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Contact Information:
Edward S. Kisscorni, CPA
290 Suncrest Court, SW
Grandville, MI 49418

Office: 616/233-0667
Cell: 616/443-6730
Fax: 616/233-0667

Blog: www.EdKisscorni.com/Blog1
Email: Ed@EdKisscorni.com
 



 



 

 Blog 
Monday, June 27 2011

Letters Are Generated from Match With the Internal Revenue Service

 

The Projects Unit of the Michigan Department of Treasury will be mailing 19,679 Notice of Proposed Income Tax Adjustments to taxpayers for the CP2000 (unreported income) IRS match program for the 2007 tax year.

 

The letters will be dated June 30, 2011. The telephone number listed on the letter is (517) 636-4486 for the Call Center.  It is very important that taxpayers or their representative respond to the letter.  Usually a simple explanation is required. 

 

Posted by: Ed Kisscorni AT 02:39 pm   |  Permalink   |  0 Comments  |  Email
Monday, June 20 2011

Constitutionality of Taxing Pension Income and Awarding Exemptions Based on Age or Household Income at Issue

The Michigan Supreme Court has issued an order stating that it would hear arguments regarding the constitutionality of several personal income tax changes that were enacted earlier.  Pension benefits are taxable under certain circumstances and personal exemptions are phased out in some cases.

The particular questions the court will consider are:

  • if reducing or eliminating the statutory exemption for public pension income impairs accrued financial benefits of a pension plan or retirement system of Michigan or its political subdivisions under the state constitution;
  • if reducing or eliminating the statutory exemption for pension income impairs a contract obligation in violation of the federal or state constitutions;
  • if determining eligibility for exemptions on the basis of total household resources, or age and total household resources, creates a graduated income tax in violation of the state constitution; and
  • if determining eligibility for exemptions on the basis of date of birth violates equal protection under the federal or state constitutions.

Oral argument is scheduled for September 7, 2011.

Order, In Re Request for Advisory Opinion Regarding Constitutionality of 2011 PA 38, Michigan Supreme Court, Docket No. 143157, June 15, 2011

 

Posted by: Ed Kisscorni AT 11:10 am   |  Permalink   |  0 Comments  |  Email
Friday, June 17 2011

Which Conveyances Involving a Joint Tenancy Are or Are Not Transfers of Ownership

A revised case memo has been issued by the State Tax Commission that discusses the Michigan Supreme Court's decision in Klooster v. City of Charlevoix, No. 140423 (2011).  The issue addressed by the Supreme Court is regarding the interpretation of MCL 211.27a(7)(h) and specifically which conveyances involving a joint tenancy are or are not transfers of ownership for local property tax assessment purposes.

The Michigan Supreme Court found that the death of the only other joint tenant is a conveyance under the general property tax provisions and does not require a written instrument beyond the deed initially creating the joint tenancy. The court also determined that MCL 211.27a(7)(h) establishes requirements for an exception from the definition of transfer of ownership in three separate and distinct types of conveyances: (1) termination of a joint tenancy; (2) creation of a joint tenancy where the property was not previously held in joint tenancy; or (3) the creation of a successive joint tenancy.

The memo also discusses how to determine if a property should uncap and provides the following conclusions.

Posted by: Ed Kisscorni AT 01:19 pm   |  Permalink   |  0 Comments  |  Email
Thursday, June 16 2011

Recapture Not Required When Taxpayer Did Not Claim CAD

In Comcast Cablevision of the South, Inc. v. Department of Treasury, Michigan Court of Appeals, No. 293433, June 9, 2011, a taxpayer was not required to recapture the capital acquisition deduction (CAD) under the Michigan single business tax (SBT) when that taxpayer had not claimed the CAD on a previously filed return.  Before 2001, the taxpayer did not file SBT returns and, so, did not receive the benefit of the CAD.  In 2001 and 2002, the taxpayer disposed of assets in Michigan.  The Department of Treasury argued that the taxpayer was required to recapture the undepreciated cost of the asset when the asset was disposed of, regardless of whether the taxpayer had taken the CAD with regard to the asset.  The appellate court disagreed, reasoning that the statutory language suggested that the legislative intent indicated that the taxpayer should be required to recapture CAD only where the CAD was taken by the taxpayer in the first place.  In addition, because tax statutes are liberally construed, any ambiguities are resolved in favor of the taxpayer.  Accordingly, the court held that CAD recapture was not required when the taxpayer never took the original deduction.

