
597 N.W.2d 271 (1999)
235 Mich. App. 372
Jack ELENBAAS and Eleanor Elenbaas, Plaintiffs-Appellees,
v.
DEPARTMENT OF TREASURY, Defendant-Appellant.
Docket No. 197467.
Court of Appeals of Michigan.
Submitted April 9, 1998, at Lansing.
Decided April 23, 1999, at 9:20 a.m.
Released for Publication July 27, 1999.
Mika, Meyers, Beckett & Jones, P.L.C. (by Jeffrey A. DeVree), Grand Rapids, for the plaintiffs.
Frank J. Kelley, Attorney General, Thomas L. Casey, Solicitor General, and Kevin T. Smith, Assistant Attorney General, for the defendant.
Before: MARK J. CAVANAGH, P.J., and HOLBROOK, JR., GRIBBS, GRIFFIN, FITZGERALD, SAAD, and GAGE, JJ.
MARK J. CAVANAGH, P.J.
Pursuant to MCR 7.215(H)(3), this special panel was convened to resolve a conflict between this Court's prior, vacated opinion in Elenbaas v. Dep't of Treasury, 231 Mich.App. 801, 585 N.W.2d 305 (1998), and this Court's earlier decision in Cook v. Dep't of Treasury, 229 Mich.App. 653, 583 N.W.2d 696 (1998). In accordance with MCR 7.215(H)(1), the prior Elenbaas panel was required to follow the precedent of Cook, supra. Were it not for MCR 7.215(H)(1), the previous panel would have affirmed the decision of the lower court.
The facts of this case were set out in this Court's previous opinion:
After this Court's ruling in Bauer v. Dep't of Treasury, 203 Mich.App. 97, 512 N.W.2d 42 (1993), plaintiffs filed amended income tax returns for 1990, 1991, 1992, and 1993, seeking refunds for income taxes paid on their gross receipts from oil and gas production. In Bauer, this Court determined that § 15 of the severance tax act, M.C.L. § 205.315; M.S.A. § 7.365, allows an individual who pays the severance tax on royalties received from oil and gas leases to be exempt from paying income tax on those royalties. Id. at 99, 512 N.W.2d 42. This Court held that § 15 was clear and unambiguous and that, when it applies, the severance tax is to be paid in lieu of all other taxes. Id. at 100, 512 N.W.2d 42. No exception is made for the income *272 tax. Id. at 101, 512 N.W.2d 42. Because plaintiffs had paid both the severance tax and the income tax on the gross receipts from their oil and gas production in those years, they filed amended income tax returns. Plaintiffs calculated the amount of their claimed refunds by subtracting the amount of their gross receipts from oil and gas production, which receipts had been taxed pursuant to the severance tax act, from the total taxable income on the returns for each year. They then recalculated the amount of income tax owed.
Defendant failed to issue the full amount of the refunds claimed for 1990, 1991, and 1992 and failed to issue any refund for 1993. It determined that the amount of gross receipts should not have been deducted from the total taxable income, but rather the amount of net income derived from oil and gas production for each year should be subtracted. This resulted in less of a refund for 1990, 1991, and 1992. In 1993, plaintiffs did not enjoy net income from their oil and gas production, but rather had a net loss. Defendant determined that the net loss should be added to their total taxable income for 1993 and thus, plaintiffs owed additional taxes for that year. The Court Of Claims determined that plaintiffs were entitled to the full refunds claimed, which refunds were calculated by subtracting the gross receipts from oil and gas production from their total taxable income. [Elenbaas, supra at 801-802, 585 N.W.2d 305.]
The conflict at issue is over whether plaintiffs were entitled to deduct oil and gas expenses when calculating their 1993 Michigan income tax or to include those expenses when calculating their net operating loss for Michigan income tax purposes. The Cook panel held that subsection 265(a)(1) of the federal Internal Revenue Code[1] generally applies, under subsection 2(3) of the Michigan Income Tax Act (ITA),[2] to prevent taxpayers from deducting expenses related to exempt classes of income. The prior Elenbaas panel disagreed, noting that plaintiffs were entitled to deduct oil and gas production expenses when calculating their federal adjusted gross income and that oil and gas receipts are taxed in Michigan under the severance tax act, M.C.L. § 205.301 et seq.; M.S.A. § 7.351 et seq.
Following an order by the Court of Appeals en banc invoking the conflict resolution procedure of MCR 7.215(H)(3)-(6), this case was reconsidered by this special panel. After due consideration, we are persuaded that the Cook panel reached the correct result. We therefore hold, for the reasons set forth in Cook, that the trial court erred in finding that plaintiffs were entitled to deduct the expenses associated with oil and gas production in computing a net operating loss.[3] In all other respects, we adopt the opinion of the prior Elenbaas panel as our own.
Affirmed in part, reversed in part, and remanded for further proceedings consistent with this opinion. We do not retain jurisdiction.
HOLBROOK, JR., GRIBBS, GRIFFIN, and FITZGERALD, JJ., concur.
GAGE, J. (dissenting).
I respectfully dissent. Subsection 30(1) of the Income Tax Act (ITA), M.C.L. *273 § 206.1 et seq.; M.S.A. § 7.557(101) et seq., defines "taxable income" as "adjusted gross income as defined in the internal revenue code [26 U.S.C. § 1 et seq.]," subject to further adjustment by specified additions and subtractions. See M.C.L. § 206.30(2)-(4); M.S.A. § 7.557(130)(2)-(4). I agree with the prior Elenbaas panel's interpretation of ITA § 30.
