Taxpayer protest; Tax credits under the Michigan Business Tax Act (formerly the Single Business Tax Act - SBTA); MCL 208.1435 & 1437; Assignment of credits; MCL 208.38g(18) & 208.39c(7); Kim v JPMorgan Chase Bank, NA; “Transfer” under the Banking Code; Distinguishing between a “voluntary act” of assignment & a transfer “by operation of law”; Miller v Clark; Expressio unius est exclusio alterius; Detroit v Redford Twp; Tax Tribunal (TT)

The court held that tax credits lawfully acquired by one of plaintiff-bank’s subsidiaries, a Michigan bank, could lawfully pass to another of its subsidiaries, a Texas bank, when the two banks merged because the Banking Code let the Texas bank acquire the credits “by operation of law” and the SBTA did not interfere with the Banking Code’s operation. Plaintiff’s affiliate earned certain tax credits under the SBTA. That subsidiary assigned the credits to another subsidiary, a Michigan bank. Plaintiff later created a third subsidiary, a Texas bank, and merged the Michigan bank into the Texas bank. It claimed the tax credits, on behalf of the Texas bank, in its Michigan tax filings. Defendant disallowed the tax credits, finding “the Texas bank did not receive the Michigan bank’s credits through the merger because the Michigan bank lacked the legal authority to transfer” them. The TT found defendant appropriately disallowed the tax credits and granted it partial summary disposition. The Court of Appeals reversed in relevant part. On appeal, defendant argued that the credits were unlawfully assigned when they passed from the Michigan bank to the Texas bank and that they were not a “vested right” or a “property right.” While the statute “plainly forbade the Michigan bank to assign the credits, there’s no evidence that the Michigan bank assigned, or tried to assign, the credits.” Instead, plaintiff asserted that “the credits passed to the Texas bank not by assignment but by ‘operation of law.’ In other words, the Michigan bank did not need to assign the credits to the Texas bank because the law operated to move the credits from one to the other.” The court stated its continued agreement with “Kim’s and Miller’s distinction between an assignment effected by a voluntary act and a transfer effected by an automatic, statutory process, i.e., ‘by operation of law.’” It could not “escape the statute’s plain meaning, i.e., that the Michigan bank’s privileges were conferred on the Texas bank ‘by operation of’ the Banking Code, not by assignment. If the credits are privileges, no assignment was needed for them to pass to the Texas bank.” In addition, it found “no contextual or circumstantial predicate for invoking the negative-implication canon,” and declined to apply it here. Finally, it concluded that “the SBTA’s ‘ordinary meaning is discernible’ by examining the text and context of its relevant provisions,” and strict construction played no role here. Affirmed.

Concurring in the result, Justice Cavanagh, joined by Chief Justice McCormack and Justice Welch, agreed with the majority that, “whether the certificated credits are construed as either ‘rights, interests, privileges, powers, [or] franchises’” such that the Texas bank “simply ‘possesses’ them or as ‘property’ such that it was ‘transferred’” to the Texas bank, “neither scenario constitutes an ‘assignment’ as contemplated by the SBTA.” Contrary to the Court of Appeals’ ruling, she did “not see the expressio unius est exclusio alterius canon of statutory interpretation as particularly applicable in this case.” The SBTA’s “limitation on single assignments is simply not sufficient to suggest an exclusive or exhaustive means of transfer.”

Concurring in part and dissenting in part, Justice Welch indicated her belief that the majority “reached the right result but went too far in declaring the tax credits at issue in this case ‘vested’ property rights.”