Int'l Bus. Machs. Corp. v. Dep't of Treasury, Docket No. 146440.
| Decision Date | 14 July 2014 |
| Docket Number | Docket No. 146440. |
| Citation | 496 Mich. 642,852 N.W.2d 865 |
| Parties | INTERNATIONAL BUSINESS MACHINES CORP. v. DEPARTMENT OF TREASURY. |
| Court | Michigan Supreme Court |
OPINION TEXT STARTS HERE
Miller, Canfield, Paddock and Stone, PLC, Lansing (by Clifford W. Taylor and Gregory A. Nowak), and Silverstein & Pomerantz LLP (by Amy L. Silverstein, Edwin P. Antolin, and Johanna W. Roberts, pro hac vice) for IBM Corporation.
Bill Schuette, Attorney General, Aaron D. Lindstrom, Solicitor General, and Michael R. Bell, Assistant Attorney General, for the Department of Treasury.
Honigman Miller Schwartz and Cohn LLP, Detroit (by Lynn A. Gandhi) for the Council on State Taxation.
Honigman Miller Schwartz and Cohn LLP, Detroit (by Lynn A. Gandhi) and Morrison & Foerster LLP (by Craig B. Fields and Mitchell A. Newark, pro hac vice) for Lorillard Tobacco Company.
Joe Huddleston, Shirley K. Sicilian, and Sheldon H. Laskin, pro hac vice, for the Multistate Tax Commission.
Jeffrey B. Litwak, pro hac vice.
Richard L. Masters, pro hac vice, for the Interstate Commission for Juveniles and the Association of Compact Administrators of the Interstate Compact on the Placement of Children.
BEFORE THE ENTIRE BENCH.
In this case, we must determine whether plaintiff International Business Machines Corporation (IBM) could elect to use the three-factor apportionment formula under the Multistate Tax Compact 1 (the Compact) for its 2008 Michigan taxes, or whether it was required to use the sales-factor apportionment formula under the Michigan Business Tax Act (BTA). 2 The Department of Treasury (the Department) rejected IBM's attempt to use the Compact's apportionment formula and, instead, required IBM to apportion its income using the BTA's sales-factor formula.
We conclude that IBM was entitled to use the Compact's three-factor apportionment formula for its 2008 Michigan taxes and that the Court of Appeals erred by holding otherwise on the basis of its erroneous conclusion that the Legislature had repealed the Compact's election provision by implication when it enacted the BTA. We further hold that IBM could use the Compact's apportionment formula for that portion of its tax base subject to the modified gross receipts tax of the BTA.
Accordingly, we reverse the Court of Appeals judgment in favor of the Department, reverse the Court of Claims order granting summary disposition in favor of the Department, and remand to the Court of Claims for entry of an order granting summary disposition in favor of IBM.
IBM is a corporation based in New York that provides information technology products and services worldwide. In December 2009, IBM filed its Michigan Business Tax annual return for the 2008 tax year. Line 10 of IBM's return, the “Apportionment Calculation” line, read “SEE ATTACHED ELECTION.” IBM filed a separate statement along with its return, entitled “Election to use MTC Three Factor Apportionment,” indicating that it elected to apportion its business income tax base and modified gross receipts tax base using the three-factor apportionment formula provided in the Compact. Under these calculations, IBM sought a refund of $5,955,218. The Department disagreed. It determined that IBM could not elect to use the Compact's formula and that IBM was entitled to a refund of only $1,253,609 when calculated under the BTA's sales-factor apportionment formula.
IBM filed a complaint in the Court of Claims, challenging the Department's decision. Thereafter, IBM moved for summary disposition under MCR 2.116(C)(10), and the Department moved for summary disposition under MCR 2.116(I)(2). After a hearing on the motions, the Court of Claims denied summary disposition to IBM and granted summary disposition in favor of the Department. The Court of Claims determined that the BTA mandated the use of the sales-factor apportionment formula.
