TYSON FOODS INC V DEPT OF TREASURY
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STATE OF MICHIGAN
COURT OF APPEALS
TYSON FOODS, INC.,
FOR PUBLICATION
September 20, 2007
9:00 a.m.
Plaintiff-Appellee,
v
No. 272929
Court of Claims
LC No. 05-000159-MT
DEPARTMENT OF TREASURY,
Defendant-Appellant.
Official Reported Version
Before: Fort Hood, P.J., and White and Borrello, JJ.
PER CURIAM.
In this action arising under the Single Business Tax Act (SBTA),1 MCL 208.1 et seq.,
and the revenue act, MCL 205.1 et seq., defendant Department of Treasury appeals as of right an
order granting plaintiff Tyson Foods, Inc.'s, motion for summary disposition under MCR
2.116(C)(10) and ordering defendant to refund plaintiff for single business taxes, penalties, and
interest that plaintiff paid under protest. We reverse.
I. Facts and Procedural History
Plaintiff is a Delaware corporation that has its main office in Arkansas. Although
plaintiff conducts business in the state of Michigan, plaintiff did not submit single business tax
returns to defendant for the tax years 1989 through 1996. On January 12, 1998, defendant issued
to plaintiff an intent to assess single business taxes, plus penalties and interest, in the amount of
$372,884.64, for the tax years 1989 through 1996. This first intent to assess indicated that the
total amount of taxes due was $200,000, which was based on an assessment of $25,000 for each
of the eight years for which plaintiff failed to submit a tax return, plus $98,750 in penalties and
$74,134.64 in interest. In the first intent to assess, defendant noted that plaintiff had not filed tax
returns for the years in question. Defendant did not conduct an audit of plaintiff 's books or
records before issuing the first intent to assess, and the first intent to assess indicated that the
assessed amounts for the years in question had been computed from available information. The
first intent to assess instructed plaintiff to "file actual returns to adjust this computed liability,"
but plaintiff did not file the returns as instructed. Thereafter, on February 24, 1998, defendant
1
The Single Business Tax Act has since been repealed. See 2006 PA 325.
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issued plaintiff a first final assessment for the tax years at issue. The total amount of the first
final assessment was $373,873.68, which included $200,000 in single business taxes, plus
penalties and interest. Like the first intent to assess, the first final assessment indicated that the
taxes assessed had been computed from available information and instructed plaintiff to "file
actual returns to adjust this computed liability."
Plaintiff paid the entire amount of taxes, penalties, and interest assessed in the first final
assessment for the tax years 1989 through 1996, but never filed the requested returns for those
years. However, plaintiff did file single business tax returns for the 1997 and 1998 tax years.
Defendant began the process of auditing plaintiff in March 1999. Initially, the scope of the audit
covered the years 1995 through 1999; however, plaintiff consented to expand the scope of the
audit to include 1989 through March 1995. The audit revealed that plaintiff 's single business tax
liability for 1989 through September 1996 greatly exceeded the amount assessed by defendant in
the first final assessment and paid by plaintiff. On the basis of information gleaned from the
audit, defendant issued plaintiff a second intent to assess on May 17, 2001, for the tax deficiency
for the years at issue, plus penalties and interest, in an amount totaling more than $6 million.
Plaintiff contested the results of the audit for the years 1989 through 1996 and requested an
informal hearing on the matter. The hearing referee recommended that the amount of plaintiff 's
single business tax liability be imposed as determined in the second intent to assess, reasoning
that defendant's second assessment was valid because plaintiff had failed to file returns for the
years at issue and the years for which plaintiff failed to file returns were therefore "open for
review." Defendant issued an order accepting the hearing referee's recommendation and stating
that it would issue a final assessment against plaintiff in the amount determined by defendant in
the second intent to assess, plus penalties and interest.
On June 20, 2005, defendant issued plaintiff a second final assessment for the tax years
1989 through 1996,2 which assessed a $6,316,393.77 tax deficiency against plaintiff. This
amount included $2,705,352 in single business taxes, $1,083,970.50 in penalties, and
$2,527,071.27 in interest. The second final assessment stated: "The deficiency is based on an
audit conducted by the Michigan Department of Treasury." Plaintiff paid the entire amount
under protest.3 Thereafter, plaintiff filed a complaint in the Court of Claims, seeking a refund of
the taxes, interest, and penalties paid under protest, plus interest. Plaintiff moved for summary
disposition under MCR 2.116(C)(10), arguing that defendant did not have statutory authority,
under either the SBTA or the revenue act, to issue a second single business tax final assessment
2
The second final assessment also included $1,572.94 in interest for 1999, but this amount is not
at issue.
