Legal Alert: Multistate Tax Commission Committees Discuss Apportionment Details and an Information-Sharing Program


Related Practices/Industries

July 29, 2015

Yesterday, the Multistate Tax Commission (MTC) held meetings of its Litigation, Uniformity, and Strategic Planning Steering Committees. The meetings were generally dominated by discussions of evolving apportionment issues, including litigation and significant edits to existing regulations. The Uniformity Committee also advanced its new model “engaged in business” statute.

Litigation Committee Updates

The Litigation Committee heard a presentation on and generally discussed the sourcing of digital goods. Initially focusing on sales tax sourcing, the Committee reviewed the current sourcing rules in both Streamlined Sales and Use Tax Agreement states and non-Streamlined states. The Committee also discussed sourcing rules under the proposed Digital Goods and Services Tax Fairness Act (S. 851). After discussing sales and use tax sourcing, the Committee turned to how to include digital goods in the sales factor. The MTC’s proposed Section 17 regulations are modeled on the Massachusetts sourcing rules and would impose a market sourcing regime. See our prior coverage for more information on the proposed Section 17 language.

The Litigation Committee also reviewed the extensive equitable apportionment litigation and predicted what the future might bring. The potential adoption of market-based sourcing in proposed Section 17 could mean an entirely new round of issues that could be ripe for equitable apportionment litigation under Section 18. Among those issues the Committee expects might be litigated under new sourcing regimes include issues related to defining the “market,” the possible distortion that single sales factor apportionment can create by excluding property and payroll factors from the apportionment formula, unanticipated sourcing issues, and situations where a taxpayer has “functional test” income but little or no “transactional test” income.

Uniformity Committee Updates

During the Uniformity Committee meeting, the Section 1 workgroup reported on its proposed edits to the existing MTC Uniform Division of Income for Tax Purposes Act (UDITPA) regulations. Section 1 of the Compact contains definitions and was amended last year to change the definition of business income. The draft regulation’s proposed changes added language to the definition of “apportionable income” to specify that it is all income apportionable under the United States Constitution, reorganized the structure of some definitions, and inserted new examples. The workgroup recommended conforming the regulations by universally using the terms “apportionable income,” “non-apportionable income,” and “receipts” for the terms “business income,” “nonbusiness income,” and “sales” throughout all of the UDITPA regulations (and not just those in the Section 1 regulations). Although no formal vote was taken, the Committee generally advised the workgroup to maintain a so-called five-year rule for determining when a business asset transitions to an investment asset. Under the current draft, property which has been withdrawn from use in the taxpayer’s trade or business for more than five years is presumed to be held for investment purposes. The Committee also advised the workgroup to keep in the definition of “receipts” a list of income that is presumed not to be “receipts.” Finally, the Committee requested that the workgroup give additional consideration to inserting new definitions. Potential new defined terms include “hedging,” “securities,” and “non-apportionable receipts.” The workgroup will reconvene to address the terms “gross receipts” and “trade or business.”

As expected, the Section 17 workgroup presented its model market-based sourcing regulations, which are largely based on Massachusetts regulations (830 CMR 63.38.1). The proposed language makes significant changes to the sourcing rules for receipts from sales of other than tangible personal property. The language specifies that income from marketing intangibles (for instance, trademarks) is only included in the denominator of the sales factor if the income is from a United States source (unless the licensor can demonstrate the extent to which the intangibles are used in foreign markets). The language also proposes a throw-out rule for income from marketing intangibles. Income from production intangibles (like copyrights, patents and trade secrets) is sourced to its place of actual use, if known, or if unknown, to the commercial domicile of the licensee. If a license also involves a digital good, then the sale will be sourced according to the rules for digital goods.

Sales of a contract right or government license are sourced to the state in which the right may be exercised. If an intangible does not fit within the listed sourcing rules, then it is excluded from both the numerator and the denominator of the receipts factor. The draft regulations separately address the sourcing of income from sales of digital goods. Sales of pre-written software delivered electronically and digital goods and services are sourced as if they were a service delivered electronically (that is, sourced to the place of use or delivery, depending on the identity of the customer).

