TEI Files Amicus Brief in Gillette Commercial Operations Michigan Retroactivity Litigation

On January 5, 2016, TEI filed an amicus brief in support of the taxpayer's application for leave to appeal the Michigan Court of Appeals' decision in Gillette Commercial Operations North America v. Department of Treasury, Case No. 152588, and its four companion cases. Gillette upheld the validity of 2014 PA 282, which the Michigan Legislature enacted to retroactively overrule the Michigan Supreme Court's decision in International Business Machines Corp v Department of Treasury, 496 Mich. 642 (2014). The IBM case held that IBM was entitled to elect three factor apportionment under the Multistate Tax Compact's alternative apportionment provision for its 2008 tax year. By upholding 2014 PA 282, the Gillette decision eliminated refunds that IBM had determined were due and revived assessments that IBM had determined were invalid by denying taxpayers the right to elect three factor apportionment. Gillette rationalized these outcomes were warranted because the Legislature "clarif[ied] through statutory amendment the intended meaning of a statutory provision that had been misread" by the Michigan Supreme Court in IBM when the Legislature enacted 2014 PA 282.

TEI's brief argues that 2014 PA 282 and Gillette cannot be squared with the limitations on retroactive tax legislation imposed by the Due Process and Separation of Powers Clauses of the United States and Michigan Constitutions. Further, the rationale employed by the Court of Appeals in Gillette places virtually no limit on the Michigan Legislature's ability to retroactively amend tax laws and invalidate court decisions it disagrees with, and thus interferes with the judicial power vested in the courts. The Gillette decision, if left to stand, will thus embolden the Michigan Legislature to continue a pattern of neglecting provisions in Michigan's tax law and forcing taxpayers to litigate them, knowing the Legislature can retroactively overrule any court decision it disagrees with. This tactic creates uncertainty for taxpayers, is inconsistent with sound tax policy and administration, and wastes judicial resources.

TEI's brief was prepared under the aegis of TEI's State & Local Tax Committee, whose chair is Jamie Fenwick. TEI Tax Counsel Pilar Mata and John Schoenecker coordinated and are the principal authors of the brief. Paul McCord and Graham Crabtree of Fraser Trebilcock Davis & Dunlap, P.C. served as local counsel for TEI in this matter.

Download the brief.