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Sunday, August 10, 2014

Op/Ed: Michigan Voters Lack of Information on Proposal 1 of 2014, Leads Pending Language Clarity Lawsuit


Photo Credit - aecom.com
Michigan's Supreme Court Building in Lansing, Michigan


Do we, the public-at-large vote on issues without having all the complete information to do so? Is our main steam media complicit in holding back facts we need to know at times of importance? Does the low voting turnout during Michigan's August 5, 2014 primary means a similar low voter participation rate for November 4, 2014 General Election? 

Part 1 -The answer to all of the above questions is yes:

Michigan's Supreme Court on July 14 majority opinion decision on International Business Machines (IBM) Corporation v Department Of Treasury, case docket 14644, will have large

Photo Credit-The Detroit News
Michigan Supreme Court Justice David
Viviano (R) during appointment Press
Conference in 2013 with Gov. Rick Snyder (R)
implications for the state budget going forward.

As it stands right now, the state of Michigan is on the hook to IBM and likely 147 other corporations filing legal briefs in this case, for upward to $1.1 Billion dollars or more.

Writing for the majority, Justice David Viviano stated:

"It is a well-established rule that in the construction of a particular statute, or in the interpretation of its provisions, all statutes relating to the same subject, or having the same general purpose, should be read in connection with it, as together constituting one law, although they were enacted at different times, and contain no reference to one another.  
The endeavor should be made, by tracing the history of legislation on the subject, to ascertain the by tracing the history of legislation on the subject, to ascertain the uniform and consistent purpose of the legislature or to discover how the policy of the legislature with reference to the or subject-matter has been changed or modified from time to time. 
In other words, in determining the meaning of a particular statute, resort may be had to the established policy of the legislature as disclosed by a general course of legislation. With this purpose in view therefore it is proper to consider, not only acts passed at the same session of the legislature, but also acts passed at prior and subsequent sessions," Id. at 543-544 quoted."
Simply put, before a legislative body enacts a law, the Representatives are expected to perform due diligence. Ensuring outstanding questions related prior statutes similar in nature, are addressed in the new legislation.

At play in the Michigan Supreme Court July 14 decision is Michigan Business Tax (MBT) from 2007, the Multistate Compact Tax Statute from 1969, and a Business Tax cut for C & S Corporations in HB 4361 of 2011.

Michigan Multistate Tax Compact of 1969 purpose was to “proper determination of state and local tax liability of multistate taxpayers, including the equitable apportionment of tax bases and settlement of apportionment disputes.” In this case businesses operating in Michigan, whose headquarters or primary physical location is not located in state, would be subject to state and local taxation rates on revenue made, in Michigan.

Michigan Business Tax (MBT) of 2007 created a two tier levity on business taxes in Michigan.

First, businesses would be subject to an overall tax on if the organization was headquartered in Michigan or not, and performed business operations in the state. Second, a business personal property tax was created.

Michigan's business personal property tax on equipment was never subject to depreciation under the MBT or prior state tax statutes. However, businesses could claim equipment depreciation costs on business equipment on the Federal 1040 form with a Schedule C.

Part Two - The Michigan Business Tax Act of 2011 Change, and Its Importance:

Justice Viviano explained on the prior three levels of taxation for businesses headquartered out of state, but doing businesses in Michigan. The BTA defines the Business Tax Act passed in 2008.

"With the history of Michigan business taxation and applicable legal principles in mind, we turn to the specific statutes at issue. IBM sought to apportion its BTA tax base using the Compact’s three-factor apportionment formula. 
In so doing, IBM relied on the Compact’s election provision, which reads in pertinent part: 
(1) Any taxpayer subject to an income tax whose income is subject to apportionment and allocation for tax purposes pursuant to the laws of a party state or pursuant to the laws of subdivisions in 2 or more party states may elect to apportion and allocate his income in the manner provided by the laws of such state or by the laws of such states and subdivisions without reference to this compact, or may elect to apportion and allocate in accordance with article IV . . . .[39] 
This provision allows a taxpayer subject to an income tax to elect to use a party state’s apportionment formula or the Compact’s three-factor apportionment formula. 
However, the Department rejected IBM’s attempts to apportion its income through the Compact’s apportionment formula. Instead, it required IBM to apportion its BTA tax base consistently with the BTA and its sales-factor formula. Section 301 of the BTA reads as follows: 
(1) Except as otherwise provided in this act, each tax base established under this act shall be apportioned in accordance with this chapter. 
(2) Each tax base of a taxpayer whose business activities are confined solely to this state shall be allocated to this state. Each tax base of a taxpayer whose business activities are subject to tax both within and outside of this state shall be apportioned to this state by multiplying each tax base by the sales factor calculated under section 303.[40]
.....
However, as stated previously, § 301 of the BTA is not the only provision of Michigan’s tax laws pertaining to the apportionment of business income—the Compact’s election provision shares the same purpose. Therefore, we cannot interpret § 301 of the BTA in a vacuum.43

