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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




Thursday, October 31 2013

Business Process Review Initiative to Achieve Efficiency

The Department of Treasury has sent employees to training to be a facilitators for value street mapping designed to pinch out waste.  Their first assignment is the Hearings Division.  The goal is to settle more cases and to move cases through the Hearing Division faster.  The Business Tax Advisory Group (BTAG) was briefed by Daniel Greenberg, Administrator of the Hearings Division.

Approximately 40% of cases in the Hearings Division are settled without an Informal Conference.  Treasury wants to increase this number.  A Request for an Informal Conference is first docketed and then sent to the taxing unit for review.  Previously, an assignment to Hearing Referee and scheduling a date for Informal Conference was not done until the taxing unit completed its review.  Going forward, the Hearings Division will immediately, upon receipt of a Request for an Informal Conference, assign a docket number, a Hearing Referee and schedule a date for Informal Conference. 

The Revenue Act requires a Request for Informal Conference to include, in a written notice within 60 days of the date of the notice of intent to assess, a statement of the contested amounts and an explanation of the dispute and payment of the uncontested portion of the assessment. 

Because Treasury desires to settle cases at the front end before an Informal Conference, the Request for Informal Conference might be accompanied with a Brief (written appeal) and relevant exhibits.  In the future, Treasury will be providing to the Taxpayer and/or the Taxpayer's Representative, a copy of the Audit Report of Findings.  Therefore, the Taxpayer and/or the Taxpayer's Representative, will be in a better position to challenge an audit determination or assessment.

Once a case is assigned to a Hearing Referee, the Informal Conference is conducted in an informal manner.  The taxpayer can represent them self, or be represented by someone/any one else.  An executed Power of Attorney form is required.  The Hearing Referee can consider personal testimony (including second hand or hearsay testimony) from the taxpayer or anyone else.  Also, the Hearing Referee can consider affidavits or any other written documentation including the taxpayers records, invoices, agreements and other legal documents.

There is no record made of an Informal Conference although the taxpayer can request such.  The Informal Conference may be a telephonic conference or a video conference.

The hearing referees are internal to the Department of Treasury.  The Hearing Referees are independent and they prepare a written recommendation based on Michigan law after a review of the facts in the case. 

The recommendations of the Hearing Referee are first reviewed by the Administrator acting on behalf of the Treasurer.  If the Administrator believes the recommendation of the Hearing Referee is not in conformity with Treasury policy, it is sent to Tax Policy for review.  A rebuttal (over ride of the Hearing Referee recommendation) must be approved by the Deputy Treasurer for Tax Administration.

The Administrator will issue a Decision and Order of Determination which will include a copy of the Hearing Referee recommendation and rebuttal if applicable.     

Posted by: Ed kisscorni AT 01:00 pm   |  Permalink   |  Email
Wednesday, October 30 2013

Sales of Drugs and Supplies Sold in Conjunction With Professional Services by a Veterinarian Were Taxable Based on Purchase Price

In Southkent Veterinary Hospital, PLLC v. Department of Treasury, Michigan Tax Tribunal, No. 448604, August 28, 2013 an assessment for Michigan Sales Tax imposed on a veterinary clinic was partially upheld because the substance of the transactions on the relevant invoices reflected the sale of tangible personal property, not services.

Utilizing the "incidental to service" test in Catalina Marketing Sales Corp v. Department of Treasury, 470 Mich 13; 678 NW2d 619 (2004), the Tax Tribunal found that for seven of the disputed invoices, the buyers were seeking to purchase tangible personal property at the time of the transactions and were not at the office to seek veterinary services.  Though the receptionist may have obtained veterinary approval prior to dispensing the medication, this action is not sufficient to qualify as the performance of a service.

The tangible personal property reflected on the invoices was available without any exam or consultation being performed at the time of purchase.  For the transactions described in the remaining four invoices, which were accompanied by separate invoices denoting the performance of an exam or test, the Tax Tribunal concluded that they also constituted the sale of tangible personal property.  The taxpayer applied a mark-up of 35% to the items, which may have generated a profit, and the intangible services did not contribute to the value of the medication purchased.  Also, the pet receiving the exam was not necessarily the same pet for which the medication was purchased.

It should be noted that the original assessment included drugs and supplies sold in conjunction with professional services at the total selling price.  However, Treasury agreed to an adjustment requiring tax to be paid on the purchase price of the drugs and supplies.