The Section 17 workgroup asked the Uniformity Committee for guidance on several questions, including (1) whether examples should be included in the regulations, (2) whether “credit card processing services” should be included in the definition of professional services, (3) whether to include a de minimis rule for administrative and compliance receipts, (4) whether to address foreign tax haven jurisdictions in defining “subject to tax,” (5) how to handle the interaction of Section 17 and Section 18 (equitable apportionment), and (6) how to address related party transactions.

The Committee advised the workgroup to keep the existing examples in the regulations, reasoning that states are free to remove the examples if they wish. The Committee members agreed that “credit card processing services” should be included as a professional service. In the Committee’s opinion, this was not a change in policy, but rather a clarification that the “lending and credit card services” in the current definition of professional services include both extending credit to borrowers and processing credit card transactions. After discussing compliance benefits and the policy reasons for a de minimis rule for a small percentage of receipts, the Committee did not provide any instruction to the workgroup on this issue. Similarly, the Committee left the issues of defining “subject to tax,” the interaction between Section 17 and Section 18, and how to address related party transactions open for now.

The workgroup formed to address the Model Sales and Use Tax Nexus Statute referred its proposed language to the Uniformity Committee for consideration. The language includes a click-through nexus provision with a rebuttable presumption and a minimum threshold. This draft does not impose a collection duty on marketplace providers, but rather attributes nexus to a seller that uses a provider that engages in certain listed activities in the state. The Committee voted to move this item forward to the Executive Committee, which meets tomorrow, July 30.

Strategic Planning Steering Committee Updates

The Nexus Committee asked the Strategic Planning Steering Committee to charter a new project to investigate the creation of an information-sharing program among member states. The Steering Committee approved the development of a project description, which will be undertaken by members of the Nexus Committee. After the project description is completed, the Steering Committee will vote on whether to allow the project to move forward.

If you have any questions about this Legal Alert, please feel free to contact any of the attorneys listed under ‘Related People/Contributors’ or the Sutherland attorney with whom you regularly work

How Far Back Can a Back Tax Go? Petition for Certiorari in Hambleton Asks Supreme Court to Right Unjust Retroactivity

Retroactivity is an endemic problem in the state tax world.  In this year alone, we have seen retroactive repeal of the Multistate Tax Compact (MTC) in Michigan, as well as significant retroactivity issues in New York, New Jersey and Virginia.  But after decades of states changing the rules on taxpayers after-the-fact, relief may be on the way if the Supreme Court of the United States grants certiorari in a Washington estate tax case, Hambleton v. Washington, with retroactivity that makes you say “What the heck?”.The taxpayers filed a petition for certiorari on June 5, 2015.  The Court requested a response, which is now due by September 9, 2015.  The Tax Executives Institute filed an amicus brief on July 6, 2015.

The case involves two widows’ estates.  As stated in the petition:

Helen Hambleton died in 2006, and Jessie Macbride died in 2007.  Each was the passive lifetime beneficiary of a trust established in her deceased husband’s estate, and neither possessed a power under the trust instrument to dispose of the trust assets.  Under the Washington estate tax law at the time of their deaths, the tax did not apply to the value of those trust assets.  In 2013, however, the Washington Legislature amended the estate tax statutes retroactively back to 2005, exposing their estates to nearly two million dollars of back taxes.

In 2005, Washington state enacted an estate tax that was intended to operate on a standalone basis, separate from the federal estate tax.  In interpreting the new law, the Department of Revenue issued regulations that the transfer of property from the petitioners’ husbands to the petitioners through a Qualified Terminable Interest Property (QTIP) trust was not subject to the Washington estate tax.  The Department then reversed its position and assessed tax.  Petitioners, along with other estates, challenged the Department’s position and won in Washington Supreme Court (In re Estate of Bracken, 290 P.3d 99 (Wash. 2012)).  Then in 2013, the Washington legislature amended the estate tax to retroactively adopt the Department’s position, going back to 2005.  The petitioners challenged this law up to the Washington Supreme Court, which held in favor of the Department and concluded that the retroactive change satisfied the due process clause under a rational basis standard.

