Daimlerchrysler Corp. v. State Tax Com'n
| Decision Date | 30 July 2008 |
| Docket Number | Docket No. 133394.,Calendar No. 2.,Docket No. 133400.,Docket No. 133401.,Docket No. 133403.,Docket No. 133404.,Docket No. 133402.,Docket No. 133405.,Docket No. 133396.,Docket No. 133406. |
| Citation | 753 N.W.2d 605,482 Mich. 220 |
| Parties | DAIMLERCHRYSLER CORPORATION, Petitioner-Appellee, v. STATE TAX COMMISSION and Department of Environmental Quality, Respondents-Appellees, and City of Auburn Hills, Respondent-Appellant. Ford Motor Company, Petitioner-Appellee, v. State Tax Commission and Department of Environmental Quality, Respondents-Appellees, and City of Dearborn, Intervening Respondent-Appellant. Ford Motor Company, Petitioner-Appellee, v. State Tax Commission and Department of Environmental Quality, Respondents-Appellants, and City of Dearborn, Intervening Respondent-Appellee. Detroit Diesel Corporation, Petitioner-Appellee, Cross-Appellant, v. State Tax Commission and Department of Environmental Quality, Respondents-Appellants, Cross-Appellees, and Charter Township of Redford, Intervening Respondent-Appellee. Ford Motor Company, Petitioner-Appellee, v. State Tax Commission and Department of Environmental Quality, Respondents-Appellants. DaimlerChrysler Corporation, Petitioner-Appellee, Cross-Appellant, v. State Tax Commission and Department of Environmental Quality, Respondents-Appellants, and Township of Sylvan, Respondent-Appellee. Daimlerchrysler Corporation, Petitioner-Appellee, v. State Tax Commission and Department of Environmental Quality, Respondents-Appellants, and City of Auburn Hills, Respondent-Appellee. |
| Court | Michigan Supreme Court |
Butzel Long (by Carl Rashid, Jr., Michael F. Smith, and Katherine D. Goudie), Detroit, for DaimlerChrysler Corporation and Detroit Diesel Corporation.
Honigman Miller Schwartz and Cohn L.L.P. (by John D. Pirich, Jeffrey A. Hyman, and Stewart L. Mandell) Detroit, for Ford Motor Company.
Michael A. Cox, Attorney General, Thomas L. Casey, Solicitor General, and John Fordell Leone and Ross H. Bishop, Assistant Attorneys General, for the Michigan Department of Environmental Quality and the Michigan State Tax Commission.
William H. Irving and Debra A. Walling, for the city of Dearborn.
Secrest Wardle (by Derk W. Beckerleg), Farmington Hills, for the city of Auburn Hills.
These consolidated appeals concern a tax exemption that aims to improve Michigan's environment by encouraging entities to reduce air pollution they create in Michigan. Based on the plain language of the statute, we hold that in order to for equipment to be exempt, it must be installed or acquired for the primary purpose of regulating or curbing the spread of pollution in Michigan. Further, the equipment must actually and physically limit pollution. None of the equipment that is the subject of this appeal meets these tests. Therefore, the Court of Appeals erred by partially overturning the decision of the Department of Environmental Quality (DEQ) and the State Tax Commission (STC) to that effect and holding that petitioners' test cells qualify for the exemption. We reverse the Court of Appeals in part and restore the DEQ and STC decisions concluding that none of the equipment qualifies for the tax exemption.
The material facts in these consolidated appeals are undisputed. Pursuant to federal law, before issuing a certificate allowing for sales of new vehicles, the Environmental Protection Agency (EPA) must "test or require to be tested" new motor vehicles or new motor vehicle engines to ensure compliance with emission standards that the EPA promulgates.1 To that end, the agency has created a testing regime, requiring vehicle manufacturers to submit an application with an enormous amount of supporting data.2 Ford Motor Company, DaimlerChrysler Corporation, and Detroit Diesel (petitioners) installed test cells. The test cells are large buildings that can replicate many temperature conditions. They also house equipment that allows for up to 40 different types of tests and data collection.3 Petitioners' test cells are used in the manufacturing process to ensure compliance with the regulations. In addition to its test cell, Detroit Diesel installed a new engine production line to meet federal emissions regulations.
