Judge upholds law shielding state from $1.1B payout
LANSING — Michigan lawmakers were entitled to correct a mistake by retroactively clarifying that they never intended for out-of-state companies to lessen their tax liability under a 2007 business tax overhaul, a judge ruled.
Court of Claims Chief Judge Michael Talbot, in rulings made public Monday and issued Friday, upheld a law signed by Gov. Rick Snyder in September. It was designed to ensure that the state is not forced to pay $1.1 billion in refunds in about 134 cases similar to one in which the Michigan Supreme Court in July said IBM was owed roughly $6 million.
The law's approval was a "valid, constitutional act" and one that prevented taxpayers from getting a "windfall that the Legislature did not mean to provide," Talbot writes.
He issued two opinions in cases brought by Santa Ana, California-based Ingram Micro Inc. and its subsidiaries and Waukegan, Illinois-based Yaskawa America Inc. — along with 98 related orders. Fifty-four cases were dismissed, 21 were partially tossed and 25 remain open, said John Nevin, spokesman for the high court.
In 2007, Michigan scrapped the Single Business Tax in favor of the Michigan Business Tax.
IBM later challenged the state Treasury Department's ruling that it was not allowed to determine certain tax bases using a formula from a 1970 multi-state tax compact. IBM sought a $6 million refund; the state said it should have been about $1.2 million under the MBT.
The Supreme Court agreed with IBM, ruling 4-3 that legislators never expressly repealed multistate businesses' ability to calculate their taxes via the compact.
A 2011 tax rewrite subsequently replaced the MBT with the Corporate Income Tax. The legal dispute involves certain companies' tax liability in the 2008, 2009 and 2010 tax years.
Before he signed the law making clear the Legislature's intent, Snyder had said the state should not take chances. Treasury has estimated that it could have been forced to pay back $1.1 billion plus interest because of the high court's decision five months ago.