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IBM-Related Cases Make Up 40% Of Court Of Claims’ Active Docket

September 16, 2014

Of the 205 open cases in the Court of Claims, suits against the Department of Treasury similar to that filed by IBM for old tax refunds based on a Michigan Business Tax (MBT) loophole account for 82 of them, according to the judge overseeing the cases.

That’s exactly 40 percent of the Court of Claims’ open cases that have been consumed by cases related to arguments made by IBM. 

Gov. Rick SNYDER Friday signed legislation making clear that out-of-state corporations cannot file business taxes for 2008 to about 2010 based on a multi-state compact that would yield them, in many cases, millions of dollars in refunds. 

Rather, these businesses were required to file taxes under the Michigan Business Tax (MBT), a clarification Snyder and the Legislature hope will prevent companies from claiming what the Department of Treasury estimated to be $1.1 billion in refunds. 

IBM was the first out-of-state company to attempt to use a multistate compact created in the 1960s to pry refunds out of the state. While it wasn’t successful at the Court of Claims or Court of Appeals levels, it scored sympathy from a split Supreme Court, meaning a $6.2 million refund for itself and potential for other refunds to other out-of-state companies (See “Treasury: IBM Decision To Cost State $1.098B,” 8/7/14). 

The exploding number of cases may be new to the Legislature, but it’s not new to chief Court of Claims Judge Michael TALBOT. In the recent transition in moving the Court of Claims from the Ingham County Court to the Court of Appeals, Talbot was so struck by the number of claims against Treasury, he designated himself as the sole judge to handle the cases. 

Many of them were put on hold until the Supreme Court decided what it wanted to do with IBM, but the huge number of Treasury cases has been “very difficult in some ways,” Talbot said. 

“IBM is consuming a lot of time,” he said. “It’s nobody’s fault. That’s just the way it is . . . When we resolve IBM, things will be at a manageable level,” he said. 

In the run-up to the Legislature passing and the Governor signing SB 0156, Talbot said the briefs from attorneys representing these out-of-state companies “have been rolling in.” The application of the new statute on these cases is the next step, he said. 

Meanwhile, the state Supreme Court has not yet ruled on Treasury’s motion to reconsider the IBMdecision and the enactment of SB 0156 could have an impact on that. 

The tie-breaking vote in the 4-3 IBM ruling was Justice Brian ZAHRA, who wrote in a concurring opinion that the Legislature in 2011 created the window that companies later used to make their multi-state compact claim. 

If a new law makes it clear the Legislature didn’t mean to create a window from 2008-2010, it’s possible Zahra could see the case differently.

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