Justia Tax Law Opinion Summaries

Articles Posted in Michigan Supreme Court
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Taxpayers for Michigan Constitutional Government and several individuals brought an original action to the Court of Appeals against the state of Michigan; the Department of Technology, Management, and Budget; and the Office of the Auditor General to enforce section 30 of the Headlee Amendment, Const 1963, art 9, which prohibited the state from reducing its budget for total state spending paid to all units of local government, taken as a group, below that proportion in effect in fiscal year 1978–1979. Plaintiffs: (Count I) alleged the state violated section 30 by classifying as state spending paid to local government monies paid to school districts pursuant to Proposal A, Const 1963, art 9, section 11; (Count II) alleged the same assertion as to monies paid to public school academies (PSAs) pursuant to Proposal A and MCL 380.501(1); (Count III) alleged the state improperly classified as section 30 state spending those funds paid to maintain trunk-line roads; and (Count IV) sought a determination that state funds directed to local governments for new state mandates could not be counted toward the proportion of state funds required by section 30. The Court of Appeal dismissed Count III without prejudice upon stipulation of the parties; all parties moved for summary judgment on the remaining claims. The appellate court granted the state defendants motion on Counts I and II; plaintiffs' motion was granted as to Count IV. Finally, the court granted plaintiffs mandamus relief and directed the state to comply with reporting requirements found in MCL 21.235(3) and MCL 21.241. The Michigan Supreme Court concluded the appellate court erred when it held that PSAs were “school districts” as the term was used in the Headlee Amendment. Further, the Court held PSAs were themselves not a “political subdivision of the state” as voters would have understood the term when the Headlee Amendment was ratified. The Court thus reversed the conclusion reached in Part III(C) of the Court of Appeals opinion that PSAs were “school districts” and remanded to the Court of Appeals for its reconsideration of this issue. The Supreme Court vacated the panel’s grant of mandamus in Part III(E), and directed the Court of Appeals to provide further explanation of its decision to grant this extraordinary remedy. View "Taxpayers for Michigan Constitutional Govt. v. Michigan" on Justia Law

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2 Crooked Creek, LLC (2CC) and Russian Ferro Alloys, Inc. (RFA) filed an action against the Cass County Treasurer, seeking to recover monetary damages under the Michigan General Property Tax Act (the GPTA) in connection with defendant’s foreclosure of certain property. In 2010, 2CC purchased property for development, but failed to pay the 2011 real-property taxes and, in 2013, forfeited the property to defendant. From January through May 2013, defendant’s agent, Title Check, LLC, mailed via first-class and certified mail a series of notices to the address listed in the deed. The certified mail was returned as “Unclaimed—Unable to Forward,” but the first-class mail was not returned. Meanwhile, 2CC constructed a home on the property, obtaining a mortgage for the construction from RFA. A land examiner working for Title Check visited the property; determined it to be occupied; and being unable to personally meet with any occupant, posted notice of the show-cause hearing and judicial-foreclosure hearing on a window next to the front door of the newly constructed home. Title Check continued its notice efforts through the rest of 2013 and into 2014, mailing various notices as well as publishing notice in a local newspaper for three consecutive weeks. After no one appeared on 2CC’s behalf at the show-cause hearing or the 2014 judicial-foreclosure hearing, the Cass Circuit Court entered the judgment of foreclosure. The property was not redeemed by the March 31, 2014 deadline, and fee simple title vested with defendant. 2CC learned of the foreclosure a few weeks later. In July 2014, 2CC moved to set aside the foreclosure judgment on due-process grounds. These efforts failed because the circuit court concluded defendant’s combined efforts of mailing, posting, and publishing notice under the GPTA provided 2CC with notice sufficient to satisfy due process. In an unpublished per curiam opinion, the Court of Appeals affirmed. 2CC moved to set aside the foreclosure judgment, filing a separate action in the Court of Claims for monetary damages under MCL 211.78l(1), alleging it had not received any notice required under the GPTA. After a bench trial at the Court of Claims and at the close of 2CC’s proofs, the court granted an involuntary dismissal in favor of defendant, holding, in relevant part, that 2CC had received at least constructive notice of the foreclosure proceedings when the land examiner posted notice on the home. 2CC appealed as of right, and the Court of Appeals also affirmed. Finding no reversible error, the Michigan Supreme Court affirmed too. View "2 Crooked Creek, LLC v. Cass Cty. Treas." on Justia Law

