STATE OF MINNESOTA
IN SUPREME COURT
A23-1259
Tax Court Moore, III, J. Took no part, Hennesy, J.
Christopher J. Wendell and Nancy A. Wendell,
Relators,
vs. Filed: June 5, 2024 Office of Appellate Courts Commissioner of Revenue,
Respondent.
______________________
Christopher J. Wendell, Nancy A. Wendell, Hudson, Wisconsin, pro se.
Keith Ellison, Attorney General, Jennifer A. Kitchak, Assistant Attorney General, Saint Paul, Minnesota, for respondent.
________________________
1. The Commissioner of Revenue has the authority to adjust a taxpayer’s
reported federal adjusted gross income when determining the correct amount of state
income tax owed by the taxpayer under our decision in Specktor v. Commissioner of
Revenue, 308 N.W.2d 806 (Minn. 1981) and Minn. Stat. § 270C.33, subdivision 4 (2022).
2. The tax court did not err in granting summary judgment in favor of the
Commissioner of Revenue.
2 3. The statutory penalty imposed for filing a frivolous tax return under Minn.
Stat. § 289A.60, subd. 7 (2022), is not unconstitutional under the Due Process Clauses and
Excessive Fines Clauses of the United States Constitution and Minnesota Constitution or
the Equal Protection Clause of the United States Constitution.
Affirmed.
Considered and decided by the court without oral argument.
OPINION
MOORE, III, Justice.
The dispute here centers on two years of Minnesota individual tax returns filed by
Relators Christopher and Nancy Wendell (“the Wendells”). In 2019 and 2020, the
Wendells, residents of Wisconsin, filed joint tax returns reporting no Minnesota taxable
income, despite receiving more than 1 million dollars in payments from Minnesota sources
over those 2 years. The Wendells asserted that the payments received from Minnesota
sources were not taxable wages or ordinary business income. Respondent Commissioner
of Revenue disagreed, modified the Wendells’ reported income accordingly, assessed
additional income tax, and imposed a 25 percent penalty for filing a frivolous tax return
under Minn. Stat. § 298A.60, subd. 7 (2022). The Wendells appealed the Commissioner’s
assessment and the Minnesota Tax Court granted summary judgment in the
Commissioner’s favor. Because we conclude that (1) the Commissioner of Revenue had
the authority to adjust the Wendells’ reported federal adjusted gross income, (2) the tax
court did not err in granting summary judgment in favor of the Commissioner, and (3) the
3 statutory penalty for filing a frivolous return under Minn. Stat. § 289A.60, subd. 7 (2022),
is constitutional, we affirm the decision of the tax court.
FACTS
Relator Christopher Wendell, a resident of Wisconsin, is an anesthesiologist
licensed to practice medicine in Minnesota. In 2019, he received $551,214.69 in wages or
compensation from Associated Anesthesiologists, P.A. (“AAPA”), located in Plymouth.
From those wages, $43,315.12 was withheld by AAPA for Minnesota income taxes. He
also received $33,658 in ordinary business income from Associated Health Services, Inc.
(“AHS”), also located in Plymouth. In 2020, Dr. Wendell received $589,530.00 in wages
or other compensation from AAPA, from which $47,881.00 was withheld for Minnesota
income taxes. He also received $26,799 in ordinary business income from Health Billing
Systems, Inc. (“HBS”), a Minnesota business.
Dr. Wendell and his wife, Nancy Wendell, filed timely joint Minnesota individual
tax returns for 2019 and 2020 tax years. On their 2019 tax return, the Wendells reported
$0 in federal adjusted gross income and $0 in Minnesota taxable income, despite receiving
over half a million dollars in payments from AAPA and AHS. On their 2020 tax return,
the Wendells reported $7,226 in federal adjusted gross income and $0 in Minnesota taxable
income. For both years, the Wendells declared no Minnesota individual income tax
liability and requested refunds of all state tax withheld from the payments to Christopher
Wendell from AAPA. In making this request, the Wendells asserted that the payments
from AAPA, AHS, and HBS to Christopher Wendell were not “connected with any activity
or of a status which would render payments to [them] subject to federal income excise tax.”