3
To briefly summarize and clarify what occurred procedurally in this case, we observe that
plaintiff failed to voluntarily file single business tax returns or pay single business taxes for the
years in question. Therefore, in 1998, defendant issued plaintiff the first intent to assess and the
first final assessment, which plaintiff paid in full (without filing the requested tax returns).
Thereafter, defendant audited plaintiff and discovered that plaintiff had a tax deficiency for the
years at issue. Thus, on the basis of information revealed by the audit, defendant issued plaintiff
a second intent to assess and second final assessment, which plaintiff paid under protest.
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when defendant had already issued a single business tax assessment for the years at issue, and
plaintiff had paid the amount of the original assessment in full. According to plaintiff, the
original assessment was final and conclusive, and defendant was therefore precluded from
reassessing the tax for that period. The Court of Claims granted plaintiff 's motion, ruling that
"[d]efendant had no authority to reassess [p]laintiff 's Single Business Tax liability under the
statutory authority granted to it" and that defendant "must accordingly refund those monies for
tax years 1989-1996 [that] [p]laintiff paid under protest."
II. Standard of Review
This Court's review of a trial court's grant of summary disposition pursuant to MCR
2.116(C)(10) is as follows:
This Court reviews de novo a trial court's grant or denial of summary
disposition under MCR 2.116(C)(10). Spiek v Dep't of Transportation, 456 Mich
331, 337; 572 NW2d 201 (1998). A motion brought under MCR 2.116(C)(10)
tests the factual support for a claim. Downey v Charlevoix Co Rd Comm'rs, 227
Mich App 621, 625; 576 NW2d 712 (1998). The pleadings, affidavits,
depositions, admissions, and any other documentary evidence submitted by the
parties must be considered by the court when ruling on a motion brought under
MCR 2.116(C)(10). Downey, supra at 626; MCR 2.116(G)(5). When reviewing
a decision on a motion for summary disposition under MCR 2.116(C)(10), this
Court "must consider the documentary evidence presented to the trial court 'in the
light most favorable to the nonmoving party.'" DeBrow v Century 21 Great
Lakes, Inc (After Remand), 463 Mich 534, 539; 620 NW2d 836 (2001), quoting
Harts v Farmers Ins Exchange, 461 Mich 1, 5; 597 NW2d 47 (1999). A trial
court has properly granted a motion for summary disposition under MCR
2.116(C)(10) "if the affidavits or other documentary evidence show that there is
no genuine issue in respect to any material fact, and the moving party is entitled to
judgment as a matter of law." Quinto v Cross & Peters Co, 451 Mich 358, 362;
547 NW2d 314 (1996). [Clerc v Chippewa Co War Mem Hosp, 267 Mich App
597, 601; 705 NW2d 703 (2005).]
The proper interpretation of a statutory provision is also a question of law, which this
court reviews de novo. Neal v Wilkes, 470 Mich 661, 664; 685 NW2d 648 (2004).
III. Analysis
Defendant argues that it is authorized by law to impose assessments on single business
taxpayers for taxes lawfully owed to the state of Michigan and that it is not limited to issuing
only one assessment to a taxpayer for the same tax period. According to defendant, it has
statutory authority to issue more than one single business tax assessment to a taxpayer for the
same tax period if necessary to recover all the taxes lawfully owed to the state. Plaintiff, on the
other hand, asserts that once defendant has issued a single business tax assessment, it is
precluded from issuing a subsequent assessment for the same tax period.
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Resolution of this issue requires us to consider and construe various provisions of the
revenue act. When addressing a question of statutory construction, this Court must begin by
examining the language of the statute. Macomb Co Prosecutor v Murphy, 464 Mich 149, 158;
627 NW2d 247 (2001). The primary rule governing the interpretation of statutes is to discern
and give effect to the Legislature's intent through reasonable construction in consideration of the
purpose of the statute and the object sought to be accomplished. Frankenmuth Mut Ins Co v
Marlette Homes, Inc, 456 Mich 511, 515; 573 NW2d 611 (1998). If a statute is clear, it must be
enforced as plainly written. People v Spann, 250 Mich App 527, 530; 655 NW2d 251 (2002),
aff 'd 469 Mich 904 (2003). However, if a statute is susceptible of more than one interpretation,
judicial construction is proper to determine legislative intent. Id. In determining legislative
intent, statutory language must be given a reasonable construction that best accomplishes the
purpose of the statute. Frankenmuth Mut, supra at 515.
