                          STATE OF MICHIGAN

                            COURT OF APPEALS



D’AGOSTINI LAND COMPANY LLC,                                         FOR PUBLICATION
                                                                     January 9, 2018
               Plaintiff-Appellant,                                  9:20 a.m.

v                                                                    No. 336599
                                                                     Tax Tribunal
DEPARTMENT OF TREASURY,                                              LC No. 16-000174-TT

               Defendant-Appellee.


Before: O’CONNELL, P.J., and HOEKSTRA and SWARTZLE, JJ.

SWARTZLE, J.

        This Court is asked again to determine the character of a rather protean actor under
Michigan tax law, the “unitary business group.” The group has no independent existence outside
of tax law, unlike, for example, a partnership or corporation. It is a recent creation of tax law,
and its definition has changed markedly since inception.

        In this appeal, petitioner D’Agostini Land Company, LLC, as the representative member
of a unitary business group, claims that it should be treated as a unified taxpayer for purposes of
the Michigan Business Tax Act’s small business alternative credit. Because “unitary business
group” is not listed as a type of taxpayer subject to certain disqualifications, the group should be
able to claim the credit notwithstanding the fact that one of its members would otherwise trigger
one of the disqualifications. Respondent Department of Treasury disagrees and points to its
published guidance that explains that each member of the unitary business group is subject to the
disqualifying provisions. To grasp how to apply the credit and its disqualifying provisions to a
unitary business group, the plain, ordinary meaning of the statutory text is sufficient, although
our conclusion is strengthened by applying a common canon of statutory construction. As
explained here, we agree with petitioner and reverse.

                                       I. BACKGROUND

        Central to this appeal is how the Michigan Business Tax Act’s (MBT) small business
alternative credit applies to a specific type of taxpayer—unitary business group. It will be
helpful, therefore, to review the credit’s history under Michigan tax law, as well the state’s
relatively recent adoption and modification of the unitary-business-group concept.

    A. THE SMALL BUSINESS ALTERNATIVE CREDIT UNDER MICHIGAN TAX LAW


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        Given the importance of small businesses to the state’s economy, Michigan has
historically provided tax credits for qualifying small businesses. Beginning in the late 1970s,
Michigan offered a form of the following credit under the state’s Single Business Tax Act
(SBT):

       (2) The credit provided in this section shall be taken before any other credit under
       this act, and is available to any person whose gross receipts do not exceed . . .
       $10,000,000.00 for tax years commencing after 1991, and whose adjusted
       business income minus the loss adjustment does not exceed $475,000.00 for tax
       years commencing on or after January 1, 1985, subject to the following:

              (a) An individual, a partnership, or a subchapter S corporation is
              disqualified if the individual, any 1 partner of the partnership, or
              any 1 shareholder of the subchapter S corporation receives more
              than . . . $115,000.00 for tax years commencing after December
              31, 1997 as a distributive share of the adjusted business income
              minus the loss adjustment of the individual, the partnership, or the
              subchapter S corporation.

              (b) A corporation other than a subchapter S corporation is
              disqualified if either of the following occur for the respective tax
              year: [various adjustments not relevant here] [MCL 208.36
              (repealed by 2011 PA 39) (emphasis added).]

        Effective January 2008, Michigan repealed the SBT and replaced it with the MBT. The
MBT also included a small business alternative credit in substantially the same form as the prior
one, though it was updated, among other ways, to include limited liability companies among
those taxpayers which may be disqualified from taking the credit:

       (1) The credit provided in this section shall be taken after the credits under
       sections 403 and 405 and before any other credit under this act and is available to
       any taxpayer with gross receipts that do not exceed $20,000,000.00 and with
       adjusted business income minus the loss adjustment that does not exceed
       $1,300,000.00 as adjusted annually for inflation using the Detroit consumer price
       index and subject to the following:

              (a) An individual, a partnership, a limited liability company, or a
              subchapter S corporation is disqualified if the individual, any 1
              partner of the partnership, any 1 member of the limited liability
              company, or any 1 shareholder of the subchapter S corporation
              receives more than $180,000.00 as a distributive share of the
              adjusted business income minus the loss adjustment of the
              individual, the partnership, the limited liability company, or the
              subchapter S corporation.

