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Alticor, Inc. v. Department of Treasury

Court of Appeals of Michigan

May 22, 2018

ALTICOR, INC., Plaintiff-Appellant,
v.
DEPARTMENT OF TREASURY, Defendant-Appellee. ACCESS BUSINESS GROUP, LLC, Plaintiff-Appellant,
v.
DEPARTMENT OF TREASURY, Defendant-Appellee. OLD ORCHARD BRANDS, LLC, Plaintiff-Appellant,
v.
DEPARTMENT OF TREASURY, Defendant-Appellee.

          Court of Claims LC Nos. 17-000011-MT, 17-000012-MT, 16-000114-MT

          Before: Murphy, P.J., and Jansen and Shapiro, JJ.

          Murphy, P.J.

         Defendant, Department of Treasury (the Department), was conducting audits in the three tax cases involving plaintiffs when the Legislature enacted and the Governor signed 2014 PA 3, which was made effective February 6, 2014, and which allowed for a minimal extension of the four-year limitations period for a deficiency assessment if a Department audit was commenced after September 30, 2014. However, 2014 PA 3 was silent regarding Department audits commenced on or before September 30, 2014, such as plaintiffs' audits, although the statutory law in place when the audits were initiated had provided for the suspension or tolling of the four-year limitations period when an audit was performed.[1] There is no dispute that if the audits conducted in these cases tolled the limitations period, the deficiency assessments issued by the Department against plaintiffs were timely, and, given the dates the audits were commenced, no party is maintaining that the audits resulted in extensions of the limitations period under the new law. Plaintiffs contend that because 2014 PA 3 did not contain a savings clause tied to the old law with respect to audits commenced on or before September 30, 2014, the audits did not toll the limitations period because the tolling language had been repealed by 2014 PA 3. And, therefore, the four-year limitations period applied absent any adjustment whatsoever for the audits, rendering all of the deficiency assessments untimely. The Department argues that because the audits had already been commenced before the 2014 change in the law and were ongoing when 2014 PA 3 became effective, as well as on September 30, 2014, those audits remained subject to the previous law allowing for the tolling of the limitations period. The Court of Claims agreed with the Department, summarily dismissing all three tax challenges in which plaintiffs maintained that the deficiency assessments were time-barred. Plaintiffs appeal as of right, and we hold that the audits continued to toll the limitations period after 2014 PA 3 took effect. Accordingly, we affirm the rulings by the Court of Claims.

         We review de novo a trial court's ruling on a motion for summary disposition, as well as issues of statutory construction. Kemp v Farm Bureau Gen Ins Co of Mich, 500 Mich. 245, 251-252; 901 N.W.2d 534 (2017). With respect to principles of statutory interpretation, the Kemp Court observed:

When interpreting statutes, our goal is to give effect to the Legislature's intent, focusing first on the statute's plain language. In so doing, we examine the statute as a whole, reading individual words and phrases in the context of the entire legislative scheme. When a statute's language is unambiguous, the Legislature must have intended the meaning clearly expressed, and the statute must be enforced as written. [Id. at 252 (citations and quotation marks omitted).]

         Before the Legislature enacted 2014 PA 3, MCL 205.27a provided, in pertinent part, as follows:

(2) A deficiency, interest, or penalty shall not be assessed after the expiration of 4 years after the date set for the filing of the required return or after the date the return was filed, whichever is later .....
(3) The running of the statute of limitations is suspended for the following:
(a) The period pending a final determination of tax, including audit, conference, hearing, and litigation of liability for federal income tax or a tax administered by the department and for 1 year after that period.
(b) The period for which the taxpayer and the state treasurer have consented to in writing that the period be extended.

         Under former MCL 205.27a(3)(a), the four-year period of limitations for the Department to assess a deficiency was tolled during the pendency of an audit, plus an additional year following the conclusion of the audit. See Krueger v Dep't of Treasury, 296 Mich.App. 656, 660-661; 822 N.W.2d 267 (2012). Thus, as an overly simplified example, if a Department audit was initiated in April 2003 regarding an April 2000 state tax return and the audit was not completed until April 2007, resulting in a tolling period of five years (four year of audit, plus one year thereafter) or until April 2008, the Department would have until April 2009 to assess a deficiency (one year remained on four-year limitations period when tolling began). See id.

         With the enactment of 2014 PA 3, which was made effective February 6, 2014, MCL 205.27a now provides, in relevant part:

(2) A deficiency, interest, or penalty shall not be assessed after the expiration of 4 years after the date set for the filing of the required return or after the date the ...

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