Gillette Commercial Operations North America & Subsidiaries v. Department of Treasury

Order Michigan Supreme Court
Lansing, Michigan
June 24, 2016 Robert P. Young, Jr.,
Chief Justice
152598-610 Stephen J. Markman
Brian K. Zahra
Bridget M. McCormack
David F. Viviano
Richard H. Bernstein
SONOCO PRODUCTS COMPANY, Joan L. Larsen,
Justices
Plaintiff-Appellant,
v SC: 152598
COA: 325505
Court of Claims: 14-000142-MT
DEPARTMENT OF TREASURY,
Defendant-Appellee.
____________________________________/
ANHEUSER-BUSCH, INC.,
Plaintiff-Appellant,
v SC: 152599
COA: 325506
Court of Claims: 13-000111-MT
DEPARTMENT OF TREASURY,
Defendant-Appellee.
____________________________________/
INGRAM MICRO, INC.,
Plaintiff-Appellant,
v SC: 152600
COA: 325507
Court of Claims: 11-000035-MT
DEPARTMENT OF TREASURY,
Defendant-Appellee.
____________________________________/
RENAISSANCE LEARNING, INC.,
Plaintiff-Appellant,
v SC: 152601
COA: 325508
Court of Claims: 12-000093-MT
DEPARTMENT OF TREASURY,
Defendant-Appellee.
____________________________________/
RENAISSANCE LEARNING, INC.,
Plaintiff-Appellant,
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v SC: 152602
COA: 325509
Court of Claims: 13-000006-MT
DEPARTMENT OF TREASURY,
Defendant-Appellee.
____________________________________/
AK STEEL HOLDING CORPORATION,
Plaintiff-Appellant,
v SC: 152603
COA: 325510
Court of Claims: 13-000074-MT
DEPARTMENT OF TREASURY,
Defendant-Appellee.
____________________________________/
ADVANCE/NEWHOUSE
PARTNERSHIP,
Plaintiff-Appellant,
v SC: 152604
COA: 325511
Court of Claims: 14-000067-MT
DEPARTMENT OF TREASURY,
Defendant-Appellee.
____________________________________/
BIG LOTS STORES, INC.,
Plaintiff-Appellant,
v SC: 152605
COA: 326039
Court of Claims: 13-000133-MT
DEPARTMENT OF TREASURY,
Defendant-Appellee.
____________________________________/
KIMBALL INTERNATIONAL
MARKETING, INC.,
Plaintiff-Appellant,
v SC: 152606
COA: 326075
Court of Claims: 14-000300-MT
3
DEPARTMENT OF TREASURY,
Defendant-Appellee.
____________________________________/
NINTENDO OF AMERICA, INC.,
Plaintiff-Appellant,
v SC: 152607
COA: 326080
Court of Claims: 14-000253-MT
DEPARTMENT OF TREASURY,
Defendant-Appellee.
____________________________________/
ADVANCE/NEWHOUSE
PARTNERSHIP,
Plaintiff-Appellant,
v SC: 152608
COA: 326110
Court of Claims: 14-000206-MT
DEPARTMENT OF TREASURY,
Defendant-Appellee.
____________________________________/
FLUOR CORPORATION
AND SUBSIDIARIES,
Plaintiff-Appellant,
v SC: 152609
COA: 326123
Court of Claims: 14-000292-MT
DEPARTMENT OF TREASURY,
Defendant-Appellee.
____________________________________/
T-MOBILE USA, INC.
AND SUBSIDIARIES,
Plaintiff-Appellant,
v SC: 152610
COA: 326136
Court of Claims: 14-000276-MT
4
DEPARTMENT OF TREASURY,
Defendant-Appellee.
____________________________________/
On order of the Court, the application for leave to appeal the September 29, 2015
judgment of the Court of Appeals is considered, and it is DENIED, because we are not
persuaded that the questions presented should be reviewed by this Court.
MARKMAN, J. (dissenting).
I respectfully dissent from this Court’s order denying leave to appeal. Because the
issues raised here are, in my judgment, of considerable constitutional significance as to
matters affecting the tax policy and procedures, the fiscal and business environments, and
the jurisprudence of this state, I believe they ought to be heard by the highest court of this
state, and would thus grant leave to appeal.
In 1970, Michigan joined the Multistate Tax Compact (the Compact) when the
Legislature enacted MCL 205.581. See 1969 PA 243, effective July 1, 1970. Article
III(1) of the Compact provided that certain multistate taxpayers may elect to apportion
income to Michigan for tax purposes “in the manner provided by the laws of such state,”
i.e., the laws of Michigan, or else “in accordance with Article IV.” MCL 205.581, art
III(1). Article IV provided for an apportionment formula based on property, payroll, and
sales factors. MCL 205.581, art IV(9). Effective January 1, 2008, the Legislature
enacted the Michigan Business Tax Act (BTA), MCL 208.1101 et seq., 2007 PA 36,
which provided that “each tax base established under this act shall be apportioned in
accordance with this chapter.” MCL 208.1301(1). Finally, MCL 208.1301(2) of the
BTA provided for an apportionment formula based solely on a sales factor.