Rather, we must consider it along with the Compact “by tracing the history of legislation on the subject, to ascertain the uniform and consistent purpose of the legislature.”
Subsequently the Court clearly implied, one statute covering taxation on businesses operating or headquartered in Michigan, is connected to other previous laws of the same nature.

Michigan's Business Tax Act of 2011, applied C & S legally classified corporations. The measure as passed, directly connects to currently as it stands, state taxpayers owning out of state businesses operating in Michigan, $1.1 billion dollars or more in taxation liability.

In 2011, Michigan Governor Rick Snyder (R) described his pleasure to the state's

Photo Credit - MLIVE
Michigan Governor Rick Snyder, surrounded by
Republican Legislators, signing into law
HB 4361 of 2011.
Republican controlled House and Senate passage of a $1.8 million dollar tax cut, for legality classified C and S Corporations operating or headquartered in the state.
“Something fundamentally had to happen to make us a great state again,” Snyder said before signing House Bill 4361 into law as Republican lawmakers looked on, to MLive May 25, 2011.
Signing into law the biggest tax overhaul to Michigan's business taxation methodology in 17 years, Governor Rick Snyder (R) May 25, 2011 with a stroke of a pen, eliminated a large majority of the state's personal income tax business revenue.

House Bill 4361 of 2011 amounted to $220 million dollar cut to business income tax receipts for the State of Michigan. This measure freed another 100,000 classified C and S Corporations from paying Michigan's Business Tax (MBT) repealed in the legislation, equaling another $1.65 billion dollar slash to the state's coffers.

Michigan's Seniors, Middle Class Homeowners, Working Class Citizenry and residents giving charitable donations for tax credits made up the $1.42 billion dollar difference. State Retirees started in the 2012 tax year, paying income tax on annuity, pension or 401K retirement income.

The law wiped out Michigan's Homestead Property Tax Credit for homeowners making more than $50,000 or those with homes with a taxable value of more than $135,000.

Lastly, Michigan Earned Income Tax Credit for low-income wage earners was reduced from 20 percent of the federal credit to 6 percent or from a maximum of $650.00 to $50.00. State credit for donations to charity organizations, was eliminated.

“This plan recognizes them for the job creators they are," Lt. Governor Brian Calley stated to MLive when the business taxation law was signed in 2011
Yet, three years later in Michigan is the state has the 4th highest unemployment rate out of 50 states in the nation, at 7.5% according to a July 18 Bureau of Labor Statistics (BLS) report.

Part Three - Large Businesses in Michigan wanted MORE:

Michigan's Proposal 1, or Public Act 80 of 2014, was a series of eleven bills passed in the state's Legislature from 2012-2014 starting a change course for Michigan Constitution on how business equipment taxes were allocated to local municipalities.

Additionally, Proposal 1 of 2014 changed, altered or eliminated the following Public Acts in Michigan, according to information obtained from Ballotpedia:

