Int'l Auto. Components Grp. N. Am. v. Dep't of Treasury
| Decision Date | 19 January 2023 |
| Docket Number | 360602 |
| Parties | INTERNATIONAL AUTOMOTIVE COMPONENTS GROUP NORTH AMERICA, INC., Plaintiff-Appellant, v. DEPARTMENT OF TREASURY, Defendant-Appellee. |
| Court | Court of Appeal of Michigan (US) |
UNPUBLISHED
Court of Claims LC No. 21-000189-MT
Before: JANSEN, P.J., and SERVITTO and GADOLA, JJ.
Plaintiff appeals as of right the Court of Claims order granting summary disposition in defendant's favor. We affirm.
Plaintiff is an automotive interior components and systems supplier. On November 13, 2007, it was awarded a Michigan Economic Development Corporation (MEGA) employment tax credit under the Michigan Business Tax Act, MCL 208.1101 et seq. The employment tax credit was thereafter extended in April 2008 for qualified jobs through the 2018 tax year.
In 2012, Michigan replaced the Michigan Business Tax (MBT) with the Corporate Income Tax (CIT). 2011 PA 38, effective January 2012; D 'Agostini Land Co LLC v Dept of Treasury, 322 Mich.App. 545, 550; 912 N.W.2d 593 (2018). However, the Legislature recognized that businesses (such as plaintiff) may have tax credits that were awarded to them under the MBT and saw fit to ensure that the businesses would not have to lose out on those tax credits. Thus, it did not immediately repeal the MBT, but instead enacted provisions permitting businesses with tax credits to continue to file MBT returns until they had used up all of the credit that had been awarded them. MCL 208.1500; MCL 206.680. In order to take advantage of these provisions, businesses had to use a specific formula set forth by the Legislature to determine the amount of its tax liability. The formula, at its most basic, requires the business using up its tax credits (and thus filing an MBT return) to calculate both the amount of its tax liability under the MBT and the amount that its tax liability would be if the business filed its taxes under the CIT; the business's tax liability would be the greater of the two amounts. MCL 208.1500(4).
Plaintiff filed MBT tax returns claiming a MEGA Employment tax credit for tax years 2008-2011. When the CIT became effective for tax year 2012, plaintiff chose to pay the "greater of" tax as calculated under MCL 208.1500(4) for the tax years 2012 through 2018, when its MEGA credits were exhausted.
According to plaintiff, for tax year 2019, it filed its first CIT return and claimed a business loss carryforward in the amount of $12,826,381. Defendant denied the requested business loss carryforward. Plaintiff timely appealed the denial and informal conference proceedings were held on June 15, 2021. Defendant issued a decision and order of determination on July 9, 2021, denying plaintiff's request for the business loss carryforward. Plaintiff appealed the decision to the Court of Claims.
In lieu of answering plaintiff's complaint, defendant moved for summary disposition in its favor. Citing MCR 2.116(C)(8) and (10), defendant asserted that the CIT does not allow taxpayers to claim CIT business losses from a preceding tax year in which they did not file a CIT return. According to defendant, plaintiff had no actual CIT business losses from 2018 because plaintiff did not file a CIT return in 2018; it filed an MBT return. A CIT business loss carryforward is not the same as an MBT business loss carryforward and, as a result, an MBT business loss carryforward cannot be claimed as a deduction on a CIT return.
Plaintiff responded that a taxpayer, to keep receiving the benefit of tax credits it was awarded under the MBT, pays the greater of the liability computed under each tax. Thus, the taxpayer is essentially subject to both taxes, with a credit for the lesser tax being given against the greater tax. Plaintiff claimed that it was required to pay the higher of the MBT or calculated CIT tax for each year it filed an MBT return and in fact, paid the calculated CIT amount (as it was higher) in four of the seven preceding years. Plaintiff also calculated both the MBT and CIT business losses and tracked the carryforward amounts for every tax year during 2012 through 2018 as the "greater-of" return tax forms prescribed and claimed the calculated CIT business loss carryforward on its 2019 CIT return.