The taxpayer was also deemed ineligible to receive a sales tax discount for early payment under MCL 205.54.  The taxpayer was not a seller that collected sales or use tax.  It merely remitted use tax owed on tangible personal property purchased from out-of-state vendors.  There is no discount available for the remittance of use tax on a taxpayer’s own purchases.

Posted by: Ed Kisscorni AT 01:01 pm   |  Permalink   |  Email
Tuesday, October 29 2013

Treasury’s Exercise of Discretion Upheld Because of Rational Basis

In CMS Energy Corporation v. Department of Treasury, Michigan Court of Appeals, No. 309172, October 15, 2013, the Michigan Court of Appeals in Affirming the Court of Claims held that a taxpayer’s portion of the business loss carryover deduction under the Single Business Tax (SBT) was properly disallowed on the consolidated return for the 1998 tax year. 

Under state law, the Department of Treasury exercised its discretion to allow the taxpayer to file a consolidated SBT return.  Citing its policy as explained in Revenue Administrative Bulletin 1989-49, the department limited the business loss.  Permitting the taxpayer to deduct business loss carryovers from previous years after approval to consolidate was granted would allow the taxpayer to get around the department’s prohibition against retroactive consolidation.  The department’s exercise of discretion is upheld unless there is no rational basis.

The court reasoned that there was a rational basis for the limit because the limit prevented a profitable corporation that is in an affiliated group with less profitable members to reduce the tax liability when filing a consolidated return.  The department’s decision was within its discretionary authority.  The court rejected the taxpayer’s arguments that limiting the business loss deduction violated the Equal Protection clause of the federal constitution and the Uniformity of Taxation clause of the state constitution.  The court noted that the taxpayer did not meet its burden of proving that the department failed to treat similarly situated enterprises equally.  Furthermore, the fact that the department settled previous cases with similar issues was not evidence of disparate treatment.

Posted by: Ed Kisscorni AT 01:00 pm   |  Permalink   |  Email
Monday, October 28 2013

Bonus Interest of 3% Added to Statutory Interest on Refunds Not Paid Within 60 Days

Public Act 133 of 2013 provides that beginning January 1, 2014; the Michigan Department of Treasury will be required to pay additional interest on a personal income tax refund owed to an individual taxpayer if the refund had not been paid within one of the following dates for the applicable tax year:

  • May 1, for returns received by March 1 of the applicable tax year;
  • 60 days from the date the department received the return, for returns received after March 1 of the applicable tax year.

The additional interest must be paid at a rate of 3% per annum, calculated from the time the tax was due and until the refund was paid, if all of the following conditions are met:

  • the refund was due on an original return that was timely filed under the applicable income tax provision;
  • the department did not adjust the refund;
  • the return was complete for processing purposes with no calculation errors and contained all required information prescribed by the department;
  • the taxpayer had complied with the department's request, if any, for additional documentation or information within 30 days of the request;
  • the refund was not subject to a suspension of the statute of limitations under §205.27a(3) or (4), M.C.L., except for an audit by the department;
  • no portion of the refund was subject to interception under §205.30a, M.C.L., for other liability of the taxpayer; and
  • the amount to be refunded was more than $1.
Posted by: Ed Kisscorni AT 01:00 pm   |  Permalink   |  Email
Friday, October 25 2013

Corporate Income Tax Added to the Taxes Covered by the Lookback Period of a VDA

Public Act 135 of 2013, effective October 15, 2013, has been enacted to amend the Revenue Act provision pertaining to a voluntary disclosure agreement (VDA).  The Act was amended to include the Corporate Income Tax among the taxes covered by the lookback period of a VDA.

In addition, a combined 48-month lookback period is provided for the Single Business Tax, the Michigan Business Tax, and the Corporate Income Tax.  A refund of taxes is also required to a taxpayer who entered into a VDA after October 1, 2012, and before May 1, 2013, if the combined lookback period under that agreement exceeded the combined 48-month period.

Under the legislation, one criterion for a person who is a nonfiler for a particular tax to enter into a voluntary disclosure agreement with the Department of Treasury also has been changed to require the person to have a filing responsibility under nexus standards issued by the department or enacted into law after December 31, 1997.  Prior to the change, there was no reference to a filing responsibility enacted into law.

Posted by: Ed Kisscorni AT 01:00 pm   |  Permalink   |  Email
Thursday, October 24 2013

Taxpayers’ Used a Different Address for Tax Return, Voting, Mortgage Statement and Driver’s License

In Nelson v. County of Mackinac, Michigan Court of Appeals, No. 309811, October 10, 2013, a denial of the homestead exemption was affirmed by the Michigan Court of Appeals because the property taxpayers failed to provide documentation to support their claim that they occupied the subject property as their principal residence during the years at issue.

