Ford Motor Company v. Department of Treasury
313 Mich. App. 572
| Mich. Ct. App. | 2015Background
- The Department of Treasury audited Ford for July 1, 1993–Nov. 30, 2001 and assessed use taxes (including ~ $10.7M and later a second ~ $44M assessment) related to Ford test vehicles and parts supplied under extended service plans (ESPs).
- Ford argued: (1) test vehicles displaying manufacturer’s license plates were exempt from the industrial processing exemption’s prohibition on "vehicles licensed and titled for use on public highways"; and (2) Ford was not liable for use tax on parts dealers sold under ESPs because Ford did not use, store, or consume those parts.
- The Court of Claims granted summary disposition to Ford on the ESP issue (refund ≈ $1.6M) and on the test-vehicle issue (refund ≈ $24M), and ordered the Department to pay Ford attorneys’ fees and costs on multiple motions, finding the Department’s positions frivolous in several respects.
- The Department later issued a second large assessment covering the same years; the Court of Claims consolidated that action with the earlier case, found the second assessment improper, and awarded additional fees and exemplary damages.
- Ford sent two January 28, 1999 letters to the Department asserting refund claims for the test vehicles; the Court of Claims held those letters provided "adequate notice" so interest on the refund began to accrue from that date.
Issues
| Issue | Plaintiff's Argument (Ford) | Defendant's Argument (Treasury) | Held |
|---|---|---|---|
| Whether test vehicles displaying manufacturer’s plates were "licensed ... for use on public highways" and thus excluded from the industrial-processing exemption | Manufacturer’s plates do not "license" individual vehicles; they license the manufacturer to operate/test vehicles, so vehicles remained exempt | A manufacturer’s plate authorizes a vehicle to be operated on public highways — the plate makes the vehicle "licensed" for use | Held for Treasury: vehicles displaying manufacturer’s plates are "licensed" and not exempt under former MCL 205.94(g)(i) (summary disposition reversed) |
| Whether the 1999 amendment to the UTA should be applied retroactively to change the exemption’s scope | The 1999 amendment merely clarified existing law and should be applied retroactively to validate the exemption for such vehicles | The amendment changed the law prospectively and does not apply retroactively | Held for Treasury: amendment not applied retroactively; court declines to retroactively change prior law |
| Whether the Department’s assessment and defenses relating to ESP parts and the second assessment were frivolous (entitling Ford to fees and costs) | The Department lacked factual and legal support to tax ESP parts and to reissue the large second assessment; actions were frivolous and vexatious | Department contends it had authority and did not act frivolously; challenges reasonableness of fee awards | Held for Ford in part: Court of Claims did not clearly err finding defenses frivolous for ESP issue and second assessment; award of fees largely affirmed though some fee items (e.g., fees for amended complaint) were excessive and reversed as to those items |
| Whether Ford’s Jan. 28, 1999 letters constituted a filed claim triggering the 45‑day interest accrual period for refunds | The letters asserted a right to a refund and were submitted to Treasury, providing adequate notice and thus started the 45‑day period | Letters were not explicit refund claims and contemplated future filings, so they did not start interest accrual | Held for Ford: letters constituted "claims" and gave adequate notice; interest began to accrue from Jan. 28, 1999 |
Key Cases Cited
- Lindsay Anderson Sugar Trust v. Dep’t of Treasury, 204 Mich. App. 128 (1994) (adequate-notice standard for refund claims)
- Ford Motor Co. v. Dep’t of Treasury, 496 Mich. 382 (2014) (elements for triggering 45-day interest period on tax refunds)
- Smith v. Khouri, 481 Mich. 519 (2008) (standards and method for assessing reasonable attorney fees)
- Adamo Demolition Co. v. Dep’t of Treasury, 303 Mich. App. 356 (2013) (frivolous-claim analysis in tax litigation)
- Halloran v. Bhan, 470 Mich. 572 (2004) (use of dictionaries to ascertain plain statutory meaning)
- Oakland County Bd. of County Road Commissioners v. Michigan Prop. & Cas. Guaranty Ass’n, 456 Mich. 590 (1998) (statutory interpretation principles)
- Nastal v. Henderson & Associates Investigations, Inc., 471 Mich. 712 (2005) (when plain meaning forecloses further construction)
- Willett v. Waterford Charter Twp., 271 Mich. App. 38 (2006) (de novo review of summary disposition)
- Persichini v. William Beaumont Hosp., 238 Mich. App. 626 (1999) (trial court’s inherent authority to impose sanctions)