Six taxpayers separately filed petitions for writ of certiorari with the US Supreme Court (USSC), seeking review of the Michigan Court of Appeals ruling upholding the constitutionality of the retroactive repeal of the Multistate Tax Compact (Compact), a provision that allowed a taxpayer to make an election to use the Compact's equally weighted three-factor apportionment formula to determine certain Michigan tax liabilities. The taxpayers are: Sunoco Products Co.,¹ Skadden, Arps, Slate, Meagher & Flom, LLP (Skadden),² Gillette Commercial Operations North America and Subsidiaries (collectively, Gillette),³ International Business Machines Corporation (IBM),⁴ Goodyear Tire & Rubber Company (Goodyear),⁵ and DIRECTV Group Holdings, Inc.⁶

Specific questions presented in the petitions are the following:

— Whether the Compact has the status of a contract that binds its signatory states and requires them to allow taxpayers to elect to use the Compact's equally-weighted apportionment formula, until the state prospectively withdraws from the Compact

— Whether a state law that imposes retroactive tax liability for a period of almost seven years, in a manner that upsets settled expectations and reasonable reliance interests, violates the Due Process Clause

— Whether Michigan's retroactive repeal of, and withdrawal from, the Compact violates the Commerce Clause.

Responses to these petitions are due by December 23, 2016 for Sunoco and Skadden. Responses to the petitions are due December 27, 2016 for Gillette, IBM, and Goodyear. A response to the petition is due January 5, 2017 for DIRECTV.

Implications

Until the issue is finalized either by the USSC denying certiorari or further state action upon a ruling of the USSC, the application of the Compact election in Michigan remains open. Taxpayers should continue to review their positions and take the steps necessary to preserve their appeal rights. Taxpayers that have already protested the denial of the Compact election should continue to hold their appeals in abeyance pending the USSC's decision as to whether or not to review this issue.

For additional details on the MTC election, please see Tax Alerts 2016-1178 and 2015-2006.

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ENDNOTES

¹ Sonoco Products Co. v. Department of Treasury, State of Michigan, U.S. Supreme Court, Dkt. 16-687, petition for certiorari filed November 21, 2016.

² Skadden, Arps, Slate, Meagher & Flom LLP v. Michigan Department of Treasury, U.S. Supreme Court, Dkt. 16-688, petition for certiorari filed November 21, 2016.

³ Gillette Commercial Operations North America v. Michigan Department of Revenue, U.S. Supreme Court, Dkt. 16-697, petition for certiorari filed November 21, 2016.

⁴ International Business Machines Corp. v. Michigan Department of Treasury, U.S. Supreme Court, Dkt. 16-698, petition for certiorari filed November 18, 2016.

⁵ Goodyear Tire & Rubber Co. v. Michigan Department of Revenue, U.S. Supreme Court, Dkt. 16-699, petition for certiorari filed November 21, 2016.

⁶ DIRECTV Group Holdings, LLC. V. Michigan Department of Treasury, U.S. Supreme Court, Dkt. 16-736, petition for certiorari filed December 5, 2016.