Michigan Supreme Court 

Lansing, Michigan 

Chief Justice: Justices: 

Clifford W. Taylor Michael F. Cavanagh 

Elizabeth A. Weaver Opinion Marilyn Kelly 

Maura D. Corrigan 

Robert P. Young, Jr. 

Stephen J. Markman 

FILED JULY 30, 2003 

DAIMLERCHRYSLER CORPORATION, 

Petitioner-Appellee, 

v No. 133394 

STATE TAX COMMISSION and 

DEPARTMENT OF ENVIRONMENTAL 

QUALITY,

 Respondents-Appellees, 

and 

CITY OF AUBURN HILLS, 

Respondent-Appellant. 

FORD MOTOR COMPANY, 

Petitioner-Appellee, 

v No. 133396 

STATE TAX COMMISSION and 

DEPARTMENT OF ENVIRONMENTAL 

QUALITY,

 Respondents-Appellees, 

and 
v 

v 

CITY OF DEARBORN, 

Intervening RespondentAppellant. 

FORD MOTOR COMPANY, 

Petitioner-Appellee, 

Nos. 133400-133402 

STATE TAX COMMISSION and 

DEPARTMENT OF ENVIRONMENTAL 

QUALITY,

 Respondents-Appellants, 

and 

CITY OF DEARBORN, 

Intervening RespondentAppellee. 

DETROIT DIESEL CORPORATION, 

Petitioner-Appellee, 

Cross-Appellant, 

No. 133403 

STATE TAX COMMISSION and 

DEPARTMENT OF ENVIRONMENTAL 

QUALITY,

 Respondents-Appellants, 

Cross-Appellees, 

and 

2
 
v 

v 

CHARTER TOWNSHIP OF REDFORD, 

Intervening RespondentAppellee. 

FORD MOTOR COMPANY, 

Petitioner-Appellee, 

No. 133404 

STATE TAX COMMISSION and 

DEPARTMENT OF ENVIRONMENTAL 

QUALITY,

 Respondents-Appellants. 

DAIMLERCHRYSLER CORPORATION, 

Petitioner-Appellee, 

Cross-Appellant, 

No. 133405 

STATE TAX COMMISSION and 

DEPARTMENT OF ENVIRONMENTAL 

QUALITY,

 Respondents-Appellants, 

and 

TOWNSHIP OF SYLVAN, 

Respondent-Appellee. 

DAIMLERCHRYSLER CORPORATION, 

Petitioner-Appellee, 

3 
v No. 133406 

STATE TAX COMMISSION and 

DEPARTMENT OF ENVIRONMENTAL 

QUALITY,

 Respondents-Appellants, 

and 

CITY OF AUBURN HILLS, 

Respondent-Appellee. 

BEFORE THE ENTIRE BENCH 

YOUNG, J. 

These consolidated appeals concern a tax exemption that aims to improve 

Michigan’s environment by encouraging entities to reduce air pollution they create 

in Michigan. Based on the plain language of the statute, we hold that in order to 

for equipment to be exempt, it must be installed or acquired for the primary 

purpose of regulating or curbing the spread of pollution in Michigan. Further, the 

equipment must actually and physically limit pollution. None of the equipment 

that is the subject of this appeal meets these tests. Therefore, the Court of Appeals 

erred by partially overturning the decision of the Department of Environmental 

Quality (DEQ) and the State Tax Commission (STC) to that effect and holding 

that petitioners’ test cells qualify for the exemption. We reverse the Court of 

Appeals in part and restore the DEQ and STC decisions concluding that none of 

the equipment qualifies for the tax exemption. 

4
 
 

FACTS AND PROCEDURAL HISTORY 

The material facts in these consolidated appeals are undisputed. Pursuant 

to federal law, before issuing a certificate allowing for sales of new vehicles, the 

Environmental Protection Agency (EPA) must “test or require to be tested” new 

motor vehicles or new motor vehicle engines to ensure compliance with emission 

standards that the EPA promulgates.1

 To that end, the agency has created a testing 

regime, requiring vehicle manufacturers to submit an application with an 

enormous amount of supporting data.2 Ford Motor Company, DaimlerChrysler 

Corporation, and Detroit Diesel (petitioners) installed test cells. The test cells are 

large buildings that can replicate many temperature conditions. They also house 

equipment that allows for up to 40 different types of tests and data collection.3 

Petitioners’ test cells are used in the manufacturing process to ensure compliance 

with the regulations. In addition to its test cell, Detroit Diesel installed a new 

engine production line to meet federal emissions regulations. 

1

 42 USC 7525(a)(1) and 7521. 

2

 See 40 CFR 86.1 et seq. 

3

 Narrative Statement attached to DaimlerChrysler Auburn Hills Application 

for Tax Exemption Certificate, July 14, 2003, pp 5-11. The Auburn Hills 

DaimlerChrysler test cell is similar to the test cells of the other petitioners. The 

individual specifications of each test cell do not control the disposition of this case. 

Therefore, this Auburn Hills DaimlerChrysler test cell summary can serve as a 

general example for purposes of analysis. 

5
 
 

All the petitioners sought tax exemptions from the STC under part 594

 of 

the Natural Resources and Environmental Protection Act (NREPA)5

 for their test 

cells, and Detroit Diesel also petitioned for an exemption for its engine line. Part 

59 provides real and personal property tax exemptions, as well as sales and use tax 

exemptions for certain air pollution control facilities.6

 The law requires that the 

STC refer applications to the DEQ. The DEQ concluded that none of petitioners’ 

equipment qualified for an exemption under part 59 because their primary purpose 

was not to reduce pollution, but to test products for compliance with federal 

emissions standards and to manufacture engines that comply with those standards. 

The DEQ also found that all the equipment actually generated some pollution 

during the testing or manufacturing processes, instead of physically disposing of 

air pollution or controlling it as the law requires. The STC agreed and denied all 

the exemptions. Petitioners appealed to various circuit courts. Ford’s four 

exemption denials were reversed, while denials for DaimlerChrysler and Detroit 

Diesel were affirmed. 

4

 MCL 324.5901 et seq. 

5

 MCL 324.101 et seq. 

6

 Ford had previously applied for and received a tax exemption under part 

59 for its Allen Park test cell facility in 2001. While the applications involved in 

the instant action were pending in 2004, DEQ notified Ford that it was requesting 

revocation of its exemption for the Allen Park facility because the facility did not 

meet the requirements of part 59. The STC rejected the revocation, though, 

concluding that an exemption certificate under part 59 cannot be revoked. That 

exemption dispute is not before the Court. 

6
 
 

 

The Court of Appeals granted the appellate applications of all the aggrieved 

parties and consolidated the cases on appeal. Its published opinion held that tax 

exemptions must be issued for all petitioners’ test cells. The Court of Appeals 

concluded that the primary purpose of the test cells is to reduce pollution and that 

they need not physically or directly reduce pollution in order to qualify as taxexempt. However, the Court of Appeals affirmed the denial of an exemption for 

Detroit Diesel’s engine manufacturing line on the ground that its primary purpose 

was engine manufacturing, not pollution reduction. The Court also held that no 

due process violation occurred during the STC’s consideration of Detroit Diesel’s 

application for a tax exemption.7 This Court granted leave to appeal.8 

STANDARD OF REVIEW 

The Court reviews de novo motions for summary disposition.9

 Issues of 

statutory construction are also reviewed de novo.10 

ANALYSIS 

The primary issue on appeal is whether the Court of Appeals erred in its 

application of the tax exemption of part 59 of NREPA. As noted, the Court of 

7

 We agree with the Court of Appeals that the full hearing conducted by the 

STC satisfied Detroit Diesel’s due process rights. 

8

 480 Mich 880 (2007). 

9 Spiek v Dep’t of Transportation, 456 Mich 331, 337; 572 NW2d 201 

(1998). 

10 City of Taylor v Detroit Edison Co, 475 Mich 109, 115; 715 NW2d 28 

(2006). 

7
 
 

 

Appeals reached different conclusions for the petitioners’ test cells and Detroit 

Diesel’s engine line. With regard to the test cells, the Court held 

[I]t is plainly apparent to us that the test cells were “installed 

or acquired for the primary purpose of controlling or disposing of air 

pollution” and that the test cells were designed and are operated 

“primarily for the control, capture, and removal of pollutants from 

the air, and [are] suitable, reasonably adequate, and meet[] the intent 

and purposes of part 55 . . . .”[11] 

However, with regard to Detroit Diesel’s engine line, the Court reached the 

opposite conclusion, holding that “[c]learly, the engine line . . . is not ‘operated 

primarily for the control, capture, and removal of pollutants from the air . . . .’”12 

While the Court of Appeals quoted language from the proper statutory 

provisions, the Court did not offer a construction of that language. Instead, the 

Court held that it was plain and clear which equipment was eligible and which was 

not. As will be discussed later, the statutory provisions provide no principled 

basis for distinguishing between the different equipment involved in this appeal. 

Under the plain language of these provisions, neither the test cells nor the engine 

line qualify for the exemption. 

MCL 324.5901 defines “facility,” in part, as 

machinery, equipment, structures, or any part or accessories of 

machinery, equipment, or structures, installed or acquired for the 

primary purpose of controlling or disposing of air pollution that if 

11 Ford Motor Co v State Tax Comm, 274 Mich App 108, 113; 732 NW2d 

591 (2007) (alterations in Ford Motor). 

12 Id. at 118. 

8
 
 

 

 

 

released would render the air harmful or inimical to the public health 

or to property within this state. 

An exemption for a particular “facility” requires a determination by the DEQ that 

“the facility is designed and operated primarily for the control, capture, and 

removal of pollutants from the air, and is suitable, reasonably adequate, and meets 

the intent and purposes of part 55[13] and rules promulgated under that part.”14 

Thus, the equipment must meet the requirements of both §§ 5901 and 5903 

to qualify for the tax exemption. Section 5901’s definition of “facility” expressly 

requires that the equipment be “installed or acquired for the primary purpose of 

controlling or disposing of air pollution . . . .” “Control” means to “exercise 

restraint or direction over; dominate, regulate, or command; to hold in check; 

curb.”15 “Dispose of” means “a. to deal with conclusively; settle. b. to get rid of; 

discard or destroy.”16 

The primary purpose of this equipment is to build engines (Detroit Diesel) 

or test engines (petitioners’ test cells). The ancillary effect of the equipment is the 

control of pollution emitted by the engines. While the test cells help petitioners 

ensure that they are producing less polluting engines, the primary purpose of this 

equipment is not to regulate, curb the spread of, or destroy air pollution—and 

13 MCL 324.5501 et seq. 

14 MCL 324.5903 (emphasis added). 

15 Webster’s Universal College Dictionary (1997). 

16 Random House Webster’s College Dictionary (1997). 

9
 
 

 

certainly not “pollution that if released would render the air harmful . . . to the 

public health or to property within this state.”17 Instead, the primary purpose of 

the equipment is to test engines to ensure that petitioners have properly designed 

their engines to meet federal regulations so that they can sell them to consumers.18 

Furthermore, the equipment itself does not get rid of or curb air pollution. Thus, 

petitioners’ test cells are not “facilities” as defined by MCL 324.5901. 