We believe that the ITA necessarily provides that taxable income will not include oil and gas production expenses, which are a proper deduction in arriving at federal adjusted gross income. Because plaintiffs were entitled to the deductions when calculating their federal adjusted gross income and because the ITA does not provide that the expenses associated with oil and gas production must be added back into federal adjusted gross income when calculating taxable income for Michigan, we would hold that the trial court correctly allowed the deductions. [Elenbaas v. Dep't of Treasury, 231 Mich.App. 801, 807, 585 N.W.2d 305 (1998).]
The severance tax act (STA), M.C.L. § 205.301 et seq.; M.S.A. § 7.351 et seq., was enacted in 1929. 1929 PA 48. The Legislature subsequently enacted the ITA in 1967. 1967 PA 281. The Legislature is presumed to have knowledge of existing law when enacting new law or amending an existing law. Stevens v. Inland Waters, Inc., 220 Mich.App. 212, 219, 559 N.W.2d 61 (1996). While the Legislature could have enacted a provision within the ITA requiring the addition of expenses attributable to income exempt from taxation, to date it has chosen not to do so. Because subsection 30(1) is clear and unambiguous, judicial interpretation requiring an addition for expenses attributable to income exempt from taxation is not permitted. Bauer v. Dep't of Treasury, 203 Mich.App. 97, 100, 512 N.W.2d 42 (1993).
Although the ITA does not contain a general rule that no deduction may be taken for expenses attributable to income that is exempt from taxation, the Internal Revenue Code (IRC) does include such a provision. 26 U.S.C. § 265(a)(1). In Cook v. Dep't of Treasury, 229 Mich.App. 653, 583 N.W.2d 696 (1998), the Court relied on subsection 2(3) of the ITA, M.C.L. § 206.2(3); M.S.A. § 7.557(102)(3), which states that the Legislature intended "that the income subject to tax [under the ITA] be the same as taxable income as defined" within the IRC, as support for its conclusion that expenses allocable to the production of oil and gas revenues cannot be deducted when calculating a net operating loss (NOL). Oil and gas proceeds are subject to federal income taxation; thus, a deduction may be taken for expenses related to the generation of those proceeds. 26 U.S.C. § 265(a)(1); Cook, supra at 658, 583 N.W.2d 696. While gross oil and gas proceeds are excluded from taxation under the ITA, Bauer, supra at 100-101, 512 N.W.2d 42, they are taxed under the STA. STA § 15, M.C.L. § 205.315; M.S.A. § 7.365. The severance tax is paid in lieu of income tax. However, no provision in the STA allows for the deduction of production expenses before payment of the severance tax. Under the result reached by the majority, gross oil and gas proceeds are taxed according to the STA, but neither the STA nor the ITA permits a deduction for production expenses. The majority's conclusion that expenses related to oil and gas production cannot be deducted in calculating an NOL for the purpose of determining income subject to taxation under the ITA thus does not result in equal treatment of income as contemplated by ITA subsection 2(3).
Because federal adjusted gross income consists of gross income less deductions, including a deduction for ordinary and necessary business expenses, 26 U.S.C. §§ 62(a)(1), 162(a), and because Michigan taxable income constitutes federal adjusted gross income subject to further specified adjustments, ITA subsection 30(1), expenses incurred in the production of oil and gas should be deductible when calculating an NOL for purposes of determining Michigan taxable income. No provision in *274 either the STA or the ITA precludes the deduction of expenses related to oil and gas production when calculating an NOL. None of the clear and unambiguous language of ITA subsection 30(1) contemplates the addition of oil and gas expenses into federal adjusted gross income. Therefore, the majority's interpretation of subsection 30(1) in a manner that incorporates 26 U.S.C. § 265(a)(1), which is not otherwise a part of the ITA, is inappropriate. Lorencz v. Ford Motor Co., 439 Mich. 370, 376, 483 N.W.2d 844 (1992) (When a statute is clear and unambiguous, judicial construction or interpretation is unnecessary and therefore precluded.). The Elenbaas resolution of the issue of the deductibility of oil and gas production expenses more closely achieves the stated goal of ITA subsection 2(3)oil and gas proceeds are taxed, albeit under the STA rather than under the ITA, and a corresponding deduction for the expenses related to oil and gas production is allowed under the ITA. The virtue of the prior Elenbaas opinion's interpretation is that it better comports with the language of the ITA.
I would affirm the prior Elenbaas opinion in its entirety.
SAAD, J., concurs.
NOTES
[1]  26 U.S.C. § 265(a)(1).
[2]  M.C.L. § 206.2(3); M.S.A. § 7.557(102)(3).
[3]  The prior Elenbaas panel and our dissenting colleagues disagree with Cook in part because oil and gas gross receipts are taxed under the severance tax act. We are not convinced by this argument. Section 2(3) of the ITA does not say that, after considering all available Michigan tax schemes, Michigan taxpayers should be treated the same as they would under the federal tax scheme. Instead, § 2(3) clearly states that "the income subject to tax [shall] be the same as taxable income as defined and applicable to the subject taxpayer in the internal revenue code." M.C.L. § 206.2(3); M.S.A. § 7.557(102)(3). We therefore conclude that the taxation of a taxpayer under a different tax scheme, such as the severance tax act, is irrelevant.