              (b) A corporation other than a subchapter S corporation is
              disqualified if either of the following occur for the respective tax

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               year: (i) Compensation and directors’ fees of a shareholder or
               officer exceed $180,000.00. (ii) The sum of the following amounts
               exceeds $180,000.00: [various adjustments not relevant here]
               [MCL 208.1417 (repealed by 2011 PA 39) (emphasis added).]

       The MBT was not long for the tax world, and the state replaced it just four years later
with the Corporate Income Tax (CIT), effective January 2012. As with prior tax acts, the current
CIT includes a credit for qualifying small businesses:

       (1) The credit provided in this section shall be taken before any other credit under
       this part and is available to any taxpayer, other than those taxpayers subject to the
       tax imposed under chapter 12 or 13, with gross receipts that do not exceed
       $20,000,000.00 and with adjusted business income minus the loss adjustment that
       does not exceed $1,300,000.00 as adjusted annually for inflation using the Detroit
       consumer price index, and subject to the following:

               (a) A corporation or unitary business group is disqualified if either
               of the following occurs for the respective tax year:

                      (i) Compensation and directors’ fees            of   a
                      shareholder or officer exceed $180,000.00.

                      (ii) The sum of the following amounts exceeds
                      $180,000.00: [various adjustments not relevant
                      here] [MCL 206.671(emphasis added).]

  B. UNITARY BUSINESS GROUP AS A “TAXPAYER” UNDER MICHIGAN TAX LAW

        One key difference between the CIT’s small business alternative credit and those in the
SBT and MBT is the former’s inclusion of the term “unitary business group” among the
taxpayers which may be disqualified from taking the credit. A unitary business group is not a
separate and distinct legal entity, like a corporation, limited liability company, or partnership;
rather, the group is purely a creation of tax law. In general, a unitary business group is a group
of related U.S. persons whose business activities are sufficiently interdependent. MCL
206.611(6) (CIT); MCL 208.1117(6) (MBT). To qualify as a unitary business group, one
member of the proposed group must own or control more than 50 percent of the other members
and there must be a sufficient connection between the members to meet one of two relationship
tests. MCL 206.611(6) (CIT); MCL 208.1117(6) (MBT). If a group of businesses qualifies as a
unitary business group in a particular tax year, then the group must file a unitary tax return for
that year. MCL 206.691(1) (CIT); MCL 208.1511 (MBT). Michigan, like several other states,
has adopted the unitary-business-group concept in an effort to measure more accurately the
related group’s taxable activities in the state.

         Unitary business groups were not taxed as such under the SBT. When it enacted the
MBT, the Legislature added “unitary business group” to the list of persons who qualify as a
“taxpayer” under state law. MCL 208.1117(5). Membership in a unitary business group was
open to individuals as well as a wide range of legal entities, including corporations, limited
liability companies, and partnerships. MCL 208.1117(6),(7). With the CIT, the Legislature
                                                -3-
retained the concept of a “unitary business group” in the definition of a “taxpayer,” but it
restricted membership in such a group to corporations, insurance companies, and financial
institutions. MCL 206.611(6).

   C. TREASURY DISALLOWS CREDIT CLAIMED BY UNITARY BUSINESS GROUP

         In this tax dispute, the unitary-business-group taxpayer (represented by petitioner
D’Agostini Land Company LLC (D’Agostini)) and the Department of Treasury (Treasury)
disagree on whether a unitary business group is subject to the disqualifying provision of the
MBT’s small business alternative credit. The following facts are not in dispute: D’Agostini is
the designated representative of a unitary business group who filed returns under the MBT in
2009, 2010, and 2011. The group claimed a small business alternative credit under the MBT in
2009 and 2010. In neither year did the group’s gross receipts exceed $20,000,000, nor did the
group’s adjusted net income exceed $1,300,000. One of its members, a subchapter S
corporation, did receive more than $180,000 as a distributive share of the adjusted net business
income. Consistent with its then-published guidance, Treasury disallowed the credit because, in
its view, no member of a unitary business group can violate the disqualifying provision in MCL
208.1417(1)(a),(b) and claim the credit, even though the term “unitary business group” is not
itself listed as a type of taxpayer which may be disqualified from taking the credit. See
Treasury’s MBT FAQs C41. Treasury adjusted the group’s 2009 and 2010 returns, which
resulted in an adjustment to the 2011 return as well; the adjustments added taxes due by the
group as well as late penalties and interest.

