SALT Blawg – State and Local Tax
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As previously reported on the SALT Blawg, Chamberlain Hrdlicka attorneys Stewart M. Weintraub and Adam M. Koelsch, together with Peter L. Faber of McDermott, of Will & Emery LLP, filed in the U.S. Supreme Court an amicus brief on behalf of the American College of Tax Counsel in support of the petitioners challenging a retroactive repeal of tax legislation by the state of Michigan. Although the petitioners and the amici had asserted various reasons for granting certiorari, the most prominent of those assertions was that the repeal, stretching seven years into the past, violates the Due Process Clause of the U.S. Constitution.
Subsequent to those submissions, the Supreme Court removed from its conference calendar the petition submitted in another pending retroactive tax legislation case from Washington state (Dot Foods, Inc. v. State of Washington), presumably to consider it jointly with the Michigan cases at a later date, and also ordered Michigan to submit a response to the petitions filed -- moves widely seen as signaling that the Court is interested in addressing Due Process issue.
Michigan has since submitted its response, setting forth a novel basis for denying cert.: that the 2014 legislation challenged by the petitioners -- which repealed retroactive to 2008 a statute authorizing a three-factor apportionment election that had existed since 1970 -- was a “legislative clarification” of a 2008 Business Tax statute that had supposedly mandated single-factor apportionment for all prospective years, and was therefore not retroactive at all. Thus, according to Michigan, application of that principle of state statutory-construction law constitutes an adequate and independent state law ground to uphold the decision of the Michigan state court, thereby depriving the Supreme Court of jurisdiction to review the issue.
Not so, replied the petitioners. IBM and Skadden Arps submitted reply briefs on March 24 and 27, respectively. IBM’s brief challenged the assertion that the doctrine of “legislative clarification” in fact exists, and asserted that the any new law that applies to activities (or tax years) in the past is, by definition, retroactive. Skadden Arps, in its brief, added that the Michigan Court of Appeals had never mentioned the doctrine in its decision, while explicitly acknowledging the statute’s retroactive effect, and that, in any event, “the Supremacy Clause does not allow federal retroactivity doctrine to be supplanted by the invocation of a contrary approach to retroactivity under state law.” On March 28, a brief filed on behalf of Goodyear Tire, Deluxe Financial Services, and Monster Beverage reiterated the arguments of IBM and Skadden Arps.
The briefs for the Michigan petitioners and for the petitioners in Dot Foods will all be considered during the Court’s conference on April 13, and the Court's decisions could be announced as early as April 17.