4 The Wendells did not explain what the payments from AAPA, AHS, or HBS were, if not
taxable income, and they did not explain why these Minnesota businesses reported those
payments as wages or ordinary business income.
The Commissioner of Revenue reviewed the Wendells’ 2019 and 2020 tax returns
separately after they were filed. Following these reviews, the Commissioner issued orders
adjusting the Wendells’ income tax liability, finding that they had unreported wages and
ordinary business income. The Commissioner then adjusted the amount of federal adjusted
gross income reported on the return, determined that no tax refund was owed to the
Wendells, and assessed additional tax and interest.
As part of the adjustment to the 2019 tax return, the Commissioner warned the
Wendells that if they “continue[d] to file Minnesota income tax returns which the
[Minnesota Department of Revenue] considers frivolous,” a frivolous return penalty would
be imposed under Minn. Stat. § 289A.60, subd. 7. In 2020, after the Wendells again did
not report any Minnesota taxable income, the Commissioner assessed a 25 percent
frivolous return penalty, totaling $13,223.75.
The Wendells requested administrative review of the Commissioner’s orders,
arguing that the Commissioner lacked the authority to amend their reported federal
adjusted gross income and challenging the imposition of the frivolous return penalty. The
Minnesota Department of Revenue filed two supervening Notices of Determination on
Appeal affirming the Commissioner’s tax determinations and adjustments.
The Wendells appealed the Department of Revenue’s orders to the Minnesota Tax
Court, reiterating the arguments made during the administrative appeal. They further
5 argued that the penalty for filing a frivolous tax return under Minn. Stat. § 289A.60, subd.
7, is unconstitutional. Following a motion for summary judgment by the Commissioner of
Revenue, the tax court granted partial summary judgment. The tax court first determined
that the Wendells failed to show any disputed material facts regarding whether the disputed
payments from AAPA, AHS, and HBS were, in fact, taxable income. Next, the tax court
concluded that the Commissioner plainly has the authority to adjust incorrect tax returns
and determined that the Wendells’ returns were validly adjusted to include the wages and
ordinary business income received from AAPA, AHS, and HBS. In addition, the tax court
determined that the frivolous return penalty had been properly imposed, but declined to
decide whether the penalty statute is constitutional for lack of jurisdiction. 1
After staying the case and referring it to the District Court for the Second Judicial
District to obtain jurisdiction over the undecided constitutional issue, the tax court granted
summary judgment on the remaining issues in favor of the Commissioner. The tax court
1 The tax court does not have original jurisdiction to hear constitutional matters but can gain jurisdiction over constitutional issues through a process first articulated in Erie Mining Co. v. Commissioner of Revenue, 343 N.W.2d 261, 264 (Minn. 1984). See Minn. Stat. § 271.01, subd. 5 (2022) (“[T]he Tax Court shall be the sole, exclusive, and final authority for the hearing and determination of all questions of law and fact arising under the tax laws of the state . . . .”). Under this process, referred to as the “Erie shuffle,” the tax court may stay proceedings and refer the case to the district court for determination of the constitutional issues. Erie Mining Co., 343 N.W.2d at 264. If the district court declines to make a constitutional determination and refers the case back to the district court, the tax court may then exercise jurisdiction over the constitutional issue. Id.; see also Wilson v. Comm’r of Revenue, 619 N.W.2d 194, 199 (Minn. 2000) (“In essence, the district court transfers its legal and equitable powers to the tax court, thereby giving the tax court jurisdiction to hear constitutional issues.”). This process occurred here and enabled the tax court to obtain jurisdiction to rule on the Wendells’ properly raised constitutional claims regarding the penalty statute.
6 found that the Wendells’ tax liability was correctly calculated and adjusted, that no material
facts were in dispute, and that the frivolous return penalty statute was constitutional. 2 The
Wendells then appealed to this court by writ of certiorari. See Minn. Stat. § 271.10 (2022).
ANALYSIS
The Wendells raise three issues on appeal. First, the Wendells assert that the
Commissioner of Revenue lacked the authority to modify their reported federal adjusted
gross income when determining their state tax liability. Second, the Wendells contend that
the tax court improperly granted summary judgment in favor of the Commissioner. Lastly,
the Wendells assert that the penalty for filing a frivolous tax return found in Minn. Stat.
