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04/05/76 PRODUCTION CREDIT ASSOCIATIONS v.

April 5, 1976

PRODUCTION CREDIT ASSOCIATIONS
v.
DEPARTMENT OF TREASURY



Appeal from Ingham, Jack W. Warren, J.

Leave to appeal applied for.

Allen, P. J., and Bronson and R. M. Maher, JJ.

SYLLABUS BY THE COURT

1. Taxation -- Income Taxes -- Statutes -- Statutory Construction.

The United States Internal Revenue Code of 1954 is to be used as an interpretive tool in construing any words or terms in the Michigan Income Tax Act of 1967 which are not adequately explained within the latter act (MCLA 206.1 et seq.; MSA 7.557[101] et seq.).

2. Taxation -- Income Taxes -- Statutes -- Statutory Construction -- Taxable Income.

The Michigan income tax statute should in general be construed so as to make Michigan "taxable income" the same as "taxable income" under the Internal Revenue Code, therefore "net profits" are to be equal to "gross income" minus various deductions as utilized by the Federal Code and the terms "expenses and costs" must therefore be read as being coextensive with the term "deductions" found in the Internal Revenue Code.

3. Taxation -- Income Taxes -- Net Operating Loss Deduction -- Loss Carry-back.

The Michigan and Federal income tax laws contain a "net operating loss deduction" which allows a corporation sustaining a "net operating loss" to carry its losses back three years and carry any unused loss forward for five years; the loss must first be carried back to the earliest of the "taxable years" to which the law can be carried and any portion of the loss which is remaining is then applied to successively later tax years until it is used up.

4. Taxation -- Income Taxes -- Corporate Taxpayers -- Operating Losses -- Loss Carry-back.

Corporate taxpayers which sustained operating losses for the tax year of 1969 and carried their losses back to the tax years of 1966 and 1967 on their Federal tax returns, during which time the loss carry-back was "used-up", had to use the same years on their Michigan tax returns, for the loss carry-back, and thus consider the loss carry-back "used-up" prior to 1968, despite the fact that there was no Michigan income tax until 1968.

The opinion of the court was delivered by: Bronson

Complaints by Production Credit Associations of Lansing, Southeastern Michigan, Grand Rapids, Kalamazoo, Traverse City and the Evening News Association against the Revenue Division of the Michigan Department of Treasury for refunds of state income taxes. The cases were consolidated in circuit court. Summary judgment for plaintiffs. Defendant appeals.

Prior to March 15, 1969, plaintiffs each filed with defendant their Michigan income tax returns for 1968 showing various tax liabilities, which were all paid by plaintiffs. In 1971, each plaintiff filed an amended return claiming refunds in various amounts for 1968, resulting from the carry-back of net operating losses sustained by each for its 1969 fiscal year. For purposes of their Federal income tax returns, each plaintiff ...


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