"Proposal 1 was technically Public Act 80 of 2014. However, Proposal 1 activated 10 other statutes, making the proposal much more than just Public Act 80. None of the statutes would have gone into effect without the approval of Proposal 1 on August 5, 2014.
The following is a summary of the statutes enacted by Proposal 1 provided by Anderson Economic Group: 
Passed in 2012:
Public Act 401 of 2012: All new manufacturing-related personal property is no longer subject to the PPT starting December 31, 2015. PA 401 was later amended by PA 154.
Public Act 402 of 2012: All commercial and industrial personal property of a single owner valued at less than $40,000 is exempt from the PPT starting December 31, 2013. PA 402 was later amended by PA 153.
Note: Public Act 402 is the only statute already in effect. If Proposal 1 is defeated, Public Act 402 will be reversed.
Public Act 403 of 2012: All industrial personal property that is ten years old or older is no longer subject to the PPT starting December 31, 2015. 
Passed in 2013:
Public Act 153 of 2013: Amends PA 402 to exempt all commercial and industrial personal property of a single owner valued at less than $80,000 starting December 31, 2013. Also, amends PA 402 to include deadline for application for the exemption and the penalty for a fraudulent claim.
Public Act 154 of 2013: Amends PA 401 to include deadline for application for the exemption and outline the penalty for a fraudulent claim. 
Passed in 2014:
Public Act 80 of 2014: Creates the Local Community Stabilization Share Tax by dividing the use tax into a local share tax and a state share tax. The tax is to be administered by the Local Community Stabilization Authority (LCSA).
Public Act 86 of 2014: Creates the Local Community Stabilization Authority (LCSA). Also, PA 86 establishes the formula for reimbursement of municipalities, sets up a prioritized list for reimbursements to local governments and requires the state to appropriate enough funds to make up for debt loss in FY 2015 and FY 2016.
Public Act 87 of 2014: Makes minor amendments to 2012 acts in order for them to apply to 2014 statutes.
Public Act 88 of 2014: Gives the LCSA authority over telecommunications right-of-way oversight.
Public Act 92 of 2014: Creates the Essential Services Assessment (ESA) beginning on January 1, 2016.
Public Act 93 of 2014: Creates the Alternative State Essential Services Assessment (ASESA) beginning on January 1, 2016."
Simply put, Michigan Legislature comprised of Republicans and Democrats, worked on a series of eleven Public Acts with only P.A. 402 of 2012 in effect prior to Proposal 1 of 2014
Photo Credit - Blogs.mml.org
A coalition of Public and Public Groups in Michigan
plus elected leaders, Republican and Democrat,
comprised the "Michigan Citizens for Strong and
Safe Communities" front group, pushing for Proposal
1 of 2014 passage.
passage by voters August 5.

The series of Public Acts changed how the states business property tax structure.

However, ten of the eleven Public Acts in total, could not be enacted into law on their own. Due to their vast nature of altering how revenue is generated in Michigan, without a public vote to change language in the State Constitution.

Thus, a Proposal was drafted for Michigan Residents to vote FOR changing provisions on how local municipalities received business tax revenue, per Michigan Constitution.

Ironically, a majority of Michigan voters throughout the state had little to no idea about the 10 previous passed Public Acts, the pending statutes overall impact revenue received on behalf from the state for local municipalities, or worst, the pending Michigan Supreme Court Case decided July 14, IBM v.s. Michigan Department of Treasury.

Why did Michigan voters not have the full story behind Proposal 1 of 2014?

Part Four - Our Media in Michigan failed at Reporting Details on Proposal 1:

Media is general is defined as:


"Communication channels through which news, entertainment, education, data, or promotional messages are disseminated. Media includes every broadcasting and narrowcasting medium such as newspapers, magazines, TV, radio, billboards, direct mail, telephone, fax, and internet," quoted the Business Dictionary
In turn, News is defined as:
"New information or a report about something that has happened recently," stated in Merriam-Webster Online Dictionary
At times, the public has a tendency to confuse the meanings of media and news.

Michigan's news resources easily could have reported the decision by the state Supreme Court decided on July 14, 2014, well before residents voted on Proposal 1 of 2014.

Instead, media or news stories regarding this important issue first appeared Friday, August 8, 2014 in the Detroit Free Press, Detroit News, MLive and other traditional corporately owned and operated, news resources. Or three days after Michigan's Primary Election date of August 5, 2014.

Why so late?

It is unknown at this point.

What is known is groups pushing for the passage of Proposal 1 of 2014 spend upwards to $7 million dollars on the ballot measure passage. No "formalized" opposition from politically elected Republican or Democrat Representatives in Michigan existed against the Proposal.

Organizations usually polar opposites of issues and policies such as the Mackinac Center of

Photo Credit - Michigan Capitol Confidential
The Mackinac Center for Public Policy James
Hohman, wrote an informational piece
explaining details of Proposal 1
, creating more
questions than answers for Tea-Party aligned
groups in Michigan
Public Policy, Michigan League of Public Policy, Michigan Township Association Michigan Chamber of Commerce, a brevity of News Corporations, Republican and Democrat County Executives and Michigan Municipal League were either in unison, neutral or where all over the map on Proposal 1 of 2014.