The subject property was located in Mackinac County.  However, the taxpayers filed their tax returns using their address in Lake Orion, and voted in Oakland County.  The taxpayers’ mortgage statement and driver’s licenses also reflected the Lake Orion address.

Taxpayer’s Home Had to be the One Place Where He Intended to Return

In Chen v. Muskegon County, Michigan Court of Appeals, No. 311979, October 17, 2013 a taxpayer was properly denied a local Michigan property tax principal residence exemption because his home was not the taxpayer’s principal residence for all the tax years in question.

In order to qualify as a principal residence, the taxpayer’s home had to be the one place where he always intended to return.  Contrary to the taxpayer’s argument, the taxpayer only changed his address after being audited.  Before that, his address was listed at his wife’s home. The Michigan Tax Tribunal determined that this was proof that the taxpayer’s home was not his principal residence.

The taxpayer argued that he should be allowed to make a retroactive conditional rescission to keep the principal residence exemption for the years in question.  However, the taxpayer did not properly file the necessary forms or have his house for sale the entire time, both of which were requirements for using a conditional rescission.

The taxpayer also argued that the Tax Tribunal erred by not considering his old age, financial difficulties, federal HUD public policy, the real estate market, and his inability to sell his house. However, none of these considerations pertained to the classification of the taxpayer’s home as his principal residence.  Therefore, the Tax Tribunal did not err by failing to take these considerations into account.

Posted by: Ed Kisscorni AT 01:00 pm   |  Permalink   |  Email
Wednesday, October 23 2013

Date of the Statutory Transfer of Ownership was Incorrectly Identified

In Miller-Bradford & Risberg, Inc. v. Township of Negaunee, Michigan Court of Appeals, No. 309726, October 10, 2013 the taxable value of a commercial property in Michigan purchased via land contract was erroneously uncapped because the date of the statutory transfer of ownership was incorrectly identified.  The Petitioner entered into a land contract for the purchase of the subject property in 1989, whereby it acquired the beneficial use of the property.  Legal title, however, did not pass to the Petitioner until January, 1996.  

According to MCL 211.27a(3), if there is a transfer of ownership, the property’s base taxable value is uncapped and recalculated using the property’s state equalized value for the calendar year following the transfer.  The Tax Tribunal found that the statutory transfer of ownership occurred when legal title passed to the Petitioner in 1996.  However, "transfer of ownership" is statutorily defined as "a conveyance of title to or a present interest in property, including the beneficial use of the property ...."  Furthermore, MCL 211.27a(6) explicitly provides that a transfer of ownership includes a "conveyance by land contract."  Consequently, the subject property’s transfer of ownership occurred in 1989 when the Petitioner entered into the lease/purchase agreement and before the state began capping and uncapping the taxable value of real property.

Posted by: Ed Kisscorni AT 03:00 pm   |  Permalink   |  Email
Tuesday, October 22 2013

Michigan Sales and Use Tax with Ed Kisscorni and Ron Kaley

Take this opportunity to become up-to-date on the sales and use tax law, recent amendments, new administrative rules, bulletins and court cases.  Audit procedures will be discussed along with proposed legislation on tax administration and compliance.

Register on line at the MACPA website:

Tuesday, October 29, 2013 - Hilton Grand Rapids Airport - Grand Rapids, Michigan

Amendments to the General Sales Tax Act and the Use Tax Act

Public Act 126 of 2012 - Amends the sales tax act to eliminate the sales tax exemption for sales to inmates.

Public Act 211 of 2012 - Clarifies what constitutes the filing of a return for purposes of the statute of limitations.

Public Act 299 of 2012 - Limits the imposition of the use tax on a manufacturer contractor to affixations to real estate in Michigan; effectively eliminating the use tax on out of Michigan contracts.  PA 299 is retroactive and effective January 1, 2006.

Public Act 474 of 2012 - Amends the use tax act to provide an exemption for property purchased or manufactured by a contractor to the extent that the property was affixed to and made a structural part of real estate located outside of Michigan.

Public Act 412 of 2012 and Public Act 413 of 2012 expands the sales tax and use tax exemptions for tangible personal property used at a producing mine or a facility where beneficiation of minerals occurred.

Public Act 429 of 2012 and Public Act 467 of 2012 expands the sales and use tax exemptions for parts or other tangible personal property affixed to or to be affixed to and directly used in the operation of either a qualified truck or a trailer designed to be drawn behind a qualified truck.  Both Public Act 467 and Public Act 429 are curative and intended to clarify the original intent of the law.

