Watts Regulator Company v. Department of Treasury

STATE OF MICHIGAN
COURT OF APPEALS
AK STEEL HOLDING CORPORATION, FOR PUBLICATION
February 25, 2016
Plaintiff-Appellant/Cross-Appellee, 9:00 a.m.
v No. 327175
Court of Claims
DEPARTMENT OF TREASURY, LC No. 13-000180-MT
Defendant-Appellee/Cross-
Appellant.
JOHNSON MATTHEY, INC.,
Plaintiff-Appellant/Cross-Appellee,
v No. 327251
Court of Claims
DEPARTMENT OF TREASURY, LC No. 11-000067-MT
Defendant-Appellee/Cross-
Appellant.
EMCO ENTERPRISES, INC.,
Plaintiff-Appellant/Cross-Appellee,
v No. 327313
Court of Claims
DEPARTMENT OF TREASURY, LC No. 12-000152-MT
Defendant-Appellee/Cross-
Appellant.
CARGILL MEAT SOLUTIONS
CORPORATION,
Plaintiff-Appellant/Cross-Appellee,
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v No. 327314
Court of Claims
DEPARTMENT OF TREASURY, LC No. 12-000110-MT
Defendant-Appellee/Cross-
Appellant.
WATTS REGULATOR COMPANY,
Plaintiff-Appellant/Cross-Appellee,
v No. 327315
Court of Claims
DEPARTMENT OF TREASURY, LC No. 13-000040-MT
Defendant-Appellee/Cross-
Appellant.
SLBP HOLDINGS CORPORATION,
Plaintiff-Appellant/Cross-Appellee,
v No. 327316
Court of Claims
DEPARTMENT OF TREASURY, LC No. 13-000003-MT
Defendant-Appellee/Cross-
Appellant.
RENEWAL BY ANDERSON CORPORATION,
Plaintiff-Appellant/Cross-Appellee,
v No. 327317
Court of Claims
DEPARTMENT OF TREASURY, LC No. 13-000002-MT
Defendant-Appellee/Cross-
Appellant.
ANDERSON WINDOWS, INC.,
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Plaintiff-Appellant/Cross-Appellee,
v No. 327318
Court of Claims
DEPARTMENT OF TREASURY, LC No. 12-000153-MT
Defendant-Appellee/Cross-
Appellant.
SID TOOL COMPANY, INC.,
Plaintiff-Appellant/Cross-Appellee,
v No. 327319
Court of Claims
DEPARTMENT OF TREASURY, LC No. 13-000005-MT
Defendant-Appellee/Cross-
Appellant.
MARTIN SPROCKET & GEAR, INC.,
Plaintiff-Appellant/Cross-Appellee,
v No. 327320
Court of Claims
DEPARTMENT OF TREASURY, LC No. 12-000091-MT
Defendant-Appellee/Cross-
Appellant.
UNITED STATIONERS SUPPLY COMPANY,
Plaintiff-Appellant/Cross-Appellee,
v No. 327321
Court of Claims
DEPARTMENT OF TREASURY, LC No. 12-000057-MT
Defendant-Appellee/Cross-
Appellant.
-3-
RODALE, INC.,
Plaintiff-Appellant/Cross-Appellee,
v No. 327322
Court of Claims
DEPARTMENT OF TREASURY, LC No. 12-000048-MT
Defendant-Appellee/Cross-
Appellant.
GOODYEAR TIRE & RUBBER COMPANY,
Plaintiff-Appellant/Cross-Appellee,
v No. 327323
Court of Claims
DEPARTMENT OF TREASURY, LC No. 12-000047-MT
Defendant-Appellee/Cross-
Appellant.
LESLIE CONTROLS, INC.,
Plaintiff-Appellant/Cross-Appellee,
v No. 327324
Court of Claims
DEPARTMENT OF TREASURY, LC No. 12-000055-MT
Defendant-Appellee/Cross-
Appellant.
HOKE, INC.,
Plaintiff-Appellant/Cross-Appellee,
v No. 327325
Court of Claims
DEPARTMENT OF TREASURY, LC No. 12-000054-MT
Defendant-Appellee/Cross-
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Appellant.
SPENCE ENGINEERING, INC.,
Plaintiff-Appellant/Cross-Appellee,
v No. 327326
Court of Claims
DEPARTMENT OF TREASURY, LC No. 12-000052-MT
Defendant-Appellee/Cross-
Appellant.
CIRCOR ENERGY PRODUCTS, INC.,
Plaintiff-Appellant/Cross-Appellee,
v No. 327327
Court of Claims
DEPARTMENT OF TREASURY, LC No. 12-000053-MT
Defendant-Appellee/Cross-
Appellant.
CIRCOR AEROSPACE, INC.,
Plaintiff-Appellant/Cross-Appellee,
v No. 327328
Court of Claims
DEPARTMENT OF TREASURY, LC No. 12-000056-MT
Defendant-Appellee/Cross-
Appellant.
GTECH CORPORATION,
Plaintiff-Appellant/Cross-Appellee,
v No. 327329
Court of Claims
DEPARTMENT OF TREASURY, LC No. 12-000050-MT
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Defendant-Appellee/Cross-
Appellant.
CAMBREX CHARLES CITY, INC.,
Plaintiff-Appellant,
v No. 327330
Court of Claims
DEPARTMENT OF TREASURY, LC No. 13-000060-MT
Defendant-Appellee.
CAMBREX CHARLES CITY, INC.,
Plaintiff-Appellant/Cross-Appellee,
v No. 327331
Court of Claims
DEPARTMENT OF TREASURY, LC No. 12-000044-MT
Defendant-Appellee/Cross-
Appellant.
EMC CORPORATION,
Plaintiff-Appellant/Cross-Appellee,
v No. 327333
Court of Claims
DEPARTMENT OF TREASURY, LC No. 13-000048-MT
Defendant-Appellee/Cross-
Appellant.
EMC CORPORATION,
Plaintiff-Appellant/Cross-Appellee,
v No. 327334
Court of Claims
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DEPARTMENT OF TREASURY, LC No. 12-000040-MT
Defendant-Appellee/Cross-
Appellant.
Before: RIORDAN, P.J., and JANSEN and HOOD, JJ.
PER CURIAM.
