Gillette Commercial Operations North America & Subsidiaries v. Department of Treasury
312 Mich. App. 394
Mich. Ct. App.2015Background
- Consolidated Michigan Court of Claims appeals challenge retroactive repeal of the Multistate Tax Compact via 2014 PA 282 by the Legislature.
- Compact allowed alternative three-factor apportionment; MBT Act required single-factor apportionment; IBM previously permitted three-factor use until repeal.
- 2011 PA 40 repealed Compact apportionment; IBM recognized a window for possible three-factor use prior to repeal, later clarified by IBM decision.
- 2014 PA 282 retroactively repealed the Compact start date to 2008 and eliminated the three-factor election for MBT and income tax purposes.
- Plaintiffs seek refunds for years affected; trial court upheld constitutionality; appellate review is de novo on constitutional questions.
- Court analyzes Contract Clause, Due Process, Separation of Powers, Commerce Clause, and other state constitutional provisions.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does retroactive repeal of the Compact violate the Contract Clause? | Compact created binding obligations. | Compact not binding contract; withdrawal permitted. | No Contract Clause violation; Compact not a binding contract. |
| Does retroactive repeal violate the Due Process Clauses? | Retroactive repeal deprives refunds and expectations. | Legislature has legitimate retroactive purpose; no vested rights in tax law. | No due process violation; retroactive repeal rational and within modest retroactivity. |
| Does retroactive repeal violate the Separation of Powers? | Legislature exceeded power by undoing judicial interpretation. | Legislature may correct misconstruction of statute and repeal accordingly. | No separation of powers violation; Legislature could amend to reflect original intent. |
| Does the act violate the Commerce Clause by discriminating against interstate commerce? | Single-factor MBT formula disadvantages out-of-state firms. | Single-factor formula applies to all taxpayers; no facial discrimination or improper burden. | No Commerce Clause violation; formula neutral and uniformly applied. |
| Does the act violate the First Amendment right to petition or access to courts? | Elimination of three-factor option blocks refunds and court access. | Right to petition does not guarantee government response; refunds remain available under other avenues. | No First Amendment violation; retroactive repeal did not bar access to courts. |
Key Cases Cited
- Int’l Bus. Machines Corp. v. Dep’t of Treasury, 496 Mich 642 (Michigan Supreme Court 2014) (reaffirmed limits on Compact interpretation and MBT apportionment window)
- Moorman Mfg. Co. v. Blair, 437 U.S. 267 (U.S. Supreme Court, 1978) (States have wide latitude in apportionment formulas)
- Carlton, 512 U.S. 26 (U.S. Supreme Court, 1994) (retroactive tax legislation upheld when tied to legitimate purpose)
- Detroit v. Walker, 445 Mich. 682 (Michigan Supreme Court, 1994) (due process and retroactivity considerations in tax law)
- General Motors Corp. v. Romein, 503 U.S. 181 (U.S. Supreme Court, 1992) (contract clause analysis framework for substantial impairment)
- Energy Reserves Group v. Kansas Power & Light Co., 459 U.S. 400 (U.S. Supreme Court, 1983) (test for substantial impairment and public purpose in takings/contract contexts)
- Newsweek, Inc. v. Fla. Dep't of Revenue, 522 U.S. 442 (U.S. Supreme Court, 1998) (bait-and-switch concerns distinguished from retroactivity here)