High Court Keeps IBM, Goodyear Waiting on ‘Retroactive’ Taxes

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By Che Odom

IBM, Goodyear and other companies hoping the U.S. Supreme Court will consider their challenges to “retroactive” tax laws in Michigan and Washington state must wait until at least May 1 for their answer.

The petitions were distributed to justices for an April 13 conference and then relisted for an April 21 conference. On April 24, the high court relisted them for April 28.

Several out-of-state companies are asking the court to review state court opinions upholding statutes in the two states that retroactively impact tax assessments years before the laws were enacted.

One attorney involved in the cases said the delays could be a sign that the court is interested in the case and will grant review and schedule oral arguments. Another said the court may be taking its time with these and other petitions to give Justice Neil Gorsuch, who joined the court April 10, more time to settle in.

Relisting a Sign?

In its last nine conferences, the court has granted a dozen cases for argument the next term, each one of which was relisted at least once, John Elwood, partner and appellate attorney at Vinson and Elkins LLP, said in an April 23 posting on the popular SCOTUSBlog.com.

“If indeed the Court has adopted a policy of relisting cases before granting, it may be akin to a ‘stop, look, and listen’ after provisional decision to grant—intended to give the Justices and their clerks additional time to review grant candidates for vehicle problems or other concerns,” Elwood said.

Washington Case

One of the petitioners, Dot Foods Inc., is challenging a Washington Supreme Court ruling that the retroactive application of a statutory amendment narrowing a business and occupation tax exemption didn’t violate due process. In a December 2016 reply, the company reiterated that the case is prime for review—arguing that the state court’s decision “deepens a conflict” among lower courts and implicates “millions, if not billions, of dollars” ( Dot Foods, Inc. v. Wash. Dep’t of Revenue, U.S., No. 16-308, reply in support of petition for review 12/21/16 ).

The company also argued that its petition directly relates to an open question highlighted by Justice Sandra Day O’Connor in 1994, the last time the high court considered the legality of retroactive taxation.

Michigan Cases

In the other cases, the Michigan Legislature in 2014 amended the Michigan Business Tax Act and repealed the Multistate Tax Compact. Under the compact, business taxpayers could elect to apportion income using “an equally-weighted, three-factor apportionment formula based on a business’s sales, property, and payroll.”

Under the amendment, businesses would need to apportion their tax base using a “sales-factor apportionment formula,” retroactive to Jan. 1, 2008.

Multiple out-of-state businesses have asked the high court to review several Michigan Court of Appeals rulings that upheld the 2014 statute. They are:

  • IBM Corp. v. Mich. Dep’t of Treasury, U.S., No. 16-698, reply brief 3/24/17 ;
  • Gillette Commercial Ops. N. Amer. v. Mich. Dep’t of Treasury, U.S., No. 16-697, reply brief 3/28/17 ;
  • Goodyear Tire & Rubber Co. v. Mich. Dep’t of Revenue , U.S., No. 16-699, reply brief 3/28/17 ;
  • DirecTV Grp. Holdings, LLC v. Mich. Dep’t of Treasury, U.S., No. 16-736, reply brief 3/28/17 ;
  • Skadden, Arps, Slate Meagher & Flom LLP v. Mich. Dep’t of Treasury, U.S., No. 16-688, reply brief 3/27/17 ; and
  • Sonoco Prods. Co. v. Mich. Dep’t of Treasury, U.S., No. 16-687, reply brief 4/4/17 .

In a March 13 brief, Michigan Solicitor General Aaron Lindstrom said the Supreme Court lacks jurisdiction over the issue because the 2014 Michigan law is merely a corrective measure and not retroactive “at all.”

To contact the reporter on this story: Che Odom in Washington at COdom@bna.com

To contact the editor responsible for this story: Ryan C. Tuck at rtuck@bna.com

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