Michigan ~ Corporate Income Tax: Treasury Updates Status of MTC Apportionment Litigation in Michigan

CCH Tax Day Report

The Michigan Department of Treasury has issued a Treasury Update that provides a history and status update of the various appeals concerning the apportionment election under the Mulitstate Tax Compact. The Treasury Update states the appellate courts have largely resolved the various issues surrounding the election as well as the Compact’s retroactive repeal by PA 282 of 2014.

On November 21, 2016, several taxpayer petitioned the U.S. Supreme Court to grant certiorari review of the several of the cases from the consolidated Gillette case (TAXDAY 2016/11/30, S.5). The petitions asked the U.S. Supreme Court to review Michigan appellate court decisions that rejected challenges to the retroactive repeal of the Multistate Tax Compact and its apportionment formula. The Michigan Supreme Court has denied leave to appeal, allowing the legal effect of the decisions to stand. In Gillette Commercial Operations North America & Subsidiaries, et al. v. Department of Treasury, Michigan Court of Appeals, No. 325258, September 29, 2015 (TAXDAY 2015/10/01, S.11), the court ruled that PA 282’s retroactive effect did not violate the Due Process Clauses of either the federal or Michigan’s constitutions and that the Compact was lawfully repealed. The taxpayers had no right to elect apportionment under the Compact in lieu of the method prescribed under the Michigan Business Tax.

More recently, on November 23, 2016, the Michigan Supreme Court dismissed the Michigan Attorney General’s motion to intervene in the second round of litigating involving IBM (TAXDAY 2016/12/01, S.15). The Michigan Attorney General had sought to intervene in the litigation, but was denied as the Department of Treasury did not file an appeal and the Michigan Attorney General did not represent an aggrieved party. The Treasury Update states this order likely ends the IBM litigation. Prior to this order, the last stage of the IBM litigation had been at the Michigan Court of Appeals, which ruled that IBM itself, for its Michigan Business Tax 2008 tax year, was entitled to the election under the Multistate Tax Compact. International Business Machines Corp. v. Department of Treasury, Michigan Court of Appeals, No. 327359, July 21, 2016 (TAXDAY 2016/07/25, S.11).

Treasury Update, volume 2, issue 1, Michigan Department of Treasury, November 30, 2016

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