I. INTRODUCTION
In these 23 consolidated appeals,1 the plaintiffs are taxpayers who respectively appeal as
of right orders granting summary disposition in each case to defendant, the Michigan Department
of Treasury. Each appeal raises common issues challenging the Court of Claims’ holding that
the mandatory apportionment provision of the Single Business Tax Act (“SBTA”), MCL 208.1
et seq.,2 impliedly repealed a provision of Michigan’s enactment of the Multistate Tax Compact
(“the Compact”), MCL 205.581 et seq.,3 which allowed multistate taxpayers to apportion their
tax base using an equally weighted, three-factor formula set forth in the Compact. Plaintiffs
further contend that an implied repeal of the Compact’s election provision violates the terms of
the Compact—which, according to plaintiffs, was binding on subsequent legislatures—and
violates state and federal constitutional provisions. Additionally, in Docket No. 327251, plaintiff
Johnson Matthey, Inc. (“Johnson Matthey”) also argues that it was entitled to apportion its
Michigan Business Tax (“MBT”) base pursuant to the Compact apportionment formula, and that
the retroactive repeal of the Compact by 2014 PA 282 violated the terms of the Compact and
various constitutional provisions.
In cross-appeals in all of the cases except for Cambrex Charles City, Inc v Dep’t of
Treasury (Docket No. 327330), and as alternative grounds for affirmance in all of the cases,
defendant argues that the SBT is not an income tax under the apportionment election provision
of the Compact and that the retroactive repeal of the Compact by 2014 PA 282 barred plaintiffs
from asserting their respective SBT refund claims.
Because we conclude that the SBTA did not impliedly repeal the Compact apportionment
election provision, we reverse and remand for further proceedings consistent with this opinion.
1
AK Steel Holding Corp v Dep’t of Treasury, unpublished order of the Court of Appeals, entered
November 24, 2015 (Docket Nos. 327175 et al).
2
The entire SBTA was repealed by 2006 PA 325 and replaced with the Michigan Business Tax
Act (“MBTA”). All subsequent references to the SBTA, MCL 208.1 et seq., shall incorporate
this repeal.
3
The Compact was expressly and retroactively repealed by 2014 PA 282, effective beginning
January 1, 2008. All subsequent to the Compact should similarly incorporate this later explicit
repeal.
-7-
II. HISTORICAL BACKGROUND AND PROCEDURAL POSTURE4
Plaintiffs in the present cases are claiming SBT refunds for at least one tax year between
2005 and 2007. In particular, plaintiffs seek to reduce their SBT liability for the tax years at
issue by apportioning their income through the equally weighted, three-factor apportionment
formula provided in the Compact rather than the three-factor formula provided in the SBTA,
which weighted the sales factor of the formula more heavily. As the Court of Claims stated, the
principal issue in these cases is “whether the SBT apportionment formula for the tax years in
question is mandatory or whether an SBT taxpayer may elect to apportion its tax base to
Michigan using the Compact’s equally weighted, three-factor apportionment formula.”
A. THE SBTA
From January 1, 1976, until its repeal effective December 31, 2007, the SBTA governed
the taxation of business activity in Michigan. See 1975 PA 228; 2006 PA 325. Under the
SBTA, a tax base was calculated by beginning with a business’s federal taxable income and then
adding back compensation, depreciation, and other factors, as well as making other adjustments.
See Trinova Corp v Mich Dep’t of Treasury, 498 U.S. 358, 366-367; 111 S. Ct. 818; 112 L. Ed. 2d
884 (1991) (Trinova II). Throughout its history, the SBT was apportioned using a three-factor
formula consisting of payroll, property, and sales. As the Court of Claims explained in its
opinion, this formula originally weighted the three factors equally, in accordance with previous
business taxes in Michigan and the nearly universal practice of other states at the time.
However, in later years, many states moved away from an equally weighted, three-factor formula
by more heavily weighting the sales factor. Following this trend, the Michigan Legislature
abandoned uniform apportionment and began to more heavily weight the sales factor in 1991.
See 1991 PA 77. Subsequent amendments continued to weigh the sales factor even more
heavily. For tax years 1999 through 2005, the sales factor was weighted at 90%, and for 2006
and 2007, the sales factor was weighted at 92.5%. See 1995 PA 283; 2005 PA 295; MCL
208.45a(1)(c), (2)(c), repealed by 2006 PA 325.
B. THE COMPACT
The Compact originally was adopted by seven states in 1967. The Michigan Legislature
adopted the Compact provisions effective in 1970. See 1969 PA 343. While Congress never
approved the Compact, it was upheld against constitutional challenges. See US Steel Corp v
Multistate Tax Comm, 434 U.S. 452; 98 S. Ct. 799; 54 L. Ed. 2d 682 (1978). The Compact
established the Multistate Tax Commission (“the Commission”), but each state remained free to
adopt or reject the Commission’s rules and regulations and remained free to withdraw from the
Compact at any time. See id. at 473. Most relevant to this appeal, Article IV of the Compact set
forth a three-factor apportionment formula that equally weighted property, payroll, and sales
factors. MCL 205.581, Art IV(9). Article III of the Compact provided that a taxpayer subject to
4
In summarizing the historical development of the law in Michigan, we rely heavily on the
Court of Claims’ comprehensive and well-written recitation of the relevant legal background in
its opinion issued in EMCO Enterprises, Inc v Dep’t of Treasury (Docket No. 327313).
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an income tax “in two or more party states may elect to apportion and allocate his income in the
manner provided by the laws of such states . . . without reference to this compact, or may elect to
apportion and allocate in accordance with article IV.” MCL 205.581, Art III(1).
On May 25, 2011, the Michigan Legislature passed 2011 PA 40, which amended the
Compact so that a multistate taxpayer subject to the MBTA or the income tax act of 1967 could
not elect the Compact apportionment formula beginning January 1, 2011. Then, on September
11, 2014, our Legislature enacted 2014 PA 282, which retroactively repealed the Compact
provisions effective January 1, 2008, and mandated the use of a single sales-factor
apportionment formula for the purpose of calculating the MBT and the corporate income tax. As
the Court of Claims explained in EMCO:
PA 282 thus amended the MBT to express the “original intent” of the
Legislature with regard to (1) the repeal of the Compact provisions, (2)
application of the MBT’s apportionment provision under MCL 208.1301, and (3)
the intended effect of the Compact’s election provision under MCL 205.581. The
effect of the amendments, as written, retroactively eliminates a taxpayer’s ability
to elect a three-factor apportionment formula in calculating tax liability under
both the MBT and the [corporate income tax].
C. THE COURT OF CLAIMS’ DECISION
In one of the present appeals, EMCO Enterprises, Inc v Dep’t of Treasury (Docket No.