Administrative Rules

Effective May 6, 2013, the Department of Treasury has promulgated a set of revised General Sales and Use Tax Rules and Specific Sales and Use Tax Rules.  Three rules were rescinded.  Notably missing was a proposed rule on single mixed transactions.

Judicial Decisions

Michigan courts issued 20 opinions on sales and use tax cases in 2012.  Two major cases will be decided by the Michigan Supreme Court in 2013.

Tax Administration and Compliance

Audit Standards - House Bill 4292 - Amends the Revenue Act

Transparency and Guidance - House Bill 4290 - Amends the Revenue Act

Audit Procedures - House Bill 4288 - Amends the Sales Tax Act and House Bill 4292 - Amends the Use Tax Act.  Limits the use of indirect audit procedures by the Department of Treasury.

Collection Goals, Budgets or Quotas - Senate Bill 327 - Amends the Revenue Act

Officer Liability/Successor Liability - Senate Bill 64 - Amends the Revenue Act

Offer in Compromise - House Bill 4003 - Amends the Revenue Act

Delayed Refunds to Taxpayers - House Bill 4002 - Amends the Revenue Act

Limitation on Time to Audit/Refund Claims - Senate Bill 337 - Amends the Revenue Act

Confidentiality - Senate Bill 316 - Amends the Revenue Act

Posted by: Ed Kisscorni AT 01:00 pm   |  Permalink   |  Email
Wednesday, October 16 2013

Six Year Delay in Issuing the Decision did not Prejudice the Taxpayer

In Huron Development, L.L.C. v. City of Lansing, Michigan Court of Appeals, No. 303618, September 19, 2013, the Michigan Tax Tribunal’s order upholding the special assessments that were levied against a taxpayer’s real property in property tax year 2003 for curb, gutter, and storm sewer improvements was upheld because the Tax Tribunal did not commit an error of law or adopt a wrong legal principle and its factual findings were supported by competent, material, and substantial evidence.  Moreover, the Tax Tribunal’s lengthy delay in issuing its opinion did not deny the taxpayer its right to procedural due process.

The taxpayer contended that the Tax Tribunal erred by rejecting the taxpayer’s market value appraisal.  The Tax Tribunal based its decision on the fact that the appraisal did not value the property both with and without the special assessment improvements, which was necessary to determine whether the improvements resulted in an increase in the value of the property.

The Michigan Court of Appeals held that the evidence supported the Tax Tribunal’s decision because the taxpayer’s appraisal improperly focused on the value of properties with and without on-site storm water detention ponds and did not engage in correct comparisons to properties with and without curb, gutter, and storm sewer improvements.  Further, because the taxpayer failed to present credible evidence rebutting the presumption of the validity of the special assessments, the Tax Tribunal had no basis to strike down the special assessments and the burden of going forth with the evidence never shifted to the city.

The taxpayer also argued that the Tax Tribunal’s six-year delay in issuing its opinion denied the taxpayer its right to due process.  The appellate court held, however, that the taxpayer failed to show that it was prejudiced by the delay.  The taxpayer paid the special assessments in full under protest before the Tax Tribunal conducted the hearing and was in no worse position after the Tax Tribunal issued its decision.

Posted by: Ed Kisscorni AT 12:00 pm   |  Permalink   |  Email
Tuesday, October 15 2013

Credit Card Lenders Wrote Off the Bad Debt

In Menard Inc. v. Department of Treasury, Michigan Court of Appeals, No. 310399, September 12, 2013, a retailer that contracted with finance companies to issue private label credit cards was not entitled to claim refunds of Michigan Sales Tax based on the bad debt deduction provision because the retailers were fully compensated for the sales transactions, including the tax, pursuant to the reimbursement agreements with the finance companies.

The consumers paid for the goods with funds from the credit card lenders, and, when the customers defaulted, the lenders wrote off these amounts as bad debts.  The bad debt statute states that when the debt is paid by the consumer or another person, the taxpayer remains liable for remittance of the tax to the extent of the amount paid.  Consequently, the payment of the bad debt by the third-party lenders did not entitle the retailers to a bad debt refund. Furthermore, the Legislature limited the availability of the deduction when it amended MCL 205.54i to allow a taxpayer and a lender to make an election designating which party may claim the deduction.

