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.