On July 12, 2017, the Michigan Department of Treasury (Department) issued a notice (Notice) to taxpayers¹ clarifying how it will proceed with audits, informal conferences, and litigation relating to the retroactive repeal of the Multistate Tax Compact (Compact). The US Supreme Court recently denied certiorari for seven taxpayers² who appealed the Michigan Supreme Court's denial of application for leave to appeal the judgment of the Michigan Court of Appeals. The Court of Appeals upheld the constitutionality of the retroactive repeal of the 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 result of US Supreme Court's denial is that the Michigan Appellate Court's ruling stands and effectively brings this tax matter to a close.

With the litigation on this matter now final, according to the Notice, the Department will proceed as follows regarding Compact election related matters:

— Audits — All audits that were held in abeyance pending the final outcome of the Compact litigation will be processed. This may result in Intents to Assess or refund denials, as applicable.

— Informal conference — Taxpayers who timely requested (and were acknowledged for) an informal conference, which is in abeyance, will be contacted by the Department to determine how the taxpayer would like to proceed. The taxpayer will be given the option to withdraw from informal conference or proceed as there may be other non-Compact tax issues in dispute.

— Litigation before the Tax Tribunal and Court of Claims — Regarding cases before the Michigan Tax Tribunal or the Michigan Court of Claims, the Department intends to file motions for summary disposition unless the taxpayer stipulates to dismiss. Cases involving issues beyond the Compact election will proceed as normal. If a taxpayer wishes to discuss the status of its case with the Department, the taxpayer's legal counsel or representative should contact the Assistant Attorney General representing the Department.

Implications

The Notice offers guidance on the actions the Department intends to take to bring closure to the Compact election related issues. Should you have any questions or need assistance with this matter, please reach out to any of the contacts listed at the bottom of this Alert.

For additional details on the Compact election, please see Tax Alerts 2017-843, 2016-1178 and 2015-2006.

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ENDNOTES

¹ Notice to Taxpayers Regarding the Conclusion of Multistate Tax Compact Election Litigation, Michigan Department of Treasury, July 12, 2017 (available on the Internet here (last accessed Aug. 3, 2017)).

² IBM Corp. v. Mich. Dept. of Treasury, petition for cert. denied, Dkt. No. 16-698 (U.S. S. Ct. May 22, 2017); Gllette Commercial Operations North America and Subs. v. Mich, Dept. of Treasury, petition for cert. denied, Dkt No. 16-697 (US S. Ct. May 22, 2017); Sonoco Products Co. v. Dept. of Treasury, petition for cert. denied, Dkt. No. 16-687 (US S. Ct. May 22, 2017); Goodyear Tire & Rubber Co. v. Mich. Dept. of Treasury, petition for cert. denied, Dkt. No. 16-699 (U.S. S. Ct. May 22, 2017); Skadden, Arps, Slate, Meagher & Flom LLP v. Mich. Dept. of Treasury., petition for cert. denied,Dkt. No. 16-688 (U.S. S. Ct. May 22, 2017); DIRECTV Group Holdings, LLC v. Mich. Dept. of Treasury, petition for cert. denied, Dkt. 16-763 (U.S. S. Ct. May 22, 2017); R.J. Reynolds Tobacco Co., as Successor in Interest to Lorillard Tobacco Co. v. Mich. Dept. of Treasury, petition for cert. denied, Dkt. No. 16-1260 (U.S. S. Ct. June 19, 2017).