Posted by: Ed Kisscorni AT 12:58 pm   |  Permalink   |  Email
Monday, October 14 2013

Home Health Care Providers Did Not Qualify for Charitable Exemption

In Porter Hills Presbyterian Village Inc. v. Township of Grand Rapids, Michigan Tax Tribunal, No. 416076, August 6, 2013, the portion of the subject property leased to two nonprofit corporations was not exempt from Michigan ad valorem taxation because neither the lessor nor the lessees qualified as charitable institutions.

The charitable exemption under MCL 211.7o(3) applies if: (1) the owner of the property meets the definition of "nonprofit charitable institution"; (2) the occupant also meets the definition; (3) the occupancy of the property was solely for the purposes for which the institution was established; and (4) the property would be exempt if the owner occupied the property itself solely for the purposes for which it was organized or established. In the present case, the lessees’ articles of incorporation stated that the entities were created to "provide intermittent or part time skilled nursing and other home health services ..." However, neither the bylaws nor the articles included language stating that the entities were formed for religious, charitable, or educational purposes. Therefore, though the lessees offered charity for certain services not covered by insurance, the overall nature of these entities was not charitable in nature. The lessor, a nonprofit corporation that operated homes for the elderly, also did not qualify as a charitable institution, as it did not submit evidence that it provided services on a non-discriminatory basis and that its charges were no more than were necessary for its maintenance.

Rehabilitation Center Did Not Qualify as Charitable Institution

In Hope Network-Rehabilitation Services v. City of Kentwood, Michigan Tax Tribunal, No. 412553, July 3, 2013, an exemption from Michigan ad valorem taxation was properly denied because the petitioner did not qualify as a charitable institution.  

The charitable exemption under MCL 211.7o(1) applies where real or personal property is owned and occupied by a nonprofit charitable institution while occupied by that nonprofit charitable institution solely for the purposes for which that nonprofit charitable institution was incorporated. The petitioner provides specialized residential services to adults and children undergoing rehabilitation from traumatic brain and spinal cord injuries. However, the subject property was not used for charitable purposes. Since the property began operations, the petitioner has been able to recoup payment in return for services rendered. Furthermore, any write-offs from amounts insurance companies and government agencies did not cover does not constitute charity.

Posted by: Ed Kisscorni AT 12:56 pm   |  Permalink   |  Email
Sunday, October 13 2013

Scheduled for Friday, October 18th in Traverse City and October 24th in Novi


The Michigan State & Local Tax Update course with Ed Kisscorni and Ron Kaley is an opportunity to get current and up to date information on the State of Michigan’s tax issues.  The numerous amendments added to the income tax act during 2012 will be discussed.  The fall  follow-up will evaluate how flow through withholding is working.  Guidance on new withholding requirements has been slow, but Ed and Ron will point out the effects on corporations, flow-through entities, and non-resident individuals. 


Mop up on the Single Business Tax (SBT) and Michigan Business Tax (MBT) continues with a review of SBT court cases and new amendments to the MBT.  Audits of MBT returns are in progress creating many issues for practitioners.  The process to start the phase out of the personal property tax has begun.  Special provisions for small businesses will be addressed.  A complete update of the sales and use tax will include a review of new law, court cases, new administrative rules and proposed legislation.


Register on line at the MACPA:


Michigan State & Local Tax Update with Ed Kisscorni & Ron Kaley (MSLTTC)

Friday, October 18, 2013

Great Wolf Lodge, Traverse City


Michigan State & Local Tax Update with Ed Kisscorni & Ron Kaley (MSLTNV)

Thursday, October 24, 2013

Walsh College, Novi

Posted by: Ed Kisscorni AT 07:00 pm   |  Permalink   |  Email
Friday, October 11 2013

Vice President Did Not Have Control Of, Supervision Over, or Responsibility for the Filing of Tax Returns and Payment of Taxes

In Huggins v. Department of Treasury, Michigan Tax Tribunal, No. 448835, August 6, 2013, a corporate taxpayer’s vice president of accounting was not liable for assessments of Michigan sales and use tax and single business tax (SBT) because she was not a responsible corporate officer.

Despite her title, corporate documents did not identify her as a corporate officer.  Furthermore, an affidavit from another vice president stated that when he received the title, his job responsibilities and pay remained the same.  Even if the petitioner was a corporate officer, evidence showed that she lacked the requisite control of, supervision over, or responsibility for the filing of tax returns and payment of taxes.  The petitioner was not authorized to sign checks on behalf of the taxpayer, was not responsible for preparing tax returns other than transcribing numbers provided by the accounting firm, and signed the returns only as a convenience for the taxpayer’s president.  She also had no responsibility to make the returns and payments of taxes.

