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Michigan Court of Claims upholds legislation retroactively repealing Multistate Tax Compact

The Michigan Court of Claims has upheld the validity of legislation that retroactively repeals the Michigan statutes adopting the Multistate Tax Compact effective Jan. 1, 2008. On Sept. 11, 2014, this legislation was enacted to prevent taxpayers from claiming Michigan Business Tax (MBT) refunds based on an election to use the Compact’s three-factor apportionment formula. This legislation was in response to the Michigan Supreme Court’s decision in International Business Machines Corp. v. Department of Treasury that allowed a taxpayer to elect to use the Compact’s three-factor apportionment formula on its MBT return for the 2008 tax year. In the instant case, the Court of Claims determined that the retroactive repeal of the Compact provisions was constitutional and provided clarity on the original intent of the MBT Act. The Court granted summary disposition for the Michigan Department of Treasury after concluding that the legislation retroactively applied to the instant case and all pending similar MBT refund actions.

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