The petition urges the Supreme Court to take the case to resolve the uncertainty as to “how long is too long” when it comes to retroactive taxes, citing multiple examples of past and ongoing litigation in which lower courts have taken divergent approaches to the length of retroactivity that is permissible.  Of particular interest, one of the cases cited is International Business Machines Corp. v. Michigan Department of Treasury, 852 N.W.2d 865 (Mich. 2014).  The retroactive repeal of the MTC election in Michigan is a central issue in that ongoing litigation. If the Supreme Court takes Hambleton, its decision would likely impact the Michigan MTC litigation. The recent decision by the New York Court of Appeals, allowing retroactivity that a lower court had voided, Caprio v. New York Department of Taxation and Finance, no. 116 (slip op. Jul. 1, 2015), is another example of a retroactive tax that could be affected if the Supreme Court takes up Hambleton.

It is hard to imagine a more sympathetic situation for a due process retroactivity challenge to a state tax.  The taxpayers took a position on their returns consistent with the law and regulations, challenged the Department’s arbitrary re-interpretation of the law and won. The Supreme Court of Washington had made a definitive interpretation as to the application of the law as then in effect.  Unfortunately, the legislature then retroactively amended the statute in an effort to raise revenue, subjecting the petitioners to a tax that was not owed under the law at the time.  This type of chain of events is inherently unfair, and if allowed, potentially subjects taxpayers to new tax liabilities at any time.  For instance, if the imposition of an entirely new tax is allowed, then what could stop a legislature from raising money by retroactively increasing the corporate income tax rate for the previous few years on all taxpayers because the legislature did not budget correctly with the initial passage of the rate?

It will be interesting to see if the Court takes up this case as a vehicle to address the retroactivity question, as the Court has had opportunities in the past to review other retroactive state tax impositions but has declined (e.g., Miller v. Johnson Controls, Inc., 296 S.W.3d 392 (Ky. 2009), cert. denied, 560 U.S. 935 (2010)).  There is some hope for certiorari given the Roberts Court’s recent willingness to take state tax cases (e.g. Direct Marketing Association, Wynne, Hyatt); until the decision on certiorari this fall, we won’t know whether both death and taxes are truly certain.

Tax Credit Connection, Inc.


Tax Credit Connection, Inc.                                                                     July 2015

In This Issue
Nonprofits Officially Qualify for Tax Credits
News and Events
Cap Update
Quick Links
Dear Judith,
We all have something to celebrate – the Department of Revenue just announced emergency rule making that allows non-profits to earn tax credits.  See below for more details.

We are also excited to begin sending our newsletter on a monthly basis instead of quarterly.  This is going to allow us to provide more value to all of you – monthly updates on the Division of Real Estate tax credit cap and timely announcements of events hosted by our land trust and local government partners.  Also, fewer articles per issue so your eyes don’t get tired!

We’ll watch for interesting events that are coming up, but please send us a note if you have something you’d like us to include in our next newsletter.

Happy Conservation!

~ Ariel ~

Nonprofits Officially Qualify for Tax Credits
Private citizens aren’t the only landowners with land that has important conservation values – non-profits own hundreds of camps, retreats and wildlife sanctuaries around the state that have been providing scenic vistas, housing wildlife and protecting biological diversity.
After more than a year of relying on a private letter ruling to encourage non-profits to donate conservation easements, the Colorado land conservation community got some welcomed news late yesterday.  The Department of Revenue has initiated emergency rule making to officially declare non-profits eligible for Colorado tax credits.  This comes after a somewhat concerning meeting this May where the staff of Revenue expressed that they may have erred in the private letter ruling and considered reversing the decision.
Thanks to the great work of land trusts, local governments, attorneys, appraisers, tax credit brokers, and the Colorado Coalition of Land Trusts, Revenue received overwhelming comments encouraging non-profits to be recognized as taxpayers.
Please see our article that can be shared with non-profit organizations that have land with strong conservation values and click here for a link to the Colorado Coalition of Land Trusts site that includes a link to the language of the rule.
Time to uncork the champagne!