§ 289A.60, subd. 7, is unconstitutional. We address each issue in turn.
I.
We begin with the question of whether the Commissioner of Revenue has the
authority to adjust or correct the amount of federal adjusted gross income reported on a
taxpayer’s Minnesota tax return to determine the amount of state tax owed. The tax court
below determined that the Commissioner did have this authority. We review “orders of
the tax court to determine whether the tax court lacked jurisdiction, whether its decision
was not justified by the evidence or did not conform to the law, and whether the tax court
otherwise committed an error of law.” Turner v. Comm’r of Revenue, 840 N.W.2d 205,
207 (Minn. 2013); see also Minn. Stat. § 271.10, subd. 1.
2 The tax court additionally granted summary judgment in favor of the Commissioner on an issue relating to Minnesota’s ability to tax income from a brokerage account and corresponding interest, which is not at issue in this appeal.
7 The amount of income tax owed under Minnesota law rests in part upon an
individual’s federal adjusted gross income. Minnesota law imposes income tax on the
“taxable income” of residents and non-residents. Minn. Stat. § 290.03(1) (2022). The
income of non-residents, like the Wendells, is generally taxable “only to the extent that
income is derived from activities within Minnesota.” Luther v. Comm’r of Revenue, 588
N.W.2d 502, 507 (Minn. 1999). Non-resident taxable income includes the amount of the
taxpayer’s “net income” apportioned to Minnesota. Minn. Stat. § 290.01, subds. 22, 29
(2022). 3 For an individual, Minnesota defines “net income” as the “federal adjusted gross
income” with certain state modifications permitted by statute. Minn. Stat. § 290.01, subd.
19(b) (2022) (emphasis added). In turn, federal gross income is defined as:
[A]ll income from whatever source derived, including (but not limited to) the following items: (1) Compensation for services, including fees, commissions, fringe benefits, and similar items; (2) Gross income derived from business; (3) Gains derived from dealings in property; (4) Interest; (5) Rents; (6) Royalties; (7) Dividends; (8) Annuities; (9) Income from life insurance and endowment contracts; (10) Pensions; (11) Income from discharge of indebtedness; (12) Distributive share of partnership gross income; (13) Income in respect of a decedent; (14) Income from an interest in an estate or trust.
I.R.C. § 61 (emphasis added).
If net income reported on a Minnesota tax return is inaccurate, the Commissioner of
Revenue is authorized to assess additional tax if the Commissioner “determines that the
correct amount of tax is different than that assessed on a return filed with the
3 The Wendells’ challenge is focused upon the Commissioner’s adjustment to their reported “federal adjusted gross income.” Therefore, we do not address the manner in which the amount of net income apportioned to Minnesota is determined.
8 commissioner.” 4 Minn. Stat. § 270C.33, subd 4(a)(1) (2022). We addressed the issue of
the Commissioner’s authority to alter or adjust a taxpayer’s reported income—derived
from their federal adjusted gross income—in Specktor v. Commissioner of Revenue, 308
N.W.2d 806 (Minn. 1981). 5
In Specktor, the Commissioner adjusted the taxpayers’ tax liability after determining
that a federal taxation election and subsequent deduction of losses from the operation of
several apartment buildings that reduced their taxable income on Minnesota partnership
and corporate tax returns were incorrectly taken. Id. at 807. The tax court determined that
the Commissioner could not make independent adjustments to a taxpayer’s federal adjusted
gross income and, therefore, was bound by the federal determination of adjusted gross
income. Id. at 807–808. On appeal, we held that the Commissioner is authorized to “adjust
a taxpayer’s Minnesota gross income notwithstanding the federal government’s failure to
make a similar adjustment.” Id. at 808. Furthermore, and importantly, we held that
4 In addition, the Commissioner has the authority to “audit and adjust the taxpayer’s computation of federal adjusted gross income[] [and] federal taxable income . . . to make them conform with the provisions of chapter 290 or section 298.01.” Minn. Stat. § 289A.35(a) (2022). The Commissioner did not invoke this statutory authority in adjusting the Wendells’ tax liability, instead relying solely on Minn. Stat. § 270C.33, subd. 4. 5 Specktor dealt with the taxpayer’s “gross income” under Minn. Stat. § 290.01, subd. 20 (1980). 308 N.W.2d at 807–08. At the time Specktor was decided, “gross income” for individuals, estates, and trusts was defined as “the adjusted gross income as computed for federal income tax purposes.” Minn. Stat. § 290.01, subd. 20. And “net income” was defined as “gross income, as defined in subdivision 20” less the applicable statutory deductions. Minn. Stat. § 290.01, subd. 19 (1980). Because the dispute here likewise concerns “federal adjusted gross income,” the reasoning in Specktor is applicable.
