Challenge to a tax adjustment; The four-year statute of limitations (SOL) involving an assessed “deficiency” under the Revenue Act (MCL 205.27a(2))

The court held that the trial court did not err by granting defendant-Treasury summary disposition of plaintiff-taxpayer’s challenge to a tax adjustment. Defendant audited plaintiff’s tax returns for tax years 2008-10. It finished the audit in 2017 and issued a final audit determination reflecting a total net credit of $966,462 along with a check for that amount. Plaintiff cashed the check, which mistakenly reflected and included a prior-year overpayment credit of $711,415 that plaintiff claimed in its 2011 return. Realizing its error, defendant formally adjusted plaintiff’s 2011 return. It sent plaintiff a formal notice in 2018 that it was disallowing the overpayment credit on the 2011 return. But the disallowance did not result in plaintiff having to pay additional monies related to the 2011 return – it “resulted in a much lower overpayment credit that could be carried forward.” Plaintiff challenged the adjustment in an informal conference, arguing defendant’s actions violated the four-year SOL involving an assessed “deficiency” under the Revenue Act. The referee disagreed, as did defendant. The trial court concluded that “the reduction of a credit that does not result in a tax deficit owed by the taxpayer cannot be a ‘deficiency’” under the Act, noting that “when the credit reduction results in a lower credit to carry forward to the next year, there is no deficiency to be paid by the taxpayer.” It also concluded that the “adjustment was not a collateral attack on the audit.” On appeal, the court agreed with the trial court that the 2018 adjustment “did not result in a ‘deficiency’ under MCL 205.27a(2).” Defendant disallowed the $711,415 claimed credit “that, in effect, offset [defendant’s] earlier payment of an amount ($966,462) that had included the value of that claimed credit ($711,415).” The disallowance “did not result in additional tax being owed, in the sense that [plaintiff] did not have to cut a check to pay a tax deficit.” As such, it was “inaccurate to characterize this as an assessment of a ‘deficiency,’ because whether or not there is a tax deficit to pay is merely a potential secondary effect of the disallowance of the credit.”