News and Events
  • Join the Mountain Area Land Trust (MALT) and take a walk around Pennsylvania Mountain Natural Area on a free guided hike. See ancient bristlecone pines, stunning wildflowers, alpine researchers in the field and more! Walks are from 10 am to 12:30 pm on Saturday July 18, Saturday July 25, and Saturday August 1. Call MALT to reserve your space. 303-679-0950. 
  • Continental Divide Land Trust is celebrating 21 years! Their birthday party takes place on Thursday, July 23 from 4 pm to 7 pm during the Wild About Colorado Art & Outdoor Festival at Carter Park Pavilion in Breckenridge. Click here to view their newsletter with color photos.
  • Join the Black Canyon Regional Land Trust on July 25 at 9 am for a guided wildflower hike along Courthouse Mountain. More details on the hike can be found here.
  • La Plata Open Space Conservancy (LPOSC) invites you to a special gallery exhibit of fine art painted by local artists on private lands which have been permanently protected by LPOSC. The event is on Thursday, August 6 from 5 pm to 8 pm. Read more details by visiting
  • Join Legacy Land Trust in Greeley for a live auction and learn how land conservation can benefit Weld County. The event runs from 5:30 pm to 7:30 pm on Saturday, July 25. Follow this link for more info and to RSVP.
  • Mesa Land Trust raised hundreds of thousands of dollars to buy out 781 acres of mostly undeveloped canyon land in Mesa County and preserve it forever. Watch the video of their local news story here.

California’s Harley-Davidson Decision Rides over Nexus Lines

On May 28 2015, The California Court of Appeals issued a decision in Harley-Davidson, Inc. v. Franchise Tax Board, 187 Cal.Rptr.3d 672; and it was ultimately about much more than the validity of an election within California’s combined-reporting regime. It also tackled issues and, perhaps most importantly, blurred lines surrounding the Commerce Clause’s substantial nexus requirement. In Harley-Davidson, the court concluded that two corporations with no California physical presence had substantial nexus with California due to non-sales-related activities conducted by an in-state agent. The court applied an “integral and crucial” standard for purposes of determining whether the activities conducted by an in-state agent satisfy Commerce Clause nexus requirements.

The corporations at issue were established as bankruptcy-remote special purpose entities (SPEs) and were engaged in securing loans for their parent and affiliated corporations that conducted business in California. As a preliminary matter, the court found that an entity with a California presence was an agent of the SPEs. The court then concluded that the activities conducted by the in-state agent created California nexus for the SPEs that satisfied both Due Process and Commerce Clause requirements.

The Due Process Clause requires some “minimum connection” between the state and the person it seeks to tax, and is concerned with the fairness of the governmental activity. Accordingly, a Due Process Clause analysis focuses on “notice” and “fair warning,” and the Due Process nexus requirement will be satisfied if an out-of-state company has purposefully directed its activities at the taxing state. In Harley-Davidson, the SPEs purpose was to generate liquidity for the in-state entity in a cost-effective manner so that it could make loans to Harley-Davidson dealers, including dealers in California. Additionally, the SPEs’ loan pools contained more loans from California than from any other state, and the in-state entity oversaw collection activities, including repossessions and sales of motorcycles, at California locations on behalf of the SPEs. As a result, the court concluded that “traditional notions of fair play and substantial justice” were satisfied.

The Commerce Clause requires a “substantial nexus” between the person being taxed and the state. The Supreme Court of the United States has addressed this substantial nexus requirement, holding that a seller must have a physical presence in the taxing state to satisfy the substantial nexus requirement for sales-and-use tax purposes. In Tyler Pipe Industries v. Washington State Department of Revenue, 483 U.S. 232 (1987), the Supreme Court stated that, “the crucial factor governing [Commerce Clause] nexus is whether the activities performed in this state on behalf of the taxpayer are significantly associated with the taxpayer’s ability to establish and maintain a market in this state for the sales.” While Harley-Davidson argued that the activities of the in-state agent could not create nexus for the SPEs, as such activities were not sales-related activities, the California court rejected this argument stating that “this argument fails from the outset, however, because the third-party’s in state conduct need not be sales-related; it need only be an integral and crucial aspect of the businesses” (internal citations omitted). The court observed that participating in actions to repossess motorcycles “maintain[ed] the value of the security interests underlying the securitization pools” and was “integral and crucial” to the SPE’s securitization business, thus, creating nexus for the SPEs.