9 “Minnesota’s definition of gross income as federal adjusted gross income refers to the
correct federal adjusted gross income.” Id. at 809 (emphasis added). 6
The Wendells argue that the tax court misinterpreted Specktor, which they assert is
correctly interpreted as giving the Commissioner the authority only to correct allowable
additions or deductions to a taxpayer’s federal adjusted gross income. According to the
Wendells, the Commissioner cannot change their reported amount of federal adjusted gross
income when the federal government has made no modification. We disagree.
We reaffirm that, under Specktor, the Commissioner of Revenue is authorized to
adjust incorrect Minnesota tax returns, including incorrectly reported federal adjusted gross
income. See also Minn. Stat. § 270C.33, subd. 4. The Wendells’ argument that Specktor
is distinct because it dealt more specifically with allowances and deductions is immaterial;
the reasoning applies generally to the Commissioner determining a taxpayer’s “correct
federal adjusted gross income.” 308 N.W.2d at 809 (emphasis added). As we noted in
Specktor, a conclusion to the contrary would make the statutory provisions relating to the
investigation and correction of tax returns, such as Minn. Stat. § 270C.33, a nullity. 308
N.W.2d at 808. Under Minnesota tax laws, purported factual declarations made on a tax
return—including those relating to the correct amount of federal adjusted gross income—
6 In the Commissioner’s opening brief, the Commissioner improperly cited this quote as “Minnesota’s definition of gross income and federal adjusted income refers to the correct federal gross income.” (Emphasis added.) The Commissioner filed a citation to supplemental authority correcting the misquote. Despite the Wendells’ arguments to the contrary, this misquote appears to have been inadvertent and is not material to our consideration of the issues.
10 do not make that return impervious to investigation and subsequent correction, if errors are
found. Id. at 809; see also Minn. Stat. § 270C.33, subd. 4.
II.
Having determined that the Commissioner of Revenue has the authority to adjust a
taxpayer’s reported amount of federal adjusted gross income on their Minnesota tax return,
we now turn to the question of whether the tax court erred in granting summary judgment
in favor of the Commissioner. On appeal, we review orders of summary judgment from
the tax court to determine “(1) whether there are any genuine issues of material fact and
(2) whether the lower court erred in its application of the law.” Bond v. Comm’r of
Revenue, 691 N.W.2d 831, 836 (Minn. 2005).
Summary judgment is appropriate if “the movant shows that there is no genuine
issue as to any material fact and the movant is entitled to judgment as a matter of law.”
Minn. R. Civ. P. 56.01. 7 The nonmoving party “ ‘must do more than rest on mere
averments’ to create a genuine issue of material fact that precludes summary judgment.”
Hagen v. Steven Scott Mgmt., Inc., 963 N.W.2d 164, 172 (Minn. 2021) (quoting DLH, Inc.
v. Russ, 556 N.W.2d 60, 70–71 (Minn. 1997)). “Summary judgment is ‘inappropriate when
reasonable persons might draw different conclusions from the evidence presented.’ ” See
Henson v. Uptown Drink, LLC, 922 N.W.2d 185, 190 (Minn. 2019) (quoting Osborne v.
Twin Town Bowl, Inc., 749 N.W.2d 367, 371 (Minn. 2008)).
7 We note that the Minnesota Rules of Evidence and Rules of Civil Procedure generally govern procedures in the tax court. Minn. Stat. § 271.06, subd. 7 (2022).