327313) (“EMCO”), the Court of Claims issued a 29-page opinion addressing the plaintiff’s
claims and granting summary disposition in favor of defendant pursuant to MCR 2.116(I)(2). In
summarizing its decision, the Court of Claims stated:
The Court, in fulfilling its duty to ascertain and apply the intent of the
Legislature, finds that the taxpayer is required to use the apportionment formulas
mandated under the SBTA for the tax years in question, and is not entitled to elect
a different apportionment formula under the Compact. Though the SBT is an
income tax within the meaning of the Compact, future legislatures were not bound
by the policies of the legislature that enacted 1969 PA 343. The purpose of state
tax uniformity as embedded in both the Compact’s apportionment elective
provision by the 1969 legislature, and the SBTA’s equally weighted, three-factor
apportionment formula as originally enacted by the 1975 legislature, is not
consistent with the purpose of later amendments made to apportionment formulas
by the Legislature. Under traditional rules of statutory construction, the
apportionment formula under the SBTA for the tax years in question must control.
More specifically, in its EMCO opinion, the Court of Claims concluded that the Compact was
advisory and did not bind future legislatures, that the Compact was not a binding contract under
Michigan law, and that the Legislature was therefore free to mandate the use of apportionment
formulas that deviated from the formula set forth in the Compact. The court further determined
that the SBTA in effect during the tax years at issue conflicted with the Compact apportionment
election provision by requiring the use of a different apportionment formula from that provided
in the Compact, and that these provisions could not be harmonized. Thus, the Court of Claims
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concluded that the SBTA apportionment provision was controlling and had impliedly repealed
the Compact’s apportionment election provision. Further, the court rejected arguments that
denying plaintiffs the right to elect the Compact’s equally weighted, three-factor apportionment
formula violated the Commerce and Due Process Clauses of the United States Constitution.
In the remaining appeals, the Court of Claims entered essentially identical orders in each
case granting summary disposition in favor of defendant pursuant to MCR 2.116(I)(1) on the
basis of the reasoning in the EMCO opinion.5
III. STANDARD OF REVIEW
A trial court’s decision to grant summary disposition pursuant to MCR 2.116(I)(1) is
reviewed de novo. Gillette Commercial Operations North America & Subsidiaries v Dep’t of
Treasury, ___ Mich App ___, ___; ___ NW2d ___ (2015) (Docket Nos. 325258 et al); slip op at
16, lv pending (“Gillette”). MCR 2.116(I)(1) provides, “If the pleadings show that a party is
entitled to judgment as a matter of law, or if the affidavits or other proofs show that there is no
genuine issue of material fact, the court shall render judgment without delay.”6 We also review
de novo issues involving statutory interpretation as well as constitutional questions. Gillette, ___
Mich App at ___; slip op at 16.
IV. IMPLIED REPEAL OF THE COMPACT ELECTION PROVISION
The central issue in this case is whether the Court of Claims erred in concluding that the
SBTA’s mandatory apportionment provision impliedly repealed the Compact’s apportionment
election provision for the tax years at issue (i.e., 2005, 2006, and 2007). We agree with plaintiffs
5
In Johnson Matthey (Docket No. 327251), the Court of Claims’ order also included language
referencing the Court of Claims’ opinions in two other cases holding that 2014 PA 282 negated
the plaintiffs’ claims for refunds under the MBTA. The two cases were Yaskawa America, Inc v
Dep’t of Treasury (Docket No. 325475), and Ingram Micro, Inc v Dep’t of Treasury (Docket No.
325507), both of which were part of the 50 consolidated appeals that were the subject of this
Court’s recent published opinion in Gillette Commercial Operations North America &
Subsidiaries v Dep’t of Treasury, ___ Mich App ___; ___ NW2d ___ (2015) (Docket Nos.
325258 et al), lv pending, which is discussed later in this opinion.
6
The Court of Claims’ opinion in EMCO stated that it was granting summary disposition to
defendant pursuant to MCR 2.116(I)(2), which states: “If it appears to the court that the opposing
party, rather than the moving party, is entitled to judgment, the court may render judgment in
favor of the opposing party.” However, the orders in the other 22 consolidated cases stated that
summary disposition was granted to defendant pursuant to MCR 2.116(I)(1). The issues raised
in these cases concern questions of law. As such, whether defendant is entitled to summary
disposition is a matter of law. Thus, we conclude that review under MCR 2.116(I)(1) is proper.
It is well settled that regardless of the subrule cited by the trial court in granting summary
disposition, this Court will review the court’s order under the correct subrule. See Spiek v Dep’t
of Transp, 456 Mich. 331, 338 n 9; 572 NW2d 201 (1998).
-10-
and hold that the SBTA did not impliedly repeal the Compact’s apportionment election
provision.
A. BACKGROUND LAW
“When interpreting statutory language, our obligation is to ascertain the legislative intent
that may reasonably be inferred from the words expressed in the statute.” Koontz v Ameritech
Servs, Inc, 466 Mich. 304, 312; 645 NW2d 34 (2002). “Courts must give effect to every word,
phrase, and clause in a statute, and must avoid an interpretation that would render any part of the
statute surplusage or nugatory.” Id. Statutory language must be read in context, and undefined
words are to be given their plain and ordinary meanings. MidAmerican Energy Co v Dep’t of
Treasury, 308 Mich. App. 362, 370; 863 NW2d 387 (2014). “If the language of the statute is
unambiguous, the Legislature must have intended the meaning clearly expressed, and the statute
must be enforced as written.” Sun Valley Foods Co v Ward, 460 Mich. 230, 236; 596 NW2d 119
(1999).
In general, “repeals by implication are disfavored.” Wayne Co Prosecutor v Dep’t of
Corrections, 451 Mich. 569, 576; 548 NW2d 900 (1996). As such, it is generally presumed “that
if the Legislature had intended to repeal a statute or statutory provision, it would have done so
explicitly.” Id. When presented with a claim that two statutes conflict, a court must endeavor to
construe the statutes harmoniously if possible. Id.
[R]epeal by implication will not be found if any other reasonable construction
may be given to the statutes, such as reading in pari materia two statutes that
share a common purpose or subject, or as one law, even if the two statutes were
enacted on different dates and contain no reference to one another. However, a
repeal of a statute may be inferred in two instances: (1) where it is clear that a
subsequent legislative act conflicts with a prior act; or (2) when a subsequent act
of the Legislature clearly is intended to occupy the entire field covered by a prior
enactment. [City of Kalamazoo v KTS Indus, Inc, 263 Mich. App. 23, 36-37; 687
NW2d 319 (2004) (citations omitted; emphasis added).]
Similarly, the Michigan Supreme Court previously explained, “[I]f the provisions of a
later statute are so at variance with those of an earlier act, or a part thereof, that both cannot be
given effect[,] then the later enactment control[s] and there is a repeal by implication. In such a
case it must be presumed that the legislature intended a repeal.” Jackson v Mich Corrections
Comm, 313 Mich. 352, 357; 21 NW2d 159 (1946). “Repeals by implication are not favored, but
do happen, and, when clear, must be given effect.” Id. (quotation marks and citation omitted).
