Davis v. Department of Treasury

Decision Date17 May 1983
Docket NumberDocket No. 62236
Citation124 Mich.App. 222,333 N.W.2d 521
PartiesPaul S. DAVIS, Petitioner-Appellant, v. DEPARTMENT OF TREASURY, Respondent-Appellee. 124 Mich.App. 222, 333 N.W.2d 521
CourtCourt of Appeal of Michigan — District of US

[124 MICHAPP 224] Paul S. Davis, East Lansing, for petitioner-appellant.

Frank J. Kelley, Atty. Gen., Louis J. Caruso, Sol. Gen., and Richard R. Roesch and Curtis G. Beck, Asst. Attys. Gen., for respondent-appellee.

Before HOLBROOK, P.J., and J.H. GILLIS and DODGE, * JJ.

PER CURIAM.

Petitioner appeals as of right from a January 11, 1982, judgment of the Michigan Tax Tribunal affirming the denial of petitioner's claim for an intangibles tax refund.

Petitioner timely paid his intangibles taxes for the years 1976, 1977 and 1978. In November, 1979, the Michigan Department of Treasury issued a notice of intent to assess an additional intangibles tax of $118.40 for the years 1976 and 1978. Petitioner paid the tax under protest and requested a hearing. A hearing was held before a Department of Treasury hearing officer who, by decision and order dated November 21, 1980, denied petitioner's claim for an intangibles tax refund.

Petitioner then petitioned the Tax Tribunal for review of the department's denial of his refund [124 MICHAPP 225] claim, alleging that the intangibles tax act, M.C.L. Sec. 205.131 et seq.; M.S.A. Sec. 7.556(1) et seq., was unconstitutional in several respects or, in the alternative, that the November, 1979, assessment was improper.

On December 10, 1981, the Tax Tribunal's hearing officer issued a proposed judgment recommending affirmance of the department's denial of the refund claim. Petitioner filed exceptions and, on January 11, 1982, the tribunal adopted the findings of fact and conclusions of law of the proposed judgment. Petitioner appeals as of right.

Petitioner first argues that the intangibles tax act taken in conjunction with the Income Tax Act of 1967, M.C.L. Sec. 206.1 et seq.; M.S.A. Sec. 7.557(101) et seq., results in a graduated income tax in violation of Const.1963, art. 9, Sec. 7. The argument lacks merit. The intangibles tax is a specific tax on the privilege of ownership of intangible personal property. The fact that income is used as a partial basis for measuring the intangibles tax does not make it an income tax. Shivel v. Kent County Treasurer, 295 Mich. 10, 19, 294 N.W. 78 (1940). See also Shapero v. Dep't of Revenue, 322 Mich. 124, 33 N.W.2d 729 (1948). Since the intangibles tax does not constitute an income tax, there is no violation of Const.1963, art. 9, Sec. 7.

With regard to petitioner's second argument, we adopt the following analysis of the Tax Tribunal hearing officer:

"Petitioner next argues that since the new Constitution removed intangible property from the general property tax, removed the reference to 'specific' taxes, and the reference to a nongraduated income tax, it 'is clear that the intent of the new Constitution was to replace the intangible property tax with an income tax'. * * *

[124 MICHAPP 226] "Petitioner is correct that the reference in Section 4 of the 1908 Constitution has not been reinserted in the new Constitution ('The legislature may by law impose specific taxes, which shall be uniform upon the classes upon which they operate') and that the new Constitution provides for 'the uniform general ad valorem taxation of real and tangible personal property not exempt by law'. Thus, the new Constitution specifically speaks only of tangible property.

"But, as the Convention comments point out: 'This is a revision of Sections 3, 4, 7 and 8, Article X, of the present [1908] Constitution. The first sentence preserves the uniformity clause of Sec. 3, Article X, except as it presently applies to intangible personal property for which ad valorem taxation has proved unworkable'. Thus, the drafters of the 1963 Constitution, in realization of the fact that the Intangibles tax act had been passed in 1939 removed the phrase 'except on property paying specific taxes' and provided for the uniformity provision to apply to the ad valorem property taxation of tangible real and personal property. Thus, the problems with excepting specific taxes was solved.