Posted by: Ed Kisscorni AT 01:16 pm   |  Permalink   |  0 Comments  |  Email
Wednesday, June 15 2011

Presence of Independent Registered Representatives in Michigan Did Not Create Nexus

In Vestax Securities Corp. v. Department of Treasury, Michigan Supreme Court, No. 142535, June 1, 2011, the Supreme Court reversed the appellate court in lieu of granting leave to appeal.  The Michigan Supreme Court ruled that the evidentiary record did not support the appellate court's determination that the independent registered representatives were the taxpayer's agents or that there existed a substantial nexus between Michigan and the taxpayer's business activities sufficient to impose the Single Business Tax.

The appellate court held that a corporation was subject to the SBT because sufficient nexus with Michigan was established by the physical presence in the state of independent registered representatives doing business as agents of the corporation acting on its behalf to solicit requests for securities transactions. Accordingly, the case was remanded so that summary disposition to the taxpayer could be reinstated.

Posted by: Ed Kisscorni AT 01:52 pm   |  Permalink   |  0 Comments  |  Email
Tuesday, June 14 2011

Petitioner Failed to Adequately Answer Interrogatory Questions

The Court of Appeals in Dav-Id Two, L.L.C. v. City of Harper Woods, Michigan Court of Appeals, No. 296882, May 31, 2011 affirmed that the Michigan Tax Tribunal properly dismissed a limited liability company's appeal of a local property tax assessment because of the company's willful noncompliance with the Tax Tribunal's orders.  The company's answers to the interrogatories, which were filed after the Tax Tribunal granted the city's motion to compel, were blatantly nonresponsive to the interrogatory questions.

Rather than dismissing the petition at that time, the Tax Tribunal gave the company another chance when it allowed the company the opportunity to answer the questions, provide the requested documents, and file a motion to set aside the default.  However, the company again did not fully answer the questions and did not provide all of the documents. The Tax Tribunal's decision to enforce its authority was within the range of reasonable and principled outcomes under the circumstances.

 

Posted by: Ed Kisscorni AT 02:32 pm   |  Permalink   |  0 Comments  |  Email
Monday, June 13 2011

Court of Appeals Distinguishes between Taxable Value and True Cash Value

In Chosid v. City of Ann Arbor, Michigan Court of Appeals, No. 292721, May 31, 2011, the Court of Appeals affirmed that the the Michigan Tax Tribunal correctly denied the taxpayers' motion to amend their petition challenging a city's true cash value assessment of their home for the 2008 property tax year because the tribunal lacked subject matter jurisdiction.  The taxpayers claimed the Tax Tribunal had jurisdiction to hear their appeal because they first timely protested the taxable value assessment with the July Board of Review.  The Michigan Court of Appeals noted, however, that a true cash value assessment and a taxable value assessment were two separate and unique assessments.

As the Tax Tribunal explained in its opinion, taxable value was determined through the use of a statutory mathematical calculation, whereas true cash value involved consideration of market prices. The taxpayers were required to timely protest both the taxable value assessment and the true cash value assessment to the Board of Review in order to vest the Tax Tribunal with jurisdiction to review the assessments.  Even if the Tax Tribunal had granted the taxpayers' motion to amend their petition, it would not have vested the Tax Tribunal with jurisdiction because the amendment would not have changed the fact that the board of review did not first consider the true cash value assessment.  Moreover, the taxpayers never claimed that they appealed the true cash value assessment to the board.