Therefore, “if there is such repugnance that both [statutes] cannot operate, then the last
expression of the legislative will must control.” Id. at 356. “[T]he latter act operates to the
extent of the repugnancy, as a repeal of the first . . . .” Id. at 357 (quotation marks and citation
omitted). See also Metro Life Ins Co v Stoll, 276 Mich. 637, 641; 268 N.W. 763 (1936) (“It is the
rule that where two laws in pari materia are in irreconcilable conflict, the one last enacted will
control or be regarded as an exception to or qualification of the prior statute.”). Notably, “when
faced with two statutes that bear on the same subject, our task is not to discern the most logical
construction of the more recent statute, but to labor to permit the survival of both enactments if
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possible.” House Speaker v State Admin Bd, 441 Mich. 547, 571-572; 495 NW2d 539 (1993)
(quotation marks and citation omitted).
B. ANALYSIS
During the tax years at issue in this case, § 41 of the SBTA provided that “[a] taxpayer
whose business activities are taxable both within and without this state, shall apportion his tax
base as provided in this chapter.” MCL 208.41 (emphasis added). As previously discussed, for
tax years prior to 1991, the SBTA prescribed an equally weighted, three-factor apportionment
formula comprised of property, payroll, and sales factors. Beginning with the 1991 tax year,
however, the SBTA required the sales factor to be weighted more heavily than the other factors,
and the weight of the sales factor was further increased in later tax years by legislative
amendments to the act. See MCL 208.45; MCL 208.45a. For the 2005 tax year, the sales factor
was weighted at 90%. MCL 208.45a(1)(c). For the 2006 and 2007 tax years, the sales factor
was weighted at 92.5%. MCL 208.45a(2)(c).
To the contrary, during the tax years at issue, the Compact’s apportionment election
provision stated:
(1) Any taxpayer subject to an income tax whose income is subject to
apportionment and allocation for tax purposes pursuant to the laws of a party state
or pursuant to the laws of subdivisions in 2 or more party states may elect to
apportion and allocate his income in the manner provided by the laws of such
state or by the laws of such states and subdivisions without reference to this
compact, or may elect to apportion and allocate in accordance with Article IV . . .
. [MCL 205.581, Art III(1).]
As explained supra, article IV of the Compact set forth an equally weighted, three-factor
apportionment formula comprised of property, payroll, and sales factors. MCL 205.581, Art
IV(9). Thus, the Compact election “provision allow[ed] a taxpayer subject to an income tax to
elect to use a party state’s apportionment formula or the Compact’s [equally weighted,] three-
factor formula.” Int’l Business Machines Corp v Dep’t of Treasury, 496 Mich. 642, 653; 852
NW2d 865 (2014) (opinion by VIVIANO, J.) (“IBM”).
The Court of Claims correctly concluded that an apparent conflict exists between the
language of the SBTA and the Compact election provision. Under § 41 of the SBTA, a
multistate taxpayer “shall apportion his tax base as provided in this chapter.” MCL 208.41
(emphasis added). “The Legislature’s use of the word ‘shall’ generally indicates a mandatory
directive, not a discretionary act.” Smitter v Thornapple Twp, 494 Mich. 121, 136; 833 NW2d
875 (2013). The SBTA apportionment formula for the tax years at issue weighted the sales
factor more heavily than the other factors, MCL 208.45a(1)(c), (2)(c), and there is no language in
the SBTA indicating that a taxpayer was permitted to use an apportionment formula other than
the one provided in that chapter. By contrast, the language of the Compact allowed a taxpayer to
choose the equally weighted, three-factor formula in the Compact. MCL 205.581, Arts III(1),
IV(9). As the Court of Claims explained, “[b]ecause the SBTA during the tax years in question
mandates the use of one apportionment formula, while the Compact provides for the
discretionary use of another apportionment formula, the statutes are in apparent conflict.”
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However, we disagree with the Court of Claims that the two statutes cannot be
harmonized. Rather, we find persuasive the reasoning utilized in the lead opinion in IBM, 496
Mich. at 651-662 (opinion by VIVIANO, J.),7 concerning the interplay between the MBT and the
Compact. Consistent with that analysis, we hold that it is possible to reasonably construe § 41 of
the SBTA and Articles III(1) and IV(9) of the Compact in harmony with each other.
The lead opinion explained,
[W]here the intent of the Legislature is claimed to be unclear, it is our duty to
proceed on the assumption that the Legislature desired both statutes to continue in
effect unless it manifestly appears that such view is not reasonably plausible.
Repeals by implication will be allowed only when the inconsistency and
repugnancy are plain and unavoidable. We will construe statutes, claimed to be in
conflict, harmoniously to find any other reasonable construction than a repeal by
implication. Only when we determine that two statutes are so incompatible that
both cannot stand will we find a repeal by implication. [IBM, 496 Mich. at 651-
652 (opinion by VIVIANO, J.) (quotation marks and footnotes omitted).]
In attempting to find a harmonious construction, courts should consider all statutes addressing
the same general subject matter as comprising part of one system. Id. at 652, citing Rathbun v
Michigan, 284 Mich. 521, 544; 280 N.W. 35 (1938). “Further, ‘[s]tatutes in pari materia, although
in apparent conflict, should, so far as reasonably possible, be construed in harmony with each
other, so as to give force and effect to each . . . .’ ” IBM, 496 Mich. at 652 (opinion by VIVIANO,
J.) (alterations in original), quoting Rathbun, 284 Mich. at 544.
It is a well-established rule that in the construction of a particular statute, or in the
interpretation of its provisions, all statutes relating to the same subject, or having
the same general purpose, should be read in connection with it, as together
constituting one law, although they were enacted at different times, and contain
no reference to one another. The endeavor should be made, by tracing the history
of legislation on the subject, to ascertain the uniform and consistent purpose of the
legislature, or to discover how the policy of the legislature with reference to the
subject-matter has been changed or modified from time to time. In other words,
in determining the meaning of a particular statute, resort may be had to the
established policy of the legislature as disclosed by a general course of legislation.
With this purpose in view therefore it is proper to consider, not only acts passed at
the same session of the legislature, but also acts passed at prior and subsequent
sessions. [IBM, 496 Mich. at 652-653 (opinion by VIVIANO, J.), quoting Rathbun,
284 Mich. at 543-544 (block quote omitted).]
7
Because a majority of the justices in IBM did not agree on the implied-repeal analysis contained
in the lead opinion, the lead opinion’s holding on that issue is not binding authority. See Burns v
Olde Discount Corp, 212 Mich. App. 576, 582; 538 NW2d 686 (1995); Felsner v McDonald
Rent-A-Car, Inc, 193 Mich. App. 565, 569; 484 NW2d 408 (1992).