Even assuming that petitioners’ federally required pollution equipment and 

Detroit Diesel’s engine line qualify as “facilities,” petitioners are still not entitled 

to an exemption because none of the equipment qualifies under § 5903. Under 

that section, the DEQ must find “that the facility is designed and operated 

17 MCL 324.5901 (emphasis added). The dissent is correct that the statute 

does not require that the equipment “solely” control pollution in Michigan. 

However, this equipment does not control any pollution in Michigan. It is the 

engines and vehicles tested that emit less pollution. While those vehicles may be 

sold in Michigan and may emit less pollution than other vehicles sold in Michigan, 

the test cells and Detroit Diesel’s engine plant do not control any pollution in 

Michigan or any other state. 

18 The dissent misconstrues this statement to argue that this interpretation 

would render any equipment required by a federal regulation ineligible for the 

exemption. Regardless of whether the federal government requires the installation 

of the pollution testing equipment, it is not a “facility” under this statute unless its 

primary purpose is pollution control or disposal. For example, in Covert Twp v 

State Tax Comm, 407 Mich 561; 287 NW2d 895 (1980), federal law required that 

the petitioner install a containment device at its nuclear facility. That equipment 

still qualified under the statute at issue because its primary purpose was to control 

pollution at the site in the case of an accident at the nuclear facility. The primary 

purpose of the test cells and Detroit Diesel’s engine plant is not control or disposal 

of pollution. Therefore, regardless of whether federal law or “philanthropy” 

motivated petitioners to install the test cells or the engine plant, they do not qualify 

for the exemption. 

10
 
 

primarily for the control, capture, and removal of pollutants from the air.” There 

are a number of terms in this provision that need to be defined to properly construe 

it. The focus of the section is on the “design” and the “operation” of the facility. 

“Design” means “to intend for a definite purpose,” while “operate” means “to 

work, perform, or function, as a machine does . . . to bring about, effect, or 

produce, as by action or the exertion of force or influence.”19 Thus, the facility 

must be intended to and bring about “the control, capture, and removal of 

pollutants from the air.” “Control” has already been defined. “Capture” means 

“to gain control of or exert influence over,” and “remove” means “to move or shift 

from a place or position; to eliminate; do away with or put an end to.”20 Because 

the Legislature used the conjunction “and,” a qualifying facility must do all three 

things: curb, control, and eliminate pollution. Furthermore, the words suggest that 

the facility must actually and physically limit pollution. They do not stand for the 

proposition that the facility itself may contribute to the creation of a product that 

pollutes less than a similar product, which is what the equipment in this case does. 

Because the statutory language requires the facility to do the removing, 

controlling, and capturing of pollution, this equipment does not qualify. 

The Court of Appeals held that the test cells qualified under § 5903 

“because without the test cells, [petitioners] would not be able to ensure that their 

19 Random House Webster’s College Dictionary (1997). 

20 Id. 

11
 
 

products are adequately controlling, capturing, and removing pollutants from the 

air as compared to earlier versions of their vehicles and engines.”21 This 

observation misses the mark. The fact that the federal government may require 

such pollution control testing equipment has nothing to do with its eligibility for a 

tax exemption under Michigan law. The dissent makes a similar analytic mistake, 

asserting that the test cells qualify because they “control” pollution “by regulating 

the emissions output” and “by curbing the levels of pollutants released into the air 

in the first place”; they “capture” pollution by “ensur[ing] that pollutants that 

would otherwise have been released into the atmosphere are never produced in the 

first place”; and they “remove” pollution “by preventing the pollutants from being 

created in the first place.”22 The problem with both of these analyses is that the 

test cells, much like Detroit Diesel’s engine line, are not the source of the removal, 

control, or capture of pollution as required by the exemption. The testing process 

both produces and releases pollution contrary to the requirements of the statute. 

The design of the engine, and the engine alone once put into manufacture and sold 

in a vehicle, accomplishes the removal, control, and capture of pollution because 

such an engine produces less pollution than other models. Without the changes to 

the design of the engine, the test cells would accomplish nothing. Because the 

statutory language requires the facility to do the removing, controlling, and 

21 Ford Motor, supra at 114 (emphasis added). 

22 Post at 18.
 

12
 
 

capturing, and the test cells and the pollution testing equipment in the engine plant 

do not remove, control, or capture pollutants, this equipment does not qualify for 

the tax exemption. Furthermore, none of the pollution control created by 

redesigned engines tested by petitioners is intended to improve the quality of 

Michigan’s air. This fact does not trouble the Court of Appeals or the dissent, 

which must presume that our Legislature intended a gift from Michigan taxpayers 

to the nation by advancing national, rather than local, air quality goals. 

Moreover, the Court of Appeals opinion does not directly address the 

requirement that a facility must “meet[] the intent and purposes of part 55” of 

NREPA.23 A review of the other provisions in part 55 leaves little question that 

part 55 regulates the construction and operation of sources of air pollution, and 

23 The dissent asserts that the purpose of that part is the prevention and 

abatement of air pollution. In addition to being overly simplistic, this 

interpretation, when applied to MCL 324.5903, violates the rule of statutory 

construction that the Court should not interpret a statute in a way that renders part 

of it nugatory or mere surplusage. Grimes v Dep’t of Transportation, 475 Mich 

72, 89; 715 NW2d 275 (2006). MCL 324.5903 provides: “If the department finds 

that the facility is designed and operated primarily for the control, capture, and 

removal of pollutants from the air, and is suitable, reasonably adequate, and meets 

the intent and purposes of part 55 and rules promulgated under that part, the 

department shall notify the state tax commission, which shall issue a certificate.” 

Thus, the statute requires that the “facility” control, capture, and remove pollutants 

and meet the intent and purposes of part 55. If the dissent is correct that the 

“intent and purposes” of part 55 are simply the reduction of pollution, then that 

requirement adds nothing to the first requirement. However, our interpretation 

that the “intent and purposes” of part 55 are the reduction of pollution at stationary 

sources adds something to the first requirement, namely a specific source of 

pollution that is to be targeted. 

13
 
 

 

part 55 itself defines “source” as “a stationary source.”24 The dissent attempts to 

overcome this fact by focusing on the definition of “air pollution control 

equipment,” MCL 324.5501(c), arguing that because that definition is arguably 

broad enough to encompass petitioners’ test cells, the test cells must fall within the 

“intent and purposes of part 55.” The dissent’s analysis of the definition of “air 

pollution control equipment” must occur in a vacuum to reach its conclusion.25 

24 MCL 324.5501(t). The dissent decries our effort to ascertain the intent 

and purposes of part 55 by considering the whole of part 55. The dissent would 

prefer to look at one sentence of § 5540 of part 55 that supports the dissent’s result 

to ascertain the intent and purposes of part 55. 

The entirety of § 5540 is: 

It is the purpose of this part to provide additional and 

cumulative remedies to prevent and abate air pollution. This part 

does not abridge or alter rights of action or remedies now or 

hereafter existing. This part or anything done by virtue of this part 

shall not be construed as estopping persons from the exercise of their 

respective rights to suppress nuisances or to prevent or abate air 

pollution. [MCL 324.5540.] 

The clear import of this section is that part 55 provides additional remedies to the 

existing remedies for the prevention or control of air pollution, namely private 

nuisance suits or citizen suits under MCL 324.1701. This section does not stand 

for the idea that the intent and purposes of part 55 are to control air pollution in all 

its forms and from any source, as the dissent asserts. 

The dissent misconstrues the import of this discussion of § 5540. Unlike 

the dissent, we do not believe that the “intent and purposes” of part 55 are 

contained solely in § 5540. Instead, as noted, we believe that the entirety of part 

55 should be considered to determine its “intent and purposes.” Therefore, we 

think it is unnecessary “to explain how pollution-control facilities other than the 

test cells can provide ‘additional remedies’ that the test cells cannot.” Post at 21. 

25 Similarly, the dissent has chosen the one subsection of MCL 324.5512(1) 

that references “mode[s] of transportation” to bolster its conclusion that the test 

cells meet the intent and purposes of part 55. Unfortunately, most of the 

subsections of MCL 324.5512(1) deal with “stationary sources” in accordance 

(continued...) 

14
 
 

The air pollution control equipment is only relevant to the control of pollution at 

“sources” and in “processes.” A “process” is defined as “an action, operation, or a 

series of actions or operations at a source that emits or has the potential to emit an 

air contaminant.” MCL 324.5501(p) (emphasis added). Therefore, the fact that, 

as the dissent argues, a test cell theoretically qualifies as “air pollution control 

equipment” is wholly irrelevant for purposes of part 55 because the test cell has no 

effect on air pollution at any source or in any process. 

Part 55 provides for permitting, monitoring to ensure compliance, 

reporting, and imposing sanctions for violations. Notably, emissions from vessels 

and motor vehicles are covered in parts 61, 63, and 65. The inescapable 

conclusion is that part 55 serves to regulate air pollution from stationary sources, 

while air pollution from mobile sources is covered by other parts of NREPA. 

Nothing about the test cells affects air pollution from a stationary source; in fact, 

as stated, a test cell itself adds contaminants to the air in its location. If reduction 

of vehicle emissions qualifies as meeting the purpose of part 55, then the vehicles 

themselves would also qualify. Likewise, any auto repair shop could claim as 

(...continued) 

with the “intent and purposes” of part 55. We are uncertain why the Legislature 

decided to confer rulemaking authority with regard to modes of transportation in 

part 55; however, we do not believe that this one subsection alters the fact that the 

“intent and purposes of part 55 and rules promulgated under that part” are to 

regulate air pollution from stationary sources. See Mich Admin Code, R 336.1101 

et seq. 

15
 
 

exempt any equipment it installed to test motor vehicle exhaust for excess 

pollution. 

