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Rimon’s David Fruchtman defends taxpayers’ right to refunds despite states’ manipulations

Insight David A. Fruchtman David A. Fruchtman · June 02, 2015

Rimon Counsel David Fruchtman was quoted in State Tax Today discussing the state and local tax community's reaction to a Michigan decision.

David Fruchtman of Rimon PC said that too often, states argue in court that a decision in a taxpayer's favor will be applied by other taxpayers as well and will cost the jurisdiction an unverifiable enormous amount in refunds. Michigan cited avoiding the potential $1.1 billion revenue hit as a result of refunds owed as a significant, legitimate public purpose for the retroactive repeal of the compact. "The Michigan Supreme Court rightly refused to be moved by such an argument," Fruchtman said.

More generally, Fruchtman said, states are implying that they should be able to keep the money because they need it and cannot afford to return it. "Well, taxpayers need the money, too -- and it's their money," Fruchtman said. "Moreover, what is one to think about a state that makes such an assertion but, shortly thereafter, announces that it is running a huge budget surplus, as occurred earlier this year in Minnesota?" In court documents filed in Minnesota's lead compact election case, Kimberly-Clark Corp. v. Commissioner of Revenue, the state's solicitor general cited estimates that Minnesota would have to refund nearly $700 million in taxes before interest if out-of-state taxpayers prevailed in asserting the right to apportion their business income using the compact's evenly weighted three-factor formula. "The point is that none of this has anything to do with the merits of the case, except as a signal to the court that the state lacks confidence in its position," Fruchtman said.

You can read the full article here.