts 

In E.I. duPont, the taxpayer apportioned its income to the state using the state’s statutory single sales factor formula (Minn. Stat. Sec. 290.21) and, in doing so, included receipts from its hedging transactions in the factor. The Commissioner of Revenue concluded that inclusion of these receipts inflated the sales factor denominator, yielded a result that did not fairly reflect the taxpayer’s allocable income to the state, and resulted in quantitative distortion. Thus, the Commissioner invoked alternative apportionment (Minn. Stat. Sec. 290.20), under which the sales factor included only the net income and not gross receipts from hedging transactions. On appeal, the Tax Court upheld the Commissioner’s use of alternative apportionment. 

Qualitative Different Receipts 

The State Supreme Court (“court”) affirmed the Tax Court decision. In upholding the exclusion of the hedging receipts, the court repeatedly referred to the fact that the hedging receipts were qualitatively different than receipts earned from the taxpayer’s main line of business (electronics and communications, biosciences, etc.). The court concluded that including only net income, and not gross receipts, fairly reflected the taxpayer’s in-state business activities. 

Case-by-Case Analysis 

The court reiterated that it has never adopted a bright-line test for what constitutes substantial evidence that shows a fair reflection of allocable income. Rather, the court said that “[d]etermining whether an alternative apportionment formula under section 290.20 is appropriate is done case by case.” 

Ryan’s Take and Action Steps 

Although the Commissioner of Revenue was successful in its application of alternative apportionment, taxpayers should remember that they can, as well, invoke alternative apportionment in cases where the standard formula yields a distorted result that does not fairly reflect its in-state business activity. 

Capital- and labor-intensive businesses, such as duPont in this case, may consider whether Minnesota’s single sales factor formula itself may yield a distorted result and whether the state’s pre-2014 formula, which also included property and payroll factors, would more fairly reflect in-state business activity. In this case, the state may not have been able to prove distortion had property and payroll been considered. 

In any event, this decision should prompt businesses to reexamine recent Minnesota returns to see whether the current formula creates a distorted result and to weigh the merits of a petition for alternative apportionment. Contact the Ryan tax specialist below to get started with the petition process.  

TECHNICAL INFORMATION CONTACT: 

Greg Rottjakob 
Principal 
Ryan 
813.568.9085 
greg.rottjakob@ryan.com  

The material presented in this communication is intended to provide general information only and should solely be seen as broad guidance and not directed to the particular facts or circumstances of any individual who may read this publication. No liability is accepted for acts or omissions taken in reliance upon the content of this piece. Before taking (or not taking) any action, readers should seek professional advice specific to their situation from Ryan, LLC or other tax professionals. For additional information about this topic, please contact us at info@ryan.com.