Corporate tax; Depreciation; The tax-benefit rule; Single Business Tax Act (SBTA); Michigan Business Tax Act (MBTA); Corporate Income Tax Act (CITA); “Business income,” “taxable income,” & “gross income”; Lear Corp v Department of Treasury; Sturrus v Department of Treasury; Penalty waiver; MI Admin Code, R 205.1013; Federal taxable income (FTI)

Noting that there did not appear to be any case law explicitly addressing the tax issues raised here, the court concluded that (1) “plaintiff’s amended tax returns were not supported by any Michigan statutory scheme[,]” (2) the tax-benefit rule did not apply here, and (3) plaintiff was not entitled to a penalty waiver. The case concerned “the proper interpretation and application of several Michigan corporate tax regimes.” The parties agreed that a depreciation deduction existed and that plaintiff took it in its federal tax returns. Plaintiff wanted “to use nondepreciated values for the sale of the Property during the CITA years in order to increase its adjusted basis in the assets and result in a lesser gain from the sale.” The court found no support for this. There was “simply no provision allowing plaintiff to retroactively modify its adjusted basis in the Property from the SBTA years.” The court held that “the CITA essentially taxes plaintiff as if it has taken depreciation deductions in the Property.” The court also agreed with the Court of Claims that the principles set forth in Lear supported defendant’s position. Contrary to plaintiff’s claims, Lear’s facts and principles were analogous to the case here. Plaintiff sought “to change its original tax returns in a manner unsupported by the SBTA, MBTA, or CITA.” The court disagreed with its claims that the Lear court’s “statements about the FTI starting point were mere dicta.” Plaintiff went to great lengths to claim “that the FTI starting point is not an exact number from a taxpayer’s federal tax returns but merely a method,” but the court failed to see how this was “dispositive or even relevant.” Plaintiff alternatively argued that the tax-benefit rule applied and supported its actions. “Sturrus is the only Michigan case that mentions the tax-benefit rule.” The court held that even “assuming the tax-benefit rule applies to the SBTA, MBTA, or CITA, the rule” did not apply here. There was “no dispute from plaintiff that, during the SBTA years, it did not take any depreciation deductions on its SBT returns because the SBTA prohibited this. Plaintiff took depreciation deductions in its federal return, which meant that these deductions were included in plaintiff’s FTI starting point. However, the SBTA” (in MCL 208.9(4)(c)) expressly required it to add them back. Thus, “plaintiff did not deduct any of the federal depreciation on its SBT returns.” Affirmed.