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Thus, the Compact’s election provision and § 41 of the SBTA should be construed together as
statutes in pari materia because they share, like the Compact and the MBTA, “the common
purpose of setting forth the methods of apportionment of a taxpayer’s multistate business
income.” IBM, 496 Mich. at 653 (opinion by VIVIANO, J.).8
In reviewing the statutes in pari materia, we conclude that the following reasoning,
employed by the lead opinion in IBM with regard to the MBTA and the Compact, is equally
applicable in this case:
[T]he Compact’s election provision, by using the terms “may elect,” contemplates
a divergence between a party state’s mandated apportionment formula and the
Compact’s own formula—either at the time of the Compact’s adoption by a party
state or at some point in the future. Otherwise, there would be no point in giving
taxpayers an election between the two. In fact, reading the Compact’s election
provision as forward-looking—i.e., contemplating the future enactment of a state
income tax with a mandatory apportionment formula different from the
Compact’s apportionment formula—is the only way to give meaning to the
provision when it was enacted in Michigan. Viewed in this light, the [MBT’s]
mandatory apportionment language may plausibly be read as compatible with the
Compact’s election provision.
8
We recognize that the rule of in pari materia “does not permit the use of a previous statute to
control by way of former policy the plain language of a subsequent statute . . . .” Voorhies v
Faust, 220 Mich. 155, 157; 189 N.W. 1006 (1922). However, neither the IBM lead opinion, nor
our opinion in this case, effectively resolves the conflict between the MBT or the SBT in favor of
the Compact, i.e., the earlier enacted statute, or permits the utilization of the apportionment
provision in the Compact in such a way that contradicts the plain language of a subsequent
statute. Rather, as explained in this opinion, we conclude that the apportionment provisions of
the SBTA and the Compact can be read harmoniously.
Additionally, we recognize that “the interpretive aid of the doctrine of in pari materia can
only be utilized in a situation where the section of the statute under examination is itself
ambiguous.” Tyler v Livonia Pub Sch, 459 Mich. 382, 392; 590 NW2d 560 (1999), citing
Voorhies, 220 Mich. at 157; see also In re Indiana Mich Power Co, 297 Mich. App. 332, 344; 824
NW2d 246 (2012). However, this principle does not preclude the use of the doctrine in this case.
Although the language of § 41 of the SBTA arguably may be unambiguous when read in
isolation, the interpretation and construction of that section—or a determination of the
applicability of that section on its own—is not at issue here. Rather, we are inescapably required
to consider the effect of MCL 208.41 on the Compact election provision, which, in this case,
clearly requires consideration of the statutes together in the context of the statutory scheme as a
whole. Cf. KTS Indus, Inc, 263 Mich. App. at 36-37 (“[R]epeal by implication will not be found
if any other reasonable construction may be given to the statutes, such as reading in pari materia
two statutes that share a common purpose or subject, or as one law, even if the two statutes were
enacted on different dates and contain no reference to one another.”).
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* * *
Because the Legislature gave no clear indication that it intended to repeal
the Compact’s election provision, we proceed under the assumption that the
Legislature intended for both to remain in effect. After reading the statutes in
pari materia, we conclude that a reasonable construction exists other than a repeal
by implication. Under Article III(1) of the Compact, the Legislature provided a
multistate taxpayer with a choice between the apportionment method contained in
the Compact or the apportionment method required by Michigan’s tax laws. If a
taxpayer elects to apportion its income through the Compact, Article IV(9)
mandates that the taxpayer do so using a three-factor apportionment formula.
Alternatively, if the taxpayer does not make the Compact election, then the
taxpayer must use the apportionment formula set forth in Michigan’s governing
tax laws. In this case, IBM’s tax base arose under the [MBT]. Had it not elected
to use the Compact’s apportionment formula, IBM would have been required to
apportion its tax base consistently with the mandatory language of the [MBT]—
i.e., through the [MBT’s] sales-factor apportionment formula. Thus, we believe
the [MBT] and the Compact are compatible and can be read as a harmonious
whole. [Id. at 656-658 (opinion by VIVIANO, J.).]
In the context of the instant case, the Legislature provided plaintiffs with a choice,
through Article III(1) of the Compact, between the apportionment method contained in the
Compact or the apportionment method required by the SBTA. If a taxpayer elects to apportion
its income as provided by the Compact, Article IV(9) requires that the taxpayer do so using a
three-factor apportionment formula. Alternatively, if the taxpayer does not elect the
apportionment method under the Compact, then the taxpayer is required to use the apportionment
formula set forth in the applicable tax laws. There is a reasonable construction that harmonizes
the two statutes. Thus, the presumption against implied repeals has not been rebutted here. See
id. at 660 (“[B]ecause there is a presumption against implied repeals, it is our task to determine if
there is any other reasonable construction that would harmonize the two statutes and avoid a
repeal by implication.” [Footnotes omitted.]).
The lead opinion in IBM also found that its conclusion that the Compact apportionment
provision was not impliedly repealed was consistent with the development of Michigan tax law,
concluding that a “review of the statutes in pari materia indicates a uniform and consistent
purpose of the Legislature for the Compact’s election provision to operate alongside Michigan’s
tax acts.” Id. at 656. The opinion noted that the Legislature, despite its full knowledge of the
Compact, left its election provision intact while repealing or amending other acts that were
inconsistent with provisions concerning business taxation. Id. at 657. Likewise, the opinion also
noted the Legislature’s retroactive amendment of the Compact effective January 1, 2011, which
did not apply to all tax years subject to the MBTA, in ascertaining the Legislature’s intent to
keep the Compact’s provisions intact despite the enactment and amendment of the MBTA. Id. at
658-659 (discussing 2011 PA 40).
We acknowledge the enactment of 2014 PA 282, which provides, in pertinent part:
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Enacting section 1. 1969 PA 343, MCL 205.581 to 205.589, is repealed
retroactively and effective beginning January 1, 2008. It is the intent of the
legislature that the repeal of 1969 PA 343, MCL 205.581 to 205.589, is to express
the original intent of the legislature regarding the application of section 301 of
the Michigan business tax act, 2007 PA 36, MCL 208.1301, and the intended
effect of that section to eliminate the election provision included within section 1
of 1969 PA 343, MCL 205.581, and that the 2011 amendatory act that amended
section 1 of 1969 PA 343, MCL 205.581, was to further express the original
intent of the legislature regarding the application of section 301 of the Michigan
business tax act, 2007 PA 36, MCL 208.1301, and to clarify that the election
provision included within section 1 of 1969 PA 343, MCL 205.581, is not
available under the income tax act of 1967, 1967 PA 281, MCL 206.1 to 206.713.
