GMAC LLC v. TREASURY DEPT.

• Decision Date: 03 December 2009
• Docket Number: 289266.,Docket No. 289261,289262,289263
• Parties: GMAC LLC v. DEPARTMENT OF TREASURY. Nuvell Credit Company LLC v. Department of Treasury.
• Court: Court of Appeal of Michigan — District of US

781 N.W.2d 310

GMAC LLC v. DEPARTMENT OF TREASURY.

Nuvell Credit Company LLC v. Department of Treasury.

Docket Nos. 289261, 289262, 289263, 289266.

Court of Appeals of Michigan.

Submitted June 2, 2009, at Lansing.

Decided December 3, 2009, at 9:05 a.m.

COPYRIGHT MATERIAL OMITTED

Honigman Miller Schwartz and Cohn LLP (by Alan M. Valade, Detroit, June Summers Haas and John D. Pirich, Lansing) for plaintiffs.

Michael A. Cox, Attorney General, B. Eric Restuccia, Solicitor General, and Bruce C. Johnson, Heather M.S. Durian, Shenique A. Moss, Michael S. Newell, and Drew M. Taylor, Assistant Attorneys General, for defendant.

Robert S. LaBrant, Lansing, for the Michigan Chamber of Commerce.

Clark Hill PLC (by David D. Grande-Cassell), Lansing, for the Michigan Manufacturers' Association.

Willingham & Coté PC (by Raymond J. Foresman, Jr.), East Lansing, for the Michigan Automobile Dealers' Association.

Abbott Nicholson PC (by Robert Y. Weller, II), Detroit, for the Detroit Automotive Dealers' Association.

McClelland & Anderson LLP (by Gregory L. McClelland), Lansing, for the Michigan Association of Realtors.

Before: FORT HOOD, P.J., and MARK J. CAVANAGH and KIRSTEN FRANK KELLY, JJ.

PER CURIAM.

Plaintiffs appeal as of right the order granting summary disposition in favor of defendant. In this tax dispute, plaintiffs contend that a refund should be awarded pursuant to the bad debt deduction, MCL 205.54i, as interpreted by this Court in DaimlerChrysler Services North America LLC v. Dep't of Treasury, 271 Mich.App. 625, 723 N.W.2d 569 (2006), despite the recent amendment to the statute clarifying the availability of the deduction. The Court of Claims held that the legislative amendment was clear and unambiguous and, therefore, plaintiffs were not entitled to the deduction. We affirm.

In DaimlerChrysler, supra at 627, 723 N.W.2d 569, the plaintiff financed consumer purchases of motor vehicles from participating dealerships. If the plaintiff agreed to finance the transaction, the consumer executed a retail installment sales contract with the dealership, and the dealer retained a security interest in the vehicle. The plaintiff and the dealership agreed that the plaintiff would pay the dealers all the amounts due under the contract, including the sales tax on the purchase price of the vehicle. In exchange, the dealers assigned all rights, titles, and interests in the motor vehicle purchase agreements to the plaintiff. However, the dealers remitted the sales tax to the defendant. The plaintiff was assigned the right to repossess the vehicles when consumers defaulted on the contracts. However, the plaintiff was unable to recover the balance due on some of the contracts. Consequently, the plaintiff determined that it had overstated its gross receipts as a result of uncollectible bad debt and sought a refund or deduction on the alleged overpayment. Id. at 627-628, 723 N.W.2d 569. The hearing referee and the Court of Claims denied the plaintiff's requested relief, concluding that the plaintiff, as the financing provider, did not constitute a taxpayer for purposes of MCL 205.54i, and that an assignee did not achieve the status of a person subject to the act and is not allowed a sales tax deduction under the act for bad debt. Id. at 628-630, 723 N.W.2d 569.

The Court of Appeals held that the plaintiff was a taxpayer under the statute, holding:

We conclude that, consistent with MCL 492.102(6), the plaintiff was a sales finance company "financing installment sale contracts" between the dealers and the purchasers who defaulted on their loans. As noted above, the pre-2004 GSTA General Sales Tax Act defined "taxpayer" as "a person subject to a tax under this act." MCL 205.51(1)(m). A "person" was defined as "an individual, firm, partnership, joint venture ... or any other group or combination acting as a unit. ..." MCL 205.51(1)(a) (emphasis added.) The statute, by its plain language, contemplated a broad array of taxpayers. It also expressly declared that "any other group or combination" of persons may have been "acting as a unit," and, therefore, could have been considered as a single taxpayer.

Defendant concedes and we agree that the dealers, as retailers, fell under the statute—otherwise defendant would be owed no tax in the first place—even though the statute's definition of "person" contained no reference to "retailers" or "motor vehicle dealers." Given the fact that motor vehicle sales frequently require financing, and that plaintiff here was the financing company, we conclude that the dealers and plaintiff were "acting as a unit," i.e., as a single, taxable entity, for the purpose of the retail sales of automobiles. Any other reading would render the language referring to a "combination" of persons "acting as a unit" nugatory.