11 The Wendells first contend that the tax court improperly relied on hearsay evidence
from the Commissioner in granting summary judgment. Evidence cited to support or
dispute a fact must be in a form that would be admissible in evidence. Minn. R. Civ. P.
56.03(b). Here, the tax court relied on declarations and exhibits from the Commissioner in
determining that there were no genuine issues of material fact. The exhibits submitted by
the Commissioner included W-2 wage and tax statement forms and K-1 shareholder
income forms produced by the Internal Revenue Service and the Minnesota Department of
Revenue, which would be admissible as records of regularly conducted business activity
and public records. Minn. R. Evid. 803(6), (8). The Commissioner’s exhibits also included
interrogatory answers provided by the Wendells and affidavits from attorneys at the
Department of Revenue, both of which are properly considered as evidence on summary
judgment. See Minn. R. Civ. P. 56.03(a) (stating that a party must support assertions by
“citing to particular parts of materials in the record, including . . . affidavits, . . . admissions,
interrogatory answers”). The Wendells’ objections to the admissibility and relevance of
this evidence are unpersuasive, and the tax court properly relied on such evidence in
determining whether summary judgment was appropriate.
The Wendells also argue that the tax court failed to consider their affidavits
opposing the motion for summary judgment. These affidavits, however, contained “mere
averments,” rather than specific evidence creating a genuine dispute of material fact.
Hagen, 963 N.W.2d at 172. Nowhere in these affidavits do the Wendells provide a
colorable, supported explanation for what the payments made to Christopher Wendell by
AHS, AAPA, and HBS were, if not taxable wages and ordinary business income. And the
12 affidavits give no explanation as to why AAPA, AHS, and HBS reported the disputed
payments as taxable income on W-2 and K-1 tax forms. The affidavits merely assert that
“[t]o [Christopher Wendell’s] knowledge, [his] activities in 2019 and 2020 were not of a
class or kind taxable or reportable on an income tax return.” Statements such as this are
insufficient to create a genuine dispute of material fact, such that a trial on the issue would
be warranted. As the tax court correctly noted below, “disagreement with the facts
presented does not make them disputed.” See Hagen, 963 N.W.2d at 172.
Considering the record before us, we conclude that the tax court properly evaluated
the admissibility of the evidence submitted on summary judgment. Furthermore, we
conclude that the tax court did not err in finding summary judgment appropriate; the
Commissioner demonstrated that there is no genuine issue of material fact, and the
Wendells did not create any genuine disputes of material fact that would preclude summary
judgment.
III.
We lastly address the Wendells’ constitutional challenges to the penalty for filing a
frivolous tax return found in Minn. Stat. § 289A.60, subd. 7. We review the tax court’s
determination of whether a tax statute is constitutional de novo. Olson v. Comm’r of
Revenue, 955 N.W.2d 605, 607 (Minn. 2020). State tax statutes are presumed
constitutional, and the party challenging a statute’s constitutionality “bears a heavy burden
to overcome that presumption.” Sheridan v. Comm’r of Revenue, 963 N.W.2d 712, 716
(Minn. 2021). “[W]e ‘exercise our power to declare a statute unconstitutional with extreme
caution and only when absolutely necessary.’ ” Fletcher Props., Inc. v. City of
13 Minneapolis, 947 N.W.2d 1, 9 (Minn. 2020) (citing Boutin v. Lafleur, 591 N.W.2d 711,
714 (Minn. 1999)).
A summary of the frivolous return penalty is necessary before turning to the merits
of the Wendells’ constitutional claims. Minnesota Statutes section 289A.60, subdivision
7, details the frivolous return penalty as follows:
If a taxpayer files what purports to be a tax return or a claim for refund but which does not contain information on which the substantial correctness of the purported return or claim for refund may be judged or contains information that on its face shows that the purported return or claim for refund is substantially incorrect and the conduct is due to a position that is frivolous or a desire that appears on the purported return or claim for refund to delay or impede the administration of Minnesota tax laws, then the taxpayer shall pay a penalty of the greater of $1,000 or 25 percent of the amount of tax required to be shown on the return. In a proceeding involving the issue of whether or not a taxpayer is liable for this penalty, the burden of proof is on the commissioner.
