The Michigan Supreme Court (MSC) denied a group of taxpayers applications for leave to appeal the decision by the Michigan Court of Appeals (COA) upholding the 2014 retroactive repeal by the Michigan Legislature of the Multistate Tax Compact (MTC) under 2014 PA 282.¹

Justice Markman, joined by Justice Viviano, dissented, claiming the issues raised by the retroactive repeal are, in his judgment, "of considerable constitutional significance as to matters affecting the tax policy and procedures, the fiscal and business environments, and the jurisprudence of [Michigan]." Specifically, Justice Markman believes the following questions warranted further consideration by the MSC:

1. Is 2014 PA 282 consistent with federal due-process protections under the US Constitution given that the period of retroactivity was six years and nine months?

2. Is 2014 PA 282 consistent with the Michigan Due Process Clause (which, in his view, operates in some cases differently than the federal constitutional provisions)?

3. Does 2014 PA 292 violate either the federal or state prohibitions against the impairment of contracts?

4. Does 2014 PA 282 violate the Separation of Powers Clause?

Justice Viviano wrote the lead majority opinion, in which Justice Markman joined, in the earlier appeal of the case upholding the taxpayer's right to make an MTC compact election.²

Implications

The MSC's denials of leave to appeal these MTC retroactive repeal cases solidifies the positions of the Michigan Department of Treasury (Department) and the Legislature that 2014 PA 282 validly and retroactively repealed the MTC effective January 1, 2008. IBM still has pending litigation in connection with its 2008 tax year, on which the MSC initially ruled favorably (July 2014) and subsequently ruled unfavorably upon remand to the Court of Claims as a result of 2014 PA 282 (April 2015). IBM's oral arguments are scheduled for July 12, 2016, before the COA. After the denial of the petition, IBM and the remaining taxpayers with appeals pending would appear to have only one more recourse: an appeal to the US Supreme Court.

Considering the uphill battle, the Department and Michigan courts with appeals pending on this issue will likely begin communicating with taxpayers regarding the status of informal conferences and appeals, most of which had been placed in abeyance pending the MSC's decision on this matter.

Taxpayers whose facts are distinguished from Gillette and that wish to continue pursuing protests should monitor their correspondence to ensure their conference or appeal remains active.

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ENDNOTES

¹ Gillette Comm Operations N Am & Subsidiaries v. Department of Treasury, No. 152588 (Mich. S. Ct. June 24, 2016) (consolidated with 49 other appeals); International Business Machines Corporation v. Department of Treasury, No. 152650 (Mich. S. Ct. June 24, 2016).

² IBM v. Dep't of Treasury, 496 Mich. 642, 852 N.W.2d 865; 2014 Mich. LEXIS 1282 (2014)