The Court of Appeals and the dissent simply fail to give meaning to part 

55. In so doing, they have broadly construed this tax statute, contrary to the rule 

of construction that exemptions be narrowly construed against the taxpayer;26 

distorted the purpose of this tax statute; and awarded taxpayer money to business 

entities who fail to abate pollution in this state. In fact, the dissent actively 

conflates part 55 with the other parts of NREPA by concluding, “[a]s long as 

petitioners sell engines and vehicles in Michigan, thereby reducing harmful 

pollution in Michigan, the fact that they also sell engines and vehicles in other 

states, thereby reducing pollution in those states as well, does not prevent them 

from qualifying for the instant tax exemption.”27 

The two published opinions interpreting this part of NREPA support the 

conclusion that the exemption does not apply to petitioners’ equipment. In Meijer, 

Inc v State Tax Comm,

28 the Court of Appeals held that a trash compactor and 

baler, which Meijer installed to replace an incinerator that polluted the air when 

burning trash from Meijer’s grocery stores, was eligible for the tax exemption 

under MCL 336.1 (the predecessor to MCL 324.5901). In the second case, Covert 

26 See Wexford Medical Group v City of Cadillac, 474 Mich 192, 207; 713 

NW2d 734 (2006), and post at 10-11. 

27 Post at 16 n 15. 

28 66 Mich App 280; 238 NW2d 582 (1975). 

16
 
 

 

Twp Assessor v State Tax Comm,

29 this Court upheld the STC’s grant of a tax 

exemption to Consumers Power Company for a nuclear containment building at its 

nuclear power plant. Both of these cases concerned sources of pollution that 

would have been subject to the regulatory statutes of part 55. 

This Court’s decision in Covert interpreted “primary purpose” to mean “the 

primary purpose served by the facility for which [the] exemption is sought.”30 

While the equipment in Covert was installed pursuant to federal law, this Court 

stated that the “purpose served” need not “align with the motivation of” those 

installing the facilities.31 Nonetheless, the statute requires that the primary 

purpose be the control or disposal of air pollution. The equipment in Covert was 

installed to prevent the release of hazardous materials in the event of an accident at 

the petitioner’s nuclear facility in this state. Therefore, the primary purpose was 

the control of air pollution in the event of an accident. That primary purpose 

qualified the equipment for the tax exemption. 

Similarly, the “facility” in Meijer, a compactor and baler, actually served 

the primary purpose of controlling pollution in Michigan. The Meijer petitioner 

installed the compactor and baler to replace its incinerator because the incinerator 

produced pollution in excess of the amount allowed under the law. The compactor 

29 407 Mich 561; 287 NW2d 895 (1980). 

30 Id. at 580. 

31 Id. at 580-581. 

17
 
 

 

and baler accomplished the same task as the incinerator but by producing less 

pollution.32 

Contrary to the Court of Appeals conclusion, the test cells are not 

analogous to the compactor and baler because the test cells did not replace a more 

polluting testing process. As noted by the Meijer panel, “had no pollution 

problem existed, and appellee simply chose the method of waste disposal by 

compacting and baling in order to dispose of waste, it would be ineligible for tax 

exemption because the necessary element—primary pollution control purposes— 

would be lacking.”33 The facilities in the instant case were installed for the 

primary purpose of testing engines, which will theoretically produce less pollution 

than other engines once put into production. However, petitioners simply chose a 

method of testing. They did not install the test cells to replace a process that 

accomplishes the same task with more pollution. Thus, the Court of Appeals and 

the dissent erroneously relied on Meijer to conclude that ancillary equipment 

32 The dissent argues that under our interpretation of MCL 324.5901, the 

compactor and baler would not qualify as a facility because the equipment simply 

compresses or bales material. This argument misconstrues both our interpretation 

and the facts of Meijer. The Meijer petitioner had been disposing of its refuse 

with an incinerator that produced an abundance of pollution. As noted, the 

petitioner installed the compactor and baler for the primary purpose of controlling 

the air pollution produced by its refuse disposal system. Furthermore, when the 

compactor and baler were operated they actually “controlled, captured, and 

removed” pollutants at that site. The test cells simply do not perform these 

functions. Any reduction of pollution that is connected to the test cells is entirely 

contingent on the redesign and manufacture of the engines and vehicles that may 

be introduced for future sales across the country. 

33 Meijer, supra at 285. 

18
 
 

 

installed primarily for the purpose of testing other equipment also qualifies for the 

exemption. 

The clear import of these cases and the statute is that the “facility” must 

reduce the air pollution caused by the operation of the petitioner’s Michigan site 

to qualify for the tax exemption. However, the dissent argues that the reduction of 

air pollution caused by the petitioner’s engine products—well after those products 

have left the petitioner’s control—can qualify the testing equipment used to 

manufacture those products for the exemption. This interpretation expands the 

exemption statute far beyond its plain meaning and contrary to any rationale that 

our Legislature entertained for affecting this state’s environment. 

CONCLUSION 

In denying DaimlerChrysler’s application for its Auburn Hills test cell, the 

DEQ listed the following “Non-Air Pollution Function(s) of Equipment”: “The 

testing of vehicles is one of the manufacturing steps that the applicant takes in 

researching, designing, manufacturing, testing, marketing and selling vehicles.”34 

In the “comments” section, the DEQ states: 

Testing vehicles at the Chrysler Technical Center actually 

generates and emits air contaminants. None of the requested 

equipment controls, capture [sic] or removes pollutants generated by 

the vehicle testing equipment. The applicant has not satisfied its 

burden of establishing that its described machinery, equipment, 

structures, or related accessories were installed or acquired and 

34 DEQ Tax Exemption Review, December 15, 2003. The DEQ reached 

the same conclusion with regard to the other petitioners’ test cells. 

19
 
 

designed and operated to physically control, dispose, capture, and/or 

remove air pollutants from the air, that if released would render the 

air harmful, pursuant to the intent of Sections 5901 and 5903 of Part 

59, as separate and distinct from apparent other purposes of 

measuring, recording and assessing data to determine if a product is 

fit for continued production or commercial sales, or for other 

research, manufacturing, marketing or sales purposes. The 

Department finds that the applicant has not established a primary 

purpose qualifying for a tax exemption under Part 59.[35] 

The DEQ properly applied §§ 5901 and 5903 and concluded that the test cells do 

not qualify for a tax exemption. Therefore, we reverse the Court of Appeals and 

reinstate the STC’s decision denying petitioners’ request for tax exemptions for 

their test cells. However, we affirm the Court of Appeals holding that the Detroit 

Diesel Equinox Line was not entitled to a tax exemption and that Detroit Diesel 

received due process. 

Robert P. Young, Jr. 

Clifford W. Taylor 

Michael F. Cavanagh 

35 Id. 

20
 
v 

v 

S T A T E O F M I C H I G A N 

SUPREME COURT 

DAIMLERCHRYSLER CORPORATION, 

Petitioner-Appellee, 

No. 133394 

STATE TAX COMMISSION and 

DEPARTMENT OF ENVIRONMENTAL 

QUALITY,

 Respondents-Appellees, 

and 

CITY OF AUBURN HILLS, 

Respondent-Appellant. 

FORD MOTOR COMPANY, 

Petitioner-Appellee, 

No. 133396 

STATE TAX COMMISSION and 

DEPARTMENT OF ENVIRONMENTAL 

QUALITY,

 Respondents-Appellees, 

and 

CITY OF DEARBORN, 

Intervening RespondentAppellant. 
 

v 

v 

FORD MOTOR COMPANY, 

Petitioner-Appellee, 

Nos. 133400-133402 

STATE TAX COMMISSION and 

DEPARTMENT OF ENVIRONMENTAL 

QUALITY,

 Respondents-Appellants, 

and 

CITY OF DEARBORN, 

Intervening RespondentAppellee. 

DETROIT DIESEL CORPORATION, 

Petitioner-Appellee, 

Cross-Appellant, 

No. 133403 

STATE TAX COMMISSION and 

DEPARTMENT OF ENVIRONMENTAL 

QUALITY,

 Respondents-Appellants, 

Cross-Appellees, 

and 

CHARTER TOWNSHIP OF REDFORD, 

Intervening RespondentAppellee. 

2
 
v 

v 

FORD MOTOR COMPANY, 

Petitioner-Appellee, 

No. 133404 

STATE TAX COMMISSION and 

DEPARTMENT OF ENVIRONMENTAL 

QUALITY,

 Respondents-Appellants. 

DAIMLERCHRYSLER CORPORATION, 

Petitioner-Appellee, 

Cross-Appellant, 

No. 133405 

STATE TAX COMMISSION and 

DEPARTMENT OF ENVIRONMENTAL 

QUALITY,

 Respondents-Appellants, 

and 

TOWNSHIP OF SYLVAN, 

Respondent-Appellee. 

DAIMLERCHRYSLER CORPORATION, 

Petitioner-Appellee, 

No. 133406 

STATE TAX COMMISSION and 

DEPARTMENT OF ENVIRONMENTAL 

QUALITY, 

3
 

v 
 Respondents-Appellants, 

and 

CITY OF AUBURN HILLS, 

Respondent-Appellee. 

KELLY, J. (concurring in the result). 

Justice Young and Justice Weaver disagree about whether the test cells at 

Ford Motor Company, DaimlerChrysler Corporation, and Detroit Diesel 

Corporation are entitled to tax-exemption certificates. The justices reasonably 

apply the statutory language, but reach opposite conclusions. In this situation, 

judicial construction should be brought to bear to resolve the issue. When the 

applicable canon of interpretation is applied, it becomes apparent that the test cells 

are not entitled to tax-exemption certificates. Thus, although I disagree with some 

of his reasoning, I concur in the result of Justice Young’s opinion. 

In addition, I agree with both Justice Weaver and Justice Young that the 

Detroit Diesel Corporation engine production equipment is not entitled to a taxexemption certificate. Finally, I agree that the corporation received a full hearing 

before the STC that satisfied its due process rights. 

THE TWO-PART TEST OF NREPA 

The issue that divides Justice Young and Justice Weaver is whether the test 

cells qualify for tax-exemption certificates under part 59 of the Natural Resources 

4
 

and Environmental Protection Act (NREPA).1 For purposes of this case, the key 

provisions of part 59 are §§ 5901 and 5903. Section 5901 sets forth the definition 

of “facility.” It provides in relevant part: 

As used in this part, “facility” means machinery, equipment, 

structures, or any part or accessories of machinery, equipment, or 

structures, installed or acquired for the primary purpose of 

controlling or disposing of air pollution that if released would render 

the air harmful or inimical to the public health or to property within 

this state. . . . 

