Ford Motor Credit Loses Its Bid to Have the U. S. Supreme Court Rule on the Retroactive Fix to the Bad Debt Deduction
In Ford Motor Credit Co. v. Department of Treasury (U.S. Supreme Court, Docket 10-481, Petition for certiorari denied January 18, 2011) the U.S. Supreme Court has denied the request of a motor vehicle financing company to decide whether a retroactive change in a Michigan sales tax refund statute for bad debts satisfied due process when applied to deny refunds for the preceding five-year period.
InDaimlerChrysler Services North America LLC v. Department of Treasury,723 N.W.2d 569 (2006), the Michigan Court of Appeals held that a motor vehicle financing company was a"taxpayer"entitled to refunds of sales tax paid and remitted by dealerships on installment sales when the purchasers subsequently defaulted on their obligation to repay the amount financed, including the sales tax previously remitted. In response, the Michigan Legislature retroactively amended the bad debt sales tax statute to overturn the effect of the decision inDaimlerChrysler.
The taxpayer in the current case filed a refund action asserting that the amendments violated the Due Process Clause of the U.S. Constitution because they imposed an indefinite period of retroactivity and were applied to a five-year period in the taxpayer's case. However, the Court of Appeals affirmed the dismissal of the taxpayer's action for the reasons stated in the contemporaneously argued case ofGMAC, LLC v. Dep't of Treasury,781 N.W.2d 310 (Mich. Ct. of App. 2009). InGMAC,the court held that a seven-year retroactive application of the amendments did not violate due process or the requirement that such legislation be limited to a modest period of retroactivity. The Michigan Supreme Court denied review.