Since Tyler Pipe, no case has expanded the “purposeful availment” or “substantial nexus” standards to encompass attribution of activities not relating to an out-of-state company’s ability to establish and maintain an in-state market. Although, some have argued that Tyler Pipe has left this door open. In contrast, other activities that do not directly generate income—such as purchases from in-state suppliers—have been found to be non-nexus creating.  The court’s decision in Harley-Davidson blurs the “market-enhancement” bright line by asserting that a broader range of activities conducted by in-state “agents” could satisfy Commerce Clause requirements if the activities are deemed “integral and crucial” to an out-of-state entity’s business. Interestingly, the court cites to a California Supreme Court decision, involving two foreign insurance companies and nexus under the Due Process Clause, to presumably support its Commerce Clause conclusion.

Since “integral and crucial” is a fairly amorphous standard, would an out-of-state business that retains a California law firm or a California management consulting firm to provide general advice (i.e., not specifically related to California) become subject to California taxation? After conversations with Franchise Tax Board (Board) employees, we understand the Board is encouraged that this decision reflects a broader view of the activities of an in-state person that can be attributed to an out-of-state business for nexus purposes. While this seems to be the superficial conclusion in Harley-Davidson, a closer review of the court’s rationale reveals that the court may have been confusing the “representative” and “alter ego” sub-categories of attributional nexus—or possibly, confusing unitary facts (which relate merely to apportionment concepts) with jurisdictional requirements. Perhaps the factors on which the court relied should have resulted in merely the conclusion that the two SPEs are properly includable in a combined California return, and not that such SPEs are taxpayers themselves.

Chicago Adopts Highest Sales Tax Among Major Cities


July 16, 2015

When Cook County, Illinois adopted a one percentage point county sales tax increase yesterday, its county seat — Chicago — vaulted to the top of a dubious list: major cities with the highest sales tax. Including state, county, city, and public transit sales tax impositions, Chicago’s combined sales tax will return to its former high of 10.25 percent as of January 1.

I’ve received a number of calls and emails asking if Chicago’s pending rate represents the highest combined state and local sales tax in the nation. It won’t. That distinction goes to a handful of towns in Tennessee and one in Arkansas (with 12 percent combined rates), all with populations of a few thousand people or less. A smattering of small municipalities in Arizona, Louisiana, and Oklahoma also feature higher combined rates.

Tennessee, however, foregoes an individual income tax (except for on interest and dividend income), and thus leans heavily on the sales tax as a source of state revenue. While Arizona, Arkansas, Louisiana, and Oklahoma impose all of the major tax categories, they also lean disproportionately on the sales tax, with sales tax collections as a percentage of total state and local revenue ranging from 32.4 percent in Oklahoma to 39.3 percent in Louisiana, perhaps in response to low property tax collections. The national average is 22.7 percent reliance on the sales tax for state and local revenue.

Chicago stands out because it’s a high sales tax amidst a sea of high taxes, even with the partial sunsets of the 2011 Illinois tax hikes. Its rate as of January 1, 2016 will also stand out as the highest rate in a major city. You can quibble with definitions of what constitutes a major city, but by any possible measure, Chicago will impose the highest city rate as of 2016.

City Rate
Chicago, IL (2016) 10.25%
Birmingham, AL 10.0%
Montgomery, AL 10.0%
Macon, AL 10.0%
Mobile, AL 10.0%
Fayetteville, AR 9.75%
Santa Monica, CA 9.5%
Seattle, WA 9.5%
Tacoma, WA 9.5%
Chicago, IL (2015) 9.25%
Nashville, TN 9.25%
Chattanooga, TN 9.25%
Memphis, TN 9.25%
Knoxville, TN 9.25%
Glendale, AZ 9.2%
For more on state and local sales tax rates, see our midyear update.
Tax Topic

Texas Legislative Recap for State and Local Taxes 2015

While the 2015 Texas Legislature gave taxpayers a significant franchise tax (margin tax) rate cut and repealed some smaller taxes (some of which had not been collected in years), it otherwise left much of the Texas tax code otherwise unchanged.    Below, we’ll tell you about the changes the Texas Legislature made and provide links to the underlying bills.

