Michigan tax fix bill gets final approval

LANSING – A tax fix bill that will limit the state’s financial exposure following a Supreme Court decision was passed with broad bi-partisan support in the state Senate Wednesday and is on its way to Gov. Rick Snyder for his signature.

The bill passed 34-3, but lost the support of the bill’s sponsor, Sen. Jack Brandenburg, R-Harrison Township.

“It’s a way to legislate around a Supreme Court ruling and I’m definitely not about that,” he said.

The bill is in response to a lawsuit filed by IBM against the state Treasury Department. The corporate giant argued that Michigan had improperly calculated the business taxes it paid in 2008. The Court of Claims and Court of Appeals agreed with the state, but the Michigan Supreme Court, in a 4-3 decision, ruled in favor of IBM in July, meaning that IBM will get a $6-million tax refund, rather than the $1.3 million calculated by the Michigan Treasury.

The bill is intended to avoid the potential $1-billion liability from 134 other similar cases winding their way through the courts. There is a possibility of a legal challenge from the companies affected by the bill.

“We basically are trying to stop and correct a corporate tax loophole that needed to be fixed with the Supreme Court ruling, said Sen. Mark Jansen, R-Gaines Township. “That’s what we intended, the goal is we want to make sure that the tax system is right and fair.”

The case relates to whether out-of-state companies had to calculate the taxes they owe Michigan for 2008, 2009 and 2010 by the method spelled out in the Michigan Business Tax, which has since been repealed, or by another method, more favorable for out-of-state corporations, prescribed in a multistate tax compact Michigan joined in 1970.

Snyder said he supports the tax fix, but it would have been easier if the Supreme Court had ruled in favor of the state.

“If the court would have done that, it might have been a simpler path,” he said. “But let’s not take chances on that.”

Kathleen Gray is a reporter for the Detroit Free Press.