            If this opinion indicates that it is “FOR PUBLICATION,” it is subject to
                 revision until final publication in the Michigan Appeals Reports.




                           STATE OF MICHIGAN

                            COURT OF APPEALS



KOJAIAN MANAGEMENT CORPORATION                                      UNPUBLISHED
AND AFFILIATES,                                                     December 17, 2019

               Plaintiff-Appellant,

v                                                                   No. 344697
                                                                    Court of Claims
DEPARTMENT OF TREASURY,                                             LC No. 17-000104-MT

               Defendant-Appellee.


Before: REDFORD, P.J., and JANSEN and LETICA, JJ.

JANSEN, J. (dissenting).

       I respectfully dissent.

        First, I agree with the Court of Claims’ determination that the Department of Treasury’s
assessments were timely, and not barred by the statute of limitation. The Court of Claims
correctly concluded that under this Court’s decision in Alticor, Inc v Dep’t of Treasury, 324
Mich App 403, 411-414; 921 NW2d 748 (2018), any audit commenced by the Department of
Treasury before September 30, 2014, tolls the four-year statute of limitations for the pendency of
the audit, plus one year thereafter in accordance with MCL 205.27a(3)(a), as amended by 2014
PA 3. Therefore, the Department of Treasury’s assessments in this case are not time-barred.

        Second, I disagree with the majority’s conclusion that the Court of Claims erred in
determining that plaintiff, Kojaian Management Corporation and its affiliates (Kojaian), was not
entitled to the claimed investment tax credit (ITC) for tax years 2008 through 2011. The
language of MCL 208.1403(3) requires plaintiff to have “paid or accrued” costs relating to a
tangible asset to be entitled to an ITC. Here, plaintiff did not acquire any new tangible assets,
nor did it make improvements to any qualifying tangible assets. Rather, plaintiff adjusted, or
“stepped up,” its basis in a tangible asset it already owned. The Court of Claims correctly
concluded that, “the incoming partner acquired a partnership interest and, instead of acquiring an
asset that is the subject of the IRC § 754 election, [the incoming partner] is merely adjusting the
basis of an asset.” Where plaintiff obtained partnership interests in partnerships that had
elections under IRC § 754, it properly “stepped up,” or adjusted, its basis in the assets that it



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obtained. The adjustment was based on the difference between the value that the Lehman
Brothers received for the transfer of assets and the Lehman Brother’s capital account value.

        In my view, plaintiff merely adjusted its accounting in an already existing tangible asset;
it did not pay for or accrue costs relating to tangible assets. As the Department of Treasury
explained in its brief on appeal,

       The purpose behind the Investment Tax Credit was to incentivize economic
       development in Michigan by allowing taxpayers to reduce their Michigan tax
       liability based on a percentage of the amounts expended during the tax year to
       acquire tangible assets for use in Michigan. In that instance, Michigan’s economy
       would benefit from the product created by the asset and the taxpayer would
       benefit from a reduced Michigan tax liability.

Accordingly, I do not believe that the ITC found in MCL 208.1403(3) was designed by our
Legislature to address the type of accounting adjustment that occurred here, and therefore
plaintiff was not entitled to an ITC for tax years 2008 through 2011. I would affirm.


                                                            /s/ Kathleen Jansen




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