Stelzner v. Commissioner of Revenue, No. C0-00-715.

CourtSupreme Court of Minnesota (US)
Writing for the CourtBLATZ, Chief Justice.
Citation621 N.W.2d 736
Docket NumberNo. C0-00-715.
Decision Date08 February 2001
PartiesDonald G. STELZNER, et al., Relators, v. COMMISSIONER OF REVENUE, Respondent.

621 N.W.2d 736

Donald G. STELZNER, et al., Relators,
v.
COMMISSIONER OF REVENUE, Respondent

No. C0-00-715.

Supreme Court of Minnesota.

February 8, 2001.


621 N.W.2d 737
Regan & Vincent, PLC, Thomas M. Regan, Minneapolis, for Relators

Mike Hatch, Attorney General, Craig R. Anderson, Assistant Attorney General, Tax Litigation Division, St. Paul, for Respondent.

Considered and decided by the court en banc without oral argument.

OPINION

BLATZ, Chief Justice.

Relators Donald and Donna Stelzner appeal from the Minnesota Tax Court's decision affirming an order of the Commissioner of Revenue assessing Minnesota state income taxes, penalties, and interest for each of the taxable years from 1987 through 1993. On appeal to the tax court, the Stelzners argued that they were domiciled in Nevada, not Minnesota, and raised federal constitutional issues challenging the tax assessment. In the alternative, the Stelzners argued that the commissioner should be equitably estopped from collecting the taxes, penalties, and interest and that they had shown reasonable cause to support abatement of late filing and late payment penalties. The tax court found that the Stelzners were nondomiciliary residents under Minn.Stat. § 290.01, subd. 7(2) (2000), the nondomiciliary resident statute. In addition, the tax court concluded that application of the nondomiciliary resident statute to tax the Stelzners' entire income does not implicate the Commerce Clause and rejected the Stelzners' other constitutional challenges, equitable estoppel claim, and abatement arguments. In this appeal, the Stelzners assert that, as nondomiciliary residents, Minnesota's taxation of their income earned primarily in interstate commerce violates the Commerce Clause of the United States Constitution. In the alternative, the Stelzners argue that good faith reliance on their tax preparer to file all necessary returns constitutes reasonable cause to abate late filing and late payment penalties. We affirm.

The essential facts underlying this case are not in dispute. Donald and Donna Stelzner were born and raised in Minnesota

621 N.W.2d 738
and were married in Nevada in 1958. The Stelzners worked in various positions in the gaming industry and also engaged in acquiring, improving, and selling residential property in Nevada and Minnesota, including a residence located on West Calhoun Parkway in Minneapolis, Minnesota. The Stelzners resided there from 1983 until mid-1999, during which time the Stelzners spent more than $400,000 remodeling and expanding the property. From 1983 through 1993, the Stelzners received homestead status for the West Calhoun Parkway property. During the 1987 through 1993 audit period, the Stelzners also occupied a studio condominium in Las Vegas, Nevada

The Stelzners spent the majority of their time in Minnesota during the audit period, with Donald Stelzner spending approximately 300 or more days per year and Donna Stelzner spending more than 350 days per year. Nonetheless, the Stelzners considered themselves residents and domiciliaries of Nevada and maintained Nevada drivers' licenses and voter registration. An audit of the Stelzners' 1984 tax return by the Internal Revenue Service determined that the Stelzners were domiciliaries of Nevada for federal tax purposes and allowed office and other "away from home" expense deductions for the West Calhoun Parkway property.

In the 1970's, Donald Stelzner developed a foreign currency exchange business serving the casino industry in New Jersey, Illinois, Nevada, some Native American tribal lands, and the Canadian Province of Ontario. The resulting companies, Bond Mortgage Forex and Bond Mortgage New Jersey, are Nevada-based general partnerships with the Stelzners as the only partners. At their high point, the Stelzners' business operation accounted for approximately 85 percent of the foreign currency exchange generated by the Nevada and New Jersey casino industry. Recently, competition from banks and exchange houses has significantly reduced the Stelzners' customer base.

Throughout the audit period, the Stelzners' income was generated primarily from this currency exchange business. Donald Stelzner traveled to client casinos, purchased the accumulation of client casinos' foreign currency with U.S. cash or cash equivalents, provided on-site inspection and verification, and arranged for transportation of the currency to foreign banks or other repositories. The Stelzners monitored currency accumulations and rates and consolidated currency for movement to foreign banks and exchange houses at a favorable exchange margin. In the interim, currency was secured in bank vault facilities or on properties owned or leased by the Stelzners, including the West Calhoun Parkway property. During the audit period the Stelzners performed the monitoring functions primarily from Minneapolis. The actual currency transactions occurred primarily outside of Minnesota.

Because this mode of operation required Donald Stelzner to transport large amounts of U.S. and foreign currencies and negotiable instruments, safety was a major concern. The Stelzners believed that living outside the geographic area of client casinos increased their personal security. Minneapolis was chosen, in part, because the Stelzners believed that Minneapolis would be viewed as an inconvenient and unlikely location for routing foreign currency. The Stelzners also recognized that Minneapolis was well-suited for their business given the location of the Minneapolis/St. Paul airport and the Federal Reserve Bank. Based on these considerations of security and convenience, the Stelzners purchased the West Calhoun Parkway property and made modifications to provide additional security.