The Court of Claims opined that when a taxpayer makes an election to file returns under the MBT after the CIT replaced it (in order to retain any MEGA credits), the MBT specifically requires the taxpayer to also compute tax liability under the CIT as if it were subject to the CIT. But, in such scenario the taxpayer is not actually subject to taxation under the CIT. The taxpayer makes the CIT calculation only to determine which tax liability (MBT or CIT) is greater. The court further opined that there is no provision in the CIT for claiming business losses that occurred in previous years in which the taxpayer filed under the MBT. Indeed, the CIT defines "business loss" in a way that directs the reader to the CIT, and not to any other act. Consequently the term "business loss" under the CIT is a loss that is to be determined after calculations-allocation and apportionment-that are to be performed under the CIT, not under the MBT or some other act. The court thus granted summary disposition in defendant's favor under MCR 2.116(C)(8). This appeal followed.
This Court reviews de novo a trial court's decision on a motion for summary disposition. Veenstra v Washtenaw Country Club, 466 Mich. 155, 159; 645 N.W.2d 643 (2002). A motion under MCR 2.116(C)(8) "tests the legal sufficiency of the complaint solely on the basis of the pleadings," Dalley v Dykema Gossett, 287 Mich.App. 296, 304; 788 N.W.2d 679 (2010), and permits a court to grant summary disposition if "[t]he opposing party has failed to state a claim on which relief can be granted." MCR 2.116(C)(8). "When deciding a motion under (C)(8), this Court accepts all well-pleaded factual allegations as true and construes them in the light most favorable to the nonmoving party. Dalley, at 304-305. "Summary disposition on the basis of subrule (C)(8) should be granted only when the claim is so clearly unenforceable as a matter of law that no factual development could possibly justify a right of recovery." Id. at 305 (quotation marks and citation omitted).
The sole issue for our review is, in a nutshell, may a taxpayer transitioning from the MBT to the CIT claim prior losses calculated and submitted under the MBT as business losses to the first tax return it files under the CIT? We find that the taxpayer may not.
We begin our statutory analysis with the wording of the statute itself, because the Legislature is presumed to understand the meaning of the language it enacts into law. Robinson v City of Detroit, 462 Mich. 439, 459; 613 N.W.2d 307 (2000). As stated by our Supreme Court:
When interpreting statutory language, our obligation is to ascertain the legislative intent that may reasonably be inferred from the words expressed in the statute. Wickens v Oakwood Healthcare System, 465 Mich. 53, 60; 631 N.W.2d 686 (2001). When the Legislature has unambiguously conveyed its intent in a statute, the statute speaks for itself, and judicial construction is not permitted. Huggett v Dep't of Natural Resources, 464 Mich. 711, 717; 629 N.W.2d 915 (2001). [Koontz v Ameritech Services, Inc, 466 Mich. 304, 312; 645 N.W.2d 34 (2002)]
"Because the proper role of the judiciary is to interpret and not write the law, courts simply lack authority to venture beyond the unambiguous text of a statute." Id.
However, if an ambiguity exists judicial construction is appropriate. Colucci v McMillin, 256 Mich.App. 88, 94; 662 N.W.2d 87 (2003). "An ambiguity can be found only where the language of a statute as used in its particular context has more than one common and accepted meaning." Id. In determining whether an ambiguity exists, a court should presume that every word has some meaning and should avoid any construction which would render a statute, or any part of it, surplusage or nugatory. Popma v Auto Club Ins Ass'n, 446 Mich. 460, 470; 521 N.W.2d 831 (1994).
As previously indicated, when the MBT was replaced with the CIT in 2012, a provision was in place allowing businesses to maintain their awarded tax credits by paying the "greater of" calculated tax liability and filing an MBT tax return. The specific provision in the MBT, MCL 208.1500, states in relevant part:
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