Mich. Supreme Court Ruling Could Cost State $1.1 Billion

Michigan has become the first state where a Supreme Court has ruled in favor of out-of-state companies in disputes with the state Treasury.

The state Supreme Court ruled in IBM’s favor, stating that the New York-based company had the right to spread its Michigan tax liability using the Multistate Tax Compact formula, a system that has been in place since 1970.

Attorney General Bill Schuette and Solicitor General Aaron Lindstrom wrote a letter to the Michigan Supreme Court asking the justices to reconsider their July 14 ruling.

The State Treasury Department argued that IBM should have only received a $1.3 million refund and that they only paid taxes based on sales and using the Michigan Business Tax formula, according to the Detroit Free Press.

The ruling applies to the duration of time the Michigan Business Tax was in place from 2008 to 2010.

“The total cost to the state is likely to exceed $1 billion,” Schuette and Lindstrom said in the letter.

Gov. Rick Snyder’s administration is also worried about the ruling.

Kurt Weiss of the state budget office said that amount of money would significantly affect the state budget.

“We are hopeful the Supreme Court will reconsider,” Weiss said.

Schuette filed motions on Tuesday in an effort to persuade the Supreme Court to reconsider its 4-3 ruling.

Amy Hamilton, a senior reporter for Tax Analyst, said the ruling on taxes for out-of-state corporations could affect other states as there are cases pending in California, Oregon, Texas and Minnesota.

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PHOTO: Michigan has become the first state where a Supreme Court has ruled in favor of out-of-state companies in disputes with the state Treasury and it might cost the state more than $1 billion (Patch File Photo)