In the early 1980's, the Stelzners hired Dale Korpi, an attorney and certified public accountant, to prepare their tax returns. Donald Stelzner gave Korpi two or three years of previous returns and explained that he and his wife were domiciled in Nevada, where no state income tax

621 N.W.2d 739
return is required, but had business purposes for being in Minnesota. As he had with previous tax preparers, Donald Stelzner informed Korpi that the Stelzners had no Minnesota income and had never filed a Minnesota tax return. This representation was consistent with Minnesota tax law because, at that time, Minnesota's definition of "resident" for individual income tax purposes excluded individuals domiciled in another state. Minn.Stat. § 290.01, subd. 7 (1986) (defining resident as "any individual domiciled in Minnesota and any other individual maintaining an abode therein * * * who shall not * * * have been domiciled outside the state")

In 1987, the definition of "resident" was amended to include "any individual domiciled outside the state who maintains a place of abode in the state and spends in the aggregate more than one-half of the tax year in Minnesota * * * ." Act of May 28, 1987, ch. 268 art. 1, § 10, 1987 Minn. Laws 1044-45 (codified at Minn.Stat. § 290.01, subd. 7(2) (2000)). Sometime during or after 1987, Korpi informed Donald Stelzner of an amendment to the Minnesota income tax law that modified the definition of resident. Stelzner testified in the tax court proceedings that he intended to follow up on the comment that a change had occurred, but did not pursue it any further. Korpi continued to file only federal returns for the Stelzners.

After an audit of the taxable periods from 1987 through 1993, the commissioner concluded that the Stelzners were nondomiciliary residents of Minnesota for each year of the audit period and issued an order finding the Stelzners liable for Minnesota income taxes, penalties, and interest for each of those years. The total amount assessed was $402,673.87. The Stelzners filed an administrative appeal, which the commissioner denied. The Stelzners appealed that determination to the Minnesota Tax Court.

Before the tax court, the Stelzners challenged the commissioner's assessment claiming that they were domiciliaries of Nevada, not Minnesota, and that application of Minn.Stat. § 290.01, subd. 7(2), the nondomiciliary resident statute, to tax their entire income...

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24 practice notes
  • Md. State Comptroller of the Treasury v. Wynne, No. 107
    • United States
    • Court of Special Appeals of Maryland
    • 28 Enero 2013
    ...(Minn. 1999) (income tax on non-domiciliary resident did not risk multiple taxation due to credit); Stelzner v. Commissioner of Revenue, 621 N.W.2d 736, 741 (Minn. 2001) (income tax on non-domiciliary residents was consistent with due process and did not threaten multiple taxation as domici......
  • Md. State Comptroller of the Treasury v. Wynne, No. 107
    • United States
    • Court of Special Appeals of Maryland
    • 28 Enero 2013
    ...(Minn. 1999) (income tax on non-domiciliary resident did not risk multiple taxation due to credit); Stelzner v. Commissioner of Revenue, 621 N.W.2d 736, 741 (Minn. 2001) (income tax on non-domiciliary residents was consistent with due process and did not threaten multiple taxation as domici......
  • Md. State Comptroller of the Treasury v. Wynne, No. 107
    • United States
    • Court of Appeals of Maryland
    • 17 Mayo 2013
    ...(Minn.1999) (income tax on non-domiciliary resident did not risk multiple taxation due to credit); Stelzner v. Commissioner of Revenue, 621 N.W.2d 736, 741 (Minn.2001) (income tax on non-domiciliary residents was consistent with due process and did not threaten multiple taxation as domicili......
  • MAYO COLLABOR. SERVICES v. COM'R OF REVENUE, No. A04-2190.
    • United States
    • Supreme Court of Minnesota (US)
    • 30 Junio 2005
    ...threshold question of whether the MinnesotaCare tax "implicates" the Commerce Clause. See, e.g., Stelzner v. Comm'r of Revenue, 621 N.W.2d 736, 740 (Minn.2001) (stating that, when examining whether a state tax unduly burdens interstate commerce, this court determines (1) whether t......
  • Request a trial to view additional results
24 cases
  • Md. State Comptroller of the Treasury v. Wynne, No. 107
    • United States
    • Court of Special Appeals of Maryland
    • 28 Enero 2013
    ...(Minn. 1999) (income tax on non-domiciliary resident did not risk multiple taxation due to credit); Stelzner v. Commissioner of Revenue, 621 N.W.2d 736, 741 (Minn. 2001) (income tax on non-domiciliary residents was consistent with due process and did not threaten multiple taxation as domici......
  • Md. State Comptroller of the Treasury v. Wynne, No. 107
    • United States
    • Court of Special Appeals of Maryland
    • 28 Enero 2013
    ...(Minn. 1999) (income tax on non-domiciliary resident did not risk multiple taxation due to credit); Stelzner v. Commissioner of Revenue, 621 N.W.2d 736, 741 (Minn. 2001) (income tax on non-domiciliary residents was consistent with due process and did not threaten multiple taxation as domici......
  • Md. State Comptroller of the Treasury v. Wynne, No. 107
    • United States
    • Court of Appeals of Maryland
    • 17 Mayo 2013
    ...(Minn.1999) (income tax on non-domiciliary resident did not risk multiple taxation due to credit); Stelzner v. Commissioner of Revenue, 621 N.W.2d 736, 741 (Minn.2001) (income tax on non-domiciliary residents was consistent with due process and did not threaten multiple taxation as domicili......
  • MAYO COLLABOR. SERVICES v. COM'R OF REVENUE, No. A04-2190.
    • United States
    • Supreme Court of Minnesota (US)
    • 30 Junio 2005
    ...threshold question of whether the MinnesotaCare tax "implicates" the Commerce Clause. See, e.g., Stelzner v. Comm'r of Revenue, 621 N.W.2d 736, 740 (Minn.2001) (stating that, when examining whether a state tax unduly burdens interstate commerce, this court determines (1) whether t......
  • Request a trial to view additional results

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