The Michigan Court of Appeals reaffirmed its March 2020 decision that application of the state’s statutory apportionment formula was unconstitutionally distortive as applied to a taxpayer’s Michigan Business Tax (MBT) liability. The Michigan Supreme Court vacated and remanded the Court of Appeals’ March 2020 decision, which was the topic of a prior SALT Shaker post located here, to address the taxpayer’s arguments regarding the proper method for calculating MBT liability under the state’s apportionment statute. The Michigan Supreme Court noted that determining the proper statutory calculation method was an important “foundational issue” and was necessary in order to ascertain whether alternative apportionment was required.

The Michigan Court of Appeals remanded the case to the trial court to determine whether the Department correctly applied the statutory apportionment formula. On remand, the trial court rejected the taxpayer’s argument that the sale of an entire business should be included in the sales factor denominator. The Court of Appeals agreed with the trial court’s conclusion and reaffirmed its prior determination that application of the statutory formula violated the Due Process and Commerce Clauses. The Court of Appeals again vacated the tax assessment and penalty, and remanded the case to the trial court once again to determine an appropriate apportionment method if the parties cannot agree on one.

Vectren Infrastructure Services Corp. v. Department of Treasury, Mich. Ct. App., Dkt. No. 17-000107-MT (Sept. 30, 2021)