        On behalf of the group, D’Agostini appealed Treasury’s decision to the Tax Tribunal. On
cross motions for summary disposition, the Tribunal affirmed Treasury’s decision with respect to
the adjustments as well as to the late penalties and interest. D’Agostini moved for
reconsideration, arguing that the group should have been reevaluated under this Court’s decision
in Labelle Mgt, Inc v Dep’t of Treasury, 315 Mich App 23; 888 NW2d 260 (2016). The Tribunal
denied the motion, concluding that the status of the unitary business group had never been at
issue and that both parties had earlier acknowledged the status of the group.

       D’Agostini appealed.

                                        II. ANALYSIS

        D’Agostini claims on appeal that the Tribunal erred in three separate ways. First, the
Tribunal misread the plain language of the disqualifying provisions of the MBT’s small business
alternative credit. The provisions list five types of taxpayers which are subject to
disqualification, and “unitary business group” is not one of them. Second, even if a unitary
business group is subject to disqualification, the Tribunal should have allowed the group to take
certain loss adjustments. Finally, according to D’Agostini, the Tribunal should have determined
whether the group was even properly considered a unitary business group under this Court’s
recent decision in Labelle Mgt.

                                A. STANDARD OF REVIEW

      On appellate review, this Court defers to the Tribunal’s factual findings supported by
competent, material, and substantial evidence, but reviews de novo the Tribunal’s legal
                                               -4-
conclusions, including its decision to grant summary disposition under MCR 2.116(C)(10) as
well as its interpretation of a statute. Briggs Tax Serv, LLC v Detroit Pub Sch, 485 Mich 69, 75;
780 NW2d 753 (2010). Summary disposition is appropriate under MCR 2.116(C)(10) when,
except as to damages, “there is no genuine issue as to any material fact, and the moving party is
entitled to judgment or partial judgment as a matter of law.”

       With respect to statutory interpretation, this Court is required to give effect to the
Legislature’s intent. Van Buren County Educational Ass’n v Decautor Pub Sch, 309 Mich App
630, 643; 872 NW2d 710 (2015). The Legislature is presumed to intend the meaning clearly
expressed, and this Court must give effect to the plain, ordinary, or generally accepted meaning
of the Legislature’s terms. Lorencz v Ford Motor Co, 439 Mich 370, 376; 483 NW2d 844
(1992). “A statutory provision is ambiguous only if it irreconcilably conflicts with another
provision, or when it is equally susceptible to more than a single meaning.” People v Fawaz,
299 Mich App 55, 63; 829 NW2d 259 (2012) (internal quotation marks and citation omitted).
Only when ambiguity exists does the Court turn to common canons of construction for aid in
construing a statute’s meaning. People v Borchard-Ruhland, 460 Mich 278, 284-285; 597
NW2d 1 (1999).

  B. SOME, BUT NOT ALL, “TAXPAYERS” ARE DISQUALIFIED FROM TAKING THE
               MBT’S SMALL BUSINESS ALTERNATIVE CREDIT

         Although D’Agostini raises three claims of error, we begin and end our analysis with the
first one. Under the MBT, a “taxpayer” is defined as “a person or unitary business group liable
for a tax, interest, or penalty under this act.” MCL 208.1117(5). The act also includes a
definition of a “unitary business group”—a group of related entities which satisfy specific
control and relationship conditions. MCL 208.1117(6). The act goes on to define a “person” as
“an individual, firm, bank, financial institution, insurance company, limited partnership, limited
liability partnership, copartnership, partnership, joint venture, association, corporation,
subchapter S corporation, limited liability company, receiver, estate, trust, or any other group or
combination of groups acting as a unit.” MCL 208.1113(3). Thus, individuals, partnerships,
limited liability companies, corporations, and unitary business groups are all specifically
identified as entities which, among others, may qualify as a taxpayer under the MBT.

       With respect to the small business alternative credit, the MBT provides that the credit can
be claimed by “any taxpayer” which has gross receipts not exceeding $20,000,000 and adjusted
net income not exceeding $1,300,000. MCL 208.1417(1). The statute then makes the credit
expressly “subject to” several disqualifying conditions:

               (a) An individual, a partnership, a limited liability company, or a
               subchapter S corporation is disqualified if the individual, any 1
               partner of the partnership, any 1 member of the limited liability
               company, or any 1 shareholder of the subchapter S corporation
               receives more than $180,000.00 as a distributive share of the
               adjusted business income minus the loss adjustment of the
               individual, the partnership, the limited liability company, or the
               subchapter S corporation.