[Emphasis added.]
Through 2014 PA 282, the Legislature clarified—contrary to the lead opinion’s conclusion in
IBM—that it had intended to impliedly repeal the Compact when it enacted the MBT through
2007 PA 36, and that this intent was further revealed by its subsequent express repeal of the
Compact election provision, effective January 1, 2011, under 2011 PA 40.
However, in clarifying its legislative intent, the Legislature included nothing in 2014 PA
282 regarding the validity of the Compact election provision for multistate taxpayers subject to
the SBTA before the effective date of the MBTA. In so doing, the Legislature left open the
application of the Compact apportionment formula during tax years subject to the SBTA. If it so
chose, the Legislature easily could have closed this door. Instead, it chose not to, and it is not
our role to second guess its reasoning for not doing so. Thus, we conclude, consistent with the
lead opinion’s analysis in IBM, that
the Legislature, in enacting [and amending] the [SBTA], had full knowledge of
the Compact and its provisions. Even with such knowledge on [multiple]
occasions, the Legislature left the Compact’s election provision intact [with
regard to the SBTA]. By contrast, the Legislature expressly repealed or amended
other inconsistent acts regarding the taxation of businesses[, including its repeal
of the Compact with regard to tax years subject to the MBTA]. Had the
Legislature believed that the Compact’s election provision no longer had a place
in Michigan’s tax system or conflicted with the purpose of the [SBTA], it could
have taken the necessary action to eliminate the election provision. [IBM, 496
Mich. at 657 (opinion by VIVIANO, J.).]
See also id. at 659 n 59 (“ ‘[T]he later express repeal of a particular statute may be some
indication that the legislature did not previously intend to repeal the statute by implication.’ ”),
quoting 1A Singer, Sutherland Statutory Construction (7th ed), § 23:11, p 485.
Accordingly, especially in light of the Legislature’s clear expressions of intent regarding
the express and implied repeal of the Compact in conjunction with the enactment of the MBTA,
and the lack of any indication that § 41 of the SBTA was intended to repeal the apportionment
election provision in the Compact, we assume that the Legislature intended for the Compact
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election provisions to remain in effect alongside the SBTA. See id. at 657. Additionally, as
explained supra, the statutes may be reasonably construed in harmony. See id.
Thus, because a “repeal by implication will not be found if any other reasonable
construction may be given to the statutes,” KTS Indus, 263 Mich. App. at 36-37 (emphasis
added), the Court of Claims erred in concluding that the Compact’s election provision was
impliedly repealed by the SBTA.
V. THE BINDING NATURE OF THE COMPACT AND OTHER CONSTITUTIONAL
CHALLENGES
Next, plaintiffs raise a series of arguments regarding whether the Compact was binding
on subsequent legislatures, whether the Compact was superior to statutory law, and whether an
implied repeal of the Compact would violate various state and federal constitutional provisions.
These claims are rooted in the Court of Claims’ conclusion that the Compact was impliedly
repealed by the SBTA. As explained supra, we hold that the SBTA did not impliedly repeal the
Compact’s apportionment election provision. Thus, to the extent that plaintiffs assert that a
repeal of the apportionment election provision of the Compact was impermissible or violated
state and federal constitutional provisions, we need not address those claims in light of our
holding.9 Furthermore, we reject any of plaintiffs’ additional claims that are not rooted in the
assumption that the SBTA impliedly repealed the election apportionment provisions of
Compact—and, instead, concern whether the Compact is binding and superior to Michigan
statutory law—for the reasons provided by this Court in reviewing the validity of 2014 PA 282
in Gillette, which are discussed next in the context of Johnson Matthey’s challenges to 2014 PA
282.
9
Plaintiffs also claim that the Court of Claims erred in determining that plaintiffs’ constitutional
claims were untimely. For the reasons stated above, we need not address this issue.
Nevertheless, we note that the Court of Claims correctly held that plaintiffs’
constitutional challenges were untimely. Pursuant to MCL 205.27a(7), a taxpayer claiming a
refund on the basis that a Michigan tax statute is invalid under, or is preempted by, a
constitutional provision or federal law must claim a refund within 90 days of the date set for
filing a return. See also American States Ins Co v Dep’t of Treasury, 220 Mich. App. 586, 589,
591; 560 NW2d 644 (1996). Plaintiffs are seeking refunds premised in part on claims that an
implied repeal of the Compact election provision would violate various constitutional provisions.
As such, they are claiming refunds based on arguments that a tax statute is preempted by
constitutional provisions. Accordingly, under MCL 205.27a, they were required to file those
claims within 90 days after the date set for filing a return.
The Court of Claims found that plaintiffs did not assert their constitutional claims within
the 90-day period, and plaintiffs fail to dispute that finding. Additionally, some plaintiffs do not
even address the Court of Claims’ ruling that the constitutional claims were untimely. To the
extent that these plaintiffs fail to address the basis of the Court of Claims’ decision, we deem this
argument abandoned. Derderian v Genesys Health Care Sys, 263 Mich. App. 364, 381; 689
NW2d 145 (2004).
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VI. JOHNSON MATTHEY’S CHALLENGES TO 2014 PA 282
In Docket No. 327251, Johnson Matthey challenges the validity and constitutionality of
2014 PA 282 (hereinafter referred to as “PA 282”), which the Legislature enacted to
retroactively withdraw Michigan from the Compact. We reject Johnson Matthey’s claims.
Johnson Matthey’s numerous state and federal constitutional challenges are identical in
all relevant respects to the arguments raised by some of the plaintiffs in Gillette. In that case, we
concluded that the Compact was not a binding contract on this state but was merely an advisory
agreement, such that PA 282’s removal of Michigan from membership in the Compact was not
prohibited. Gillette, ___ Mich App at ___; slip op at 18-19, 21-22. Further, “the Compact
contained no features of a binding interstate compact and, therefore, was not a compact
enforceable under the Contract Clause.” Id. at ___; slip op at 20. Accordingly, the Compact was
not superior to statutory law, and it was “subject to Michigan law concerning the interpretation
of statutes.” Id. at ___; slip op at 18-19, 22. See also id. at ___ n 4; slip op at 19 n 4.
Furthermore, a retroactive repeal of the Compact did not violate the Contract Clauses of either
the federal or state Constitutions. Id. at ___; slip op at 19, 21.