The big tax cut. The franchise tax rate for most taxpayers is reduced from one percent to 0.75 percent. The franchise tax rate for retailers and wholesalers is reduced from 0.5 percent to 0.375 percent. The franchise tax rate for taxpayers using the E-Z Computation is reduced from 0.575 percent to 0.331 percent, and taxpayers with no more than $20 million in total revenue may pay using the E-Z Computation. Previously, only taxpayers with no more than $10 million in total revenue could pay using the E-Z Computation.   (HB 32)


  • $200 professional fee for attorneys, CPAs, and certain other professionals. (HB 7)
  • Tax on alcoholic beverages served on trains and planes. (HB 1905)
  • Controlled substances tax. (HB 1905)
  • Crude petroleum production tax. (SB 757)
  • Sulfur production tax. (SB 757)
  • Excise tax on fireworks. (SB 761)
  • Inheritance tax. (SB 752)

Big aircraft “clarification” bill. (SB 1396):

  • The purchase of an aircraft qualifies for the sale for resale exemption if purchased for the purpose of leasing or renting the aircraft. Leasing or renting the aircraft includes the transfer of operational control under a written lease for consideration. Such a purchase would qualify for the sale for resale exemption regardless of whether the purchaser also used the aircraft, so long as more than 50 percent of the aircraft’s departures are made under the operational control of lessees other than the purchaser under a written lease.
  • A transaction between related entities is exempt from sales tax if the same transaction between unrelated entities would also be exempt.
  • Aircraft brought to Texas for the purpose of being completed, repaired, remodeled, or restored are not subject to use tax.
  • No presumption that an aircraft is subject to Texas use tax if brought into Texas by someone who did not acquire it directly from a seller by means of a purchase.
  • An aircraft brought into Texas from out of state is not subject to Texas sales and use tax if it made more than half of its departures from locations outside Texas for a year after either the acquisition of the aircraft or the aircraft’s first flight, whichever date is later.
  • Sales tax exemption for “certificated or licensed carriers,” is only available to those authorized under Parts 121, 125, 133, and 135 of the FAA regulations. (Overturns Cirrus Exploration Co. v. Combs, et al., which held that a carrier authorized under Part 91 qualified for the exemption).

Other Changes

Sales and Use Tax

  • Classifies certain sales of software to hosting providers as sales for resale. (SB 755)
  • Excludes services performed by public insurance adjusters from taxable insurance services. (HB 1841)
  • Exempts from sales and use tax telecommunications services used for the navigation of farm and ranch machinery and equipment. (SB 140)
  • Exempts digital transmission equipment purchased by radio stations from sales and use tax. (HB 2507)
  • Exempts vending machine sales by non-profits from sales and use tax if machine is stocked by individuals with special needs as part of a skills and education program that the nonprofit operates. (HB 2313)
  • Extends the temporary sales and use tax exemption for qualifying large data centers from 15 to 20 years. (HB 2712).
  • Creates a sales tax holiday for emergency preparation supplies. (SB 904)
  • “Clarifies” that sales of motor vehicles from manufacturers to dealers are not retail sales subject to motor vehicle sales and use tax. (HB 2400)
  • “Clarifies” that private school bus companies qualify for exemption from motor vehicle sales tax for school buses used to provide transportation services to school districts. (SB 724)
  • Allows municipalities to increase and decrease their local sales and use tax rates. (HB 157)
  • Allocates sales and use tax from sporting goods sales for parks and wildlife purposes only. (HB 158)

Franchise Tax (Margin Tax)

  • Apportions income from licensing or distributing programming or film programming as non-Texas sales unless the broadcaster’s customer is domiciled in Texas. (HB 2896)
  • Exempts new veteran-owned businesses from franchise tax for five years. (SB 1049)
  • Requires limited partnerships and professional associations to file a public information report with their franchise tax report, but eliminates the requirement that they file a report with the secretary of state. (HB 2891)
  • Allows electronic filing of a franchise tax public information report. (SB 1364)


  • State Office of Administrative Hearings changes – eliminates the Comptroller’s prior approval for tax judges to work on other cases, removes the Comptroller’s authority to evaluate judge performance, and ends the Comptroller’s obligation to provide input on Comptroller priorities to SOAH. (HB 2154)
  • Allows Comptroller to use estimates in annual report on the effectiveness of exemptions, exclusions, etc. if actual data isn’t available. (HB 1261)

If you think that any of these Legislative changes may affect your business, you may wish to seek the advice of a Texas tax professional, such as a Texas tax attorney, to determine how these laws may affect you.

