COA Opinion: The Legislature’s amendment to a tax statute to reverse a Court of Appeals decision applies retroactively.
Three years ago, the Court of Appeals addressed whether a financing provider for vehicles sales qualified as a taxpayer, when it was the dealer, not the financing provider, that actually paid the taxes on the vehicle sale. If the financing provider qualified as a taxpayer under MCL § 205.54i, then it could deduct from its total proceeds any bad debts (debts that were uncollectible). After the Court of Appeals concluded in that case, DaimlerChrysler Services North America, LLC v. Department of Treasury, 271 Mich App 625 (2006), that the financing provider could benefit from this tax reduction because it was acting in combination with the dealer and so was part of a single taxable unit, the Legislature amended MCL § 205.54i specifically to reverse DaimlerChrysler. The amendment provided it was “curative” and “shall be retroactively applied” to express “the original intent of the legislature that a deduction for a bad debt for a taxpayer . . . is available exclusively to those persons with the legal liability to remit the tax on the specific sale at retail.” The amendment stated that it “correct[s] any misinterpretation of the meaning of the term ‘taxpayer’ that may have been caused by the Michigan [C]ourt of [A]ppeals decision in Daimler Chrysler.” The amendment had one narrow exception: If a court had already issued a final order granting a refund under DaimlerChrysler (and the window for appealing that final order had closed), that refund was permissible if payable within the one-month period of October 2009.
Yesterday, the Court of Appeals rejected an appeal by a financing provider who contended that the Legislature intended in the exception to preserve refunds for any entity that was previously entitled to a refund under DaimlerChrysler. In GMAC LLC v. Department of Treasury, Nos. 289261, 289262, & 289263 (published Nov. 19, 2009), the Court concluded that this argument was “contrary to the plain language of the statute” and that the amendment applied retroactively. Because GMAC did not fall within the narrow exception, the Court held that it did not qualify for the bad-debt reduction. The Court also rejected GMAC’s argument that it had been deprived of due process, citing a U.S. Supreme Court case stating that “a taxpayer has no vested right in [tax legislation].”