LaBELLE MANAGEMENT, INC v. DEPARTMENT OF TREASURY
315 Mich. App. 23
| Mich. Ct. App. | 2016Background
- LaBelle Management, Inc. (plaintiff) is a Michigan corporation sold by The Pixie, Inc. (Pixie) to the LaBelle brothers on Jan 1, 2008; no individual owned >50% of any company during the tax periods at issue.
- LaBelle Limited Partnership (LLP) was formed with the LaBelle brothers as general and limited partners; later amended to add children as limited partners.
- Plaintiff filed Michigan business tax returns separately for the 2011–2012 audit periods.
- Michigan Department of Treasury audited plaintiff and, using Revenue Admin. Bulletin 2010-1, concluded plaintiff, Pixie, and LLP formed a "unitary business group" under MCL 208.1117(6) by attributing indirect and constructive ownership, producing a tax deficiency which plaintiff paid under protest and sued to recover.
- The trial court granted summary disposition for Treasury, relying on federal constructive-ownership rules (26 U.S.C. §§ 958/318) as contextually analogous to define "indirect" ownership.
- The Court of Appeals reversed, holding Michigan's statute does not incorporate federal constructive-ownership attribution and that "indirect ownership" means ownership through an intermediary, not ownership "considered as owned" by legal fiction; no entity indirectly owned >50% of another, so no unitary group.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether MCL 208.1117(6)'s phrase "owns or controls, directly or indirectly" incorporates federal constructive-ownership (attribution) rules. | "Indirect" means ownership through an intermediary (ordinary meaning); Michigan statute does not import federal constructive-ownership. | Michigan may look to federal tax attribution/constructive-ownership rules (e.g., §318/§958) and Treasury bulletin to determine indirect ownership for unitary-group treatment. | Court held Michigan law does not adopt federal constructive-ownership by default; "indirectly" means ownership through an intermediary, not by legal fiction of "considered owned." |
Key Cases Cited
- United States Fidelity Ins & Guaranty Co v Michigan Catastrophic Claims Ass'n, 484 Mich. 1 (statutory language controls when unambiguous)
- West v General Motors Corp, 469 Mich. 177 (summary-disposition standard and evidentiary view)
- Michigan Bell Tel Co v Dep't of Treasury, 445 Mich. 470 (tax statutes construed narrowly against expansion)
- Detroit Edison Co v Dep't of Treasury, 498 Mich. 28 (agencies cannot change statutes by rulemaking)
- Town & Country Dodge, Inc v Dep't of Treasury, 420 Mich. 226 (federal tax law may define undefined state terms only when contexts are comparable)
- Consumers Power Co v Dep't of Treasury, 235 Mich. App. 380 (resort to other authorities when federal context not comparable)
- Krohn v Home-Owners Ins Co, 490 Mich. 145 (statutory words given plain and ordinary meaning)