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Rafaeli, LLC, and Andre Ohanessian brought an action against Oakland County, Michigan, and its treasurer, Andrew Meisner, alleging due-process and equal-protection violations as well as an unconstitutional taking of their properties. Rafaeli owed $8.41 in unpaid property taxes from 2011, which grew to $285.81 after interest, penalties, and fees. Defendants foreclosed on Rafaeli’s property for the delinquency, sold the property at public auction for $24,500, and retained all the sale proceeds in excess of the taxes, interest, penalties, and fees. Ohanessian owed approximately $6,000 in unpaid taxes, interest, penalties, and fees from 2011. Like Rafaeli’s property, defendants foreclosed on Ohanessian’s property for the delinquency, sold his property at auction for $82,000, and retained all the proceeds in excess of Ohanessian’s tax debt. Plaintiffs specifically alleged that defendants, by selling plaintiffs’ real properties in satisfaction of their tax debts and retaining the surplus proceeds from the tax-foreclosure sale of their properties, had taken their properties without just compensation in violation of the Takings Clauses of the federal and Michigan Constitutions. The circuit court granted summary disposition to defendants, finding that defendants did not “take” plaintiffs’ properties because plaintiffs forfeited all interests they held in their properties when they failed to pay the taxes due on the properties. The court determined that property properly forfeited under the General Property Tax Act (GPTA), MCL 211.1 et seq., and in accordance with due process is not a “taking” barred by either the United States or Michigan Constitution. In an unpublished per curiam opinion, the Court of Appeals affirmed. The Michigan Supreme Court reversed, finding that defendants’ retention of those surplus proceeds was an unconstitutional taking without just compensation under Article 10, section 2 of the Michigan 1963 Constitution. View "Rafaeli, LLC v. Oakland County" on Justia Law

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Plaintiff TOMRA of North America, Inc., brought two separate actions in the Court of Claims against the Michigan Department of Treasury, seeking a refund for use tax and sales tax that plaintiff had paid on the basis that plaintiff’s sales of container-recycling machines and repair parts were exempt from taxation under the General Sales Tax Act, and the Use Tax Act. Plaintiff moved for summary judgment, seeking a ruling on the question whether plaintiff’s container-recycling machines and repair parts performed, or were used in, an industrial-processing activity. The Court of Claims denied plaintiff’s motion and instead granted summary disposition in favor of defendant, holding that plaintiff’s container-recycling machines and repair parts were not used in an industrial-processing activity and that plaintiff therefore was not entitled to exemption from sales and use tax for the sale and lease of the machines and their repair parts. The Court of Claims found that the tasks that plaintiff’s machines performed occurred before the industrial process began, reasoning that the activities listed in MCL 205.54t(3) and MCL 205.94o(3) were only industrial-processing activities when they occurred between the start and end of the industrial process as defined by MCL 205.54t(7)(a) and MCL 205.94o(7)(a), respectively. Plaintiff appealed, and the Court of Appeals reversed, declining to interpret MCL 205.54t(7)(a) and MCL 205.94o(7)(a) as placing a temporal limitation on the activities listed in MCL 205.54t(3) and MCL 205.94o(3), respectively. To this, the Michigan Supreme Court concurred and affirmed the Court of Appeals. The matter was remanded to the Court of Claims for further proceedings. View "TOMRA of North America, Inc. v. Dept. of Treasury" on Justia Law

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Honigman Miller Schwartz and Cohn LLP filed a petition in the Tax Tribunal, challenging the income tax assessments issued by the city of Detroit for the tax years 2010 through 2014. The firm argued that under MCL 141.623 of the Uniform City Income Tax Ordinance (UCITO), payment for services performed by attorneys working in the city on behalf of clients located outside the city constituted out-of-city revenue for the purpose of calculating income taxes, not in-city revenue as asserted by the City. The tribunal granted partial summary judgment in favor of the City, reasoning that the relevant consideration for calculating gross revenue under MCL 141.623 was where the work was performed, not where the client received the services. The Court of Appeals reversed, concluding that under MCL 141.623, the relevant consideration for determining the percentage of gross revenue from services rendered in the city was where the service itself was delivered to the client, not where the attorney performed the service. In reaching that result, the Court attributed different meanings to the term “rendered” in MCL 141.623 and the term “performed” in MCL 141.622, reasoning that because the Legislature used different words within the same act, it intended the terms to have distinct meanings. The Michigan Supreme Court reversed: when calculating the percentage of gross revenue from services rendered in the city, the focus was on where the service was performed, not on where it was delivered. View "Honigman Miller Schwartz & Cohn, LLP v. City of Detroit" on Justia Law