Posted by: Ed Kisscorni AT 02:31 pm   |  Permalink   |  0 Comments  |  Email
Friday, June 10 2011

Review of Taxable Values Limited to Tax Years Under Appeal

In MJC/Lotus Group v. Township of Brownstown, Michigan Court of Appeals, Nos. 295732, 296499, and 301043, May 31, 2011, the Court of Appeals ruled the Michigan Tax Tribunal lacked jurisdiction to indirectly review the accuracy of properties' taxable values in years not under appeal that contained unconstitutional additions for public improvements even if the values were used as a starting point to calculate the properties' taxable values in property tax years that were properly under appeal.  The court disagreed with the taxpayers' argument that the Tax Tribunal must correct the constitutional errors, use the corrected taxable values to recalculate the taxable values in the first year under appeal, and similarly adjust the taxable values in subsequent years under appeal.  A determination that a statute was unconstitutional did not nullify the limitation on the Tax Tribunal's jurisdictional authority, that the Tax Tribunal could only review the accuracy of taxable values in years properly under appeal.

The court also rejected the argument that the statutory provision that set forth the mathematical formula used to determine a property's taxable value somehow conferred jurisdiction on the Tax Tribunal to review the prior year's taxable value. Merely using a property's taxable value in the immediately preceding year to perform a calculation was quite different than reviewing the accuracy of the taxable value.  Although the provision called for use of the immediately preceding year's taxable value, it did not extend the jurisdiction of the Tax Tribunal to permit a taxpayer to contest the taxable value from tax years that were not timely appealed.

Furthermore, the court held that public improvements could not be deducted as a loss because there was no loss within the meaning of the statutory provision in these cases.  Rather, in years not properly under appeal, the properties' taxable values included unconstitutional additions for public improvements, but the tribunal lacked jurisdiction to reach back into years not under appeal to correct those constitutional errors.

Posted by: Ed kisscorni AT 02:17 pm   |  Permalink   |  0 Comments  |  Email
Thursday, June 09 2011

Partnership Received Income from Lower Tiered Partnerships

In Preston v. Department of Treasury, Michigan Court of Appeals, No. 295055, May 26, 2011 the Michigan Court of Appeals has held that a limited partnership was unitary, so that the individual partner/taxpayer properly apportioned his income to Michigan under the personal income tax laws. A Tennessee resident, the taxpayer owned a limited partnership that had no business activities of its own, but, rather, received income or losses from lower-tier partnerships. The lower-tier partnerships owned nursing homes; one partnership had two nursing homes in Michigan. On his Michigan personal income tax return, the taxpayer treated all of the income and losses distributed from the limited partnership as business income and apportioned it among all the states in which the limited partnership had lower-tier partnerships. The court noted that to properly apply the apportionment factors there must be some sharing or value exchange beyond mere flow of funds from passive investment or a distinct business operation. The evidence showed that the limited partnership operated as a unitary business, using centralized management and centralized purchasing, which resulted in economies of scale. As such, the limited partnership was unitary and the taxpayer properly apportioned his income to Michigan.

Posted by: Ed Kisscorni AT 01:55 pm   |  Permalink   |  0 Comments  |  Email
Wednesday, June 08 2011

Transfer of Ownership Issue Not Addressed

In Kalanquin v. Township of Richfield, Michigan Court of Appeals, No. 297342, May 19, 2011 the Michigan Tax Tribunal erroneously uncapped the taxable value of property, resulting in a higher local property tax assessment, because it failed to apply the terms of the relevant statutory exception pertaining to a transfer of ownership.  Whether a property's taxable value remained capped was intrinsically linked to whether there was a transfer of ownership, but the Tax Tribunal's decision dealt only with broad generalizations about the exemptions dealing with testamentary transfers and transfers via trust instruments.

The plain terms of the applicable statutory exception clearly provided that a transfer of ownership did not include a transfer pursuant to a judgment or order of a court of record making or ordering a transfer, unless a specific monetary consideration was specified or ordered by the court for the transfer. In this case, the decedent's personal representatives initiated probate proceedings, and the probate court ordered that the property be transferred from the decedent's living trust to the decedent's testamentary trust.  A probate court was clearly a court of record because it had the same powers as the circuit court to hear and determine any matter and make any proper orders to fully effectuate the probate court's jurisdiction and decisions. Therefore, this case did not involve a transfer of ownership. 