We also held that “the retroactive repeal of the Compact did not violate the Due Process
Clauses of either the state or federal [C]onstitutions or Michigan’s rules regarding retrospective
legislation. Nor did it violate the terms of the Compact itself.” Id. at ___; slip op at 22.
Additionally, we held that the enactment of PA 282 “did not violate the separation of powers
provision of the state Constitution[.]” Id. at ___; slip op at 30. Moreover, “PA 282 does not
violate the Commerce Clause” of the United States Constitution. Id. at ___; slip op at 32. We
also concluded that “the enactment of 2014 PA 282 did not violate the Title-Object Clause, the
Five-Day Rule, or the Distinct-Statement Clause of the Michigan Constitution.” Id. at ___; slip
op at 34. Likewise, we rejected the plaintiffs’ change-in-purpose challenge. Id. at ___; slip op at
38.
In sum, we rejected in Gillette the same arguments that Johnson Matthey raises here.
Thus, Johnson Matthey’s constitutional challenges to PA 282 are devoid of merit.
VII. WHETHER THE SBT IS AN INCOME TAX
Defendant argues on cross-appeal that the Court of Claims erred in concluding that the
SBT is an income tax for purposes of the Compact election provision, such that the court
erroneously concluded that the SBTA was subject to, and therefore conflicted with, the
Compact’s election provision. We disagree.
As stated supra, the Compact’s apportionment election provision previously stated:
(1) Any taxpayer subject to an income tax whose income is subject to
apportionment and allocation for tax purposes pursuant to the laws of a party state
or pursuant to the laws of subdivisions in 2 or more party states may elect to
apportion and allocate his income in the manner provided by the laws of such
state or by the laws of such states and subdivisions without reference to this
compact, or may elect to apportion and allocate in accordance with Article IV . . .
. [MCL 205.581, Art III(1) (emphasis added).]
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The Compact defined an “income tax” as “a tax imposed on or measured by net income
including any tax imposed on or measured by an amount arrived at by deducting expenses from
gross income, 1 or more forms of which expenses are not specifically and directly related to
particular transactions.” MCL 205.581, Art II(4). As such, “[u]nder the Compact’s broad
definition, a tax is an income tax if the tax measures net income by subtracting expenses from
gross income, with at least one of the expense deductions not being specifically and directly
related to a particular transaction.” IBM, 496 Mich. at 663 (opinion by VIVIANO, J.).
The SBT fits this definition. The SBT base is calculated by using federal taxable income
as a starting point and then making various additions and subtractions as required by the act.
Mobil Oil Corp v Dep’t of Treasury, 422 Mich. 473, 497, 497 n 15; 373 NW2d 730 (1985). See
also Trinova Corp v Dep’t of Treasury, 433 Mich. 141, 150; 445 NW2d 428 (1989) (Trinova I),
aff’d 498 U.S. 358; 111 S. Ct. 818; 112 L. Ed. 2d 884 (1991); Lear Corp v Dep’t of Treasury, 299
Mich. App. 533, 537; 831 NW2d 255 (2013) (“The SBTA unambiguously stated that ‘[tax base]
means business income’ and ‘[business income] means federal taxable income.’ MCL 208.9(1);
MCL 208.3(3).” [Alterations in original.]). Federal taxable income, for purposes of the SBT,
consists of gross income minus deductions allowed by the federal tax code. See MCL 208.5(3),
citing 26 USC 63. See also 26 USC 63(a); Mobil Oil, 422 Mich. at 497 n 15. In general,
deductions from gross income permitted by the federal tax code include ordinary and necessary
expenses that are paid or incurred while running a business. See 26 USC 162(a); Mobil Oil, 422
Mich. at 489.
As the Court of Claims explained, pursuant to MCL 208.9(2) through (6), “[t]he SBT . . .
expands the income tax base by adding back some, but not all, of the federal expense deductions
taken to arrive at federal taxable income.” The Court of Claims further explained:
For example, except for compensation, most ordinary and necessary business
expenses incurred in the carrying on of a trade or business are deducted from
gross income to arrive at federal taxable income, but are not added back as part of
the SBT tax base. The resulting tax is thus in part measured by “an amount
arrived at by deducting expenses from gross income” for purposes of defining
income tax under the Compact. That some expenses such as compensation are
also added back to the SBT tax base before the tax is calculated does not alter the
conclusion that the SBT is “imposed on or measured by an amount arrived at by
deducting expenses from gross income, 1 or more forms of which expenses are
not specifically and directly related to particular transactions.” Under the plain
language of the Compact, it is therefore an income tax for Compact purposes.
[Citations omitted.]
See also Trinova I, 433 Mich. at 150-151 (explaining some of the adjustments to “business
income,” i.e., federal taxable income, which must be made when calculating the SBT base); id. at
149 n 6 (noting that the SBTA prescribed “various exclusions, exemptions, and industry-specific
adjustments”).
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As the Court of Claims reasoned, some ordinary business expenses, such as insurance
premiums, rent,10 and research and development costs, which are deducted when calculating
federal taxable income,11 are not added back when determining the SBT base. See MCL 208.9
(prescribing the adjustments to federal taxable income that are required in calculating the SBT
base). Consistent with the Compact’s definition, these expenses are not specifically and directly
related to particular transactions. See MCL 205.581, Art II(4).
Therefore, because the SBT is calculated by beginning with federal taxable income,
which consists of gross income minus federally allowed deductions, and because some
deductions allowed under the federal tax code are not added back to the SBT base, it follows that
the SBT is measured by an amount arrived at through the deduction of expenses from gross
income. Thus, the Court of Claims properly determined that the SBTA qualifies as an income
tax as defined by the Compact because it “tax[ed] a variation of net income[.]” IBM, 496 Mich.
at 667 (opinion by VIVIANO, J.).
As defendant emphasizes on appeal, we recognize that a provision of the SBTA stated
that “[t]he tax levied under this section and imposed is upon the privilege of doing business and
not upon income.” MCL 208.31(3). However, a similar provision of the MBTA provided that
“[t]he [modified gross receipts tax (“MGRT”)] levied and imposed under this section is upon the
privilege of doing business and not upon income or property,” MCL 208.1203(2), and this
provision did not prevent the Michigan Supreme Court from unanimously concluding in IBM
that the MGRT was an “income tax” under the broad definition of that term in the Compact, see
IBM, 496 Mich. at 665-667 (opinion by VIVIANO, J.); id. at 664 (“Although this statement
indicates that the MGRT is not a tax upon income under the [M]BTA, we must still determine
whether the MGRT fits under the broad definition of ‘income tax’ under the Compact.”); id. at
668 (ZAHRA, J., concurring); id. at 672 n 3 (MCCORMACK, J., dissenting).
