New Covert Generating Co. v. Twp. of Covert

• Decision Date: 24 September 2020
• Docket Number: No. 348720, No. 348721,348720
• Citation: 964 N.W.2d 378,334 Mich.App. 24
• Parties: NEW COVERT GENERATING COMPANY, LLC, Petitioner-Appellee/Cross-Appellant, v. TOWNSHIP OF COVERT, Respondent-Appellant/Cross-Appellee, and County of Van Buren, Intervening Respondent-Appellant/Cross-Appellee. New Covert Generating Company, LLC, Petitioner-Appellee, v. Township of Covert, Respondent-Appellant, and County of Van Buren, Intervening Respondent-Appellant.
• Court: Court of Appeal of Michigan — District of US

334 Mich.App. 24

964 N.W.2d 378

NEW COVERT GENERATING COMPANY, LLC, Petitioner-Appellee/Cross-Appellant,

v.TOWNSHIP OF COVERT, Respondent-Appellant/Cross-Appellee,andCounty of Van Buren, Intervening Respondent-Appellant/Cross-Appellee.

New Covert Generating Company, LLC, Petitioner-Appellee,

v.Township of Covert, Respondent-Appellant,andCounty of Van Buren, Intervening Respondent-Appellant.

No. 348720

No. 348721

Court of Appeals of Michigan.

Submitted August 6, 2020, at Lansing.

Decided September 24, 2020, 9:05 a.m.

Howard & Howard Attorneys PLLC, Royal Oak (by Patrick M. McCarthy, Rodger A. Kershner, Mary C. Dirkes, and Michael O. Fawaz ) for New Covert Generating Company, LLC.

Foster, Swift, Collins & Smith, PC, Grand Rapids (by Jack L. Van Coevering and Thomas K. Dillon ) and Knotek Law Office, PLC (by M. Brian Knotek, Paw Paw) for Covert Township and Van Buren County.

Bauckham, Sparks, Thall, Seeber & Kaufman, PC, Portage (by Robert E. Thall ) for the Michigan Townships Association and the Michigan Municipal League, amici curiae.

Before: Murray, C.J., and Cavanagh and Swartzle, JJ.

Per Curiam.

[334 Mich.App. 32]

This dispute involves the tax assessed on an electric power plant owned by petitioner, New Covert Generating Company, LLC (New Covert Generating). In Docket No. 348720, respondents, Covert Township (the Township) and Van Buren County (the County), appeal by right the Tax Tribunal's opinion and judgment setting the true cash value of the personal property at issue for tax year 2016 and the Tax Tribunal's order imposing sanctions for the filing of frivolous motions. On cross-appeal in Docket No. 348720, New Covert Generating appeals by right the Tax Tribunal's opinion and judgment setting the true cash value of the personal property for tax year 2016. In Docket No. 348721, the Township and the County appeal by right the Tax Tribunal's orders imposing sanctions arising from motions filed in the dispute over tax years 2012 through 2015. We affirm.

I. STATEMENT OF FACTS

The present appeal involves a long-running dispute between New Covert Generating and the local taxing authorities regarding the proper assessed value of New Covert Generating's industrial personal property and the proper application of any tax exemptions applicable to the property. New Covert Generating owns real property in Covert Township, which is in Van Buren County. The property has been improved with a natural-gas-fired combined-cycle facility and related equipment.

[334 Mich.App. 33]

Such power plants have two kinds of turbines: combustion turbines and steam turbines. A generator converts the rotational energy of the turbines into electricity. New Covert Generating is not a utility—it is a merchant generator of electricity that sells electricity on the open market. New Covert Generating transitioned from selling in the Midcontinent Independent System Operator (MISO) market to the PJM Interconnection (PJM) by June 2016 to increase profits and work at a higher capacity. New Covert Generating had to build a new switchyard, the Segreto switchyard, to make this transition.

II. PROCEDURAL HISTORY

A. CHALLENGES TO PROPERTY ASSESSMENTS

New Covert Generating has challenged the assessments of its real and personal property for the years 2010 through 2016. In December 2012, the State Tax Commission (the Commission) granted New Covert Generating's classification appeal for the years 2010 and 2011, ordering the Township to create a separate personal-property parcel for the turbines and generators and to classify that parcel as industrial personal property. The classification change entitled New Covert Generating to receive the state education tax and school operating millage exemptions to its personal property other than its turbine property. But in January 2013, New Covert Generating challenged the 2011 and 2012 assessments on the ground that the taxing authorities failed to take into consideration the state education tax and school operating millage exemptions for nonturbine personal property.

In May 2013, the Tax Tribunal issued its opinion setting the true cash value of the parcels for 2010 and

[334 Mich.App. 34]

2011, and New Covert Generating petitioned the Tax Tribunal to require the taxing authorities to modify the assessed values for 2013 using the values established by the Tax Tribunal for 2011 with appropriate adjustments.

