Supreme Court Reschedules IBM, Goodyear Retroactive Tax Cases

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,...

By Che Odom

The U.S. Supreme Court rescheduled a conference on petitions brought by IBM, Goodyear, Dot Foods and other companies against Michigan and Washington state for “retroactive” tax laws.

The cases were distributed for the justices’ April 13 conference, but the high court announced April 17 that a conference on the petitions would be held April 21.

It’s unclear whether the court postponed the conference or scheduled a second one on the issue.

Decisions that were made by the Supreme Court last week included a footnote that said Justice Neil Gorsuch didn’t participate. The court may have pushed back more complicated or controversial cases until Gorsuch, sworn in as the newest justice April 10, could help decide what cases the court would consider.

Several out-of-state companies are asking the Supreme Court to review state court opinions upholding statutes in Michigan and Washington state that retroactively impact tax assessments years before the enactment of laws.

Washington Case

Dot Foods Inc. has challenged 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 argues that its petition directly relates to an open question highlighted by Justice Sandra Day O’Connor the last time the high court considered the legality of retroactive taxation in 1994.

Michigan 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The Michigan Legislature in 2014 amended the Michigan Business Tax Act and repealed the Multistate Tax Compact.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

To contact the editor responsible for this story: Ryan C. Tuck at

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