William Fielding v. MacDonald v. Commissioner…

Summary

The court affirmed the Tax Court’s determination that Minnesota’s resident-trust statute was unconstitutional as applied to four irrevocable trusts because the trusts lacked sufficient Minnesota contacts during the 2014 tax year to justify taxing all of their income as resident income. The court held that the due-process inquiry considers all relevant contacts and the relationship between the taxed income and state-provided benefits, but concluded that the grantor’s historical Minnesota domicile, Minnesota choice-of-law provisions, Minnesota-origin assets, and a beneficiary’s residency were too attenuated. The court did not reach the Commerce Clause challenge. Justice Lillehaug, dissenting and joined by Justice McKeig, would have upheld the taxation because the trusts’ creation, funding, governing law, and Minnesota connections supplied sufficient contacts.