CNBC Names Minnesota “America’s Top State for Business”

June 24, 2015

Minnesota jumped from 6th place in 2014 to top spot in 2015

ST. PAUL, MN – Minnesota is America’s Top State for Business in 2015, according to a new report released today by CNBC. Minnesota moved into the top spot this year, after placing 6th in 2014, and 15th in 2013.
CNBC’s annual study scores all 50 states on 60 measures of competitiveness, separated into 10 categories. These categories include workforce, economy, infrastructure and transportation, education, cost of living, cost of doing business, access to capital, innovation, business friendliness and quality of life.
Minnesota received the highest overall score this year across the 10 categories, including economy, citing Minnesota’s low unemployment rate of 3.8 percent coupled with the high labor force participation rate at 70.8 percent.  Minnesota ranked third in the nation for quality of life, noting the low crime rate, clean air and water, and access to quality health care.
“The credit for our state’s economic success belongs to the people of Minnesota. We thank the businessmen and women, who chose Minnesota, and their productive employees, who made those investments successful,” said Governor Mark Dayton. “We are proud to earn this national recognition and determined to continue on our path toward future growth.”
Since 2011, the Minnesota economy has added 189,000 jobs – a 7.1 percent increase. These new jobs have been added by the growing number of business relocating to Minnesota, in addition to companies that have announced expansions within the state.
“Minnesota has been blessed with hardworking, inventive, and entrepreneurial citizens for generations. This award is a worthy recognition for their efforts,” said Lt. Governor Tina Smith. “Despite our state’s track record of strong economic growth, we must continue to work to ensure all Minnesotans are able to benefit.”
CNBC highlighted Minnesota’s workforce, citing the quality and availability of skilled workers in the state. According to the study, Minnesota’s workforce is highly educated, and the state also offers unique worker-training programs to ensure future placement in jobs.
“The CNBC ranking underscores Minnesota’s ability to offer the complete package to businesses with an emphasis on a talented, educated workforce that is encouraging growth throughout the state,” said Minnesota Department of Employment and Economic Development Commissioner Katie Clark Sieben. “In the coming years, we will need to continue to focus on customized training for workers in order to meet the needs of our growing businesses and sustain our position as the best state for business.”
In 2014, Minnesota tied for 12th place in the education category. This year, Minnesota placed 2nd, citing the state’s educated workers and the availability of over 200 public and private higher-education institutions that offer companies the ability to recruit talent. The study also emphasized the state’s value of the K-12 education system, including long-term funding trends.
According to the U.S. Bureau of Labor and Statistics, Minnesota ranks 4th in the country for the percent of the population with a high school diploma or higher at 92.4 percent, and 11th in the nation for percent of the population with a Bachelor’s Degree or higher at 33.5 percent.
In addition to the scoring in each metric, CNBC’s “America’s Top State for Business” study takes input into consideration from the National Association of Manufacturers, the Council on Competitiveness, the CNBC Global CFO Council and a wide variety of businesses and economic development organizations.
Other Recent National Rankings for Minnesota
  • Best Place for Women – Minnesota is the best place for women according to the Institute of Women’s Policy Research
  • Best Place for Renters – Twin Cities among the best places for renters according to Nerd Wallet
  • Most Livable Place for People 50 and Older – St. Paul, Rochester, Minneapolis and Duluth all made the AARP list of the most livable places for people age 50 and older
  • Fittest in the Nation – The Minneapolis-St. Paul region ranks the 2nd fittest in the nation according to a new health index by the American College of Sports Medicine
  • World’s Top Cities for Cyclists – Minneapolis is only city in the United States to be included on a worldwide list of bike-friendly cities
  • Best State for Working Moms – Minnesota was named the 2nd best state for working moms according to WalletHub
  • Best Small Cities – Moorhead, Winona, and Mankato all rank near the top of the best small cities in America by Nerd Wallet
  • Best City Parks – Minneapolis and St. Paul tied for the title of best city parks in the Trust for Public Land’s annual ranking
  • Most Bike FriendlyForbes ranks Minneapolis as the most bike-friendly city in the United States
  • Safest Town in America – Hibbing is the safest city in America according to SafeWise, who used research and FBI crime statistics to rank the list.
  • Friendliest MetroTravel and Leisure selects Minneapolis-St. Paul at the 3rd friendliest metro in the country.