Unit Valuation – Fundamental Valuation Principles, Not Administrative Rules, Prevail

In Enbridge Energy, Limited Partnership v. Commissioner of Revenue,¹ The Minnesota Tax Court recently rejected the Minnesota Commissioner of Revenue's ("State") attempt to artificially increase an interstate pipeline's value to exceed market value, here, applying unit valuation. It rejected the State's numerous inconsistent positions and its attempt to assert its own administrative rule as a limitation on the Court's ability to determine fair market value.²

The Tax Court started with two fundamental principles: (1) it was required to determine the fair market value of the pipeline, and to do so, (2) it had to consider the three traditional approaches to value: sales comparison, cost, and income.³  Like most states, Minnesota requires all property "be valued at its market value."⁴ The Court agreed with the Taxpayer that the sales comparison approach was not applicable, noting the "very limited amount of actual sales data to be used as an evidence of value."⁵ The