Friday, April 29 2011
Court of Appeals Remanded the Uncapping Case Back to the Tax Tribunal
In Ryzyi v. Township of Bagley, Michigan Court of Appeals, No. 295759, April 19, 2011, the Michigan Court of Appeals was unable to resolve the internal inconsistencies in the Tax Tribunal's orders with respect to the uncapping of a residential property's taxable value for the 2005 through 2008 property tax years. Therefore, the court remanded the case to the Tax Tribunal for further clarification as to why it entered any determination of the taxable value when it previously stated that it had yet to determine whether uncapping should have occurred. Further, the court held that the taxpayers were denied due process when they did not have the opportunity to participate in a hearing before the Tax Tribunal.
Thursday, April 28 2011
Tax Tribunal Did Not Erroneously Modify True Cash Value of Property to Purchase Price
The Michigan Court of Appeals ruled in Oza v. Township of West Bloomfield, Michigan Court of Appeals, No. 296228, April 19, 2011, the Michigan Tax Tribunal did not commit an error of law by modifying the 2006 true cash value of taxpayers' residential property for local property tax purposes on the basis of its own evaluation of the credibility of the taxpayers' testimony to the administrative law judge without first conducting a rehearing to determine for itself if their testimony was credible.
The taxpayers' argument was premised on an inaccurate characterization of the tribunal's ruling because the ruling was not based on any credibility determination. Instead, the tribunal found that the actual purchase price for the property was a more reliable indication of the property's value and that the taxpayers' testimony alone was insufficient to show that they failed to act prudently and knowledgably in negotiating the purchase price.
Wednesday, April 27 2011
High Court Asked If the Quill Physical-Presence Nexus Stand Applies to Other Than Sales or Use Taxes
A taxpayer has asked the U.S. Supreme Court whether the Quill physical-presence nexus standard applies to non-sales and use taxes, such as the Washington business and occupation (B&O) tax and, if so, whether such a physical presence was established by two or three visits per year by sales employees to existing customers in Washington. The taxpayer is a New Jersey manufacturer of insulation and vapor barriers with no permanent offices or agents in Washington. Two or three times a year during the tax period at issue, three of the company's sales employees visited major customers in Washington. During these visits, the employees did not solicit sales directly, but they answered questions and provided information about the company's products.
The taxpayer challenged Washington's assessment of B&O tax, arguing that it did not have a substantial nexus with the state. The Washington Supreme Court rejected this challenge, holding that the taxpayer's practice of sending sales representatives to meet with its customers within Washington was significantly associated with its ability to establish and maintain its market. The court noted that there is language in Quill, 504 U.S. 298 (1992), suggesting that the physical presence requirement should be restricted to sales and use taxes. However, it added that, to the extent there is a physical presence requirement outside the sales and use tax context, it can be satisfied by the presence of activities within the state that are substantial and associated with the company's ability to establish and maintain its market within the state.
Lamtec Corp. v. Washington Department of Revenue, U.S. Supreme Court, Dkt. 10-1289, petition for certiorari filed April 19, 2011
Friday, April 22 2011
Michigan Statute References the Federal Social Security Act for Property Tax Exemption
In Wellness Plan v. City of Oak Park, Michigan Court of Appeals, No. 294988, April 14, 2011 a federally-qualified health center (FQHC) look-alike was exempt from local Michigan property taxes because, under the Health Resources and Services Administration's (HRSA) interpretation, a FQHC look-alike met the definition of a FQHC. Under the applicable Michigan statutory provision, a FQHC was explicitly awarded an exemption from real and personal property taxes.
The Michigan statutory provision provided that a "federally-qualified health center " meant that term as defined in section 1396d(l)(2)(B) of the social security act, 42 USC 1396d. The reference to 42 USC 1396d plainly signaled that the federal statute controlled which entity qualified for the FQHC exemption.