Section 5903 explains when a “facility” is entitled to a tax-exemption 

certificate. It states: 

If the department finds that the facility is designed and 

operated primarily for the control, capture, and removal of pollutants 

from the air, and is suitable, reasonably adequate, and meets the 

intent and purposes of part 55 and rules promulgated under that part, 

the department shall notify the state tax commission, which shall 

issue a certificate. The effective date of the certificate is the date on 

which the certificate is issued. 

Using these statutes, a two-part test must be applied to determine whether 

the test cells are entitled to tax-exemption certificates. First, the test cells must 

qualify as a “facility” under § 5901. Second, the “facility” must meet the 

additional requirements set forth in § 5903. 

SECTION 5901 

With respect to the first consideration, the test cells are facilities if they are 

(1) machinery, equipment, structures, or any part or accessories of machinery, 

equipment, or structures and (2) installed or acquired for the primary purpose of 

1

 MCL 324.5901 et seq. 

5
 
controlling or disposing of air pollution (3) that if released would render the air 

harmful or inimical to the public health or to property within this state. It is 

uncontested that the test cells are machinery, equipment, or structures. The 

dispute is over the other two statutory requirements. 

Respondents argue that the test cells were not installed or acquired for the 

primary purpose of controlling or disposing of air pollution. I disagree. 

Petitioners installed the test cells solely to comply with pollution laws. The test 

cells have no other purpose. Were it not for pollution laws, petitioners could build 

their products without the need for test cells. In fact, it would be cheaper for them 

to do so. Thus, it seems clear to me that the primary purpose of installing test cells 

was to control air pollution. 

Respondents also argue that the test cells do not qualify as facilities because 

their primary purpose is not to control or dispose of pollution within Michigan. I 

reject this argument because the statute does not require that the primary purpose 

of the equipment be to improve air quality in Michigan. Instead, the statutory 

command is satisfied if the pollution that the equipment is concerned with 

controlling or disposing of, if released, would “render the air harmful or inimical 

to the public health or to property within this state.” The command is satisfied 

here. If the pollutants that the test cells are concerned with controlling were 

released into the air, they would be harmful to the public health and property 

within the state. 

6
 
Finally, respondents argue that the test cells are not facilities because they 

create a small amount of pollution. This fact is irrelevant. The test cells are 

facilities if their primary purpose is controlling or disposing of pollutants that, if 

released, would be harmful to the public health and property within this state. 

These requirements are satisfied. 

SECTION 5903 

The next step of the inquiry is to determine if the test-cell facilities meet the 

requirements of § 5903. A facility is entitled to a tax-exemption certificate under 

this section if it is (1) designed and operated primarily for the control, capture, and 

removal of pollutants from the air, (2) suitable, reasonably adequate, and (3) meets 

the intent and purposes of part 55 of the act. 

Notably, § 5903 requires the “facility” to be “designed and operated 

primarily for the control, capture, and removal of pollutants from the air.” This 

differs from § 5901, which requires the test cells to be “installed or acquired for 

the primary purpose of controlling or disposing of air pollution.” It must be 

assumed that this difference in wording is purposeful. As a result, § 5903 imposes 

a more stringent requirement than § 5901. Accordingly, it does not follow from 

the fact that the test cells qualify as “facilities” that they are “designed and 

operated primarily for the control, capture, and removal of pollutants from the 

air.” 

The test cells do not actually remove pollution that is already in the air. 

Instead, they are part of a process that reduces the amount of pollution in the air by 

7
 
 

preventing the creation of pollutants. Because the test cells are not concerned with 

pollutants that are already in the air, it can be argued that the test cells are not 

“designed and operated primarily for the control, capture, and removal of 

pollutants from the air.” There is some merit to this argument. Accordingly, I 

believe that it is reasonable to decide that the test cells do not qualify for taxexemption certificates. This is the result reached by Justice Young. 

On the other hand, the test cells are operated solely in an effort to comply 

with federal pollution standards. By complying with these standards, the quantity 

of pollutants in the air is reduced. Considering that the test cells are part of a 

process that eliminates the creation of pollutants, they remove pollutants that 

would otherwise be in the air. The statute does not explicitly require the facility to 

remove pollutants that are already in the air. Hence, I believe that it is also 

reasonable to decide that the facilities are entitled to tax-exemption certificates. 

Justice Weaver reaches this conclusion. 

Because I believe that both Justice Young’s and Justice Weaver’s 

constructions of the statute are reasonable, I conclude that the correct application 

of the statute to the facts of this case is uncertain. As a consequence, the statute is 

ambiguous.2

 The remaining provisions of NREPA do not clarify this ambiguity. 

2

 A statute is ambiguous when its application to the facts of the case is 

uncertain. Elias Bros Restaurants, Inc v Treasury Dep’t, 452 Mich 144, 150; 549 

NW2d 837 (1996). 

8
 
 

 

 

Accordingly, I conclude that it is appropriate to turn to sources outside the 

statutory language to resolve the case. 

THE EFFECT OF DEQ RULINGS AND CASELAW 

Both sides claim that the rule that deference is owed to administrative 

interpretations supports their position. The Department of Environmental Quality 

(DEQ), which is authorized to determine eligibility for part 59 tax exemptions, 

decided that the test cells at issue are not entitled to tax-exemption certificates. 

However, this decision is inconsistent with at least one recent DEQ decision that 

granted a tax-exemption certificate to a test-cell facility. Accordingly, because the 

DEQ’s current interpretation is inconsistent with another of its recent 

interpretations, it does not weigh heavily in favor of either position. 

The parties also identify prior published court opinions interpreting part 59 

as supporting their positions. But these opinions do not resolve the present case. 

In Covert Twp Assessor v State Tax Comm,

3

 the facilities at issue controlled, 

captured, and removed discharges resulting from a nuclear accident.4 

Accordingly, the facilities’ primary concern was with pollutants that had already 

been created. This differs from the test cells involved here that have a goal of 

preventing pollutants from ever being created. Thus, that case is not on point 

because the facts were materially different. The other case, Meijer, Inc v State Tax 

3 Covert Twp Assessor v State Tax Comm, 407 Mich 561; 287 NW2d 895 

(1980). 

4 Id. at 580. 

9
 
 

Comm,

5

 is also not directly on point. Furthermore, it is a Court of Appeals 

decision. As such, it is not binding on this Court. 

Finally, we are directed to decisions of other states interpreting their taxexemption statutes. Given that these cases involve statutes that differ from 

Michigan’s statutes, I find them of little assistance in determing the proper 

interpretation of the Michigan statute. 

THE CANONS OF STATUTORY CONSTRUCTION 

Because I cannot resolve the issue using the statute’s language alone and 

the other sources I have mentioned do not point in either direction, I turn to the 

canons of construction. Most applicable is the well-established canon that tax 

exemptions are to be strictly construed.6

 When this canon is applied, test-cell 

facilities are exempt from taxation only if the statutory language does not allow 

another construction. But another construction is not only possible, but 

reasonable. As a result, I conclude that the test cells are not entitled to taxexemption certificates. 

CONCLUSION 

I conclude that the test cells qualify as facilities under § 5901, but that the 

correct application of § 5903 is unclear. DEQ rulings and existing caselaw are not 

5 Meijer, Inc v State Tax Comm, 66 Mich App 280; 238 NW2d 582 (1975). 

6

 See, e.g., East Saginaw Mfg Co v East Saginaw, 19 Mich 259, 279 (1869); 

Michigan United Conservation Clubs v Lansing Twp, 423 Mich 661, 664; 378 

NW2d 737 (1985). 

10
 
dispositive of the issue. As a result, I engage in judicial construction to determine 

whether the facilities are entitled to tax-exemption certificates. 

The appropriate canon of construction is that tax exemptions are to be 

strictly construed. By strictly construing the exemption in question, I conclude 

that the test-cell facilities are not entitled to tax-exemption certificates. As a 

consequence, I concur with Justice Young’s resolution of this issue. I also agree 

that Detroit Diesel’s engine line is not eligible for the tax exemption. Therefore, I 

agree with Justice Young that the Court of Appeals decision should be partially 

affirmed and partially reversed. 

Marilyn Kelly 

11
 
 

 

v 

v 

S T A T E O F M I C H I G A N 

SUPREME COURT 

DAIMLERCHRYSLER CORP, 

Petitioner-Appellee, 

No. 133394 

STATE TAX COMMISSION and 

DEPARTMENT OF ENVIRONMENTAL 

QUALITY,

 Respondents-Appellees, 

and 

CITY OF AUBURN HILLS, 

Respondent-Appellant. 

FORD MOTOR COMPANY, 

Petitioner-Appellee, 

No. 133396 

STATE TAX COMMISSION and 

DEPARTMENT OF ENVIRONMENTAL 

QUALITY,

 Respondents-Appellees, 

and 

CITY OF DEARBORN, 

Intervening RespondentAppellant. 
 

 

v 

v 

FORD MOTOR COMPANY, 

Petitioner-Appellee, 

No. 133400-02 

STATE TAX COMMISSION and 

DEPARTMENT OF ENVIRONMENTAL 

QUALITY,

 Respondents-Appellants, 

and 

CITY OF DEARBORN, 

Intervening RespondentAppellee. 

DETROIT DIESEL CORPORATION, 

Petitioner-Appellee/CrossAppellant, 

No. 133403 

STATE TAX COMMISSION and 

DEPARTMENT OF ENVIRONMENTAL 

QUALITY,

 Respondents-Appellants/CrossAppellees, 

and 

CHARTER TOWNSHIP OF REDFORD, 

Intervening RespondentAppellee. 

2
 
 

v 

v 

FORD MOTOR COMPANY, 

Petitioner-Appellee, 

No. 133404 

STATE TAX COMMISSION and 

DEPARTMENT OF ENVIRONMENTAL 

QUALITY 

 Respondent-Appellants, 

DAIMLERCHRYSLER CORPORATION, 

Petitioner-Appellee/CrossAppellant, 

No. 133405 

STATE TAX COMMISSION and 

DEPARTMENT OF ENVIRONMENTAL 

QUALITY,

 Respondents-Appellants, 

and 

TOWNSHIP OF SYLVAN, 

Respondent-Appellee. 

DAIMLERCHRYSLER CORPORATION, 

Petitioner-Appellee, 

No. 133406 

STATE TAX COMMISSION and 

DEPARTMENT OF ENVIRONMENTAL 

QUALITY, 

3
 

v 
 

 

 Respondents-Appellants, 

and 

CITY OF AUBURN HILLS, 

Respondent-Appellee. 

