Ruling in corporate tax case could cost Michigan $1 billion
Source: Detroit Free Press
In a strongly worded post-opinion motion seeking a rehearing of the case, Attorney General Bill Schuette said the ruling “results in the state potentially owing a budget-busting aggregated tax refund in the hundreds of millions of dollars (not including interest) to mostly out of state corporations.
“The total cost to the state is likely to exceed $1 billion,” Schuette said.
In a separate motion asking the court to stay its July 14 ruling “as to all lower court cases,” Schuette said there are 134 similar cases filed by out-of-state corporations pending in Michigan courts and “there are thousands of potential claims.”
"Kurt Weiss, a spokesman for the Michigan Department of Technology, Management and Budget, said officials believe most of the impact would be felt in the 2014-15 fiscal year, though there could also be some impact this year.
“It creates a significant problem for the budget,” Weiss said. “We are hoping for reconsideration from the Supreme Court.”
It’s exceedingly rare for the Michigan Supreme Court to reverse one of its own opinions in a rehearing.
And an appeal to the federal courts does not appear to be an option, said Dave Murray, a spokesman for Gov. Rick Snyder.
Justice David Viviano wrote the majority opinion in favor of IBM, joined by Justices Michael Cavanagh and Stephen Markman, and by Justice Brian Zahra, who wrote a separate concurring opinion. Justice Bridget McCormack wrote the dissent, siding with the Treasury Department, joined by Chief Justice Robert Young Jr. and Justice Mary Beth Kelly.
At the heart of the cases are state corporate income tax policies designed to favor local corporations at the expense of out-of-state corporations, Hamilton said. The Michigan Business Tax, which was repealed in 2011, required out-of-state corporations to calculate their taxes based on sales, she said."
Read more: http://www.freep.com/article/20140808/NEWS06/308080035/taxes-michigan-corporations-supreme-court
And there more:
But since 1970, Michigan has belonged to a multistate compact, intended to make things easier for out-of-state corporations by providing greater uniformity in how they calculate their tax bills for various states. Under the compact, corporations have the option of using the state tax law or an optional formula that considers not just sales but the property and payroll a corporation has in a given state.
Weighing in those factors generally leads to lower income tax bills for out-of-state corporations, Hamilton said. And companies such as IBM went to court to argue they could still use that method, despite what the MBT said.
The Michigan Court of Claims sided with the Michigan Treasury Department, as did the Michigan Court of Appeals.
But the Michigan Supreme Court has ruled for IBM, rejecting the state’s arguments that Michigan implicitly repealed the alternative tax calculating option set out in the compact when it passed the MBT — even if it didn’t explicitly do so.
The Legislature “had full knowledge of the compact and its provisions” when it passed the MBT, yet it “left the compact’s election provision intact.”
In fact, the court suggested the Legislature shot itself in the foot in 2011, when it amended the legislation related to the multistate compact to say that starting Jan. 1, 2011, out-of-state corporations no longer had the option of using the three-pronged method to calculate state taxes.
If the Legislature hadn’t wanted corporations to use that method in 2008, 2009 or 2010, it would have made the 2011 statute fully retroactive, the court said.
And some Michiganders were FOOLED into voting for Proposal 1 of 2014, cutting the Business Tax on Equipment just on Tuesday. What a joke on them, this is.
Oh yea, the Media just let out details on this important case which have been in the Michigan Court System for a minute now, this morning....
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