Posted by: Ed Kisscorni AT 01:51 pm   |  Permalink   |  0 Comments  |  Email
Tuesday, June 07 2011

Property Owner Failed to Provide Sufficient Documentary Evidence

In Austin v. Township of Liberty, Michigan Court of Appeals, No. 296394, May 17, 2011 a taxpayer who challenged a judgment of the Michigan Tax Tribunal establishing the assessed value of her property for the local property tax years at issue failed to meet her burden of proving the true cash value of the property because she did not provide sufficient documentary evidence to support her contention that the assessment was unlawfully excessive.  The taxpayer presented the Tax Tribunal with market evidence consisting of Standard & Poor's and Case-Shiller home prices indexes and newspaper articles on the economy and the decline in home values generally.  She did not present any evidence regarding what similar properties were sold for on the market or any independent market data to offer in support of her value contentions.

The township, however, applied a sales-comparison valuation approach that yielded the most accurate valuation of the property.  The Tax Tribunal also concluded that the true cash value of the property calculated by the township was correct, and the township presented substantial evidence in support of that conclusion.

In addition, the taxpayer was not entitled to relief based on equal protection grounds.  She did not establish that she was treated differently from any similarly situated property owner.  The statutes in question treated all taxpayers alike.  The statutory formula governing increases in a property's taxable value applied equally to all property owners, and the method for determining taxable value did not vary depending on the person who owned the property or any other classification. 

Posted by: Ed Kisscorni AT 01:47 pm   |  Permalink   |  0 Comments  |  Email
Monday, June 06 2011

Decision Was Not Based on Competent, Material, and Substantial Evidence

In MJC Chesterfield, L.L.C. v. Township of Chesterfield, Michigan Court of Appeals, No. 296975, May 17, 2011 the Michigan Tax Tribunal committed an error of law in its determination of the true cash value, state equalized value, and taxable value of a taxpayer's real property for local property tax purposes because its decision was not based on competent, material, and substantial evidence.

The Tax Tribunal seemingly had a basis to determine taxable values for most parcels of the property by following the applicable statutory formula, but the Michigan Court of Appeals could not substantiate the consumer price indexes used by the Tax Tribunal in performing any of its calculations.  In its opinion and judgment, the Tax Tribunal did not specify what inflationary rate it relied on in making its calculations other than what was represented by the taxpayer.  The court should not be required to guess at the methodology used by the tribunal when it makes its determination. 

Posted by: Ed Kisscorni AT 01:42 pm   |  Permalink   |  0 Comments  |  Email
Friday, June 03 2011

Tax benefit Rule Not Applicable To Case at Hand

In a published opinion, the Michigan Court of Appeals has held that the federal tax benefit rule is incorporated into the Michigan personal income tax law  However, the Court of Appeals held that it was not applicable to the taxpayers' case.  The case was issued earlier as an unpublished decision. 

Sturrus v. Department of Treasury, Michigan Court of Appeals, No. 295403, Unpublished February 8, 2011, Approved for Publication May 19, 2011

Posted by: Ed Kisscorni AT 01:38 pm   |  Permalink   |  Email
Thursday, June 02 2011

Tribunal Barred From Adjusting Taxable Value in a Year Not Under Appeal


The Court of Appeals (COA) ruled Tuesday, May 31st that the Michigan Tax Tribunal does not have jurisdiction to indirectly review the accuracy of a property's taxable value in a year not  under appeal.

The compilation opinion covered three cases where companies in Brownstown, Grand Blanc, and Northville townships were ruled against after the Tribunal changed companies' taxable values in a year not under appeal.  Specifically, the years previous to those appealed were examined for a mathematical formula that related to the tax year in question.

In the case of MJC/Lotus Group v. Township of Brownstown and that of CW Development LLC/Meadow Walk v. Township Grand Blanc, the tribunal had found that it lacked jurisdiction to examine the previous years' values. In Toll Northville LP and Biltmore Wineman LLC v. Township of Northville, the Tribunal reduced a previous year's taxable values in a year not under appeal.

To make all of the cases consistent, the COA affirmed the first two cases and reversed the third, asserting that the Tribunal's review is limited to years under appeal.

Posted by: Ed Kisscorni AT 01:34 pm   |  Permalink   |  0 Comments  |  Email

 

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