Daily Tax Report: State provides authoritative coverage of state and local tax developments across the 50 U.S. states and the District of Columbia, tracking legislative and regulatory updates,...
Sept. 22 — Michigan Attorney General Bill Schuette (R) vigorously disputed IBM’s contention that he lacks clear authority to challenge a July court ruling that handed “Big Blue” a refund of $6 million in its long-running tax dispute with the Michigan Department of Treasury ( Int'l Bus. Machs. Corp. v. Mich. Dep't of Treasury, Mich., No. 154369, response brief 9/21/16 ).
Schuette, in a response petition filed with the Michigan Supreme Court, pushed back on International Business Machines Corp.'s earlier objections asserting he lacks standing to defend the interests of the state in the tax matter. IBM’s views are premised, in part, on the treasury department’s decision to accept an earlier Michigan Court of Appeals ruling and decline the right to appeal.
On July 21, the appeals court ruled IBM is entitled to use the Multistate Tax Compact’s three-factor apportionment formula for its 2008 taxes rather than the single sales factor regime required under the Michigan Business Tax Act (BTA). The ruling triggered a demand by IBM for a refund of $5.9 million, plus interest (2016 Weekly State Tax Report 16, 7/29/16).
Schuette filed to intervene on behalf of the state on Sept. 1. IBM objected to the intervention Sept. 15 and must file a reply brief responding to Schuette's Sept. 21 response by Sept. 29, but has asked for additional time to respond.
Through Solicitor General Aaron Lindstrom, who is counsel of record, Schuette argued the state’s counsel always has standing to challenge circumstances “when the state’s money is on the line.” At a minimum, the attorney general said the Michigan Supreme Court should give him a full opportunity to argue his position before the court.
“[I]f this Court has any inclination to take the extraordinary step of determining that Attorney General lacks the authority to represent the State when the State’s money is on the line, then the Court should call for further briefing and oral argument on that issue,” according to the brief.
Tax practitioners in Michigan will be watching the matter closely.
Counsel for IBM told Bloomberg BNA that Schuette’s attempt to intervene may be the first time a state attorney general has pursued a tax appeal in his own name, while acting in conflict with a judgment of the Department of Treasury.
A spokesman for the treasury department told Bloomberg BNA that the agency chose to accept the appellate court's decision, but Schuette has adopted an alternative strategy.
“The Department of Treasury accepts the decision of the Court of Appeals in the IBM case and did not support an appeal to the Michigan Supreme Court,” the agency said in a statement. “The Attorney General chose to pursue an appeal, but Treasury is not a party to that case.”
In its motion to strike intervention filed Sept. 15, IBM cited the precedent established in Federated Ins. Co. v Oakland Cty. Road Comm'n, 475 Mich. 286 (2006). IBM argued the attorney general doesn't have standing to intervene when the losing parties fail to file a timely appeal. To the extent the treasury department—the sole defendant in the action—chose not to appeal, IBM argued Schuette essentially has no client.
“The Attorney General does not have authority to litigate a non-existent appeal that the parties themselves have chosen not to pursue,” IBM argued.
Schuette disagreed in his Sept. 21 brief, saying his client is “the state itself” and he has no requirement to demonstrate that the state’s lawyer had been injured.
In addition, Schuette said IBM’s brief assumes the taxes at issue belong to the treasury department rather than the state.
“The money in the state treasury belongs to the State, and a loss of that money injures the State, not merely the Department of Treasury (the banker),” according to the brief. “The State thus has standing to appeal, represented by the Attorney General (its attorney).”
Finally, Schuette said the precedent in Federated Insurance has no bearing in the IBM matter because the case involved an injury to a county and not the state.
“Because the State has been injured, and the Attorney General represents the State, IBM’s motion to strike should be denied,” according to the brief.
To contact the reporter on this story: Michael J. Bologna in Chicago at firstname.lastname@example.org
To contact the editor responsible for this story: Cheryl Saenz at email@example.com
Copyright © 2016 Tax Management Inc. All Rights Reserved.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to firstname.lastname@example.org.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to email@example.com.
Put me on standing order
Notify me when new releases are available (no standing order will be created)