CMS Energy Corp. v. Department of Treasury

Summary

The Michigan Court of Appeals affirmed the Tax Tribunal’s grant of summary disposition to the Michigan Department of Treasury and denial of CMS Energy Corporation’s refund request for tax years 2013 through 2016. The court held that CMS Energy’s wholesale electricity sales were properly sourced to Michigan because the contractual points of delivery to MISO were located in Michigan and MISO qualified as the purchaser. The court also rejected CMS Energy’s Commerce Clause challenge, concluding that Michigan’s apportionment methodology satisfied internal and external consistency requirements.

Holdings

1. Wholesale electricity sales are properly sourced to Michigan under MCL 206.665(1)(a) when the contract requires delivery to a purchaser in Michigan and the electricity comes to rest at contractual delivery points in Michigan. The relevant purchaser was MISO, not unidentified downstream market participants.
2. MISO qualified as 'any purchaser' under MCL 206.665(1)(a), and CMS Energy's transactions with MISO constituted sales because title transferred to MISO and CMS Energy received consideration from MISO. The statute does not require inquiry into the ultimate source of the funds used to pay the taxpayer.
3. Michigan's sourcing of CMS Energy's wholesale electricity sales did not violate the Commerce Clause because the apportionment methodology satisfied the requirements of substantial nexus, fair apportionment, nondiscrimination, and fair relation to state-provided services. CMS Energy failed to show double taxation, an attribution out of all appropriate proportion to Michigan activity, or a grossly distorted result.

Questions Presented

1. Whether CMS Energy's wholesale electricity sales through MISO were properly sourced to Michigan under MCL 206.665(1)(a).
2. Whether the transactions with MISO constituted sales to a purchaser in Michigan under MCL 206.609(4) and MCL 206.665(1)(a).
3. Whether Michigan's sourcing of all of CMS Energy's wholesale electricity sales to Michigan violated the Commerce Clause.
4. Whether summary disposition was proper when the material facts concerning the contractual counterparty, title transfer, and delivery points were undisputed.

Disposition

affirmed