All the petitioners sought tax exemptions from the STC under part 594 of the Natural Resources and Environmental Protection Act (NREPA)5 for their test cells, and Detroit Diesel also petitioned for an exemption for its engine line. Part 59 provides real and personal property tax exemptions, as well as sales and use tax exemptions for certain air pollution control facilities.6 The law requires that the STC refer applications to the DEQ. The DEQ concluded that none of petitioners' equipment qualified for an exemption under part 59 because their primary purpose was not to reduce pollution, but to test products for compliance with federal emissions standards and to manufacture engines that comply with those standards. The DEQ also found that all the equipment actually generated some pollution during the testing or manufacturing processes, instead of physically disposing of air pollution or controlling it as the law requires. The STC agreed and denied all the exemptions. Petitioners appealed to various circuit courts. Ford's four exemption denials were reversed, while denials for DaimlerChrysler and Detroit Diesel were affirmed.
The Court of Appeals granted the appellate applications of all the aggrieved parties and consolidated the cases on appeal. Its published opinion held that tax exemptions must be issued for all petitioners' test cells. The Court of Appeals concluded that the primary purpose of the test cells is to reduce pollution and that they need not physically or directly reduce pollution in order to qualify as tax-exempt. However, the Court of Appeals affirmed the denial of an exemption for Detroit Diesel's engine manufacturing line on the ground that its primary purpose was engine manufacturing, not pollution reduction. The Court also held that no due process violation occurred during the STC's consideration of Detroit Diesel's application for a tax exemption.7 This Court granted leave to appeal.8
The Court reviews de novo motions for summary disposition.9 Issues of statutory construction are also reviewed de novo.10
The primary issue on appeal is whether the Court of Appeals erred in its application of the tax exemption of part 59 of NREPA. As noted, the Court of Appeals reached different conclusions for the petitioners' test cells and Detroit Diesel's engine line. With regard to the test cells, the Court held
[I]t is plainly apparent to us that the test cells were "installed or acquired for the primary purpose of controlling or disposing of air pollution" and that the test cells were designed and are operated "primarily for the control, capture, and removal of pollutants from the air, and [are] suitable, reasonably adequate, and meet[] the intent and purposes of part 55...."[11]
However, with regard to Detroit Diesel's engine line, the Court reached the opposite conclusion, holding that "[c]learly, the engine line ... is not `operated primarily for the control, capture, and removal of pollutants from the air....'" 12
While the Court of Appeals quoted language from the proper statutory provisions, the Court did not offer a construction of that language. Instead, the Court held that it was plain and clear which equipment was eligible and which was not. As will be discussed later, the statutory provisions provide no principled basis for distinguishing between the different equipment involved in this appeal. Under the plain language of these provisions, neither the test cells nor the engine line qualify for the exemption.
MCL 324.5901 defines "facility," in part, as
machinery, equipment, structures, or any part or accessories of machinery, equipment, or structures, installed or acquired for the primary purpose of controlling or disposing of air pollution that if released would render the air harmful or inimical to the public health or to property within this state.
An exemption for a particular "facility" requires a determination by the DEQ that "the facility is designed and operated primarily for the control, capture, and removal of pollutants from the air, and is suitable, reasonably adequate, and meets the intent and purposes of part 55[13] and rules promulgated under that part." 14
Thus, the equipment must meet the requirements of both §§ 5901 and 5903 to qualify for the tax exemption. Section 5901's definition of "facility" expressly requires that the equipment be "installed or acquired for the primary purpose of controlling or disposing of air pollution...." "Control" means to "exercise restraint or direction over; dominate, regulate, or command; to hold in check; curb."15 "Dispose of" means 16
The primary purpose of this equipment is to build engines (Detroit Diesel) or test engines (petitioners' test cells). The ancillary effect of the equipment is the control of pollution emitted by the engines. While the test cells help petitioners ensure that they are producing less polluting engines, the primary purpose of this equipment is not to regulate, curb the spread of, or destroy air pollution—and certainly not "pollution that if released would render the air harmful ... to the public health or to property within this state."17 Instead, the primary purpose of the equipment is to test engines to ensure that petitioners have properly designed their engines to meet federal regulations so that they can sell them to consumers.18 Furthermore, the equipment itself does not get rid of or curb air pollution. Thus, petitioners' test cells are not "facilities" as defined by MCL 324.5901.
Even assuming that petitioners' federally required pollution equipment and Detroit Diesel's engine line qualify...
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