984 N.W.2d 1
Mich.2022Background
- KWA I, LLC earned brownfield and historic-restoration tax credits under the Single Business Tax Act (SBTA) and in 2005 assigned those credits to a Comerica subsidiary, a Michigan bank.
- In 2007 Comerica formed a Texas bank and merged the Michigan bank into the Texas bank; Comerica then claimed the credits on MBTA returns for 2008–2011 (the MBTA preserved certain SBTA credits).
- The Department of Treasury audited and disallowed the credits, relying on SBTA provisions that permitted a single assignment but prohibited an assignee from subsequently assigning the credit.
- The Tax Tribunal granted Treasury partial summary disposition, treating the credits as extinguished; the Court of Appeals reversed, concluding the credits transferred by operation of law in the merger and were not barred by the SBTA’s single-assignment rule.
- The Michigan Supreme Court affirmed: it held the Banking Code (MCL 487.13703(1)) caused the credits to pass by operation of law to the surviving bank, so no prohibited subsequent assignment occurred; expressio unius and strict-construction canons did not change that result.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Did Comerica-Texas acquire the Michigan bank’s SBTA credits via the 2007 merger (operation of law) or by a prohibited subsequent assignment? | Credits passed automatically by operation of law under the Banking Code when the banks merged; no assignment occurred. | The SBTA forbids an assignee from subsequently assigning the credit; the credits therefore could not lawfully pass to Comerica-Texas. | Held: The Banking Code effectuated an automatic transfer (operation of law); no subsequent assignment occurred, so Treasury erred. |
| Do the SBTA’s single-assignment provisions implicitly bar transfers other than assignments (expressio unius)? | N/A (Comerica argued merger transfer not covered). | The SBTA’s silence about other transfers implies prohibition of any transfer beyond the initial assignee. | Held: Expressio unius inapplicable—no contextual predicate to infer the Legislature intended to bar non-assignment transfers. |
| Are tax credits here "property" or mere "privileges," and does that classification affect transferability by merger? | Credits may be property, but classification unnecessary—Banking Code conveys both privileges and property. | Credits are privileges and thus not transferred as property by merger. | Held: Classification unnecessary to outcome; Banking Code provides the consolidated bank acquires rights, privileges, and title to property by operation of law. |
| Should the statute be strictly construed against the taxpayer so as to disallow the transfer? | N/A (Comerica argued ordinary interpretation resolves the issue). | Tax statutes (credits) should be strictly construed in favor of the government to deny ambiguous benefits. | Held: Strict-construction is a last resort; ordinary textual/contextual interpretation yielded a clear result, so strict-construction did not apply. |
Key Cases Cited
- Kim v. JPMorgan Chase Bank, N.A., 493 Mich 98 (2012) (distinguishes voluntary assignment from transfers that occur automatically by operation of law).
- Miller v. Clark, 56 Mich 337 (1885) (early articulation of the difference between voluntary assignment and transfer by operation of law).
- TOMRA of N. Am., Inc. v. Dep’t of Treasury, 505 Mich 333 (2020) (explains strict-construction of tax exemptions/credits is a canon of last resort).
- Bronner v. Detroit, 507 Mich 158 (2021) (discusses proper limits on expressio unius est exclusio alterius).
- United States v. Seattle–First Nat’l Bank, 321 U.S. 583 (1944) (explains statutory transfers effected entirely by statute are by operation of law).
- PPL Corp. v. Comm’r, 569 U.S. 329 (2013) (tax law analysis should focus on economic realities, not formalistic labels).