Posted by: Ed Kisscorni AT 12:54 pm   |  Permalink   |  Email
Thursday, October 10 2013

Prepared Sandwiches Were Deemed Taxable as Food for Immediate Consumption

In BF Enterprises v. Department of Treasury, Michigan Tax Tribunal, No. 440243, June 28, 2013, received August 29, 2013, a Michigan sales tax assessment against a convenience store/gas station that was based on a two-month sample period was upheld because the taxpayer failed to maintain adequate records.  In such circumstances, it is proper for the Department of Treasury to assess the amount of tax due based on information that is available or that becomes available to it, such as third-party invoices.  Furthermore, the issuance of three audit reports was appropriate, as the adjustments resulted from additional information provided by the taxpayer. Also, the assessment of sales tax on sandwiches prepared and sold by the taxpayer was proper, as these items were not sold by weight or volume and met the definition of "prepared food."

Posted by: Ed Kisscorni AT 12:52 pm   |  Permalink   |  Email
Wednesday, October 09 2013

Aircraft Owner Engaged in Personal Use of the Aircraft

In C.D.M. Leasing L.L.C. v. Department of Treasury, Michigan Tax Tribunal, No. 440908, June 28, 2013, released August 2013, an assessment of Michigan use tax based on the purchase price of an aircraft was upheld because the aircraft’s owner engaged in personal use of the aircraft and was not engaged in the business of leasing the aircraft to others.  Rule 82 allows a taxpayer to elect to pay use tax on rental receipts from the lease of tangible personal property rather than on the property’s purchase price.  However, any storage, use, or consumption of the property outside the scope of the leasing activity defeats the Rule 82 election.  In the present case, in addition to flights taken by the lessee, the taxpayer’s flight logs showed numerous personal trips by non-lessees. The personal use of the aircraft by the taxpayer was a conversion to a taxable use.

Furthermore, the taxpayer did not qualify as a lessor of the aircraft within the meaning of the Use Tax Act or Rule 82.  The taxpayer did not submit evidence which showed that it held itself out to the public as the lessor of the aircraft.  The taxpayer did not advertise its leasing services or attempt to pursue additional lease agreements with nonaffiliated parties.  Also, the aircraft averaged only 10 flight hours per month for the relevant period, which was inconsistent with a leasing business trying to maximize profits.

Posted by: Ed Kisscorni AT 12:51 pm   |  Permalink   |  Email
Tuesday, October 08 2013

Boat Was Brought into Michigan Within 90 Days

In Podmajersky v. Department of Treasury, Michigan Court of Appeals, No. 310996, August 13, 2013, a yacht that was purchased in Rhode Island by an Illinois resident and subsequently stored in Michigan was subject to Michigan use tax because it is presumed that tangible personal property is taxable if it is brought into the state within 90 days of purchase.  The yacht entered Michigan within 90 days of its purchase date for repairs, left the state for a brief period, and returned to Michigan for winter storage.  Contrary to the taxpayer’s assertion, MCL 205.93(1)(a) does not require proof of a taxpayer’s subjective intent for bringing property into the state.  Furthermore, the Use Tax Act does not include an exemption for storage, use, or consumption when such use is due to mechanical breakdown.

The presumption of exemption for property brought into the state by a nonresident more than 90 days after the date of purchase did not apply because the record showed that the yacht was brought to the state within 90 days. It did not matter that the taxpayer later took the yacht to Illinois and returned it to Michigan after the 90-day period expired. Also, the exemption for property brought into the state by a nonresident while temporarily within the state did not apply because the yacht was not used and stored temporarily in Michigan. Except for a 17-day period when the yacht was taken to Illinois, the yacht had remained almost exclusively in Michigan.

Posted by: Ed Kisscorni AT 12:49 pm   |  Permalink   |  Email
Monday, October 07 2013

Board of Review Protest Required to Invoke Tax Tribunal Jurisdiction

In Abundant Life Christian Center v. Charter Township of Redford, Michigan Court of Appeals, No. 310713, August 1, 2013, a religious organization’s ad valorem property tax exemption claim was properly dismissed by the Michigan Tax Tribunal due to lack of jurisdiction because the taxpayer was statutorily required to first make a protest to the Board of Review.  