WEAVER, J. (concurring in part and dissenting in part). 

I concur with the lead opinion’s holding that Detroit Diesel’s Equinox Line 

does not qualify for tax exemptions under part 59 of the Natural Resources and 

Environmental Protection Act (NREPA)1

 because the Equinox Line was not 

installed for the primary purpose of controlling or disposing of air pollution, but 

was instead installed for the primary purpose of producing a new type of vehicle 

engine for sale. However, I dissent from the lead opinion’s holding that 

petitioners’ test-cell facilities do not qualify for tax exemption under part 59. I 

would affirm the Court of Appeals and hold that petitioners’ test-cell facilities 

qualify for tax exemptions under part 59 because they meet the definition of 

“facility” in MCL 324.5901 and, under MCL 324.5903, are “designed and 

operated primarily for the control, capture, and removal of pollutants from the 

air,” are “suitable” or “reasonably adequate” at abating air pollution, and “meet the 

intent and purposes of part 55” of NREPA, MCL 324.5501 et seq., which 

regulates air pollution. 

1

 MCL 324.5901 et seq. 

4
 

 

I. FACTS AND PROCEEDINGS 

The material facts in these seven consolidated cases are undisputed. 

Petitioners, Ford Motor Company, DaimlerChrysler, and Detroit Diesel, 

manufacture motor vehicles and engines. Petitioners’ vehicles and engines are 

subject to federal air-quality regulations promulgated by the Environmental 

Protection Agency (EPA).2

 The vehicles and engines must pass EPA-mandated 

emissions tests before the vehicles and engines can be mass-produced and sold to 

consumers. Each of the petitioners established “test cell” facilities designed to test 

vehicle and engine emissions to ensure compliance with EPA regulations. In the 

test cells, vehicles and engines are placed in a closed room or a bay with a hose 

attached to the exhaust pipe. While the vehicle or engine is emitting exhaust, 

samples of the exhaust are sent through devices that measure the emissions and 

determine whether those emissions comply with federal regulations. The test cells 

then release the tested emissions into the air. 

In addition to a test-cell facility, Detroit Diesel built its Equinox Line 

facility after its existing Series 60 diesel engine failed to meet the newly enacted 

EPA emission standards. The Equinox Line facility was designed to manufacture 

new diesel engines that meet the newest federal pollution-control standards. In 

October 2002, after Detroit Diesel made significant design changes to the original 

2

 See 42 USC 7401 et seq. 

5
 
 

Series 60 engine, Detroit Diesel’s new Equinox Line of diesel engines obtained 

EPA certification. 

In 2001, Ford Motor Company filed for tax exemptions for test cells and 

equipment under part 59 of NREPA,3

 which permits tax exemptions for certain 

facilities that reduce air pollution. This application was granted by the State Tax 

Commission (STC) after review and approval by the Michigan Department of 

Environmental Quality (DEQ). In 2003 and 2004, Ford, DaimlerChrysler, and 

Detroit Diesel filed for multiple exemptions under part 59 for similar test-cell 

facilities located around the state. Additionally, in 2003 Detroit Diesel applied for 

tax exemptions for its Equinox Line facility. The STC referred the exemption 

requests to the DEQ, which concluded that the test-cell facilities and the Equinox 

Line facility did not meet the requirements for a part 59 tax exemption. 

The DEQ concluded that the primary purpose of the test cells was to enable 

petitioners to sell their vehicles by complying with federal law, not to reduce 

pollution. The DEQ explained that the test cells did not qualify for the exemption 

because they did not physically remove or control pollution, but rather actually 

created pollution during the testing process. In regard to Detroit Diesel’s Equinox 

Line, the DEQ determined that it was not a qualifying facility under part 59 

because its primary purpose was “to manufacture diesel engines for sale by Detroit 

Diesel.” The DEQ determined that because the air emissions from the Equinox 

3

 MCL 324.5901 et seq. 

6
 
Line manufacturing facility were not significantly different from those emitted by 

the Series 60 facility, the Equinox Line did not qualify as a “process change” 

under part 59 that met the goal of reducing pollution. As a result, the STC rejected 

the tax exemption requests for the test-cell facilities and the Equinox Line facility. 

In separate lawsuits, petitioners appealed to various circuit courts. In 

Ford’s suits, the Wayne Circuit Court reversed the STC’s denials of the taxexemption applications, ruling that the court was constrained by Meijer, Inc v 

State Tax Comm, 66 Mich App 280; 238 NW2d 582 (1975), to conclude that the 

test-cell facilities met the part 59 requirements because they were ancillary 

equipment for the control of pollution. The city of Dearborn, an intervening 

respondent, filed four separate applications in the Court of Appeals, arguing that 

the circuit court had improperly overturned fact-finding of the administrative 

agency. 

In Detroit Diesel’s suit, the Wayne Circuit Court affirmed the STC’s 

decision because there was competent, material, and substantial evidence 

supporting the STC’s conclusion that the test cells and the Equinox Line do not 

actually remove pollution, but rather operate for the primary purpose of producing 

engines for sale. Detroit Diesel applied for leave to appeal in the Court of 

Appeals. 

In DaimlerChrysler’s suits, the Oakland Circuit Court affirmed the STC’s 

decisions, holding that there was competent, material, and substantial evidence for 

the STC’s conclusion that the test cells do not actually remove pollution and that 

7
 
 

the primary purpose for the test cells was to ensure that DaimlerChrysler’s 

vehicles were sellable. DaimlerChrysler applied for leave to appeal in the Court of 

Appeals. 

The Court of Appeals issued an order consolidating all the appeals. The 

Court of Appeals, in a published opinion, held that all the test-cell facilities met 

the requirements of the part 59 tax exemption as a matter of law, but that Detroit 

Diesel’s Equinox Line facility did not.4 The panel concluded that the test cells 

qualified for tax-exemption certificates because petitioners installed the test cells 

solely to ensure compliance with EPA emission standards. Thus, the test cells 

were installed for the primary purpose of controlling or disposing of air pollution 

and were designed and operated primarily for the control, capture, and removal of 

pollutants from the air. The panel held that Detroit Diesel’s Equinox Line did not 

meet the requirements of part 59 because it was operated primarily for production 

of a new type of engine for sale, not for the control, capture, or removal of 

pollutants in the air. The Court of Appeals also rejected Detroit Diesel’s claims 

that the STC’s hearing process violated the Administrative Procedures Act (APA), 

MCL 24.201 et seq., and due-process principles. 

The DEQ and the STC filed separate applications for leave to appeal in 

each case. Detroit Diesel cross-appealed. The city of Auburn Hills appealed the 

4 Ford Motor Co v State Tax Comm, 274 Mich App 108; 732 NW2d 591 

(2007). 

8
 
 

 

 

 

decision regarding DaimlerChrysler’s Auburn Hills test cell, and the city of 

Dearborn appealed the decision involving Ford’s Dearborn test cell. This Court 

granted all the applications for leave to appeal or cross-appeal.5 

II. STANDARD OF REVIEW 

This case involves the interpretation of part 59 of NREPA. This Court 

reviews questions of statutory interpretation de novo.6 Clear and unambiguous 

statutory language is given its plain meaning and is enforced as written.7 

Further, this case involves review of the STC and DEQ’s interpretation and 

application of part 59. This Court reviews final decisions from administrative 

agencies by determining whether they are authorized by law and whether they are 

supported by competent, material, and substantial evidence on the whole record.8 

Although this Court affords respectful consideration to the construction of 

statutory provisions by any particular department of the government, the 

department’s interpretation is not binding on this Court and cannot be used to 

5 DaimlerChrysler Corp v State Tax Comm, 480 Mich 880 (2007). 

6 Ayar v Foodland Distributors, 472 Mich 713, 715; 698 NW2d 875 

(2005). 

7 Id. at 716. 

8 Reed v Hurley Medical Ctr, 153 Mich App 71, 75; 395 NW2d 12 (1986); 

MCL 24.306. 

9
 
 

overcome the statute’s unambiguous meaning.9

 Furthermore, this Court owes no 

deference to an agency determination when an agency issues contradictory rulings 

on the same issue and changes its policy mid-course, as the DEQ has in this case. 

“‘Substantial evidence’ is evidence that a reasonable person would accept as 

sufficient to support a conclusion. While this requires more than a scintilla of 

evidence, it may be substantially less than a preponderance.”10 

III. PART 59 TAX EXEMPTIONS 

Part 59 of NREPA provides real property, personal property, sales, and use 

tax exemptions for certain facilities designed to reduce air pollutants. Tax 

9 Catalina Marketing Sales Corp v Dep’t of Treasury, 470 Mich 13, 23-24; 

678 NW2d 619 (2004). 

10 Dep’t of Community Health v Risch, 274 Mich App 365, 372-373; 733 

NW2d 403 (2007) (citation and quotation marks omitted). The city of Dearborn 

argues in its application that the STC’s decision to deny Ford’s application for a 

tax exemption was supported by competent, material, and substantial evidence on 

the record and should therefore not be disturbed on appeal. We reject this 

argument because it is based on the incorrect assumption that the circuit court 

reversed the STC on a purely factual basis, instead of a legal one. On appeal, the 

Court of Appeals did not consider whether the STC’s decision to deny Ford’s 

application for a tax exemption was unsupported by factual evidence. Rather, the 

Court of Appeals held that the STC’s legal rulings were erroneous as a matter of 

law. Under MCL 24.306 of the APA, a reviewing court can set aside the STC’s 

decision on a legal basis or on a factual basis if the facts are not supported by 

competent, material, and substantial evidence. Therefore, the Court of Appeals 

was free to rule that the STC’s decision was legally erroneous, even if it was 

supported by competent, material, and substantial evidence. 

10
 
 

exemptions are strictly construed against the taxpayer.11 However, the Court 

interprets the statutory language creating the tax exemption according to common 

and approved usage.12 In order to qualify for the tax exemptions under part 59, the 

property in question must first meet the definition of “facility” in part 59. Part 59 

defines “facility” as follows: 

[M]achinery, equipment, structures, or any part or accessories 

of machinery, equipment, or structures, installed or acquired for the 

primary purpose of controlling or disposing of air pollution that if 

released would render the air harmful or inimical to the public health 

or to property within this state. Facility includes an incinerator 

equipped with a pollution abatement device in effective operation. 

Facility does not include an air conditioner, dust collector, fan, or 

other similar facility for the benefit of personnel or of a business. 

