Malpass v Department of Treasury; Wheeler Estate v Department of Treasury; Huzella v Department of Treasury; Wright v Department of Treasury; Wheeler v Department of Treasury

Summary

The Michigan Supreme Court held that individual taxpayers may combine profits and losses from unitary flow-through businesses and apportion the resulting income using combined apportionment factors under the Michigan Income Tax Act. The Court also held that, for the 1994 and 1995 tax years, combined reporting could include income from a foreign entity unitary with a domestic business taxable in Michigan. The Court reversed and remanded in Malpass and affirmed in Wheeler, while vacating part of the Court of Appeals’ reasoning in Wheeler.

Holdings

1. The Michigan Income Tax Act permits individual taxpayers to combine the profits and losses from unitary flow-through businesses and then apportion that income using the businesses' combined apportionment factors.
2. For the 1994 and 1995 tax years, the Michigan Income Tax Act did not geographically limit formulary apportionment to domestic entities; an individual taxpayer could combine income from a foreign entity unitary with a domestic business and apportion the income under the statutory formula.
3. The Tax Tribunal's finding that Electro-Wire and TKG were a unitary business was supported by competent, material, and substantial evidence on the whole record.

Questions Presented

1. Whether the Michigan Income Tax Act permits individual taxpayers to combine the profits and losses of unitary flow-through businesses and apportion the resulting income using combined apportionment factors.
2. Whether the Michigan Income Tax Act permitted combined apportionment for income from a foreign entity that was unitary with a domestic business during the 1994 and 1995 tax years.
3. Whether the evidence supported the Tax Tribunal's finding that Electro-Wire and TKG constituted a unitary business.

Disposition

other