The taxpayer had notice of the property’s ad valorem tax status, as it had corresponded with the assessor on the issue of exemption.  Furthermore, even if the taxpayer did not have actual notice of the ad valorem tax status, it was not established that notice is a prerequisite to the Board of Review obligation.  It was proper for the Tax Tribunal to take judicial notice of the tax assessments as the ad valorem taxes on the property were a matter of public record.  Absent any indication that a failure to send or receive the tax bills on the property relieved the taxpayer from the obligation of pursuing the exemption claim, the taxpayer could not avoid the jurisdictional requirement to protest to the Board.

Posted by: Ed Kisscorni AT 12:48 pm   |  Permalink   |  Email
Friday, October 04 2013

Refunds May be Available from Amended Returns 

In Letter Ruling No. LR 2013-3, Michigan Department of Treasury, June 26, 2013, the Michigan Department of Treasury stated that irrevocable trusts may claim the small business credit that is available against the Michigan Business Tax. Because irrevocable trusts are not specifically listed in the statute, they are not subject to the credit’s disqualifiers or reduction percentages. However, if an irrevocable trust has gross receipts that exceed $20 million or has adjusted business income minus the loss adjustment that exceeds $1.3 million, then the credit is not available to the trust.

Posted by: Ed Kisscorni AT 12:45 pm   |  Permalink   |  Email
Thursday, October 03 2013

Relation-Back Doctrine Did Not Apply to Amended Pleading

In SPE Utility Contractors, LLC v. Department of Treasury, Michigan Court of Appeals, No. 310885, June 25, 2013, a taxpayer’s motion to amend a petition challenging a Michigan use tax assessment was properly denied because of its futility.  The taxpayer failed to pay its uncontested tax liability prior to filing its appeal with the Michigan Tax Tribunal, which is a precondition to invoking jurisdiction.  Though the taxpayer filed a motion to amend its petition in order to deny any liability for the assessment, the motion was denied and the Respondent’s motion to dismiss was granted.

In order for the newly amended petition to have been timely, the relation-back doctrine must apply.  However, the proposed amendment did not seek to add a claim or defense arising out of the same transaction or conduct set forth in the original pleading but sought to alter the substance of the original petition, and therefore the doctrine did not apply and could not relate the amendment back to the date of the original pleading.

Posted by: Ed Kisscorni AT 12:44 pm   |  Permalink   |  Email
Wednesday, October 02 2013

Passed in the Senate, Pending in the House

Senate Bill 367, introduced in the Michigan Senate, would revise the corporate income tax law to allow "affiliated groups" to elect to file combined returns.  The term "affiliated group" would be defined as it is in IRC §1504, except that it would include all persons incorporated in the United States (other than a foreign operating entity) that are commonly owned, directly or indirectly, by any member of the affiliated group and other members of the group of which more than 50% of the ownership interest with voting rights or ownership interests that confer comparable rights is directly or indirectly owned by a common owner or owners.  

A taxpayer that is part of an affiliated group would be allowed to elect to have all members of the affiliated group treated as a unitary business group.  This group would then file a combined return for 10 years, with the option to renew the election once for another 10 years. The definition of "unitary business group" would be revised to include an affiliated group that makes the election to file as a unitary business group.

Senate Bill 367 has passed the Senate on a unanimous vote and is currently pending in the House Tax Policy Committee.

Posted by: Ed Kisscorni AT 12:42 pm   |  Permalink   |  Email
Tuesday, October 01 2013

Court of Appeals Requires Taxpayer to Use the MBT Single factor Apportionment Formula, Multistate Tax Compact Three Factor Apportionment Not Applicable

In International Business Machines Corp. v. Department of Treasury, Michigan Court of Appeals, No. 306618, November 20, 2012, affirming the lower court, the Michigan Court of Appeals held that a Michigan taxpayer was required to use the Michigan Business Tax (MBT) apportionment formula (100% sales) and that the taxpayer was not permitted to elect to use the Multistate Tax Compact’s apportionment formula (equally-weighted property, payroll, and sales).

The taxpayer argued that the MBT apportionment formula was optional, and the Department of Treasury argued that the MBT apportionment formula was mandatory.  The court noted that the MBT statute allowed taxpayers to request permission to use an alternate apportionment method so that unusual situations where the default formula caused distortion would not occur.  However, the Compact allowed an election of right, presumably exercised in order to obtain a lower tax liability.  Examining the statutory language, the court noted that the applicable provision (M.C.L. 208.1301) absolutely precluded any other apportionment formula except by petition.

