Respondent, Department of Treasury, appeals as of right a Tax Tribunal judgment finding in part that petitioner, Twentieth Century Fox Home Entertainment, Inc., is a film distributor and, therefore, is not required to include the royalty payments it makes to film producers in its tax base. We affirm.
Petitioner distributes copyrighted motion pictures for home entertainment primarily using the medium of videocassettes. In 1997, respondent asserted that petitioner had outstanding tax liability under the Single Business Tax Act (SBTA), MCL 208.1 et seq., totaling more than $500,000 for the tax years ending on June 30, 1991; June 28, 1992; June 27, 1993; and July 3, 1994. This liability resulted in large part from respondent’s assertion that petitioner was required to add to its tax base payments it made to motion picture producer Twentieth Century Fox Film Corporation (Fox Film).
Petitioner filed a petition in the Tax Tribunal asserting that the payments it made to Fox Film were not royalty payments, and, therefore, it was not required to add them to its tax base. Petitioner further contended that even if the payments were royalty payments, because it is a film distributor, the payments it made to Fox Film after July 14, 1993, were not required to be added to its tax base pursuant to the SBTA amendments made by
In
Michigan Milk Producers Ass’n v Dep’t of Treasury,
This Court’s authority to review a decision of the Tax Tribunal is very limited. In the absence of an allegation of fraud, this Court’s review of a Tax Tribunal decision is limited to determining whether the tribunal committed an error of law or adopted a wrong legal principle. The tribunal’s factual findings will not be disturbed as long as they are supported by competent, material, and substantial evidence on the whole record. [Citations omitted.]
Resolution of this issue also involves a question of statutory interpretation. Statutory interpretation presents a question of law that is reviewed de novo.
Eggleston v Bio-Medical Applications of Detroit, Inc,
The single business tax (SBT) is a “consumption-type value-added tax” that is subject to certain exemptions,
exclusions, and adjustments. Caterpillar,
Inc v Dep’t of Treasury,
In 1990, a television station operator sought a tax refund in the Court of Claims, asserting that the defendant, the Department of Treasury, had improperly considered payments it made to a television show distributor under an exclusive license as royalties rather than rent. Field Enterprises, supra at 152-153. This Court disagreed and found that the payments were royalties, and, accordingly, were properly included in the taxpayer’s tax base. Id. at 157.
Before the decision in Field Enterprises, petitioner deducted from its tax base those payments it made to film distributors and included in its tax base payments it received from videocassette distribution. Following Field Enterprises, respondent asserted that petitioner was required to add to its tax base, as royalties, the payments it made to film producers, though it could also deduct any royalties it received from sublicensees, MCL 208.9(7)(c).
Subsequently, the Legislature adopted
The Legislature amended the statute again through
In the Tax Tribunal, petitioner asserted, and the tribunal agreed, that as a videocassette distributor, it was a film distributor and, therefore, was not required to include royalty payments it made to film producers in its SBT base, pursuant to MCL 208.9(4)(g)(cii). Contrarily, respondent has asserted that petitioner is not a film distributor and, therefore, must include the payments it has made to film producers in its SBT base.
The purpose of judicial interpretation of statutes is to ascertain and give effect to legislative intent.
Neal v Wilkes,
The Legislature failed to define the term “film distributor” in the SBTA. The word “film” itself has multiple definitions that are used in common parlance. For instance, “film” has been defined as “a cellulose nitrate or cellulose acetate composition made in thin sheets or strips and coated with a light-sensitive emulsion for taking photographs or motion pictures” and as a “motion picture” itself. Random House Webster’s College Dictionary (2000). Thus, the term “film distributor” could arguably apply to one who distributes motion pictures, including those distributed through the medium of videocassettes, or to one who distributes cellulose strips coated with a light-sensitive emulsion onto which motion pictures have been recorded.
In seeking to determine legislative intent on the basis of the plain language of the statute, we note that a “film distributor” could only be expected to pay royalties to a “film producer” for “copyrighted motion picture films” if a motion picture had already been recorded onto the relevant “film.” MCL 208.9(4)(g)(cii). This suggests that it is the distribution of the motion picture, and not
the physical medium, with which the Legislature was concerned. The Legislature’s use of the phrase “copyrighted motion picture films” in the statute, however, seems to suggest a different result. Specifically, the Legislature
Accordingly, the language of MCL 208.9(4)(g)(cii) indicates that one need not distribute motion pictures on strips of emulsion-coated cellulose to be classified as a “film distributor.” Nor does the plain language of the statute indicate that a film distributor has to distribute films to theaters in order to be considered a film distributor, as respondent has interpreted the statute. Nothing will be read into a clear statute that is not within the manifest intention of the Legislature as derived from the language of the statute itself,
Roberts v Mecosta Co Gen Hosp,
Even if MCL 208.9(4)(g)(cii) is reasonably susceptible to more than one interpretation, and we apply the rules of judicial construction,
Spann, supra
at 530, the result does not change. Respondent cites the legislative history of the SBTA royalty exceptions as support for its position that the Legislature only intended the royally exception contained in MCL 208.9(4)(g)(cii) to apply to distributors of films to movie theaters and not to home videocassette distributors such as petitioner. A legislative analysis is a “generally unpersuasive tool of statutory construction.”
Frank W Lynch & Co v Flex Technologies, Inc,
In this regard, respondent cites a House legislative analysis of
According to a Senate legislative analysis of
Considering the relevant changes in the SBTA and the historical legal development of those changes,
2
respondent argues that because
Respondent also asserts that if the statute is interpreted as petitioner desires, the statute will have the unintended consequence of allowing petitioner to avoid taxation by sublicensing its distribution rights. If petitioner undertakes such sublicensing, then under its interpretation of the statute it can omit from its tax base the payments it makes to film producers, while also excluding as royalties the payments it receives from its sublicensees. Respondent argues that such an outcome creates a windfall for petitioner. On the other hand, petitioner argues that the Legislature intended through
[UJnder a pure value added tax, a firm that earns only royalty income is not taxed on the income. If such a firm has no related royalty expense, then it has no corresponding addback. This is not a windfall — it is inherent to a value added tax. It may appear unfair to allow a firm to conduct business activity within this state and pay no tax on its royalty income, but such is the nature of a value-added tax.
As noted above, this Court generally defers “to the Tax Tribunal’s interpretation of a statute that it is charged with administering and enforcing.”
Michigan Milk Producers Ass’n, supra
at 491. Considering the foregoing legal arguments and rules of statutory construction, we conclude that the Tax Tribunal did not
commit an error of law in
Affirmed.
Notes
See
Advanta Nat’l Bank v McClarty,