The Department of Treasury is responsible for the collection of taxes. MCL 205.1(1).
The state may impose a tax only if the tax is expressly authorized by law. Molter v Dep't of
Treasury, 443 Mich 537, 543; 505 NW2d 244 (1993). The authority to tax will not be inferred.
Id. The SBTA requires single business taxpayers to file tax returns and remit tax payments.
MCL 208.71; MCL 208.73. The SBTA provides that administration of the single business tax is
governed by the revenue act, MCL 205.1 to MCL 205.30. MCL 208.80(1). According to the
revenue act, MCL 205.21 through MCL 205.30 govern the "procedures of administration, audit,
assessment, interest, penalty, and appeal" for all taxes, including the single business tax. MCL
205.20. Therefore, the question is whether the relevant sections of the revenue act permit
defendant to issue a second assessment to a corporate taxpayer for the same tax period in order to
recover all the single business taxes lawfully owed to the state by the taxpayer. We conclude
that they do.
The first section of the revenue act that applies to this case is MCL 205.27a(2), which
provides in part that "[a] person who has failed to file a return is liable for all taxes due for the
entire period for which the person would be subject to the taxes." In this case, plaintiff failed to
voluntarily comply with its obligation to file single business tax returns for the tax years at issue
and failed to file returns even when defendant specifically requested that plaintiff file such
returns in its first intent to assess and first final assessment. If defendant were not authorized to
issue a second assessment upon obtaining information indicating plaintiff 's true tax liability,
plaintiff would be rewarded for its failure to file tax returns for the years at issue. In essence, not
permitting defendant to issue a second assessment would allow plaintiff to evade its single
business tax liability, deprive the state of taxes that it is lawfully owed, and render MCL
205.27a(2) nugatory.4 We must construe statutes reasonably, in a way that best accomplishes the
purposes of the statute. Frankenmuth Mut, supra at 515. The intended purpose of the SBTA is
to impose a tax on the privilege of conducting business activity within Michigan. ANR Pipeline
Co v Dep't of Treasury, 266 Mich App 190, 198; 699 NW2d 707 (2005). If plaintiff were
4
A reviewing court should not interpret a statute in a manner that renders it nugatory. Apsey v
Mem Hosp, 477 Mich 120, 131; 730 NW2d 695 (2007). A statute is rendered nugatory when an
interpretation fails to give it meaning or effect. Id.
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permitted to avoid single business tax liability for the years it failed to file tax returns, this
purpose would be defeated. See Frankenmuth Mut, supra at 515. Moreover, it would be an
injustice and would prejudice the public interest to permit a corporation to benefit from its failure
to file tax returns, which, by law, it is obligated to file. People v Derror (On Reconsideration),
268 Mich App 67, 73-74; 706 NW2d 451 (2005), rev'd on other grounds 475 Mich 316 (2006).
In addition to MCL 205.27a(2), MCL 205.21(1) also applies to this case.5 It provides:
If a taxpayer fails or refuses to make a return or payment as required, in
whole or in part, or if the department has reason to believe that a return made or
payment does not supply sufficient information for an accurate determination of
the amount of tax due, the department may obtain information on which to base
an assessment of the tax. By its duly authorized agents, the department may
examine the books, records, and papers and audit the accounts of a person or any
other records pertaining to the tax.
Plaintiff failed to voluntarily comply with its obligation to file returns and pay its single
business tax obligations for the tax years at issue.6 Therefore, as authorized by MCL 205.21(1),
defendant obtained information (although it did so initially without conducting an audit),
determined that plaintiff had a single business tax liability, and issued plaintiff the first intent to
assess and the first final assessment of plaintiff 's single business tax liability for the years at
issue.7 In fact, had defendant not issued the first intent to assess in 1998, which began the
process of defendant's collection of single business taxes that plaintiff lawfully owed to the state,
plaintiff likely would have failed to acknowledge its tax liability and continued to avoid paying
single business taxes. Although plaintiff paid the entire amount of single business tax assessed
by defendant in the first final assessment, including penalties and interest, plaintiff never filed
returns for the years at issue, despite the fact that defendant instructed plaintiff to file returns in
both the first intent to assess and the first final assessment. Because plaintiff did not file tax
returns as requested by defendant and plaintiff 's payment in full of the amount assessed in the
first final assessment did not supply sufficient information for an accurate determination of the
amount of tax due, defendant was authorized under MCL 205.21(1) to examine books, records,
papers, and conduct an audit of plaintiff regarding the tax after receiving payment to "obtain
information on which to base an assessment of the tax." In this case, defendant obtained further
information by conducting an audit as permitted by MCL 205.21(1), discovered that plaintiff had
a tax deficiency, and then issued a second intent to assess and second final assessment.