“Frivolousness” is determined objectively, and “a position is ‘frivolous’ if it has no basis
in law or fact.” Bond, 691 N.W.2d at 839 (citations omitted). “What is required to reach
the threshold of frivolity is that a position is without merit from the perspective of the tax
laws.” Weed v. Comm’r of Revenue, 489 N.W.2d 525, 529 (Minn. App. 1992), rev. denied
(Minn. Sept. 15, 1992).
A.
We first address the Wendells’ argument that Minn. Stat. § 289A.60, subd. 7,
violates due process because it fails to provide adequate notice for what constitutes a
14 “substantially incorrect” or “frivolous” return. 8 The Wendells appear to be making a “void-
for-vagueness” due process claim and we analyze this claim accordingly.
The Due Process Clauses of the United States and Minnesota Constitutions provide
that the government cannot deprive a person of “life, liberty, or property without due
process of law.” U.S. Const. amends. V, XIV; Minn. Const. art. I, § 7. A statute is
unconstitutionally vague under the Due Process Clause when, viewed objectively, a person
“of common intelligence must necessarily guess at its meaning.” St. Cloud Newspapers,
Inc. v. Dist. 742 Cmty. Schs., 332 N.W.2d 1, 7 (Minn. 1983) (quoting Broadrick v.
Oklahoma, 413 U.S. 601, 607 (1973)) (internal quotation marks omitted). “The fact that
taxpayers must rely on common sense and intelligence to determine whether their conduct
complies with the law does not render the law unconstitutionally vague on its face.” State
v. Enyeart, 676 N.W.2d 311, 321 (Minn. 2004). Additionally, there is a “greater tolerance”
of statutes with civil, rather than criminal penalties. Vill. of Hoffman Ests. v. Flipside,
Hoffman Ests., Inc., 455 U.S. 489, 498–99 (1982).
The Wendells’ argument that they could not reasonably discern what would
constitute a “frivolous” tax return is unpersuasive. Although Minn. Stat. § 289A.60, subd.
7, does not offer specific examples of frivolous conduct, it does provide a robust
description of what categories of conduct would qualify, including:
8 The Wendells also argue that Minn. Stat. § 289A.60, subd. 7, is unconstitutional under the First Amendment of the United States Constitution. See U.S. Const. amend. I. This claim was first raised in the Wendells’ reply brief before this court and was not argued before the tax court below. As a result, the Wendells have forfeited consideration of this First Amendment claim. See Thiele v. Stich, 425 N.W.2d 580, 582 (Minn. 1988) (stating that the court will not consider issues not presented earlier in the case).
15 [A] tax return . . . [that] contains information that on its face shows that the purported return or claim for refund is substantially incorrect and the conduct is due to a position that is frivolous or a desire that appears on the purported return or claim for refund to delay or impede the administration of Minnesota tax laws.
Under-reporting, misreporting, or otherwise failing to report taxable Minnesota income,
based on an unsupported assertion that the income is not taxable, would unquestionably
qualify as a “substantially incorrect” or “frivolous” return under an objective definition.
See, e.g., Bond, 691 N.W.2d at 839 (finding that a frivolous return is one that “has no basis
in law or fact”); Sullivan v. United States, 788 F.2d 813, 815 (1st Cir. 1986) (collecting
cases for the proposition that arguing that wages received were not taxable income is a
frivolous position); cf. Brintnall v. Comm’r of Revenue, No. 7495-R, 2003 WL 1877239,
at *3–4 (Minn. T.C. Apr. 8, 2003) (upholding the imposition of the frivolous return penalty
where taxpayer claimed to have no federal taxable income because of an improperly
claimed deduction). 9
Here, the Wendells failed to report over a million dollars of income from Minnesota
sources over 2 years. After receiving a warning from the Commissioner of Revenue that a
penalty would be imposed if they “continue[d] to file Minnesota income tax returns which
the [Department of Revenue] considers frivolous,” the Wendells filed another tax return
9 Even further, the Internal Revenue Service publishes an annual document that details common tax contentions that have been deemed “frivolous” and may subject a taxpayer to a frivolous return penalty under I.R.C. § 6702(a). One such frivolous argument is that a taxpayer can avoid income tax “by filing a tax return that reports no income and no tax liability (a ‘zero return’) even though they have taxable income.” Internal Revenue Service, The Truth About Frivolous Tax Arguments 4–5 (March 2022). Another frivolous tax argument listed is that “wages, tips, and other compensation received for personal services are not income.” Id. at. 9–10.