Facility also means the following, if the installation was completed 

on or after July 23, 1965: 

(a) Conversion or modification of a fuel burning system to 

effect air pollution control. The fuel burner portion only of the 

system is eligible for tax exemption. 

(b) Installation of a new fuel burning system to effect air 

pollution control. The fuel burner portion only of the system is 

eligible for tax exemption. 

(c) A process change involving production equipment made to 

satisfy the requirements of part 55 and rules promulgated under that 

part. The maximum cost allowed shall be 25% of the cost of the 

new process unit but shall not exceed the cost of the conventional 

control equipment applied on the basis of the new process 

production rate on the preexisting process. [MCL 324.5901 

(emphasis added).] 

11 Elias Bros Restaurants, Inc v Dep’t of Treasury, 452 Mich 144, 150; 549 

NW2d 837 (1996). 

12 Id. 

11
 
After property has been designated as a facility under MCL 324.5901, the 

facility must meet the following further requirements in order to qualify for tax 

exemptions: 

If the department finds that the facility is designed and 

operated primarily for the control, capture, and removal of pollutants 

from the air, and is suitable, reasonably adequate, and meets the 

intent and purposes of part 55 and rules promulgated under that part, 

the department shall notify the state tax commission, which shall 

issue a certificate. . . . [MCL 324.5903.] 

Therefore, property must meet the definition of “facility” under MCL 324.5901, 

and, under MCL 324.5903, (1) be “designed and operated primarily for the 

control, capture, and removal of pollutants from the air,” (2) be “suitable, 

reasonably adequate,” and (3) “meet the intent and purposes of part 55” in order to 

qualify for tax exemptions under part 59. 

A. TEST-CELL FACILITIES 

I dissent from the lead opinion, and would hold that the petitioners’ test-cell 

facilities qualify for tax exemptions under part 59. In order to determine whether 

the petitioners’ test-cell facilities qualify for tax exemptions, it is necessary to first 

determine whether the test-cell facilities are “facilities” under MCL 324.5901. 

MCL 324.5901 unambiguously defines a facility as including “machinery, 

equipment, structures, or any part or accessories of machinery, equipment, or 

structures, installed or acquired for the primary purpose of controlling or 

disposing of air pollution that if released would render the air harmful or inimical 

to the public health or to property within this state.” (Emphasis added.) 

12
 
 

Accordingly, it is necessary to determine whether the test cells were 

installed or acquired for the primary purpose of controlling or disposing of air 

pollution in Michigan. An ordinary meaning of “control” means to “exercise 

restraint or direction over; dominate, regulate, or command; to hold in check; 

curb.”13 It is undisputed that petitioners installed and operated the test cells for the 

sole purpose of regulating emissions to meet federal standards and curb emissions 

output in the engines and vehicles produced. Regulating and curbing emissions is 

thus a method of controlling emissions. 

The STC and the DEQ argue that petitioners did not install the test cells 

with the primary motive of controlling emissions because the test cells were 

installed to create vehicles conforming to EPA regulations. However, the 

petitioners’ motive behind installing the test cells is not determinative of the 

primary purpose of the test cells. It is immaterial that the test cells were created so 

that the petitioners’ engine and vehicle emissions would satisfy federal emissions 

regulations: 

The use of the words “primary purpose” in § 1 [now MCL 

324.5901], and “operated primarily for” in § 3 [now MCL 324.5903] 

of the Air Exemption Act [now part 59] evidences a legislative 

concern with the primary purpose served by the facility for which 

exemption is sought. This purpose need not, necessarily, align with 

13 Webster’s Universal College Dictionary (1997). 

13
 
 

the motivation of the persons installing, acquiring or operating the 

facilities.[14] 

The test cells primarily operate to regulate and reduce air pollutants; for taxexemption purposes, it does not matter why the test cells were implemented. 

The STC and the DEQ additionally argue that the test-cell facilities are not 

“facilities” under MCL 324.5901 because the test-cell facilities actually create a 

small amount of pollution through the testing process. This creation of a small 

amount of pollution does not, however, alter the primary purpose of the test cells, 

which is to control pollution through prevention. As petitioners point out, many 

pollution-control machines also create pollution. For example, mechanical balers 

and compactors, such as those in Meijer, supra, release some exhaust during 

recycling operations. 

The STC and the DEQ also argue that the clause “within this state” in MCL 

324.5901 bars tax exemption for petitioners because the exhaust emissions that the 

test cells reduce are released primarily outside Michigan. This argument is 

unpersuasive. First, the STC and the DEQ did not preserve this issue for appeal 

because they did not raise and argue it before the Court of Appeals. Furthermore, 

the phrase “within this state” modifies the conjoined phrases “to the public health 

or to property,” not “the primary purpose of controlling air pollution.” In other 

words, the statute merely requires that the “primary purpose” of the machinery 

14 Covert Twp Assessor v State Tax Comm, 407 Mich 561, 580-581; 287 

NW2d 895 (1980). 

14
 
 

installed be to “control . . . air pollution,” not to specifically control air pollution 

that would be released primarily within this state, as the STC and the DEQ argue. 

The statute then refines the category of “air pollution” to refer to a subcategory of 

pollution “that if released would render the air harmful or inimical to the public 

health or to property within this state.” This phrase indicates that if the pollution 

that has been controlled were to be released, that pollution must be of the type that 

would be harmful to public health or property in Michigan in order for machinery 

that controls such air pollution to qualify as a “facility.” Thus, if the test cells at 

issue were installed for the primary purpose of controlling air pollution, and if the 

release of the controlled air pollution would render the air harmful to public health 

or property within Michigan, then the test cells qualify as a “facility.” Here, the 

primary purpose of the test cells is to reduce air pollution by testing the emissions 

released by vehicles. Moreover, there is no question that vehicles and engines 

manufactured by the petitioners are sold in Michigan, and that the pollution 

controlled by the test cells is harmful to the public health. It stands to reason then 

that the vehicles and engines sold in Michigan emit fewer noxious pollutants into 

Michigan’s atmosphere than they would have released without the test cells. 

Therefore, the test cells control air pollution that, if released, “would render the air 

harmful or inimical to the public health or to property within this state.” 

Accordingly, the test cells are “facilities” under MCL 324.5901.15 

15 MCL 324.5901 does not require that pollution be reduced solely within 

(continued...) 

15
 
 

Petitioners’ test-cell facilities were installed or acquired for the primary 

purpose of controlling or disposing of air pollution in Michigan because the test 

cells curb the spread of air pollution by ensuring that less pollution is released into 

the atmosphere in the first place; therefore, the test-cell facilities are “facilities” 

under MCL 324.5901. 

The lead opinion argues that the test cells are not “facilities” because their 

primary purpose is to “test engines to ensure that petitioners have properly 

designed their engines to meet federal regulations so that they can sell them to 

consumers.” Ante at 10. However, this argument does not consider that without 

the federally mandated pollution regulations, petitioners would not need or have 

test cells, but would continue to operate without them. As petitioners point out, 

the test cells do not benefit petitioners’ businesses because conformance with EPA 

regulations increases expenses, resulting in higher vehicle and engine prices and 

reduced sales. Thus, the test cells were not installed to foster sales. Further, every 

business must comply with federal pollution regulations and every business is 

trying to sell something. Under the lead opinion’s interpretation, it appears that 

any business that complies with federal regulations is not entitled to a Michigan 

tax exemption because it could always be said that the business complied with 

(...continued) 

Michigan. As long as petitioners sell engines and vehicles in Michigan, thereby 

reducing harmful pollution in Michigan, the fact that they also sell engines and 

vehicles in other states, thereby reducing pollution in those states as well, does not 

prevent them from qualifying for the instant tax exemption. 

16
 
federal regulations merely to sell its product to consumers. Under the lead 

opinion’s interpretation, the only way a business would be entitled to a tax 

exemption is by philanthropically installing pollution-control equipment. 

The test cells perform a fundamental function in the air-pollution-control 

process. They measure the levels of pollution emitted by engines in order to 

assure compliance with air-pollution regulations. If these levels of pollution 

exceed limits, the engines are not manufactured or sold, thereby curtailing 

excessive air pollution. Without the test cells, petitioners would be unable to 

ensure that their products are less polluting. Because testing emissions is an 

essential component of “controlling or disposing of air pollution,” and because the 

test cells were installed specifically to test pollution, the test cells can fairly be 

characterized as having been installed for “the primary purpose of controlling or 

disposing of air pollution” under MCL 324.5901. Moreover, under the lead 

opinion’s analysis, even compactors or balers, which were specifically held to 

qualify as “facilities” in Meijer, supra at 284, a decision with which the lead 

opinion apparently agrees, ante at 17-18, would not qualify as such because their 

“primary purpose” is to compress or bale material, rather than to “control” 

pollution. 

Next, in order to qualify for tax exemptions under part 59, petitioners’ testcell facilities must meet the requirements of MCL 324.5903. First, the test cells 

must be designed and operated primarily for the control, capture, and removal of 

17
 
 

pollutants from the air. In this case, the test cells were created for the sole purpose 

of reducing air pollutants emitted by the petitioners’ vehicles and engines, so that 

is the cells’ primary purpose. 

As discussed earlier, the test cells control air pollutants directly by 

regulating the emissions output, and indirectly by curbing the levels of pollutants 

released into the air in the first place. The test cells also capture and remove 

pollutants from the atmosphere. An ordinary meaning of “capture” is “to gain 

control of or exert influence over.”16 Again, by regulating and curbing emissions, 

the test cells ensure that pollutants that would otherwise have been released into 

the atmosphere are never produced in the first place and thus control pollutants. 

An ordinary meaning of “remove” is “to move or shift from a place or position; to 

eliminate; do away with or put an end to.”17 The test cells “eliminate” or “put an 

end to” air pollutants by preventing the pollutants from being created in the first 

place; were it not for the test cells, the abated pollutants would be in the 

atmosphere. Thus, the test cells operate primarily for the control, capture, and 

removal of air pollutants from the air. 

Next, the test cells must be suitable and reasonably adequate for the 

purpose of reducing air pollutants and must also meet the intent and purposes of 

part 55 of NREPA to qualify for tax exemptions. “The suitability and 

16 Random House Webster’s College Dictionary (1997). 

17 Id. 

18
 
 

adequacy . . . can be, and are, measured and tested through non-empirical studies 

based on accepted scientific principles and sound analysis. . . . [T]he resolution of 

this question is particularly well-suited to the expertise of the administrative 

agencies charged with assessing the technical suitability and adequacy of facilities 

for which exemption is sought.”18 It is undisputed that the test cells function to 

help petitioners reduce and regulate the air pollutants that their vehicles and 

engines ultimately emit in order to meet federal standards. As a result, the test 

cells are suitable and reasonably adequate for the purpose of reducing noxious air 

pollutants. 

