Michigan: Department of Treasury issues guidance for unitary business groups

The Michigan Court of Appeals recently decided the case LaBelle Management, Inc. v. Michigan Department of Treasury, initiated because of an $11,856.29 tax bill stemming from the determination that a trio of companies constituted a unitary business group. The Court of Appeals reversed, holding that the three companies did not constitute a unitary business group because none of them directly possessed more than 50 percent ownership interest of any of the others, so there was not sufficient indirect ownership or control to satisfy the statutory definition of a unitary business group. We explained the details of the lawsuit in our April 15 Multistate Tax Update

Last month, the Michigan Department of Treasury (MDOT) issued initial and revised guidance to taxpayers as to how it will apply the LaBelle holding, which is binding, moving forward. Initially, the MDOT warned that unitary business groups should review their membership to determine whether the requisite level of control, as established in LaBelle, applies. If so, taxpayers should prepare amended returns and be mindful of applicable deadlines. The MDOT promised to issue compliance instructions after completing its evaluation of the decision.

One week later, the MDOT revised its guidance to note that the Court of Appeals had stayed the effect of the LaBelle case until the MDOT’s appeal rights have been exhausted. For this reason, and until the Court lifts its stay, LaBelle is not considered binding precedent.