At issue in IBM v Dep’t of Treasury, 496 Mich. 642 (2014), was whether the
plaintiff multistate taxpayer could elect to use the Compact’s three-factor apportionment
formula for its 2008 Michigan taxes or whether, as the defendant Department of Treasury
argued, it was required to use the BTA’s sales-factor-only apportionment formula. This
Court ruled in IBM that the taxpayer could elect to use the Compact’s apportionment
formula. The lead opinion stated that “the Legislature had [not] repealed the Compact’s
election provision by implication when it enacted the BTA,” id. at 645 (opinion by
VIVIANO, J.), while the concurring opinion left that question open, id. at 668 (ZAHRA, J.,
concurring). In response, the Legislature enacted 2014 PA 282, which repealed the
Compact “retroactively and effective beginning January 1, 2008.” 2014 PA 282,
enacting § 1. As a consequence, 2014 PA 282 retroactively repealed the Compact
election provision beginning that date as well. Several multistate taxpayers challenged
the constitutionality of 2014 PA 282, but the Court of Claims and the Court of Appeals
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upheld the statute against those challenges. Gillette Commercial Operations North
America & Subsidiaries v Dep’t of Treasury, 312 Mich. App. 394, 401 (2015). In my
judgment, the following four constitutional questions that are raised in the taxpayers’
various applications for leave to appeal warrant thorough consideration by this Court by a
grant of leave to appeal:
First, is 2014 PA 282 consistent with federal due-process protections, US Const,
Ams V and XIV, given that the retroactivity period here of six years and nine months
arguably exceeds “a modest period of retroactivity,” United States v Carlton, 512 U.S. 26,
32 (1994), and that one justice has observed in this same regard in a frequently cited
statement that “[a] period of retroactivity longer than the year preceding the legislative
session in which the law was enacted would raise . . . serious constitutional questions,”
id. at 38 (O’Connor, J., concurring in the judgment)?
Second, is 2014 PA 282 consistent with the Michigan Due Process Clause, Const
1963, art 1, § 17, when that clause is worded differently than the federal Due Process
Clause and we have held that the state provision may afford heightened protections, Delta
Charter Twp v Dinolfo, 419 Mich. 253, 276 n 7 (1984), because “while the Federal
supreme court is the final judge of violations of the Federal Constitution, the decision of
the Supreme Court of this State is final on the question of whether or not a State statute
conflicts with the State Constitution,” People v Victor, 287 Mich. 506, 514 (1939)?
Third, does 2014 PA 282 violate either the federal or state prohibitions against the
impairment of contracts, US Const, art I, § 10, cl 1; Const 1963, art 1, § 10, because the
Compact is a reciprocal and binding interstate compact between the signatory states with
respect to which a retroactive withdrawal from the Compact amounts to an
unconstitutional impairment of that contract, see Gillette Co v Franchise Tax Bd, 62 Cal
4th 468, 477-479 (2015)?
Fourth, does 2014 PA 282 violate the Separation of Powers Clause, Const 1963,
art 3, § 2, because by prescribing the outcomes of those cases that were held in abeyance
pending IBM, as well as IBM itself, the Legislature has impinged on the judicial power,
Const 1963, art 6, § 1, and contravened the principle that “the Legislature cannot dictate
to the courts what their judgments shall be, or set aside or alter such judgments after they
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have been rendered,” People ex rel Sutherland v Governor, 29 Mich. 320, 325-326
(1874); cf. Plaut v Spendthrift Farm, Inc, 514 U.S. 211, 217-218 (1995) (“Congress has
exceeded its authority by requiring the federal courts to exercise ‘[t]he judicial Power of
the United States,’ U. S. Const., Art. III, § 1, in a manner repugnant to the text, structure,
and traditions of Article III.”)?
As the United States Supreme Court has recognized, “[T]he power to tax involves
the power to destroy[.]” M‘Culloch v Maryland, 17 US (4 Wheat) 316, 431 (1819). This
power must be kept subject to proper constitutional limits, particularly when, as here, a
heightened tax burden has been imposed not on future business activities, but on business
activities planned and undertaken many years ago. While I do not yet have any firm
belief regarding the constitutionality of 2014 PA 282, I do have a firm belief that before
retroactive tax burdens such as those set forth in this law are imposed, the arguments of
affected taxpayers deserve consideration by the highest court of this state. Accordingly, I
respectfully dissent and would grant leave to appeal.
VIVIANO, J., joins the statement of MARKMAN, J.
I, Larry S. Royster, Clerk of the Michigan Supreme Court, certify that the
foregoing is a true and complete copy of the order entered at the direction of the Court.
June 24, 2016
a0621
Clerk