Court Office of Appellate Courts
Ellison, Attorney General, Jennifer A. Kitchak, Assistant
Attorney General, Saint Paul, Minnesota, for appellant.
B. Kilgore, Eric S. Johnson, Fryberger, Buchanan, Smith &
Frederick, P.A., Duluth, Minnesota, for respondent.
court is bound by Minnesota Rule 8100 (2017), an
administrative rule regarding ad valorem taxes for utilities,
including pipeline systems.
case requires that we decide whether the tax court must
follow an administrative rule on how utilities, including
pipelines, should be valued for tax purposes. We conclude
that the rule, including its valuation formula, is binding on
the tax court.
case arises from challenges filed by Enbridge Energy, LP
("EELP") to the Commissioner of Revenue's
valuation of EELP's petroleum pipeline system for
property taxes payable in 2013, 2014, and 2015. The tax court
consolidated these challenges for trial in the spring of
2015. Then, the tax court stayed the consolidated proceedings
pending the final resolution of Minnesota Energy
Resources Corp. v. Commissioner of Revenue
("MERC"), 886 N.W.2d 786 (Minn. 2016).
MERC considered, in part, the applicability of
administrative rules, promulgated by the Commissioner, to
valuation challenges in the tax court.
decision in MERC was filed on November 9, 2016. The
tax court then lifted the stay in this case, discovery was
conducted in the consolidated proceedings, and a trial was
held in October 2017. The tax court, on May 15, 2018, filed
its decision, in which it (1) concluded that the Commissioner
had overvalued EELP's pipeline system for all three
years, (2) issued a new valuation for all three years, and
(3) ordered the Commissioner and EELP to "discuss
procedures for addressing the method by which the court
should allocate" the pipeline system's unit value
between Minnesota and other states.
determining the value of EELP's pipeline system for the
three years at issue, the tax court rejected both the
sales-comparison approach and the cost approach. The cost
approach is explicitly used in Minnesota Rule 8100
("Rule 8100" or "the Rule"), an
administrative rule adopted by the Commissioner after our
decision in Independent School District No. 99 v.
Commissioner of Taxation, 211 N.W.2d 886 (Minn. 1973),
to guide the valuation of utilities, including pipeline
systems. But the tax court concluded that it was not bound by
Rule 8100 in determining market value, because the formula in
the Rule applied only to the Commissioner during her
valuation of the pipeline system.
rejecting the cost approach, the tax court applied the income
approach to valuation, setting the unit value of the pipeline
system for the three years at issue. The court declined,
however, "to allocate [the] system unit value between
Minnesota and other states," because the court (1) was
not limited to the formula the Commissioner used under Rule
8100 and (2) had not utilized the cost approach, which
therefore rendered the allocation formula in Rule 8100
unworkable. The tax court therefore "invited the parties
to submit proposals for allocating" the system unit
Commissioner objected to the tax court's conclusion that
it is not bound by Rule 8100 when valuing a pipeline system
and in allocating system unit value, and filed a timely
petition for discretionary ...