16 making the same argument that the payments received from Minnesota sources were not
taxable income. The tax court below found this position was “so untenable as to be
frivolous,” noting that “[t]he Wendells cannot escape taxation by renaming their income.”
We agree. Indeed, their blanket denial that the disputed payments from AAPA, AHS, and
HBS were not taxable income has no basis in law or fact. Because Minn. Stat. § 289A.60,
subd. 7, establishes that the Wendells’ position is of the type that would be considered
frivolous, they had adequate notice of the potential penalty for their conduct. See State v.
Calmes, 632 N.W.2d 641, 648 (Minn. 2001) (acknowledging that “citizens are presumed
to know the law”).
For the reasons stated above, we hold that the penalty for filing a frivolous tax return
under Minn. Stat. § 289A.60, subd. 7, is not unconstitutional on due process grounds.
B.
Next, we address the Wendells’ contention that Minn. Stat. § 289A.60, subd. 7,
violates the Excessive Fines Clause. The Excessive Fines Clause of the United States
Constitution provides that: “Excessive bail shall not be required, nor excessive fines
imposed, nor cruel and unusual punishments inflicted.” U.S. Const. amend. VIII; see also
Minn. Const. art. I, § 5.
Our inquiry into whether a statutory penalty is excessive focuses on proportionality;
in other words, does the penalty “bear some relationship to the gravity of the offense that
it is designed to punish?” Wilson v. Comm’r of Revenue, 656 N.W.2d 547, 554–55 (Minn.
2003) (citation omitted) (internal quotation marks omitted). In evaluating proportionality,
we analyze three factors: (1) the gravity of the offense compared to the harshness of the
17 penalty; (2) comparison of the contested penalty with other penalties imposed for other
offenses in the same jurisdiction; and (3) comparison of the contested fine with fines
imposed for the same offense in other jurisdictions. State v. Rewitzer, 617 N.W.2d 407,
414 (Minn. 2000).
The Wendells argue that the frivolous return penalty—a fine of the greater of $1,000
or 25 percent of the amount of tax owed—violates the Excessive Fines Clause because it
is “unduly burdensome and excessive to many filers,” and that the penalty imposed is
disproportionate to the amount of harm, if any, caused by their conduct. 10 For the reasons
discussed below, this argument fails.
We analyze the penalty imposed by Minn. Stat. § 289A.60, subd. 7, under the three-
part test articulated in Rewitzer. The first prong of that test asks us to evaluate the gravity
of the offense compared to the harshness of the penalty. Rewitzer, 617 N.W.2d at 414. We
conclude that the penalty imposed by Minn. Stat. § 289A.60, subd. 7, adequately balances
the gravity of the offense. The filing of frivolous tax returns creates unnecessary delay and
waste of government resources due to the investigation necessary to correct and adjust tax
assessments. A penalty of up to 25 percent of the tax amount actually owed is proportionate
10 In addition, the Wendells cite to penalties imposed for serious felony offenses, such as fifth-degree criminal sexual conduct, emphasizing that the penalty they received under Minn. Stat. § 289A.60, subd. 7, is greater than the statutory maximum penalties for those crimes. This citation is misplaced. In analyzing whether a penalty is unconstitutionally excessive, the focus is on comparing the disputed penalty to the penalties for similar offenses in the same jurisdiction. See Wilson, 656 N.W.2d at 555–56 (comparing the disputed wage levy sanction in tax statute to “similar wage levy sanctions in Minnesota”); Rewitzer, 617 N.W.2d at 414–15 (comparing the disputed fine for a criminal offense to “other similarly ranked offenses” in the Minnesota Sentencing Guidelines).