The purpose of part 55, by its own terms, is “to provide additional and 

cumulative remedies to prevent and abate air pollution.” The test cells, by 

ensuring that vehicle and engine emissions are clean enough to pass federal 

emissions standards, are designed to prevent and abate air pollution. Although the 

test cells were installed to ensure compliance with federal emissions regulations, 

they nonetheless accomplish the purpose of part 55—to prevent and abate air 

pollution. The test cells meet the intent and purposes of part 55 of NREPA 

because the test cells function to prevent and abate noxious air pollutants.19 

18 Covert Twp, 407 Mich at 582. 

19 Covert Twp agreed with the STC’s holding that the intent and purposes of 

the predecessor to part 55 “‘are served by pollution control facilities constructed 

within the State of Michigan whether required by reason of federal or state 

regulation. . . . It is the fact that pollution control is provided that is important and 

(continued...) 

19
 
 

Petitioners’ test-cell facilities qualify for tax exemptions under part 59 

because they meet the definition of “facility” in MCL 324.5901 and, under MCL 

324.5903, are “designed and operated primarily for the control, capture, and 

removal of pollutants from the air,” are “suitable” or “reasonably adequate” at 

abating air pollution, and “meet the intent and purposes of part 55.” 

The lead opinion argues that the test cells do not meet the requirements of 

MCL 324.5903 because they do not actually remove, control, and capture 

pollution caused by the operation of petitioners’ businesses. Ante at 11-13. 

disagree. The statute does not require that the exempt equipment itself physically 

remove air pollutants; rather, it merely requires that it be intended and operated 

primarily for that purpose. Moreover, the statute does not require that the 

pollution removed by the exempt equipment be that created by the operation of 

petitioners’ businesses; rather, the statute only refers to air pollution generally, 

without specifying any particular source of pollution. As explained earlier, the test 

cells here were intended primarily for, and functioned as, integral parts of a 

pollution-control process designed to regulate and curb air pollution produced by 

petitioners’ engines and vehicles. Therefore, the test cells were “designed and 

operated primarily for the control, capture, and removal of pollutants from the 

air.” 

(...continued) 

not whether that pollution control is provided in response to state or federal 

regulation.’” Id. at 579 (emphasis in original). 

20
 

I 
The lead opinion also sua sponte injects the argument that in order for a 

facility to meet the intent and purposes of part 55, it must regulate a “source” of 

pollution as defined by MCL 324.5501(t). Ante at 13-14. The lead opinion 

attempts to extrapolate the intent and purposes of “the whole of part 55,” ante at 

13 n 23, by putting together bits and pieces of part 55. This method is flawed. 

MCL 324.5540 clearly and unambiguously states the purpose of part 55: 

It is the purpose of this part to provide additional and 

cumulative remedies to prevent and abate air pollution. This part 

does not abridge or alter rights of action or remedies now or 

hereafter existing. This part or anything done by virtue of this part 

shall not be construed as estopping persons from the exercise of their 

respective rights to suppress nuisances or to prevent or abate air 

pollution. 

We give this language its plain meaning and enforce it as written. Ayar v 

Foodland Distributors, 472 Mich 713, 715; 698 NW2d 875 (2005). The title and 

declared purpose of part 55 refer to air-pollution control generally. The lead 

opinion wrongly argues that the intent and purposes of part 55 are not to prevent 

and abate air pollution generally, but instead to provide remedies in addition to 

private or citizen suits related to pollution control. Under the lead opinion’s faulty 

interpretation of the intent of part 55, only facilities that provide “additional 

remedies” would be eligible for a tax exemption under MCL 324.5903. The lead 

opinion fails to explain how pollution-control facilities other than the test cells can 

provide “additional remedies” that the test cells cannot. 

21
 
 

Moreover, although part 55 mainly deals with stationary sources, this fact is 

not dispositive because part 55 also refers to nonstationary sources used for 

transportation.20 The lead opinion discusses part 55’s definition of “source” in a 

vacuum, while ignoring the other defined terms in part 55. For example, part 55 

also governs “process equipment,” which it defines as “all equipment, devices, and 

auxiliary components, including air pollution control equipment, stacks, and other 

emission points, used in a process.” MCL 324.5501(q) (emphasis added). Part 55 

defines “air pollution control equipment” as “any method, process, or equipment 

that removes, reduces, or renders less noxious air contaminants discharged into the 

atmosphere.” MCL 324.5501(c). Test cells arguably qualify as “air pollution 

control equipment” because they ensure that vehicles and engines do not exceed 

federal emissions standards, thus reducing air contaminants discharged into the 

atmosphere. The important point, however, is that the lead opinion identifies no 

language from part 55 or elsewhere stating that the “intent and purposes” of part 

55 are to regulate pollution exclusively from “sources.” 

20 See, e.g., MCL 324.5501(b) (“With respect to any mode of 

transportation, nothing in this part or in the rules promulgated under this part shall 

be inconsistent with the federal regulations, emission limits . . . .”); MCL 

324.5513 (“Notwithstanding any other provision of this part or the rules 

promulgated under this part, car ferries having the capacity to carry more than 110 

motor vehicles and coal-fueled trains used in connection with tourism or an 

historical museum or carrying works of art or items of historical interest are not 

subject to regulation under this part.”); MCL 324.5512(1) (“The department shall 

promulgate rules for purposes of doing all of the following: . . . (c) Controlling any 

mode of transportation that is capable of causing or contributing to air pollution.” 

22
 
Even if the lead opinion were correct that part 55 exclusively governs 

“sources,” this would not preclude the test cells from meeting the intent and 

purposes of part 55. The lead opinion neglects to quote the following part of the 

definition of “source” in part 55: “A source includes all the processes and process 

equipment under common control that are located within a contiguous area, or a 

smaller group of processes and process equipment as requested by the owner or 

operator of the source, if in accordance with the clean air act.” MCL 324.5501(t) 

(emphasis added). As discussed earlier, because a test cell qualifies as “air 

pollution control equipment,” it also qualifies as “process equipment,” and 

accordingly as a “source” as defined by part 55. 

The lead opinion’s argument that part 55 is not intended to reduce motorvehicle emissions because those emissions are covered by parts 61, 63, and 65 is 

misplaced. Ante at 15. Part 61 is not applicable because it merely prohibits 

marine vessels from blowing flues under certain conditions. Parts 63 and 65 

include procedures for requiring certain motor vehicles in west and southeast 

Michigan that are more than one year old to be periodically inspected for 

emissions and obtain a certificate of compliance that would be necessary for 

registration renewal. Parts 63 and 65 do not include emissions standards for 

motor-vehicle engines during the design, manufacture, and sale stages, but only 

ensure that certain vehicles, which satisfy emissions standards when initially 

purchased, maintain a minimum level of emissions after one year on the road. 

23
 
 

Further, parts 63 and 65 do not currently even regulate motor-vehicle emissions in 

west and southeast Michigan because those parts of the state have apparently 

attained the national ambient air quality standards for ozone. See MCL 

324.6306(2); MCL 324.6507(2). In sum, parts 61, 63, and 65 in no way detract 

from the intent and purposes of part 55, which are to generally prevent and abate 

air pollution, including by reducing that air pollution from motor-vehicle engines 

by regulating their design and manufacture before sale. 

The lead opinion also ignores the provision that a facility qualifies for a tax 

exemption only if it “meets the intent and purposes of part 55 and rules 

promulgated under that part . . . .” MCL 324.5903 (emphasis added). Reading 

the “intent and purposes” language in context with the “rules promulgated” 

language21 makes it clear that one of the intents and purposes of part 55 is to 

reduce pollution from motor vehicles. Part 55 expressly provides that “[t]he 

department shall promulgate rules for the purpose of doing all of the 

following: . . . (c) Controlling any mode of transportation that is capable of 

causing or contributing to air pollution.” MCL 324.5512(1)(c) (emphasis added). 

This provision supports the conclusion that the intent of part 55 is not confined to 

the reduction of pollution from stationary sources. Thus, the test cells both meet 

21 This Court must consider “both the plain meaning of the critical word or 

phrase as well as ‘its placement and purpose in the statutory scheme.’” Sun Valley 

Foods Co v Ward, 460 Mich 230, 237; 596 NW2d 119 (1999), quoting Bailey v 

United States, 516 US 137, 145; 116 S Ct 501; 133 L Ed 2d 472 (1995). 

24
 
the intent and purposes of part 55 and comply with the rules promulgated under 

part 55 governing pollution created by motor vehicles. 

Moreover, the lead opinion errs by stating that our interpretation renders 

part of MCL 324.5903 “nugatory or mere surplusage.” Ante at 13 n 23. MCL 

324.5903 requires that the “facility” be “designed and operated primarily for the 

control, capture, and removal of pollutants from the air, and [be] suitable, 

reasonably adequate, and meet[] the intent and purposes of part 55,” which are “to 

prevent and abate air pollution,” MCL 324.5540. The lead opinion argues that if 

“the ‘intent and purposes’ of part 55 are simply the reduction of air pollution, then 

[the second requirement of MCL 324.5903, that the facility meet this purpose,] 

adds nothing to the first requirement [of MCL 324.5903, that the facility control, 

capture, and remove pollutants from the air].” Ante at 13 n 23. I respectfully 

disagree. The second requirement indicates the purpose of the “facility,” i.e., “to 

prevent and abate air pollution,” while the first requirement describes the means 

by which this purpose is to be achieved, i.e., by “control[ing], captur[ing], and 

remov[ing] pollutants from the air.” Thus, this interpretation does not render any 

part of this statute “nugatory or mere surplusage.” 

B. DETROIT DIESEL’S EQUINOX LINE FACILITY 

I concur with the lead opinion’s holding that Detroit Diesel’s Equinox Line 

facility does not qualify for tax exemptions under part 59 because the primary 

25
 
purpose of the Equinox Line is to produce engines, not to control or dispose of air 

pollution. In order to qualify for the tax exemption, the Equinox Line must meet 

the definition of “facility” under MCL 324.5901. MCL 324.5901 defines 

“facility,” in pertinent part, as follows: 

[M]achinery, equipment, structures, or any part or accessories 

of machinery, equipment, or structures, installed or acquired for the 

primary purpose of controlling or disposing of air pollution that if 

released would render the air harmful or inimical to the public health 

or to property within this state. Facility includes an incinerator 

equipped with a pollution abatement device in effective operation. 

