May 2017

Trustee Prevails in Precedent-Setting State Income Tax Case

North America - United States | North America | United States - Minnesota

The trustee of four irrevocable trusts successfully argued under the due process clause that the Minnesota Department of Revenue unlawfully taxed the trusts, resulting in a judgment that the statute under which the taxes were levied is unconstitutional, and entitling the trusts to a refund.

Faegre Baker Daniels represented the trustee in the matter, which centered on a provision in Minnesota tax law requiring the trusts to pay state income tax based upon the historical domicile of the grantor at the time the trusts became irrevocable and not on the residence of the trustee, the trusts’ administration and assets, or the trusts’ beneficiaries during the tax year at issue.

An initial victory was procured in Minnesota Tax Court and then upheld by the Minnesota Supreme Court. When the U.S. Supreme Court declined to review the case, the trustee’s victory became permanent.

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