As the lead opinion in IBM explained, the Court was not required to “put a definitive
label on the MGRT, a task with which commentators have struggled.” Id. at 663 n 70 (opinion
by VIVIANO, J.). Commentators had characterized the MGRT as many types of taxes other than
an income tax, but the lead opinion in IBM emphasized that its task was merely to determine
whether the MGRT constituted an “income tax” under the Compact’s definition. Id.; see also id.
at 667 n 85 (“Our holding is limited to the determination that the MGRT is included within the
Compact definition of ‘income tax.’ . . . [W]e do not need to reach the issue whether the MGRT,
generally, is an income tax.”).
Likewise, here, the labels that have been used to describe the SBT in various contexts are
not dispositive of whether the SBT qualifies as an income tax under the broad Compact
10
Although most rental expenses are not added back to the SBT base, MCL 208.9(4)(h) required
a federal deduction for rent attributable to certain “lease back” transactions to be added back to
the SBT base.
11
See 26 USC 162(a) (allowing federal deductions for ordinary and necessary expenses paid or
incurred in carrying on a trade or business).
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definition of that term. Although both the United States Supreme Court and the Michigan
Supreme Court have characterized the SBT as a value-added tax that measures business activity
rather than an income tax, see Trinova II, 498 U.S. at 367; Trinova I, 433 Mich. at 149, those
characterizations were not made in the context of the Compact definition of an income tax.
Similarly, even though this Court treated the SBT as a value-added tax rather than an income tax
in determining the application of a federal statute barring state taxes imposed on or measured by
net income derived from interstate commerce, when the only activity in the state involved
solicitation of orders, see Gillette Co v Dep’t of Treasury, 198 Mich. App. 303, 307-311; 497
NW2d 595 (1993), that analysis was not conducted under the Compact definition of an income
tax. The issue here is limited to the application of the Compact definition; no definitive
characterization of the SBT is required, just as no definitive characterization of the MGRT was
required in IBM in order to conclude that it was an income tax under the Compact. See IBM, 496
Mich. at 663 n 70 (opinion by VIVIANO, J.).
VIII. WHETHER PLAINTIFFS’ CLAIMS ARE BARRED BY THE RETROACTIVE
REPEAL OF THE COMPACT BY 2014 PA 282
Lastly, defendant argues on cross-appeal that the explicit repeal of the Compact by PA
282 extends to tax years 2005, 2006, and 2007, and taxpayers subject to the SBTA during those
years. In particular, defendant contends that the language of PA 282 stating that the Compact “is
repealed retroactively and effective beginning January 1, 2008,” means that no taxpayer may
attempt to elect the Compact apportionment method following that date. We disagree.
Defendant’s contention is contravened by the language of the enacting section of PA 282:
Enacting section 1. 1969 PA 343, MCL 205.581 to 205.589, is repealed
retroactively and effective beginning January 1, 2008. It is the intent of the
legislature that the repeal of 1969 PA 343, MCL 205.581 to 205.589, is to express
the original intent of the legislature regarding the application of section 301 of the
Michigan business tax act, 2007 PA 36, MCL 208.1301, and the intended effect
of that section to eliminate the election provision included within section 1 of
1969 PA 343, MCL 205.581, and that the 2011 amendatory act that amended
section 1 of 1969 PA 343, MCL 205.581, was to further express the original
intent of the legislature regarding the application of section 301 of the Michigan
business tax act, 2007 PA 36, MCL 208.1301, and to clarify that the election
provision included within section 1 of 1969 PA 343, MCL 205.581, is not
available under the income tax act of 1967, 1967 PA 281, MCL 206.1 to 206.713.
This language plainly indicates that the Compact was expressly repealed beginning January 1,
2008. The SBTA was no longer in effect on January 1, 2008, as it was repealed effective
December 31, 2007. See 2006 PA 325. Moreover, the enacting section of PA 282 indicates that
the Legislature’s explicit repeal of the Compact was intended to effectuate the Legislature’s
original intent concerning the application of MCL 208.1301, a section of the MBTA, and the
intended effect of that section to eliminate the apportionment election provision of the Compact.
The enacting section of PA 282 also explains that 2011 PA 40 was intended to further express
the Legislature’s original intent with regard to the application of MCL 208.1301 and to clarify
that the Compact apportionment election provision was not available under the income tax act of
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1967. There is no language in the enacting section that suggests a legislative intent to repeal the
Compact with respect to tax years affected by the SBTA or with respect to SBT taxpayers. See
Sun Valley Foods, 460 Mich. at 236 (“If the language of the statute is unambiguous, the
Legislature must have intended the meaning clearly expressed, and the statute must be enforced
as written.”).
Moreover, the lead and concurring opinions in IBM also support the conclusion that PA
282’s explicit repeal of the Compact effective January 1, 2008 did not extend to tax years before
2008. In IBM, our Supreme Court analyzed 2011 PA 40, which contained language similar to
the enacting section of PA 282. 2011 PA 40 stated that “beginning January 1, 2011[,]” a
taxpayer subject to the MBTA or the income tax act of 1967 could not elect to use the Compact
apportionment formula. The lead and concurring opinions concluded that the Compact election
provision was in effect for the 2008 tax year at issue in IBM, implicitly finding that the
“beginning January 1, 2011” language in 2011 PA 40 denotes tax years beginning in 2011. See
IBM, 496 Mich. at 659 (opinion by VIVIANO, J.); id. at 668-670 (ZAHRA, J., concurring). See also
Gillette, ___ Mich App at ___; slip op at 17 (“In IBM, the Supreme Court held that through 2011
PA 40 the Legislature created a window (from January 1, 2008 until January 1, 2011) wherein
relevant taxpayers could still utilize the apportionment option available under Article IV of the
Compact.”). Likewise, the language in PA 282 stating that the Compact was repealed “effective
beginning January 1, 2008,” is properly understood as indicating that the express repeal of the
Compact applies to tax years beginning on January 1, 2008.
Thus, the express repeal of the Compact by PA 282 does not apply to the SBTA.
IX. CONCLUSION
We agree with plaintiffs that the trial court erred in concluding that the SBTA impliedly
repealed the Compact election provision. However, the rest of plaintiffs’ claims on appeal, as
well as defendant’s alternative grounds for affirmance, lack merit.
Reversed and remanded for further proceedings consistent with this opinion. We do not
retain jurisdiction. No costs, an issue of public importance being involved. MCR 7.219(A).
/s/ Michael J. Riordan
/s/ Kathleen Jansen
/s/ Karen M. Fort Hood
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