The Michigan Court of Appeals has ruled that contributions made to a voluntary employees' beneficiary association (VEBA) were not compensation under the former Single Business Tax and thus were not required to be added back to the tax base. (Ford Motor Co. v. Department of Treasury, Michigan Court of Appeals, No. 283925, May 20, 2010)
The statutory definition of "compensation" included payments for insurance for which the employees were beneficiaries, including payments under health, welfare, and noninsured benefit plans. However, the taxpayer's contributions to the VEBA represented only potential compensation to employees. The amount in the VEBA account could have decreased due to market forces. The VEBA was essentially a savings fund to facilitate payment of the taxpayer's employees' future health care services, and not payment of actual health care costs incurred. The payments into VEBA were not required by contract and were not paid in order to procure insurance to cover medical services due employees. For these reasons, the court concluded that the VEBA contributions were not compensation under the former SBT.
Taxpayers who previously added VEBA contributions to compensation could be entitled to a refund of SBT tax. The statute of limitations is four years starting with the later of the due date for the return or the actual file date.