News and Insights

The Final Nail in the Michigan Coffin

Tax Development May 23, 2017

After several postponements on May 22, 2017, the U.S. Supreme Court (“Court”) has denied certiorari in several cases challenging Michigan’s retroactive legislation that eliminated a taxpayer’s ability to elect to be taxed based on an equally weighted three-factor apportionment formula as provided under the Multistate Tax Compact (“MTC apportionment formula”). The Court also did not take up the appeal regarding a Washington state case involving a retroactive tax change. 

This puts an end to the saga starting in July 2014, in which the Michigan Supreme Court ruled that IBM was entitled to a refund of almost $6,000,000 for the tax year 2008, by using the MTC apportionment formula.1 The overall impact of the case was that the state of Michigan could be on the hook for more than $1 billion in refund claims. However, on September 12, 2014, Michigan’s governor signed into law the retroactive repeal of the election under the MTC. The repeal was challenged by many taxpayers, and in March 2016, the Michigan Court of Appeals dismissed all of the complaints, stating that the repeal of the apportionment election did not violate the due process clause of the U.S. Constitution.2 The Michigan Supreme Court denied certiorari in this action, and now the U.S. Supreme Court has taken the same action. 

1International Business Machines Corp. v. Department of Treasury, 496 Mich. 642, 852 N.W.2d 865, July 14, 2014.
2 See Ryan release dated March 22, 2016. 


Mary Bernard