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One's Travel Ltd. v. Michigan Dep't of Treasury

April 6, 2010

ONE'S TRAVEL LTD, PLAINTIFF-APPELLANT,
v.
MICHIGAN DEPARTMENT OF TREASURY, DEFENDANT-APPELLEE.
DATA TECH SERVICES INC, PLAINTIFF-APPELLANT,
v.
MICHIGAN DEPARTMENT OF TREASURY, DEFENDANT-APPELLEE.



Court of Claims LC Nos. 07-86-MT & 07-87-MT.

Per curiam.

FOR PUBLICATION

Before: BORRELLO, P.J., AND WHITBECK AND K. F. KELLY, JJ.

In this tax dispute, we must decide whether plaintiffs are eligible for the small business tax credit provided by § 36, MCL 208.36, of the Single Business Tax Act (SBTA), MCL 208.1 et seq. The court of claims determined that plaintiffs are not eligible for the credit and granted summary disposition in defendant's favor. We agree and hold that entities part of a corporate structure in which the parent is a state chartered credit union exempt from taxation under the SBTA must, for purposes of determining their eligibility for the small business tax credit, consolidate their gross receipts with the business activities of other members in their "affiliated group," including the parent credit union. Accordingly, we affirm.

I. BASIC FACTS AND PROCEDURAL HISTORY

Plaintiffs, Data Tech Services, Inc. (Data Tech) and ONE's Travel, are both for profit Michigan corporations subject to taxation under the SBTA. Both plaintiffs are also subsidiaries of Credit Union ONE, a state chartered credit union created pursuant to Michigan's Credit Union Act, MCL 490.101 et seq., that is exempt from taxation under the SBTA.

In docket no. 287255, Data Tech claimed the small business credit for tax years 2001 through 2004 in its SBT return. Data Tech did not consolidate its business activities with those of Credit Union ONE because it believed that no consolidation of business activity is required under § 36 since Credit Union ONE is exempt from state taxation. The department audited Data Tech's 2001 through 2004 tax returns and determined, however, that the SBTA required Data Tech to consolidate its business activity with Credit Union ONE and that such a consolidation rendered Data Tech ineligible for the small business credit. As a result, the department assessed a tax against Data Tech in the amount of $157,240. Data Tech paid the tax under protest and then challenged the assessment in the Michigan Tax Tribunal. See Data Tech Services Inc v Dep't of Treasury, MTT Docket No. 0323084.*fn1

Before the matter could be resolved, however, the department audited Data Tech's 2005 SBT return and found that Data Tech had again erroneously claimed the small business credit. In its 2005 SBT return, Data Tech had carried forward a "loss adjustment" from its 2002 tax return as a result of not qualifying for the credit in 2002. It was Data Tech's position that its business loss in 2002 caused the amount distributed to its sole shareholder to fall below $115,000 and, thus, it was entitled to the small business credit in 2005. The department, however, determined that Data Tech could not use its 2002 business loss as a "loss adjustment" since Data Tech never received the small business credit in 2002. Accordingly, the department assessed a tax against Data Tech in the amount of $29,115. Data Tech also paid that amount under protest and then challenged the assessment in the court of claims.

In docket no. 287254, ONE's Travel claimed the small business credit for tax year 2005. Like Data Tech, ONE's Travel did not consolidate its business activities with those of Credit Union ONE because it believed that under § 36 no consolidation of business activity is required since Credit Union ONE is exempt from state taxation. The department audited ONE's Travel's 2005 SBT return and determined that ONE's Travel was not eligible for the credit because another member of the same "control group," Data Tech, did not qualify for the credit. Accordingly, the department assessed a tax against ONE's Travel in the amount of $6,194. ONE's Travel challenged the assessment by filing a complaint in the court of claims.

Because the same issue is involved in both cases, the parties stipulated that the matters would be consolidated and the issue would be decided on their motions for summary disposition. Plaintiffs jointly moved for summary disposition under MCR 2.116(C)(10), arguing that because Credit Union ONE is not a taxpayer under the SBTA and is totally exempt from the SBT, its tax exempt activities are "totally unrelated" to plaintiffs' taxable activities and cannot be consolidated with plaintiffs' gross receipts for purposes of determining plaintiffs' eligibility for the small business credit. The department countered that summary disposition should be granted in its favor. It argued that it is irrelevant that Credit Union ONE is exempt from taxation under the SBTA and that plaintiffs and Credit Union ONE formed an "affiliated group" as defined under the act. The court of claims ruled in favor of the department, and plaintiffs subsequently filed their claim with this Court.

II. STANDARDS OF REVIEW

The resolution of this appeal turns on whether plaintiffs are required to consolidate their gross receipts with the business activity of their parent, Credit Union ONE, a cooperative nonprofit entity, for purposes of qualifying for the small business tax credit pursuant to § 36(7) of the SBTA, MCL 208.36(7). Because the matter was decided on the parties' motions for summary disposition under MCR 2.116(C)(10), we review the court of claims decision de novo. JW Hobbs Corp v Dep't of Treasury, 268 Mich App 38, 43; 706 NW2d 460 (2005). Summary disposition under this subrule is properly granted if there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Id.

Further, we review questions of law, including the proper interpretation of a statute, de novo. Ford Credit Int'l, Inc v Dep't of Treasury, 270 Mich App 530, 534; 716 NW2d 593 (2006). The Court's main goal in interpreting the meaning of a statute is to discern and give effect to the Legislature's intent. Kmart Michigan Prop Services, LLC v Dep't of Treasury, 283 Mich App 647, 650; 770 NW2d 915 (2009). The first step in ascertaining the Legislature's intent is to look to the written language. Id. If the language is plain and unambiguous, judicial construction is neither necessary nor permitted, and the language must be applied as written. Mt Pleasant v State Tax Comm, 477 Mich 50, 53; 729 NW2d 833 (2007). Statutory language is ambiguous "only if it 'irreconcilably conflicts' with another provision or when it is equally susceptible to more than a single meaning." Lansing Mayor v Pub Service Comm, 470 Mich 154, 166; 680 NW2d 840 (2004) (citation omitted; emphasis in original). In conducting this review, we must read words and phases, not discretely, but rather within the context of the whole act. Green v Ziegelman, 282 Mich App 292, 301-302; 767 NW2d ...


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