Perspectives

Michigan Supreme Court denies Treasury’s motions for rehearing/stay in IBM

Multistate tax alert | November 18, 2014

In this tax alert we summarize the status of the Compact election for MBT purposes and provide some taxpayer considerations in light of the developments in the IBM decision and the recent enactment of Public Act 282 of 2014, retroactively repealing the Compact provisions of Michigan law.

Michigan Supreme Court's decision in IBM

On July 14, 2014, the Michigan Supreme Court in International Business Machines v. Michigan Department of Treasury (“IBM”) held that the taxpayer could elect to compute both the Modified Gross Receipts Tax (“MGRT”) and Business Income Tax (“BIT”) components of its 2008 Michigan Business Tax (“MBT”) liability using the Multistate Tax Compact (“Compact”) election in lieu of the 100% sales-weighted apportionment formula under the MBT Act.1 By application of the election (Compact Article III), the taxpayer was allowed to use an equally-weighted, three-factor apportionment formula (property, payroll and sales).2

On August 4, 2014, in response to the IBM decision, the Michigan Department of Treasury (“Treasury”) filed two motions with the court: a Motion for Rehearing, requesting that the court reconsider its decision; and a Motion to Stay, asking that the court suspend the effects of the case pending the outcome of the Motion for Rehearing.

On November 14, 2014, the Michigan Supreme Court denied both motions.3 Accordingly, the Michigan Supreme Court decision of July 14, 2014 stands, and the matter is remanded to the Michigan Court of Claims for entry of an order granting summary disposition in favor of IBM.4

In this Tax Alert we summarize the status of the Compact election for MBT purposes and provide some taxpayer considerations in light of the developments in IBM and the recent enactment of Public Act 282 of 2014, retroactively repealing the Compact provisions of Michigan law.

1 International Business Machines v. Michigan Department of Treasury, 496 Mich. 642 (Mich. Jul. 14, 2014).
2 The background, judicial history and implications of the IBM decision were summarized in the Deloitte Tax Alert dated July 16, 2014.
3 International Business Machines v. Michigan Department of Treasury, Order of the Michigan Supreme Court (Nov. 14, 2014).
4 International Business Machines, 496 Mich. at 668.

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The Multistate Tax Alert Archive includes external tax alerts issued by Deloitte Tax LLP's Multistate Tax practice during the last three years. These external alerts highlight selected developments involving state tax legislative, judicial, and administrative matters. The alerts provide a brief summary of specific multistate developments relevant to taxpayers, tax professionals, and other interested persons.
 
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