* * *

We conclude that plaintiff was a sales finance company that, along with its affiliated dealers, intended to act as one unit to make sales of motor vehicles; that plaintiff was engaged in business in Michigan; and, for those reasons, was a taxpayer under the GSTA. Further, we determine that plaintiff's bad debt was related to sales at retail because the sales themselves were "transactions by which transfer" of tangible property occurred. Plaintiff is entitled to recover from defendant sales tax overpayments under the bad-debt provision in effect at the time its claim accrued. Id. at 635-636, 640, 723 N.W.2d 569.

The Supreme Court denied the defendant's application for leave to appeal, 477 Mich. 1043, 728 N.W.2d 228 (2007), and also denied a motion for reconsideration, 478 Mich. 932, 733 N.W.2d 43 (2007).

In this case, plaintiffs, GMAC LLC and Nuvell Credit Company LLC, also provide financing for consumer purchases of motor vehicles sold by automotive dealerships in Michigan. Specifically, plaintiffs alleged that they provided financing to facilitate consumer purchases of automobiles from dealerships, which included Michigan sales tax. However, it was concluded that plaintiffs overstated their gross receipts as a result of bad debts. Because of the DaimlerChrysler decision, plaintiffs filed sales tax refund claims on September 21, 2007, and December 20, 2007. However, MCL 205.54i was amended to place limitations on the person that may be characterized as a "taxpayer" for purposes of the bad debt provision. 2007 PA 105. The amendment to MCL 205.54i also contains the following enacting provision:

Enacting section 1. This amendatory act is curative and shall be retroactively applied, expressing the original intent of the Legislature that a deduction for a bad debt for a taxpayer under the general sales tax act, 1933 PA 167, MCL 205.51 to 205.78, is available exclusively to those persons with the legal liability to remit the tax on the specific sale at retail for which the bad debt deduction is recognized for federal income tax purposes, and correcting any misinterpretation of the meaning of the term "taxpayer" that may have been caused by the Michigan Court of Appeals decision in Daimler Chrysler sic Services North America LLC v. Department of Treasury, No. 264323 271 Mich.App. 625, 723 N.W.2d 569 (2006). However, this amendatory act is not intended to affect a refund required by a final order of a court of competent jurisdiction for which all rights of appeal have been exhausted or have expired if the refund is payable without interest and after September 30, 2009 and before November 1, 2009.

The amendment to MCL 205.54i was approved and filed on October 1, 2007, given immediate effect, and expressly provided for retroactive application.

Unable to obtain a refund from defendant, plaintiffs filed complaints in the Court of Claims that requested tax refunds, relying on the DaimlerChrysler decision interpreting the bad debt deduction. The cases were consolidated, and following cross-motions for summary disposition, the Court of Claims denied plaintiffs' motion and granted defendant's motion for summary disposition, holding, in relevant part:

Defendant asserts that the plain meaning of this statutory language retroactively reverses the ruling in DaimlerChrysler, supra, except as to taxpayers who had final judgments for a refund when 2007 PA 105 was enacted with immediate effect on October 1, 2007. The Court agrees.

Plaintiffs espouse, however, a different view that appears to ignore the amendment's express mandate for its retroactive application. Noting that 2007 PA 105 expressly mentions only two dates in 2009 and is absolutely silent as to a deadline date for winning a final order for a refund, Plaintiffs contend that they must have until October 31, 2009 to pursue a final judgment. That interpretation must be rejected. Plaintiffs' reading of the act entails the patently erroneous idea, contradicted by the amendment itself, that the Legislature did not intend 2007 PA 105 to be applied retroactively to correct the misinterpretation of § 4i made by the DaimlerChrysler Court.

It follows that Plaintiffs can have no cause of action under the bad-debt provisions of § 4i. Whatever possibility of such a suit they had immediately consequent to the ruling in DaimlerChrysler was extinguished on October 1, 2007 with the enactment of 2007 PA 105. Plaintiffs' motion must therefore be denied to the extent that it relies on a mistaken interpretation of the amendatory provisions in the act.

The Court determines that the provisions of the GSTA pertinent to this case are clear and unambiguous....

In the alternative, Plaintiffs also argue that the retroactivity provision of 2007 PA 105, even if actually intended to take effect immediately when enacted on October 1, 2007, is unconstitutional because the amended § 4i of the GSTA offends several constitutional provisions, including but not limited to the Due Process Clause, the Equal Protection Clause, the Special Act Clause, and the Title-Object Clause. The Court must disagree and reject all of Plaintiffs' constitutional challenges for the reasons

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