The taxpayer next argued that the Compact was a contract.  However, the court noted that statutes were not deemed to be contracts in the absence of an exceedingly clearly-expressed intent by the Legislature.  Essentially, for the Legislature to express such an intent, it would have had to use the word "contract" or "covenant," or otherwise explicitly "surrender its power to make changes."  In addition, the Compact language did not specify that it was a contract.  As such, the court reasoned that enacting a conflicting statute might be an improper way to repeal the Compact, but not necessarily impermissible.  Accordingly, the MBT law repealed by implication the apportionment election provision in the Compact.

Court of Claims Allows MBT Apportionment Under Multistate Tax Compact

In Anheuser-Busch, Inc. v. Department of Treasury, Michigan Court of Claims, Docket No. 11-86-MT, June 6, 2013, the Court of Claims held the Multistate Tax Compact (MTC) is a binding contract that cannot be repealed by another law, the Michigan Court of Claims permitted a taxpayer to apportion the "income tax" portion of the Michigan business tax (MBT) under the MTC’s three-factor formula, but not the "modified gross receipts tax" portion of the MBT.

The MTC allows taxpayers to elect to apportion "income taxes" according to the member state's laws or according to an equally weighted, three-factor formula in Art. IV of the MTC (Michigan adopted the MTC in 1970).  However, under the MBT statutes, only a single-factor sales apportionment formula is permitted. The taxpayer elected to apportion its income under the MTC formula, but the Michigan Department of Treasury recalculated the taxpayer’s tax liability using the MBT formula.  According to the Department of Treasury, allowing the option to apportion taxes under the MTC rendered part of the MBT statutory language irrelevant.

In order to resolve this question, the court had to determine whether the MTC is a binding compact upon the state of Michigan, thereby surviving the enactment of conflicting MBT apportionment statutes.

According to the court, the MTC is a binding contract because it plainly states its intent to enter a binding contractual relationship. For example, the text of the MTC states that "the multistate tax compact is enacted into law and entered into with all jurisdictions legally joining therein." 

Furthermore, the court noted that the MTC intended to limit the Legislature’s power. Ultimately, the court reasoned that, because the MTC could not be repealed in part by the MBT statute and it could not be harmonized with the provision allowing taxpayers to request an alternative apportionment formula, the MTC controlled and functioned as an exception to the mandatory language of the MBT.

The court also agreed with the taxpayer that the business income tax portion of the MBT was an "income tax" and, thus, was subject to the election provision.  However, the court disagreed with the taxpayer that the modified gross receipts tax portion of the MBT was an "income tax."  This portion of the MBT is determined by the taxpayer’s gross receipts less purchases from other firms. It is not imposed on or measured by net income. In addition, expenses deducted are related to particular transactions in order to arrive at the value added. The court noted that this is contrary to an income tax, which uses deductions in order to tax the value a taxpayer derives from the economy.

Michigan Supreme Court Grants Application for Leave to Appeal MTC Apportionment in IBM Case

In International Business Machines Corp. v. Department of Treasury, Michigan Supreme Court, No. 146440, July 3, 2013, the Michigan Supreme Court issued an order granting the application for leave to appeal the Court of Appeals judgment holding that a taxpayer was required to use the Michigan Business Tax (MBT) apportionment formula (100% sales) and could not elect to use the Multistate Tax Compact’s apportionment formula (equally-weighted property, payroll, and sales).

The Michigan Supreme Court ordered that the following issues be briefed:

  • whether the taxpayer could elect to use the MTC’s apportionment formula or was required to use the MBT apportionment formula;
  • whether the MBT repealed by implication Article III(1) of the MTC;
  • whether the MTC constitutes a contract that cannot be unilaterally altered or amended by a member state; and
  • whether the modified gross receipts tax component constitutes an income tax under the MTC.

Michigan Supreme Court Denies Application for Leave to Appeal MTC Apportionment in Anheuser-Busch Case

In an order issued on August 2, 2013 [Anheuser-Busch, Inc. v. Department of Treasury, Michigan Supreme Court, No. 147438-9 & 10] the Michigan Supreme Court has denied an application for leave to appeal because the court is not persuaded that the questions presented should be reviewed before consideration by the Court of Appeals in the Michigan Business Tax (MBT) case.  The Court of Claims held that the Multistate Tax Compact (MTC) was a binding contract that cannot be repealed by another law, so that the taxpayer was permitted to apportion the "income tax" portion of the MBT under the MTC’s three-factor formula, but not the "modified gross receipts tax" portion of the MBT.  The taxpayer’s attorney filed a bypass application with the Michigan Supreme Court. The order issued was in response to that bypass application.

Posted by: Ed Kisscorni AT 12:39 pm   |  Permalink   |  Email


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