The terminology comprising 42 USC 1396d(l)(2)(B)(iii) expressly recognized, or at a minimum strongly suggested, that Congress delegated or entrusted to the HRSA the authority to ascertain which entities qualified as FQHCs. The HRSA declared that both FQHCs and look-alikes were indistinguishable with respect to the requirements they must satisfy, and the FQHCs and look-alikes were distinguishable only to the extent of the federal benefits they actually received.
Under the principles set forth in Chevron, USA, Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984), when Congress explicitly left a gap for a federal agency to fill, the agency was expressly delegated the authority to elucidate a specific provision of the statute by regulation. In this case, 42 USC 1396d and the social security act in general remained silent concerning the specific question whether look-alikes could be considered FQHCs. Therefore, under the principles in Chevron, the Michigan Court of Appeals deferred to the HRSA's interpretation of FQHC requirements.
Friday, April 15 2011
Uncapping of Taxpayer's Property Not Permitted When Dome After the Uncapping Event
In Michigan Properties, LLC v. Meridian Township, Michigan Court of Appeals, Nos. 289174, 289175, and 289176, April 5, 2011, the Michigan Tax Tribunal erred in holding that it was permissible to uncap the taxable values of a taxpayer's real property for the 2007 and 2008 local property tax years when the transfer of ownership of the property occurred in December 2004. The Michigan Court of Appeals acknowledged that the March Board of Review was granted broad statutory power to ensure that the assessment roll complied with the general property tax provisions. However, the court further concluded that while the March Board of Review was permitted to modify the assessed values and tentative taxable values of the property in question, it could not make a modification that would contradict an express property tax provision.The tax year at issue in this case was 2007. Therefore, because the property in question was not transferred in 2006, the unambiguous applicable statutory language provided that the 2007 taxable value was determined by ascertaining the lesser of the property's 2006 taxable value, minus any losses, multiplied by the lesser of 1.05 or the inflation rate, plus all additions and the 2007 state equalized value. The court concluded that if the March Board of Review was statutorily permitted to uncap a property's value for a year that was not immediately subsequent to a year of transfer, the applicable statutory provisions would essentially be rendered meaningless. As a result, taxpayers would be subject to perpetual uncertainty.
Thursday, April 14 2011
County Treasurer Obligated to Sell Tax-Foreclosed Parcel to City
In City of Bay City v. Bay County Treasurer, Michigan Court of Appeals, No. 294556, April 5, 2011, a trial court erred in finding that a county treasurer was not obligated to sell a local Michigan property tax-foreclosed parcel to a city by adding conditions on a "public purpose" that were not found within the clear and unambiguous language of the applicable statutory foreclosure scheme. Under the statute, the state of Michigan had a right of first refusal to purchase any tax-foreclosed properties in the state. If the state declined to purchase a property, the city, village, or township within whose limits the property was located was allowed to purchase it for a public purpose. The county treasurer in this case was the foreclosing governmental unit (FGU) because state law allowed counties to opt-in and replace the state as the FGU and administer foreclosures within their jurisdiction.
At trial, the county treasurer seemingly conceded that the city stated a public purpose for purchasing the tax-foreclosed parcel. The resolution passed by the city authorized it to acquire selected tax-reverted properties for the purpose of stimulating private investment through the redevelopment of property. On appeal, however, the county treasurer argued that the city's public purpose was unclear and that the statutory scheme required that the identified public purpose be capable of being efficiently and expeditiously carried out.
The Michigan Court of Appeals noted that the terms "efficiently" and "expeditiously" were not found in the applicable statute. Accordingly, the trial court should not have added restrictions and conditions into the statute on what constituted a public purpose. Furthermore, the determination of a proper purpose for the purchase of tax delinquent property was a legislative function. Because there was a mandatory statutory duty for the county treasurer to sell the property to the city, and no statutory discretion to decide not to sell the property, the county treasurer was not empowered to make an independent determination as to the municipality's professed public purpose.