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Plaintiffs were financing companies that sought tax refunds under Michigan’s bad-debt statute, MCL 205.54i, for taxes paid on vehicles financed through installment contracts. Defendant Department of Treasury (the Department) denied the refund claims on three grounds: (1) MCL 205.54i excluded debts associated with repossessed property; (2) plaintiffs failed to provide RD-108 forms evidencing their refund claims; and (3) the election forms provided by plaintiff Ally Financial Inc. (Ally), by their terms, did not apply to the debts for which Ally sought tax refunds. The Court of Claims and the Court of Appeals affirmed the Department’s decision on each of these grounds. The Michigan Supreme Court held the Court of Appeals erred by upholding the Department’s decision on the first and third grounds but agreed with the Court of Appeals’ decision on the second ground. Accordingly, the Court of Appeals was affirmed as to the second ground, and the matter reversed in all other respects. The case was remanded to the Court of Claims for further proceedings. View "Ally Financial, Inc. v. Michigan State Treasurer" on Justia Law

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Baruch SLS, Inc., a Michigan nonprofit corporation, sought exemptions from real and personal property taxes as a charitable institution under MCL 211.7o and MCL 211.9 for tax years 2010–2012. Petitioner based its request on the fact that it offered an income-based subsidy to qualifying residents of Stone Crest Assisted Living, one of its adult foster care facilities, provided those residents had made at least 24 monthly payments to petitioner. The Tax Tribunal ruled that Stone Crest was not eligible for the exemptions because petitioner did not qualify as a charitable institution under three of the six factors set forth in Wexford Med Group v City of Cadillac, 474 Mich 192 (2006). The Court of Appeals reversed with respect to two of the Wexford factors, but affirmed the denial of the exemptions on the ground that petitioner had failed to satisfy the third Wexford factor because, by limiting the availability of its income-based subsidy, petitioner offered its services on a discriminatory basis. The Michigan Supreme Court found the third factor in the Wexford test excluded only restrictions or conditions on charity that bore no reasonable relationship to a permissible charitable goal. Because the lower courts did not consider Baruch’s policies under the proper understanding of this factor, the Court vacated the Court of Appeals’ and Tax Tribunal’s opinions in part and remanded this case to the Tax Tribunal for further proceedings. View "Baruch SLS, Inc. v. Twp of Tittabawassee" on Justia Law

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The Tax Tribunal erred by concluding that MCL 211.7n, a statute specifically exempting from taxation the real or personal property owned and occupied by nonprofit educational institutions, controlled over the more general statute, MCL 211.9(1)(a), which authorized a tax exemption for educational institutions without regard to the institution’s nonprofit or for-profit status. SBC Health Midwest, Inc., challenged the city of Kentwood’s denial of its request for a personal property tax exemption in the Tax Tribunal. SBC Health, a Delaware for-profit corporation, had requested a tax exemption under MCL 211.9(1)(a) for personal property used to operate the Sanford-Brown College Grand Rapids. The Michigan Supreme Court held the nonprofit requirement in MCL 211.7n did not negate a for-profit educational institution like SBC Health from pursuing an exemption under MCL 211.9(1)(a). The tax exemption outlined in the unambiguous language in MCL 211.9(1)(a) applies to all educational institutions, for-profit or nonprofit, that meet the requirements specified in MCL 211.9(1)(a). View "SBC Health Midwest, Inc. v. City of Kentwood" on Justia Law

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The Supreme Court combined several taxpayers' appeals for the purpose of this opinion. In each, taxpayers owned two (or more) separate S-corporations, and attributed profits and losses from each businesses to their Michigan tax returns, arguing that the multiple businesses were unitary corporations. In each case, plaintiffs owned a Michigan company and a foreign company, but combined the profits and losses from both for credits on their Michigan returns. The Department of the Treasury disallowed the unitary classification. The Supreme Court held that under Michigan tax law, individual taxpayers may combine the profits and losses from unitary flow-through businesses and then apportion that income on the basis of those businesses’ combined apportionment factors. View "Malpass v. Dept. of Treasury" on Justia Law

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Hillsdale County Senior Services, Inc. (HCSS) filed an action against Hillsdale County, seeking mandamus to enforce the terms of a property-tax ballot proposition that provided for the levy of an additional 0.5 mill property tax in Hillsdale County to fund HCSS. The Hillsdale County voters approved the proposition in 2008 to raise funds for the provision of services to older persons by HCSS. Defendant entered into a contract with HCSS from January 1, 2009 through December 31, 2010, but did not levy and spend the full, voter-approved, 0.5 mill. The circuit court granted plaintiffs' writ for mandamus and ordered defendant to levy the entire 0.5 mill for the length of time approved by the voters. In an unpublished opinion, the Court of Appeals reversed the order, concluding that the circuit court lacked subject-matter jurisdiction over the case because the Tax Tribunal had exclusive and original jurisdiction over the matter. HCSS appealed, and the Supreme Court, after its review, agreed that the circuit court lacked subject-matter jurisdiction. Accordingly the Court of Appeals was affirmed. View "Hillsdale County Senior Services Center v. Hillsdale County" on Justia Law