18 to the harm caused by the delayed administration of tax laws. See Weed, 489 N.W.2d at
528–29 (“The federal penalty statute was enacted to deter tax protestors from filing
frivolous returns”) (citing Baskin v. United States, 738 F.2d 975, 977 (8th Cir. 1984)).
The second prong of the Rewitzer test requires us to compare the penalty in Minn.
Stat. § 289A.60, subd. 7, to the penalties imposed for similar offenses in Minnesota.
Rewitzer, 617 N.W.2d at 414. Indeed, the other subdivisions of Minn. Stat. § 289A.60
(2022) impose comparable fines. See Minn. Stat. § 289A.60, subd. 4(b) (20 percent penalty
for substantial understatement of tax liability), subd. 5 (10 percent penalty for intentional
disregard of rules or laws), subd. 5a (25 percent penalty for repeated failure to file returns
or pay taxes), subd. 6 (50 percent penalty for failure to file or filing a false or fraudulent
return), subd. 20 (20 to 50 percent penalty for promoting abusive tax shelters), subd. 24
(10 percent penalty for failure to notify the Commissioner about a change in a taxpayer’s
federal return), and subd. 27 (20 percent addition to tax amount for a “reportable transaction
understatement”). Although some penalties in section 289A.60 are lower than that
prescribed in subdivision 7, some are also higher. We conclude that the penalty for filing
a frivolous return is comparable and proportional to penalties for other tax offenses of
lesser and greater seriousness in Minnesota.
Lastly, we analyze the third prong of the Rewitzer test, which compares the penalty
in Minn. Stat. § 289A.60, subd. 7, to penalties imposed for the same offense in other
jurisdictions. Rewitzer, 617 N.W.2d at 414. Other states take varying approaches when
penalizing the filing of frivolous tax returns. For example, Iowa imposes a penalty of 75
percent of the amount claimed for “false or frivolous application for refund.” Iowa Code
19 § 421.27 6.a.(1) (2023). Other states do not feature a specific penalty for frivolous returns
but group frivolous returns with other types of erroneous filings. See, e.g., Wis. Stat.
§ 71.83(1)(b)7 (2023) (imposing 100 percent penalty for “fraudulently fil[ing] an incorrect
claim for refund of tax”); S.D. Codified Laws § 10-59-6 (2023) (imposing 10 percent
penalty for failure to file “a return or report which includes all taxable transactions”). Some
states impose a lower flat fee for frivolous returns. See, e.g., Ohio Rev. Code Ann.
§ 5747.15 (West 2023) ($500 penalty); D.C. Code § 47-4216 (2023) ($500 penalty); Ala.
Code § 40-2A-11(e) (2023) ($250 penalty); Ga. Code Ann. § 48-7-57.1(a) (2023) ($1,000
penalty). Because the penalty in Minn. Stat. § 289A.60 falls somewhere in the middle of
penalties imposed in other jurisdictions, we conclude that this factor weighs in favor of a
finding of proportionality.
On balance, we conclude that the penalty imposed for filing a frivolous tax return
under Minn. Stat. § 289A.60, subd. 7, is proportional to the gravity of the offense it is
designed to punish. Accordingly, Minn. Stat. § 289A.60, subd. 7, is not unconstitutional
under the excessive fines clause. 11
11 Finally, the Wendells argue that the Minn. Stat. § 289A.60, subd. 7, violates the Equal Protection Clause. The entirety of their argument is this statement: “Equal protection concerns are thus raised, as well – Does the right to be free from excessive fines apply more to people residing or working in other states than to those living or working in Minnesota?” In response, the Commissioner asserts that “the tax court properly rejected [the claim] as ‘nonsensical.’ ” Without more, the Wendells’ blanket assertion that the frivolous return penalty in Minn. Stat. § 289A.60, subd. 7, violates the Equal Protection Clause fails to overcome the presumption of constitutionality afforded to tax statutes. Therefore, we conclude that Minn. Stat. § 289A.60, subd. 7, is not unconstitutional on equal protection grounds.
20 CONCLUSION
For the foregoing reasons, we affirm the decision of the tax court.
Affirmed.
HENNESY, J., not having been a member of this court at the time of submission,
took no part in the consideration or decision of this case.