W Soule & Company v. Department of Treasury

STATE OF MICHIGAN
COURT OF APPEALS
W SOULE & COMPANY, UNPUBLISHED
January 17, 2017
Plaintiff-Appellant,
v No. 329213
Court of Claims
DEPARTMENT OF TREASURY, LC No. 14-000163-MT
Defendant-Appellee.
Before: O’CONNELL, P.J., and MARKEY and MURRAY, JJ.
PER CURIAM.
Plaintiff, W Soule & Company (Soule), appeals as of right an order granting summary
disposition to defendant, Department of Treasury (the Department), regarding Soule’s claim for a
tax refund. We affirm.
I. FACTUAL AND PROCEDURAL BACKGROUND
Soule provides process integration, fabrication, and other services to industrial and
commercial enterprises. In March 2011, the Department indicated that it would audit Soule’s
sales and use tax from March 2007 through February 2011. The Department’s preliminary
findings indicated that Soule, due to inadequate internal controls, had failed to report a total of
about $1.3 million of sales and use tax liability. The Department provided Soule with a Notice
of Preliminary Audit Determination on January 24, 2014. Soule agreed that its internal controls
were inadequate and, in response to the Department’s Notice, on February 7, 2014, Soule signed
the Notices, checked the boxes indicating that it agreed with the preliminary determination, and
paid the deficiencies.
However, on February 6, 2014, 2014 PA 3 went into effect. 2014 PA 3 abolished the
statute of limitations tolling period for deficiency actions during audit periods. On April 2, 2014,
Soule requested a refund for the taxes it had paid for March 2007 through December 2009.
Soule asserted that the four-year statute of limitations now barred the Department from
collecting taxes for that period because it was not entitled to limitations tolling during its audit
period.
After additional communications failed to resolve the dispute, Soule filed this action in
the Court of Claims. Soule moved for summary disposition under MCR 2.116(C)(10), asserting
that the statute of limitations barred the Department from collecting taxes from March 2007
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through December 2009. The Department counter-asserted that it was entitled to summary
disposition under MCR 2.116(I) because 2014 PA 3 did not apply retroactively and, even if it did
apply, it barred Soule’s claim for refund.
The Court of Claims ultimately entered judgment in favor of the Department, concluding
that the Department improperly collected the taxes but that Soule was not entitled to a refund
because its claim for refund was untimely under 2014 PA 3. Soule now appeals.
II. STANDARDS OF REVIEW
This Court reviews de novo the trial court’s decision on a motion for summary
disposition. Maiden v Rozwood, 461 Mich. 109, 118; 597 NW2d 817 (1999). MCR 2.116(I)(1)
provides that “[i]f 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.” This Court reviews de novo the interpretation and application
of tax statutes. Ford Motor Co v Woodhaven, 475 Mich. 425, 438; 716 NW2d 247 (2006).
III. ANALYSIS
Soule’s contentions rest on its primary argument that changes to the statute of limitations
under 2014 PA 3 barred the Department from retaining the taxes Soule paid for the March 2007
to December 2009 period. We disagree.
When the Department initiated its audit, the prior version of MCL 205.27a(2) provided a
four-year statute of limitations for both tax assessments and claims for refund, but MCL
205.27a(3) tolled the limitations period for the duration of a state audit. 2011 PA 304. However,
MCL 205.27a, as amended by 2014 PA 3, provides a four-year statute of limitations but does not
include such a tolling period:
(2) A deficiency, interest, or penalty shall not be assessed after the expiration of 4
years after the date set for the filing of the required return or after the date the
return was filed, whichever is later. The taxpayer shall not claim a refund of any
amount paid to the department after the expiration of 4 years after the date set for
the filing of the original return. A person who has failed to file a return is liable
for all taxes due for the entire period for which the person would be subject to the
taxes. If a person subject to tax fraudulently conceals any liability for the tax or a
part of the tax, or fails to notify the department of any alteration in or
modification of federal tax liability, the department, within 2 years after discovery
of the fraud or the failure to notify, shall assess the tax with penalties and interest
as provided by this act, computed from the date on which the tax liability
originally accrued. The tax, penalties, and interest are due and payable after
notice and hearing as provided by this act.
(3) The statute of limitations shall be extended for the following if the period
exceeds that described in [MCL 205.27a(2)]:
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(a) The period pending a final determination of tax through audit, conference,
hearing, and litigation of liability for federal income tax and for 1 year after that
period.
(b) The period for which the taxpayer and the state treasurer have consented to in
writing that the period be extended.
(c) The period described in [MCL 205.21(6) and (7)] or pending the completion
of an appeal of a final assessment.
(d) A period of 90 days after a decision and order from an informal conference, or
a court order that finally resolves an appeal of a decision of the department in a
case in which a final assessment was not issued prior to appeal. [Emphasis
added.]
Soule argues that it is entitled to a tax refund because MCL 205.27a(2)’s limitations
period had expired by the time the Department collected the tax. However, the plain language of
that section applies the four-year period to assessments. The Department did not assess taxes for
that period in this case: rather, it issued a preliminary statement that it intended to issue an
assessment, and Soule responded by paying the taxes owed. Because Soule paid the amount
owed, the deficiency was resolved and the Department never issued an assessment. Accordingly,
MCL 205.27a(2), which prohibits the Department from assessing deficiencies, does not apply to
the facts in this case.
We conclude that the statute of limitations did not render the Department’s collection of
taxes unlawful in this case. Simply put, the Department never issued an assessment because
Soule voluntarily paid its tax deficiency. Given our conclusion on this issue, we need not decide
whether the Court of Claims correctly decided that Soule’s claim for refund was untimely
because it reached the correct result for the wrong reason. See Gleason v Mich Dep’t of Transp,
256 Mich. App. 1, 3; 662 NW2d 822 (2003).
We affirm.
/s/ Peter D. O’Connell
/s/ Jane E. Markey
/s/ Christopher M. Murray
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