"As the Convention Comment goes on to state, 'The last sentence of the section replaces Sec. 4, of present Article X. The uninformative designation of "specific" taxes has been dropped'.

"What Article 9, Sec. 3 of the 1963 Constitution accomplished was to provide for uniform general ad valorem taxation, not to exceed 50% of true cash value and to provide that 'every tax other than the general ad valorem property tax shall be uniform upon the class or classes upon which it operates'. Thus, any other tax, such as the Intangibles tax, the Single Business tax, etc., must be uniform upon the class or classes upon which it operates. The amendment to the prior Constitutional provisions did not imply that the intangible property tax was to be replaced with an income tax but rather that the Intangibles tax did not fit into the ad valorem property tax category. Thus, the Intangibles Tax Act has not been replaced, but co-exists with the Michigan Income Tax." (Emphasis in original.)

Petitioner's contention that the Income Tax Act [124 MICHAPP 227] and the intangibles tax act result in double taxation and violate Sec. 3(b)(13) of the intangibles tax act is rejected. The intangibles tax is a specific tax against the ownership of intangible property whereas the income tax is an assessment upon the income of a person and not upon any particular property from which that income is derived. Thus, the double taxation issue need not be addressed. See Shivel, supra, 295 Mich. p. 19, 294 N.W. 78; Stockler v. Dep't of Treasury, 75 Mich.App. 640, 652, 255 N.W.2d 718 (1977), lv. den. 402 Mich. 802 (1977).

Petitioner next asserts that M.C.L. Sec. 205.133(b)(12); M.S.A. Sec. 7.556(3)(b)(12), which provides an exemption from the intangibles tax for property used in a business activity if the income from such property is considered in computing the single business tax, violates the uniformity requirement and the equal protection clause, rendering the intangibles tax act invalid.

The exemption provides:

"(b) The following shall be exempt from the tax imposed by this act:

* * * "(12) Intangible personal property owned by or comprising the assets of a person or business enterprise engaged in business activity as defined by section 3 of Act No. 228 of the Public Acts of 1975, as amended, being section 208.3 of the Michigan Compiled Laws, if, were income received from such intangible personal property, it would be considered even...

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4 cases
  • Elenbaas v. Department of Treasury
    • United States
    • Court of Appeal of Michigan — District of US
    • 4 d2 Agosto d2 1998
    ...assessed on expenditures made. Rather, income tax is intended to be assessed upon the income of a person. Davis v. Dep't of Treasury, 124 Mich.App. 222, 227, 333 N.W.2d 521 (1983). Thus, we find defendant's argument, that net income is the only amount subject to the exemption and that expen......
  • Town & Country Dodge, Inc. v. Department of Treasury
    • United States
    • Court of Appeal of Michigan — District of US
    • 16 d4 Outubro d4 1986
    ...the single business tax is not an income tax and is thus not governed by Const.1963, art. 9, Sec. 7. See Davis v. Dep't of Treasury, 124 Mich.App. 222, 225, 333 N.W.2d 521 (1983), where a similar argument failed with regard to the tax on intangible personal property, M.C.L. Sec. 205.131 et ......
  • Rosenbalm v. Department of Treasury
    • United States
    • Court of Appeal of Michigan — District of US
    • 23 d5 Setembro d5 1983
    ...prohibits a graduated income tax. This issue has previously been addressed by Michigan appellate courts. In Davis v. Dep't of Treasury, 124 Mich.App. 222, 225, 333 N.W.2d 521 (1983), this Court "The intangibles tax is a specific tax on the privilege of ownership of intangible personal prope......
  • Auer v. Department of Treasury, Docket No. 67137
    • United States
    • Court of Appeal of Michigan — District of US
    • 9 d5 Novembro d5 1984
    ...the intangibles tax act does not rely upon the definition of "dividend" used for federal income tax purposes, Davis v. Dep't. of Treasury, 124 Mich.App. 222, 333 N.W.2d 521 (1983), this is not a case of conflicting definitions, but, rather, involves a taxpayer's choice in the first instance......

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