By Ted Friedman and Leah Robinson

The Michigan Court of Appeals reversed a trial court ruling and held that three companies did not constitute a statutorily defined “unitary business group” for Michigan Business Tax (MBT) purposes. It was undisputed that there was insufficient “direct” ownership among the companies to give rise to a “unitary business group,” so the court examined whether there was sufficient “indirect” ownership, as that term is used in the MBT’s definition of “unitary business group.” The court determined that the trial court erred in using the federal income tax definition of “constructive” ownership when defining the “indirect” ownership requirement.  The court reasoned that at the point where the trial court acknowledged that the federal tax laws do not address a “comparable context,” under Michigan law it should have used the ordinary rules of statutory construction. The court concluded that the plain and ordinary meaning of “indirect” ownership is “ownership through an intermediary,” and ultimately held that, when applying the definition of “unitary business group” to the facts, no unitary business group existed because none of the involved companies owned, through an intermediary or otherwise, more than 50% of any other company. LaBelle Mgmt., Inc. v. Mich. Dep’t of Treasury, No. 324062 (Mich. Ct. App. Mar. 31, 2016).