Facility does not include an air conditioner, dust collector, fan, or 

other similar facility for the benefit of personnel or of a business. 

Facility also means the following, if the installation was completed 

on or after July 23, 1965: 

* * * 

(c) A process change involving production equipment made 

to satisfy the requirements of part 55 and rules promulgated under 

that part. The maximum cost allowed shall be 25% of the cost of the 

new process unit but shall not exceed the cost of the conventional 

control equipment applied on the basis of the new process 

production rate on the preexisting process. [MCL 324.5901 

(emphasis added).] 

Thus, under MCL 324.5901, a “facility” may be either “machinery, equipment, 

structures, or any part or accessories of machinery, equipment, or structures, 

installed or acquired for the primary purpose of controlling or disposing of air 

pollution that if released would render the air harmful or inimical to the public 

health or to property within this state” or “[a] process change involving production 

equipment made to satisfy the requirements of part 55 and rules promulgated 

under that part.” 

26
 
 

 

The Equinox Line does not satisfy the requirements of the tax exemption 

under MCL 324.5901 for a “facility” because the Equinox Line was not designed 

for the primary purpose of controlling or removing air pollutants. Unlike the test 

cells, which were installed for the primary and sole purpose of testing and 

controlling exhaust emissions, the Equinox Line was installed for the primary 

purpose of manufacturing engines. Although the Equinox Line assists in 

controlling and disposing of air pollution by manufacturing less-polluting engines 

that meet EPA standards, this purpose is secondary. Instead, the primary purpose 

of the line remains manufacturing engines for sale. Just because a manufacturing 

facility is altered or built to assure compliance with environmental laws does not 

mean that its primary purpose of manufacturing is transformed into a new primary 

purpose of controlling air pollution. The latter purpose remains secondary.22 

Therefore, because, unlike the test cells, the Equinox Line was not installed 

primarily to control or dispose of air pollution, I concur with the lead opinion’s 

22 To further illustrate, we offer the following hypothetical situation: if a 

manufacturing plant builds a new office building for pollution-control engineers 

charged with controlling and disposing of air pollution released by the plant and 

its products, the office building would not qualify as a “facility” under MCL 

324.5901. That is so because the primary purpose of the office building is to 

provide offices for employees, not to control or reduce pollution. The fact that the 

office building provides necessary accommodations for pollution-control 

engineers, and, therefore, indirectly or secondarily aims at controlling air 

pollution, does not transform its primary purpose. 

27
 
 

holding that Detroit Diesel’s Equinox Line is not a facility under MCL 324.5901. 

As a result, the Equinox Line does not qualify for tax exemptions under part 59.23 

Although the lead opinion does not address this argument, Detroit Diesel’s 

argument that the Equinox Line is a “facility” because it is “[a] process[24] change 

involving production equipment made to satisfy the requirements of part 55 and 

rules promulgated under that part” is not valid. 25 The stated purpose of part 55 is 

to prevent and abate air pollution.26 Detroit Diesel did not install the Equinox Line 

specifically to meet the requirements of part 55, but rather installed the Equinox 

Line to manufacture engines that comply with EPA requirements. That the 

installation of the Equinox Line furthers the purpose of part 55 does not mean that 

it was done to satisfy the requirements of part 55. As a result, the Equinox Line is 

not a “facility” under MCL 324.5901 because it is not “[a] process change 

23 Detroit Diesel also is not entitled to a tax exemption because the Equinox 

Line does not satisfy MCL 324.5903, which mandates that a “facility is designed 

and operated primarily for the control, capture, and removal of pollutants from the 

air” in order to qualify for a tax exemption. The Equinox Line was designed for 

the primary purpose of manufacturing engines for sale, not for the purpose of 

abating pollution. 

24 Part 55 defines “process” as “an action, operation, or a series of actions 

or operations at a source that emits or has the potential to emit an air 

contaminant.” MCL 324.5501(p). Part 55 defines “process equipment” as “all 

equipment, devices, and auxiliary components, including air pollution control 

equipment, stacks, and other emission points, used in a process.” MCL 

324.5501(q). 

25 MCL 324.5901(c). 

26 MCL 324.5540. 

28
 
involving production equipment made to satisfy the requirements of part 55 and 

rules promulgated under that part.” 

Detroit Diesel’s Equinox Line does not qualify for tax exemptions because 

the Equinox Line is neither “machinery, equipment, structures, or any part or 

accessories of machinery, equipment, or structures, installed or acquired for the 

primary purpose of controlling or disposing of air pollution that if released would 

render the air harmful or inimical to the public health or to property within this 

state” nor “[a] process change involving production equipment made to satisfy the 

requirements of part 55 and rules promulgated under that part.” As a result, the 

Equinox Line is not a facility under MCL 324.5901 and does not qualify for a tax 

exemption. 

IV. DUE PROCESS 

I do not find Detroit Diesel’s due-process argument persuasive. Detroit 

Diesel argues that the STC’s hearing process violated due process because the 

STC announced at the beginning of the hearing: “It is the position of the State Tax 

Commission after consultation with legal counsel that it has neither the authority 

nor the technical expertise to override a determination by the DEQ in regards to 

whether particular assets qualify for an air pollution control exemption.” Detroit 

Diesel argues that the STC, by abdicating its role as a true decision maker, 

deprived Detroit Diesel of a meaningful hearing. 

Generally, due process in civil cases requires notice of the 

nature of the proceedings and an opportunity to be heard in a 

meaningful time and manner by an impartial decisionmaker. 

29
 
 

 

 

 

Because the collection of a tax constitutes a deprivation of property, 

a state must provide sufficient procedural safeguards to satisfy due 

process requirements. But states are afforded great flexibility in 

satisfying the requirements of due process in the field of taxation. 

Due process is satisfied when a taxpayer has “a fair opportunity to 

challenge the accuracy and legal validity of their tax obligation and a 

clear and certain remedy for any erroneous or unlawful tax 

collection to ensure that the opportunity to contest the tax is a 

meaningful one.[27] 

Here, part 59 provides that an applicant for a tax exemption is entitled to a 

hearing: 

Before issuing a certificate, the state tax commission shall 

seek approval of the department and give notice in writing by 

certified mail to the department of treasury and to the assessor of the 

taxing unit in which the facility is located or to be located, and shall 

afford to the applicant and the assessor an opportunity for a 

hearing.[28] 

Under MCL 324.5902(1), a petitioner sends an application for a taxexemption certificate to the STC. MCL 324.5902(2) requires the STC to both 

allow the applicant an opportunity for a hearing and forward the application to the 

DEQ for approval. If the hearing concludes before the DEQ makes a 

determination, the STC must then refer the matter to the DEQ for consideration of 

factual developments at the hearing and to seek approval of the tax certificate. If 

the hearing concludes after the DEQ makes a determination, as in the instant case, 

27 By Lo Oil Co v Dep’t of Treasury, 267 Mich App 19, 29; 703 NW2d 822 

(2005) (internal citations and quotations omitted). 

28 MCL 324.5902(2) (emphasis added). 

30
 
the STC may grant or deny the certificate on the basis of the original DEQ 

determination and the developments at the hearing, or refer the matter again to the 

DEQ for consideration of any new information developed at the hearing. The 

DEQ, not the STC, has the authority and expertise to determine whether the 

facility is entitled to a tax exemption under part 59. 

MCL 324.5903 provides, in pertinent part: 

If the department finds that the facility is designed and 

operated primarily for the control, capture, and removal of pollutants 

from the air, and is suitable, reasonably adequate, and meets the 

intent and purposes of part 55 and rules promulgated under that part, 

the department shall notify the state tax commission, which shall 

issue a certificate. [Emphasis added.] 

MCL 324.5908 provides that although the STC may adopt rules considered 

necessary for administration of part 59 of NREPA, “[t]hese rules shall not abridge 

the authority of the department to determine whether or not air pollution control 

exists within the meaning of this part.” Thus, although the STC is the agency that 

actually issues the tax-exemption certificate, it must defer to the DEQ’s 

determination whether a petitioner is entitled to a tax exemption under part 59. 

Further, even assuming that the STC can grant a tax-exemption certificate 

without the DEQ’s approval, the hearing conducted by the STC in this case 

complied with due process. As required by MCL 324.5902(2), the STC forwarded 

Detroit Diesel’s application for tax-exemption certificates to the DEQ for 

approval. After receiving the DEQ’s determination that Detroit Diesel was not 

entitled to the tax exemptions, the STC afforded Detroit Diesel an opportunity for 

31
 
a hearing. The hearing at the STC was not meaningless. The STC gave Detroit 

Diesel a full hearing in which it was allowed to present evidence and argue that 

the STC was not bound by the DEQ findings. Detroit Diesel identifies no 

evidence or legal argument that it was prevented from submitting. Although the 

STC stated at the outset of the hearing that it lacked the authority to override a 

DEQ determination regarding an air-pollution-control tax exemption, the STC did 

not conduct the hearing merely to rubber-stamp the DEQ’s earlier decision. 

Rather, the STC conducted the hearing to gather additional information and 

forward this information to the DEQ for further consideration and another 

determination. Unfortunately for Detroit Diesel, the DEQ again decided that 

Detroit Diesel was not entitled to the tax exemptions. But because the DEQ 

considered the information developed at the hearing to determine whether to 

change its determination, the hearing was not meaningless. Thus, Detroit Diesel 

was afforded due process during the STC proceedings. 

V. CONCLUSION 

In conclusion, I dissent from the lead opinion and would affirm the Court of 

Appeals. I would hold that petitioners’ test-cell facilities qualify for tax 

exemptions under part 59 because they meet the definition of “facility” in MCL 

324.5901 and, under MCL 324.5903, are “designed and operated primarily for the 

control, capture, and removal of pollutants from the air,” are “suitable” or 

“reasonably adequate” at abating air pollution, and “meet the intent and purposes 

32
 
of part 55.” I concur with the lead opinion’s holding that Detroit Diesel’s Equinox 

Line does not qualify for tax exemptions under part 59 because the Equinox Line 

is not a “facility” under MCL 324.5901. Lastly, I would hold that Detroit Diesel 

was not deprived of due process during the STC proceedings. 

Elizabeth A. Weaver 

Maura D. Corrigan 

Stephen J. Markman 

33