5
We conclude that MCL 205.21(1) applies to this case because although plaintiff made a
payment, it failed to file a return for the years at issue.
6
MCL 205.27(1)(a) provides that "a person shall not . . . [f]ail or refuse to make a return or
payment within the time specified . . . ."
7
MCL 205.24(1) also provides: "If a taxpayer fails or refuses to file a return or pay a tax
administered under this act within the time specified, the department, as soon as possible, shall
assess the tax against the taxpayer and notify the taxpayer of the amount of the tax. . . ."
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We observe that MCL 205.21(1) does not specify the conditions under which payment
must be made and, thus, a taxpayer might remit a tax payment either as a result of the taxpayer
voluntarily filing a tax return and relinquishing the payment due or as a result of a prior
assessment by defendant. Therefore, not only does the language of MCL 205.21(1) not limit
defendant to issuing one tax assessment per taxpayer per tax period, but, in a case where a
taxpayer remitted payment after receiving an assessment from defendant, plainly contemplates a
second assessment if the payment, which in this case was not accompanied by a tax return, does
not supply sufficient information regarding the plaintiff 's tax liability. Furthermore, we must
harmonize the provisions of MCL 205.21(1) and MCL 205.27a(2) to carry out the purpose of the
Legislature, Macomb Co Prosecutor v Murphy, 464 Mich 149, 159-160; 627 NW2d 247 (2001).
Reading MCL 205.21(1) together with MCL 205.27a(2), which, as stated above, provides that
"[a] person who has failed to file a return is liable for all taxes due for the entire period for
which the person would be subject to the taxes," we conclude that the Legislature plainly
intended to permit defendant to issue a second tax assessment to a taxpayer for the same tax
period if necessary for defendant to collect the entire amount of taxes lawfully due from a
taxpayer for the tax period at issue.
MCL 205.23(1) also provides authorization for defendant to issue a second single
business tax assessment to a corporate taxpayer for the same tax period if necessary for
defendant to collect the entire amount of taxes lawfully due from a taxpayer for the tax period at
issue. MCL 205.23(1) provides:
If the department believes, based upon either the examination of a tax
return, a payment, or an audit authorized by this act, that a taxpayer has not
satisfied a tax liability or that a claim was excessive, the department shall
determine the tax liability and notify the taxpayer of that determination. . . .
Under MCL 205.23(1), if defendant believed, on the basis of either the examination of a tax
return, or a payment, or an audit, that plaintiff had failed to satisfy its tax liability, defendant was
authorized to "determine the tax liability and notify the taxpayer of that determination." Like
MCL 205.21(1), MCL 205.23(1) does not limit the statute's application to situations in which a
taxpayer made a payment voluntarily and without necessitating that defendant issue an
assessment. Therefore, MCL 205.23(1) plainly contemplates the possibility that a payment may
have been made after a prior assessment, yet the statute still authorizes the department to
"determine the tax liability and notify the taxpayer of that determination." Moreover, as noted
earlier, reading MCL 205.23(1) in harmony with MCL 205.27a(2), which renders a taxpayer
who fails to file a tax return liable for all taxes due for the entire tax period, the Legislature
plainly intended to permit defendant to issue a second tax assessment to a taxpayer for the same
tax period if necessary for defendant to collect the entire amount of taxes lawfully due from a
taxpayer for the tax period at issue.
Citing MCL 205.22(4) and (5), plaintiff argues that its payment of the single business tax
issued in the first final assessment constitutes a full and final satisfaction of its single business
tax liability for the years at issue. MCL 205.22 provides, in relevant part:
(4) The assessment, decision, or order of the department, if not appealed
in accordance with this section, is final and is not reviewable in any court by
mandamus, appeal, or other method of direct or collateral attack.
