City of Ann Arbor v. National Center for Mfg. Sciences, Inc.

• Decision Date: 21 March 1994
• Docket Number: Docket No. 145249
• Citation: 514 N.W.2d 224,204 Mich.App. 303
• Parties: CITY OF ANN ARBOR, Plaintiff-Appellant, v. NATIONAL CENTER FOR MANUFACTURING SCIENCES, INC., Defendant-Appellee.
• Court: Court of Appeal of Michigan — District of US

Page 224

514 N.W.2d 224

204 Mich.App. 303

CITY OF ANN ARBOR, Plaintiff-Appellant, v. NATIONAL CENTER FOR MANUFACTURING SCIENCES, INC., Defendant-Appellee.

Docket No. 145249.

Court of Appeals of Michigan.

Submitted Jan. 20, 1994, at Ann Arbor.

Decided March 21, 1994, at 10:20 a.m.

Released for Publication April 27, 1994.

John K. Van Loon, Chief Asst. City Atty., Ann Arbor, for plaintiff.

Harris, Guenzel, Meier & Nichols, P.C. by Robert J. Harris, Ann Arbor, for defendant.

Before DOCTOROFF, C.J., and MICHAEL J. KELLY and D.G. TYNER, ^* JJ.

DOCTOROFF, Chief Judge.

Plaintiff appeals a September 19, 1991, declaratory judgment and order of the Washtenaw Circuit Court granting defendant's motion for summary disposition and dismissing plaintiff's claim regarding the constitutionality of a section of the Michigan Strategic Fund Act. See M.C.L. § 125.2001 et seq.; M.S.A. § 3.541(201) et seq. On appeal, plaintiff argues that M.C.L. § 125.2074(6); M.S.A. § 3.541(274)(6), which grants exemptions from ad valorem property taxes to certain research facilities funded by the State of Michigan, is unconstitutional and that the trial court erred in concluding otherwise. We disagree and affirm.

The section of the act at issue states as follows:

Property owned and used or occupied by a nonprofit research and development enterprise that receives or has received financial aid in the amount of $1,000,000.00 or more pursuant to this section or pursuant to former Act No. 70 of the Public Acts of 1982 is exempt from ad valorem real and personal property taxes imposed under the general property tax act, Act No. 206 of the Public Acts of 1893, being sections 211.1 to 211.157 of the Michigan Compiled Laws, while the property is used or occupied by that nonprofit research and development enterprise solely for the purpose of performing research and development in present and emerging technology and of the application of that technology to business and industry and provided that the research and development enterprise retains its nonprofit status under section 501(c)(3) of the internal revenue code. [M.C.L. § 125.2074(6); M.S.A. § 3.541(274)(6).]

Plaintiff claimed below and continues to argue in this Court that the section violates the Uniformity of Taxation Clause, Const. 1963, art. 9, § 3, constitutes an impermissible delegation of legislative authority, and violates the Title-Object Clause, Const. 1963, art. 4, § 24, because the act's title does not purport to grant tax exemptions to fund recipients.

Plaintiff brought this declaratory judgment action after defendant appealed its ad valorem tax assessment to the Tax Tribunal claiming it was exempt from taxation by virtue of the above-quoted section. When plaintiff attempted to argue in the Tax Tribunal that the section was unconstitutional, the referee indicated that the tribunal did not have jurisdiction to evaluate the constitutionality of the section and that such a claim should be made in the circuit court. For purposes of this appeal, we assume defendant is a nonprofit corporation that fits within the statutory guidelines for the exemption. Any claim to the contrary is properly brought in the tax tribunal action that has been stayed pending resolution of the constitutional inquiry.

Plaintiff's first claim is that the statute violates the Uniformity of Taxation Clause found in Const. 1963, art. 9, § 3. We disagree.

The purpose of the clause is to guarantee equal treatment to similarly situated taxpayers. Molter v. Dep't of Treasury, 443 Mich. 537, 553, 505 N.W.2d 244 (1993). As a practical matter, there is no discernible difference between the Equal Protection and Uniformity of Taxation Clauses. Armco Steel Corp v. Dep't of Treasury, 419 Mich. 582, 592, 358 N.W.2d 839 (1984). The presumption of a statute's constitutionality is particularly strong where tax legislation is at issue. Penn Mutual Life Ins. Co. v. Dep't of Licensing & Regulation, 162 Mich.App. 123, 127, 412 N.W.2d 668 (1987). In evaluating the power of exempting entities from taxation, this Court stated:

The power of exemption would seem to imply the power of discrimination, and in taxation, as in other matters of legislation, classification is within the competency of the legislature....

"Granting the power of classification, we must grant Government the right to select the differences upon which the classification shall be based, and they need not be great or conspicuous.... The State is not bound by any rigid equality. This is the rule; its limitation is that it must not be exercised in 'clear and hostile discriminations between particular persons and classes.' " [Ludka v. Dep't of Treasury, 155 Mich.App. 250, 263, 399 N.W.2d 490 (1986) (quoting Banner Laundering Co. v. State Bd. of Tax Administration, 297 Mich. 419, 433, 298 N.W. 73 [1941] ).]

The standard of reasonableness under the rational-basis test is whether any set of facts reasonably may be conceived to justify the discrimination. Penn Mutual, supra at 128, 412 N.W.2d 668.

Under the statute at issue in this case, those nonprofit research entities that receive a level of funding from the state equal to or greater than $1,000,000 are entitled to the exemption. M.C.L. § 125.2001; M.S.A. § 3.541(201) contains a number of legislative findings and policy declarations related to economic development and creation of jobs within the state and serves as the purpose for creation of the Michigan Strategic Fund. Chapter 7 of the act provides for a Center for Research and Development and authorizes funding for research enterprises. M.C.L. § 125.2074; M.S.A. § 3.541(274). The section at issue here exempts those entities that receive a substantial amount of funding from liability for ad valorem property taxation, presumably in furtherance of preserving the entities' economic viability and offering incentive to the major fund recipients to remain in the area of research and development.

As the trial court stated:

The purpose for the Michigan Strategic Fund is to improve and stabilize the economy and employment levels by encouraging non-profit entities to do business in Michigan. One means of accomplishing this objective is to offer exemptions from property taxation.

We agree with the trial court's assessment of the purpose behind the section and the section's relation to the creation of the fund. Moreover, we do not agree with plaintiff's assertion that the classification is arbitrary or hostile. Thus, the trial court did not err in concluding that the section was constitutional insofar as the Uniformity of Taxation Clause is concerned.

Plaintiff also...