In an unpublished opinion, the Court of Appeals affirmed the Court of Claims order granting summary disposition in favor of the Department.3 The Court of Appeals first determined that there was a facial conflict between the BTA and the Compact insofar as the BTA mandates use of the sales-factor formula while the Compact permits taxpayers to elect to use a three-factor apportionment formula.4 On the basis of this conflict, the Court of Appeals concluded that the Legislature had repealed the Compact's election provision by implication when it enacted the BTA.5 The Court of Appeals then stated that it did not need to decide whether the modified gross receipts tax was an “income tax” under the Compact subject to the Compact's apportionment formula in light of its conclusion that the Compact's election provision had been repealed by implication.6
IBM sought leave to appeal in this Court. We granted IBM's application and asked the parties to address
(1) whether the plaintiff could elect to use the apportionment formula provided in the Multistate Tax Compact, MCL 205.581, in calculating its 2008 tax liability to the State of Michigan, or whether it was required to use the apportionment formula provided in the Michigan Business Tax Act, MCL 208.1101 et seq.; (2) whether § 301 of the Michigan Business Tax Act, MCL 208.1301, repealed by implication Article III(1) of the Multistate Tax Compact; (3) whether the Multistate Tax Compact constitutes a contract that cannot be unilaterally altered or amended by a member state; and (4) whether the modified gross receipts tax component of the Michigan Business Tax Act constitutes an income tax under the Multistate Tax Compact.7
We review de novo a Court of Claims decision on a motion for summary disposition.8 We also review de novo issues of statutory interpretation.9
Because we believe it important to our analysis in this case, we begin with a discussion of the history of business taxation in Michigan. Michigan's taxation of business income or activity began in 1953, when the Legislature enacted a business activities tax that taxed the adjusted receipts of a taxpayer.10 This tax remained in effect until Michigan adopted its first corporate income tax as part of the Income Tax Act of 1967 (ITA). 11 Against the backdrop of the ITA, Michigan joined the Multistate Tax Compact in 1970 when the Legislature enacted MCL 205.581.12 The Compact “symbolized the recognition that, as applied to multistate businesses, traditional state tax administration was inefficient and costly to both State and taxpayer.” 13 Thus, the goals of the Compact include facilitating and promoting equitable and uniform taxation of multistate taxpayers. 14 To this end, the Compact operates in conjunction with Michigan's tax acts, containing several provisions designed to ensure uniform taxation of multistate taxpayers.
In 1976, the Legislature replaced the corporate income tax with a single business tax.15 Unlike its predecessor, the Single Business Tax Act (SBTA) taxed business activity, not income, and operated as “a form of value added tax.” 16 In enacting the SBTA, the Legislature expressly amended the ITA to the extent necessary to implement the SBTA and expressly repealed provisions of the ITA that would conflict with the SBTA.17 The Legislature, however, did not expressly repeal the Compact.18
The SBTA remained in effect until 2008, when the Legislature enacted the BTA, which is at issue in this case.19 Representing another shift in business taxation, the BTA imposed two main taxes: the business income tax and the modified gross receipts tax.20 In enacting the BTA, the Legislature expressly repealed the SBTA, but again did not expressly repeal the Compact.21 However, the BTA was short-lived. Effective January 1, 2012, Michigan returned to a corporate income tax.22 At the same time, the Legislature stayed true to its past practice of repealing conflicting tax acts and expressly repealed the BTA.23
Throughout the evolution of our state's method of business taxation, the Compact has remained in effect. Another constant throughout this history is that the Legislature has always required a multistate taxpayer with business income or activity both within and without the state to apportion its tax base. 24 This process, known as formulary apportionment, has allowed Michigan to tax the portion of a taxpayer's multistate business carried on in Michigan without violating the Due Process Clause of the United States Constitution.25 We now address whether a multistate taxpayer retained the privilege of electing the apportionment method provided by the Compact for the 2008 tax year.
To determine whether IBM could elect to use the Compact's three-factor apportionment formula to calculate its 2008 Michigan taxes, we must decide if the Legislature repealed the Compact's election provision by implication when it enacted the BTA.26
We begin our analysis “with the axiom that repeals by implication are disfavored.” 27 We will presume, “in most circumstances, that if the Legislature had intended to repeal a statute or statutory provision, it would have done so explicitly.” 28 Nevertheless, “[w]hen the intention of the legislature is clear, repeal by implication may be accomplished by the enactment of a subsequent act inconsistent with a former act” or “by the occupancy of the entire field by a subsequent enactment.” 29However, “where the intent of the Legislature is claimed to be unclear, it is our duty to proceed on the assumption that the Legislature desired both statutes to continue in effect unless it manifestly appears that such view is not reasonably plausible.” 30 Repeals by implication will be allowed “only when the inconsistency and repugnancy are plain and unavoidable.” 31 We will “construe statutes, claimed to be in conflict, harmoniously” to find “ any other reasonable construction” than a repeal by implication.32 Only when we determine that two st...
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