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(5) An assessment is final, conclusive, and not subject to further challenge
after 90 days after the issuance of the assessment, decision, or order of the
department, and a person is not entitled to a refund of any tax, interest, or penalty
paid pursuant to an assessment unless the aggrieved person has appealed the
assessment in the manner provided by this section.
According to plaintiff, defendant's first final assessment was final and conclusive with
respect to both plaintiff and defendant. Defendant suggests that MCL 205.22(4) and (5) only
apply to taxpayers, not defendant. We need not determine whether MCL 205.22(4) and (5) apply
to both the taxpayer and defendant because even assuming that those provisions apply to both the
taxpayer and defendant, they do not preclude defendant from issuing a second single business tax
assessment to a corporate taxpayer for the same tax period if necessary for defendant to collect
the entire amount of taxes lawfully due for the tax period at issue. MCL 205.22 concerns the
finality of an assessment with respect to an appeal and does not address defendant's authority to
issue a second single business tax assessment to a corporate taxpayer for the same tax period.
MCL 205.22 governs an appeal of an assessment, decision, or order of the department, and
nothing in the language of MCL 205.22 refers to a final discharge of liability for a tax period or
prevents defendant from issuing a second single business tax assessment to a corporation. This
Court will not read anything into a statute that is not within the manifest intent of the Legislature
as gleaned from the language of the statute itself, Universal Underwriters Ins Group v Auto Club
Ins Ass'n, 256 Mich App 541, 544; 666 NW2d 294 (2003), and we will not extract terms from
the section of the revenue act dealing with appeals and construe them as precluding defendant
from issuing a second assessment when the statute does not specifically preclude such an
additional assessment.
Moreover, even if defendant's first final assessment were final and conclusive under
MCL 205.22, it would only be final with respect to that specific assessment itself, and not with
respect to the taxpayer's total liability for the tax period in question. Thus, while the amounts in
that particular assessment would be final and could no longer be challenged, defendant would
still have the authority to issue further assessments as necessary to collect the single business tax
owed by the corporate taxpayer to the state. We observe that in another portion of the revenue
act, MCL 205.19(1), the statute refers to "a final discharge of liability for the tax assessed . . . ."
Such language does not appear in MCL 205.22(4) and (5). This provides additional support for
the conclusion that the "final" and "conclusive" language of MCL 205.22(4) and (5) does not
refer to "a final discharge of liability" and does not preclude defendant from issuing a second
single business tax assessment to a corporate taxpayer for a tax period in which defendant has
already issued one such tax assessment.
In sum, we conclude that the above-cited provisions of the revenue act provide statutory
authority for defendant to issue the second single business tax assessments to plaintiff because
plaintiff failed to file tax returns for the tax years at issue and plaintiff 's payment of the amounts
assessed by defendant in the first assessments did not satisfy plaintiff 's single business tax
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liability for the years in question. Therefore, defendant was authorized under MCL 205.27a(2),
MCL 205.21(1), and MCL 205.23(1) to issue a second assessment to plaintiff.8
Reversed.
/s/ Karen M. Fort Hood
/s/ Helene N. White
/s/ Stephen L. Borrello
8
We recognize that it is neither good government nor good policy to permit the Department of
Treasury to have a seemingly unlimited power to issue multiple tax assessments to a taxpayer for
the same tax period. At some point, a taxpayer is entitled to the security of knowing that its tax
liability for a tax period has been discharged or satisfied. In this regard, we note that defendant
should have audited plaintiff before issuing the first intent to assess and final assessment in order
to ensure that the assessment was based on plaintiff 's actual tax liability and not merely
speculation. If defendant had made the effort to ascertain a true and accurate assessment of
plaintiff 's tax liability at the outset, the second intent to assess and final assessment would have
been unnecessary. On the other hand, plaintiff 's conduct in this case was also deficient in that
plaintiff failed to voluntarily comply with its obligation to file its single business tax returns for
the years at issue and then ignored defendant's requests that it do so in the first intent to assess
and final assessment. Had plaintiff filed such returns, plaintiff may have been able to avail itself
of the four-year limitations period for the assessment of tax deficiencies under MCL 205.27a(2).
Ultimately, while we acknowledge the possibility of an unfair result under different facts, we
believe this result was the intention of the Legislature as articulated in the relevant provisions of
the revenue act. If we are incorrect, we urge the Legislature to specifically clarify this issue in
the revenue act or the SBTA.
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