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Analysis

US Supreme Court denies cert in taxpayer challenges to MI and WA retroactive tax law amendments

Multistate Tax alert | May 22, 2017

The US Supreme Court, in a May 22, 2017 order, has refused to hear taxpayer challenges to retroactive tax legislation enacted in Washington and Michigan. In both instances, taxpayers had contended that the retroactive application of the tax law changes violated the Due Process Clause of the US Constitution.

Overview

In the May 22, 2017 order list, the United States Supreme Court denied certiorari in taxpayer challenges to a retroactive Michigan tax law amendment that had been upheld as constitutional at the state court level in Michigan. (The Supreme Court also denied cert in an unrelated taxpayer challenge to a retroactive Washington B&O tax law amendment.)

The appeal in Michigan stemmed from taxpayer challenges to the 2014 enactment of Public Act 282 (PA 282), which had retroactively rescinded Michigan’s membership in the Multistate Tax Compact (Compact) effective January 1, 2008. This retroactive element of PA 282 neutralized the election provided under Article III of the Compact by which certain taxpayers had previously sought to compute their Michigan Business Tax (MBT) liability pursuant to the Compact’s equally weighted, three-factor apportionment formula.

In 2015 and 2016, Michigan courts had rejected taxpayer challenges that the retroactive element of PA 282 violated the Due Process Clause of the US and Michigan constitutions, among other claims.

Unless the Supreme Court grants a petition for rehearing, the Compact litigation in Michigan has ended, and the weighting of the apportionment formula pursuant to the Compact Election has been resolved for Michigan tax purposes in favor of the state. Accordingly, application of the single sales factor apportionment formula, as provided under the MBT Act pursuant to MCL § 208.1301(2) and the Corporate Income Tax Act pursuant to MCL § 208.663(1), is required.

It is anticipated that within the coming months the Michigan Department of Treasury will issue guidance outlining the procedures for resolving pending MBT compact cases impacted by the denial of the taxpayer challenges to PA 282.

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Contacts

If you have questions regarding pending MBT Compact appeals or other Michigan tax matters, please contact any of the Deloitte Tax LLP professionals noted below.
Please contact Andy Colson if you have questions regarding the Washington B&O tax matter.

Pat Fitzgerald, managing director, Deloitte Tax LLP, Detroit, MI, +1 313 396 3913

Andy Colson, managing director, Deloitte Tax LLP, Seattle, WA, +1 206 716 7618

Chuck Wright, senior manager, Deloitte Tax LLP, Detroit, MI, +1 313 396 5801

Ryan Johnson, senior manager, Deloitte Tax LLP, Detroit, MI, +1 313 324 1147

Melanie Hamilton, senior manager, Deloitte Tax LLP, Detroit, MI, +1 313 396 3884

Tom Cornett, senior manager, WNT-MTS, Deloitte Tax LLP, Detroit, MI, +1 248 245 3976

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Multistate Tax alert archive

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.

View the list of archived Multistate Tax alerts.

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