Normally, actions described above would call for news organizations to perform due diligence and inform the public why a split exists.

The news groups failed to do so, and instead many wrote "editorial" articles strongly supporting Proposal 1 of 2014.

This is likely why Michigan voters did not have the full information, before voting August 5 on Proposal 1 of 2014. Which leaves state taxpayers as it stand now, are on the hook for paying out of state businesses doing business within Michigan over $1.1 Billion dollars based
Michigan's Supreme Court majority opinion in IBM v.s. Department of Treasury.

Part Five - The Second (or Third) Act of the Proposal 1 of 2014 debacle:

Mayor of Warren, Michigan, Jim Fouts (R) announced he will file a lawsuit Friday, August 8 on
Photo Credit - My Fox News Detroit
Warren Mayor Jim Fouts (R) will visit Independent
Underground Radio LIVE Tuesday, August 10 program,
to explain his lawsuit on Proposal 1 of 2014.
the clarity of the ballot language of Proposal 1 of 2014.

"Fouts pointed to a section of Michigan election law specifying that ballot language must use words with a “common everyday meaning” to the general public and “shall not create prejudice for or against the issue or proposal.” He argued the proposal which appeared before voters was biased. 
“State of Michigan law is crystal-clear prohibiting slanted ballot language on any proposal,” he said to MLive August 8
"The new PPT exemptions would have been repealed if the proposal failed, but Fouts noted that the language did not actually mention the phase out or business tax cut, suggesting a fear of “voter backlash," Mayor Fouts noted.
Voter backlash could be levity against the litany of municipal organizations, media corporations, elected officials both Republicans and Democrats and more, either supporting Proposal 1 of 2014 or ironically sat silent despite Michigan's Supreme Court IBM v.s. Michigan's Department of Treasury decision July 14. 

If voters knew the ruling by Michigan Supreme Court, set to cost state taxpayers upwards of $1.1 billion dollars on or before August 5, it is unlikely Proposal 1 would have passed.


The Michigan Supreme Court Decision, written by Justice Vivano, implies a simple fix to the May 25, 2011 Business Tax Act (BTA) law would have saved Michigan taxpayers $1.1 billion of potential liability costs to out-of-state headquartered corporations, doing business in Michigan. 
"Subsequent action by the Legislature indicates that it did not impliedly repeal the Compact’s election provision when it enacted the BTA.56

On May 25, 2011, the Legislature expressly amended the Compact’s election provision by adding the following Language:
 
[E]xcept that beginning January 1, 2011 any taxpayer subject to the Michigan business tax act, 2007 PA 36, MCL 208.1101 to 208.1601, or the income tax act of 1967, 1967 PA 281, MCL 206.1 to 206.697, shall, for purposes of that act, apportion and allocate in accordance with the provisions of that act and shall not apportion or allocate in accordance with article IV.[57] 
There is no dispute that the Legislature specifically intended to retroactively repeal the Compact’s election provision for taxpayers subject to the BTA beginning January 1, 2011. The Legislature could have—but did not—extend this retroactive repeal to the start date of the BTA. In addressing this legislation, the dissent suggests that “the 2011 Legislature may have simply been acting expressly to confirm what the 2007 Legislature believed it had already done implicitly.”58

We would agree with that conclusion if the Legislature had retroactively repealed the Compact’s election provision beginning January 1, 2008, the effective date of the BTA. However, by only repealing the Compact’s election provision starting January 1, 2011, the Legislature created a window in which it did not expressly preclude use of the Compact’s election provision for BTA taxpayers.

Further, we believe that the express repeal of the Compact’s election provision effective January 1, 2011, is evidence that the Legislature had not impliedly repealed the provision when it enacted the BTA.59 Therefore, a review of the 2011 amendments supports our conclusion that the Compact’s election provision remained in effect for the 2008 tax year."
On Independent Underground Radio LIVE -Michigan's TOP POLITICO Podcast - Warren Mayor Jim Fouts will exclusively discuss his pending lawsuit on the language clarity of Proposal 1 of 2014, Tuesday, August 12 at 11:00 am ET program. Tune into this important interview HERE.


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