                                                -5-
               (b) A corporation other than a subchapter S corporation is
               disqualified if either of the following occur for the respective tax
               year:(i) Compensation and directors’ fees of a shareholder or
               officer exceed $180,000.00.(ii) The sum of the following amounts
               exceeds $180,000.00: [various adjustments not relevant here]
               [MCL 208.1417(1) (repealed by 2011 PA 39) (emphasis added).]

Thus, in terms of structure, the credit’s language consists of a broad grant of the credit to “any
taxpayer” which meets certain financial thresholds, followed by two limited exceptions or
disqualifications related to entities which exceed other financial thresholds. The plain, logical
way to read the statute is that the main provision applies at the “any taxpayer”-level, and the
disqualifying provisions that follow similarly (and consistently) apply at the taxpayer-level—i.e.,
the entities listed in the disqualifying provisions are the types of taxpayers which may be
disqualified from claiming the credit. Thus, it follows that if a particular type of taxpayer is not
listed in the disqualifying provision, then that type of taxpayer is not subject to disqualification
based on the compensation of an owner or officer.

         This reading is consistent with how Treasury treats most types of taxpayers in this
situation. For example, in Letter Ruling 2013-3, Treasury was asked whether an irrevocable
trust, a type of taxpayer, was subject to the credit’s disqualifying provisions. Treasury explained
that it was not: “An irrevocable trust is not listed as being subject to the disqualifiers or
reduction percentages; therefore, irrevocable trusts are not subject to the disqualifiers or
reduction percentages listed under MCL 208.1417(a) and (c). See Alliance Obstetrics &
Gynecology, PLC v Michigan Dep’t of Treasury, 285 Mich App 284 (2009).” LR 2013-3 (June
26, 2013).

        Treasury agrees with this reading as far as it goes, but then it asks this Court to go farther
and infer that the disqualifying provisions also apply to a unitary business group made up of one
or more of the listed entities (e.g., individuals, partnerships, limited liability companies, or
corporations). We decline the invitation for several reasons. First, there is nothing on the face of
the statute to suggest such a reading. Subsection (1) refers broadly to “any taxpayer,” followed
immediately by subdivisions (a) and (b), which list several entities defined elsewhere as types of
taxpayers. A person who read MCL 208.1417(1) and (a) and (b) would reasonably conclude that
the entities listed in the two subdivisions were those taxpayers—and only those taxpayers—
which may be disqualified from claiming the credit. Nowhere does the plain language of the
statute imply that a taxpayer which is not itself listed under subdivision (a) or (b) should
somehow be unpacked like a matryoshka doll until a disqualifying member of the group is
discovered. The Legislature expressed itself with sufficient clarity in MCL 208.1417(1), and we
will not infer an extension that is not supported by the statute’s text. Labelle Mgt, 315 Mich App
at 29 (“Tax laws generally will not be extended in scope by implication or forced construction,
and when there is doubt, tax laws are to be construed against the government.”).

       To support its contrary reading, Treasury relies on its interpretive guidance provided to
taxpayers as well as several Tribunal decisions interpreting and applying similar provisions in
the SBT. Courts do give “respectful consideration” to a state agency’s interpretation of a statute
and do not generally overrule such an interpretation absent “cogent reasons.” In re Complaint of
Rovas, 482 Mich 90, 108; 754 NW2d 90 (2008). Moreover, legislative silence in the face of

                                                 -6-
agency decisions may, under certain circumstances, suggest legislative acquiescence. See, e.g.,
NLRB v Bell Aerospace, 416 US 267, 275; 94 S Ct 1757; 40 L Ed 2d 134 (1974) (adopting the
board’s interpretation of “employee” that had been consistently used before the act’s amendment
repeating the language). Yet, the taxation of unitary business groups as such was first introduced
in the MBT, and decisions involving how the credit was applied to affiliated groups under the
SBT are of limited interpretive value. More fundamentally, these are interpretive principles or
canons employed only when a statute is ambiguous. See Borchard-Ruhland, 460 Mich at 284-
285. Treasury has not identified another provision of the MBT with which our reading of MCL
208.1417(1) would irreconcilably conflict, and as shown above, on its face MCL 208.1417(1) is
not equally susceptible to more than a single meaning. Concluding that the statute is not
ambiguous, we need not resort to these or other canons of construction.