In February 2014, New Covert Generating filed a new petition with the Tax Tribunal regarding its 2011 tax assessments by the Township and the County. New Covert Generating stated that the Township had assessed its real property at $193,970,800 and its personal property at $6,552,240 for 2011. It noted that it had appealed to the Commission the Township's decision to classify its turbines, generators, and other machinery as real property. The Commission, it wrote, had since granted the appeal and ordered the Township to create a separate personal-property parcel for the turbines and generators. It also ordered the Township to classify the property as industrial personal property. New Covert Generating alleged that the County thereafter issued a new tax bill for 2011 that reallocated most of the value previously classified as real property to the new personal property parcel created for the turbine personal property, which was not entitled to tax exemptions. The new assessments provided:

Parcel Number	Tax Year	Actual Value/State Equalized Value	Taxable Value
80-07-004-003-03 Real Property	2011	$8,016,600	$8,016,600
80-07-900-084-00 Personal Property	2011	$6,663,600	$6,663,600
80-07-900-084-01 Turbine Property	2011	$185,842,800	$185,842,800

[334 Mich.App. 35]

New Covert Generating alleged that the County lacked the authority to make the changes and stated that, after the changes, the Commission modified its order and required the Township to assess the "turbines" alone under the new parcel—parcel 80-07-900-084-01—and to move the other personal property from the real-property parcel to the original personal-property parcel number, which was parcel 80-07-900-084-00. New Covert Generating alleged that the actions by the Township and the County did not constitute a final decision, ruling, or determination not already subject to the Tax Tribunal's jurisdiction, but it nevertheless stated that it was appealing the reclassification in its petition as a precautionary measure.

This Court issued an opinion affirming the Tax Tribunal's decision regarding the assessments for 2010 and 2011. See New Covert Generating Co. v. Covert Twp. , unpublished per curiam opinion of the Court of Appeals, issued August 4, 2015 (Docket No. 320877) 2015 WL 4634993. In that decision we recognized that the Township had initially taxed two separate parcels owned by New Covert Generating: one tax parcel for its industrial personal property and another for its real property. Id. at 1. However, we recognized that the Commission ordered the Township to establish a separate tax parcel for New Covert Generating's industrial personal property that constituted turbines beginning with the 2011 tax year. Id. at 1 n. 1. The Court stated that the Commission ordered the Township to create the separate parcel because turbines were not exempt property. Id. at 12-13. The case proceeded to trial before the Tax Tribunal, and the Tax Tribunal ultimately set the true cash value of the property at $179,100,000 for 2010 and at $228,400,000 for 2011. Id. at 2.

The Township also argued, in part, that the Tax Tribunal did not have jurisdiction to consider New Covert Generating's petition because New

[334 Mich.App. 36]

Covert Generating did not file statements of assessable property in 2010 and 2011. Id. This Court concluded that, under MCL 205.735a, New Covert Generating properly invoked the Tax Tribunal's jurisdiction without filing the statements, explaining that the statutory requirement that the petitioner file a statement of assessable property applied only to appeals in which the petitioner appealed directly to the Tax Tribunal without first protesting the assessment before the board of review. Id. at 4. Because New Covert Generating had filed a protest before the board for the 2011 assessment, it could properly appeal that assessment to the Tax Tribunal without filing a statement of assessable property. Id. at 5. Although New Covert Generating did not protest the 2010 assessment to the board, this Court concluded that New Covert Generating complied with the requirement that it file a statement of assessable property by filing the Commission's Form 4175. Id. For these reasons, the Court concluded that the Tax Tribunal had jurisdiction to consider the dispute. Id. at 6.

This Court also reviewed the Township's challenges to the Tax Tribunal's findings and determined that the Tax Tribunal did not make any errors that warranted relief. Id. at 6-8. Finally, this Court declined to interpret the meaning of the term "turbine" because the tax exemption at issue did not become effective until December 31, 2011. Id. at 13. Accordingly, it did not apply to the tax years at issue. Id.

In May 2016, New Covert Generating filed a petition challenging the assessments of its property for 2016. The Tax Tribunal thereafter consolidated all the appeals involving tax claims for years 2012 through 2015 into one appeal and ultimately granted the County's motion to intervene.

[334 Mich.App. 37]

B. MOTIONS FOR SUMMARY DISPOSITION

In February 2017, New Covert Generating moved for partial summary disposition in the consolidated appeals and the appeal involving the 2016 tax year, asking the Tax Tribunal to interpret the meaning of the term "turbine" as used in MCL 211.903(3)(b) and MCL 380.1211(10)(e)(ii ), which excluded "turbines" from the industrial personal property that was otherwise exempt from the state education tax and the school operating millage. New Covert Generating stated that the Township had taken the position that the term applied to turbines and all the machinery attached to the turbine that was needed to...