          With that said, even assuming for the sake of argument that MCL 208.1417(1) is
ambiguous, a different canon of construction conclusively demonstrates that the Legislature did
not intend to include unitary business groups in the MBT’s disqualifying provisions. Recall that
with the CIT, the Legislature explicitly added “unitary business group” to the list of taxpayers
which may be disqualified from claiming the CIT’s small business alternative credit. The form
and substance of the CIT’s credit mirrors those of the MBT’s credit, but with a crucial difference
relevant here—“unitary business group” is not listed in the MBT’s disqualifying provisions, but
it is listed in the CIT’s disqualifying provision. Courts have long understood that “a change in
the language of a prior statute presumably connotes a change in meaning.” Ray v Swager, 501
Mich 52, 80 n 68; 903 NW2d 366 (2017) (internal citation and quotation marks omitted); see
also People v Wright, 432 Mich 84, 92; 437 NW2d 603 (1989) (“It is axiomatic that when the
Legislature effects a change in the provisions of a statute, a presumption arises that the
Legislature intends a substantive change in the law.”). This is especially the case when the
statutory language and history confirm that the change is a substantive one, and not merely a
recodification of existing law. Scalia & Gardner, Reading Law: The Interpretation of Legal
Texts (St. Paul: Thomson/West, 2012), p 257.

        The CIT was a significant change in Michigan tax law. Among other things, the
definition of a “taxpayer” was circumscribed to just three entities and one group: corporation,
insurance company, financial institution, and unitary business group. MCL 206.611(5).
Similarly, membership in a “unitary business group” was limited to just corporations, insurance
companies, and financial institutions. MCL 206.611(6)           Yet, even with these and other
substantive changes, the CIT retained a small business alternative credit in much the same form
and substance as the ones found in the SBT and MBT, though with several important changes. If
Treasury’s reading of the MBT was the correct one, then there would have been no need for the
Legislature to add “unitary business group” to the CIT’s credit-disqualifying provision, as
merely listing “corporation” should have been sufficient. By adding “unitary business group” to
the CIT’s credit-disqualifying provision, the Legislature undercut any reasonable support for the
argument that the MBT’s credit-disqualifying provision should be read to include that missing
taxpayer.

        Finally, Treasury asserts that our reading would be “illogical” because one “cannot
seriously believe that the Legislature intended to place more restrictions on single-entity
taxpayers than unitary business groups in a credit designed for small businesses.” This is an
argument from policy implication, rather than an argument from law. It is undeniable that the

                                               -7-
Legislature chose not to apply the disqualifying provision to a number of taxpayers regardless of
financial size or owner/officer compensation, including banks, associations, receivers, and trusts,
as even Treasury has recognized. See, e.g., Letter Ruling 2013-3 (June 26, 2013). It is not our
place to divine why the Legislature did or did not subject unitary business groups to the
disqualifying provisions of MBT’s small business alternative credit. Rather, it is our place only
to determine whether the Legislature did or did not do so—and, as we have explained, the
Legislature did not. Wismer v Becker Contracting Engineers v Dep’t of Treasury, 146 Mich App
690, 700-701; 382 MW2d 505 (1985). Accordingly, we reverse the Tribunal’s grant of summary
disposition to Treasury with respect to whether D’Agostini’s unitary business group was
disqualified under subdivisions (a) or (b) from claiming the MBT’s small business alternative
credit under MCL 208.1417(1).

                                   C. REMAINING CLAIMS

        Because we reverse the Tribunal’s grant of summary disposition, we need not reach
D’Agostini’s second claim of error. As for the third claim of error, we agree with Treasury that
the claim was not preserved below because it was first raised in a motion for reconsideration.
Vushaj v Farm Bureau Gen Ins Co of Mich, 284 Mich App 513, 519; 773 NW2d 758 (2009).
We decline to take up the unpreserved claim on appeal.

                                       III. CONCLUSION

       A “unitary business group” is not one of the types of taxpayer listed in the disqualifying
provisions of the MBT’s small business alternative credit. Under separation-of-power principles,
we do not have the authority to add it, only the Legislature does—which it in fact did in the
disqualifying provisions of the CIT’s small business alternative credit. Accordingly, we reverse
the Tribunal’s grant of summary disposition to Treasury and remand for entry of judgment
consistent with this opinion.

       As the prevailing party, D’Agostini may tax costs. We do not retain jurisdiction.




                                                            /s/ Brock A. Swartzle
                                                            /s/ Peter D. O'Connell
                                                            /s/ Joel P. Hoekstra




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