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### STATE OF MICHIGAN

COURT OF APPEALS

ASHLEY CAPITAL, LLC,

Plaintiff-Appellee, UNPUBLISHED November 10, 2015

v No. 322386
Court of Claims DEPARTMENT OF TREASURY, LC No. 12-000132-MT

Defendant-Appellant.

Before: G ADOLA , P.J., and H OEKSTRA and M. J. K ELLY , JJ.

P ER C URIAM

.

Plaintiff, Ashley Capital, LLC, filed an action in the Court o f Claims, asserting that defendant, Department of Treasury (treasury department), improp erly calculated the tax owed by Ashley Capital under the former Michigan Business Tax Act (BTA) , MCL 208.1101, et seq ., for the tax years 2008, 2009, and 2011. 1 Ashley Capital specifically c ontested the order in which the treasury department applied cert ain carryforward credits from t he Single Business Tax Act (SBTA), MCL 208.1 et seq ., when calculating its BTA liability. 2 The treasury department appeals as of right from an opinion and order denying its motio n for summary disposition brought under MCR 2.116(C)(8) and granting judgment in favor of Ashley Capital under MCR 2.116(I)(2). Because the Court of Claims correctly determined the order in which the credits available to Ashley Capital unde r the BTA should be applied, we affirm.

This case involves the order in which credits should be applie d against tax liability under the BTA. In particular, there are four types of credits at iss ue. They are: (1) the “unused carryforward credit” descr ibed in § 401 of the BTA; (2) the “brownfield rehabilitation credit” referred to in § 437 of the BTA; (3) the “compensation credit” set forth in § 403(2) of the BTA; and (4) the “investment tax credit” provided for by § 403(3) of the BTA. Two of these credits—

1 The MBTA was repealed by 2011 PA 39, and replaced with the Cor porate Income Tax Act,
MCL 206.601 et seq . See Int’l Business Machines Corp v Dep’t of Treasury , 496 Mich 642, 650 & n 23; 852 NW2d 865 (2014).

2 The SBTA (1975 PA 228; MCL 208.1 to 208.145) was repealed by 2 006 PA 325, effective December 31, 2007, and replaced by the now former MBTA, effecti ve January 1, 2008.-2- the unused carryforward credit a nd brownfield rehabilitation cr edit—were available under the SBTA and they were carried forward into the BTA. The other cre dits—the compensation credit and the investment tax credit—were created by the BTA. Regardi ng the ordering of credits under the BTA, MCL 208.1403(1) provides that: “Notwithstanding any other provision in this act, the credits provided in this section [i.e., the compensati on credit and investment tax credits]
shall be taken before any other credit under this act .”

Although the language of MCL 208.1403(1) indicates that the co mpensation credit and investment tax credits must be taken “before any other credit under this act,” the treasury department crafted a form which required taxpayers to take carr yforward credits and brownfield rehabilitation credits before taking compensation credits and i nvestment credits. In this case, however, when Ashley Capital filed its returns, it did not foll ow the ordering of the form and it claimed its compensation credits and carryforward credits first . The treasury department then issued a BTA annual return notice of refund adjustment for the 2008 tax year, reducing Ashley Capital’s requested refund. Ashley Capitol challenged the adju stment, and an informal
conference was held with the tr easury department’s hearing refe ree. The hearing referee issued a recommendation that Ashley Capital receive a refund, but the tr easury department issued a
decision and order of determina tion overruling the hearing refe ree.

Adding claims for the 2009 and 2011 tax years, Ashley Capital appealed the decision to the Court of Claims, which reversed the treasury department’s d ecision. The Court of Claims concluded that MCL 208.1403(1) evinced a legislative intent to “create a ‘super’ priority for Compensation Credits and Invest ment Tax Credits.” Thus, the Co urt of Claims reasoned that the compensation credits and investment tax credits must be taken f irst, before all credits that originated under the BTA as well as those credits that were cre ated by the SBTA and carried forward by the BTA. Because Ashley Capital ordered the credits in this manner, the Court of Claims determined that Ashley Capital was entitled to summary d isposition under MCR 2.116(I)(2). The treasury depart ment now appeals to this Court as of right.

The issue before this Court on appeal is one of statutory inte rpretation. That is, both parties contest the interpre tation of MCL 208.1403(1) and the o rdering of credits under this provision. The parties both rec ognize that compensation credit s and investment tax credits must be taken before other credits under the BTA, but they disagree with regard to what constitutes a “credit under [the BTA].” Specifically, the treasury departmen t argues that credits under the BTA consist only of credits created by the BTA, meaning that th e phrase does not include the
brownfield rehabilitation credit s and the carryforward credits that originated under the SBTA. In contrast, Ashley Capital argues th at the brownfield rehabilitat ion credits and ca rryforward credits are credits provided for under the BTA and thus, under the plai n language of MCL 208.1403(1), the compensation credits and investment tax credits must be tak en before the brownfield
rehabilitation and car ryforward credits.

We review de novo a trial court’s decision on a motion for sum mary disposition. Jimkoski v Shupe , 282 Mich App 1, 4; 763 NW2d 1 (2008). “A court may grant sum mary disposition to the opposing party under MCR 2.116(I)(2) if it d etermines that the opposing party, rather than the moving party, is entitled to judgment.” Jaguar Trading Ltd Partnership v

Presler , 289 Mich App 319, 322; 808 NW2d 495 (2010). We review de nov o an issue of-3- statutory construction, which is a question of law. Lear Corp v Dep’t of Treasury , 299 Mich App 533, 537; 831 NW2d 255 (2013).

“When interpreting statutory language, our obligation is to as certain the legislative intent that may reasonably be inferred from the words expressed in the statute.” Koontz v Ameritech Services, Inc , 466 Mich 304, 312; 645 NW2d 34 (2002). To this end, we “must give effect to every word, phrase, and clause in a statute, and must avoid an interpretation that would render any part of the statute surplusage or nugatory.” Id. Statutory words must be read in context, and undefined terms are given their plain and ordinary meaning. Midamerican Energy Co v Dep’t of Treasury , 308 Mich App 362, 370; 863 NW2d 387 (2014). “If the language of the statute is unambiguous, the Legislature must have intended the meaning cle arly expressed, and the statute
must be enforced as written.” Ford Motor Co v Treasury Dep’t , 496 Mich 382, 389; 852 NW2d 786 (2014) (quotation marks and citation omitted). “A provisio n of law is ambiguous only if it ‘irreconcilably conflict[s]’ with another provision or ‘when it is equally susceptible to more than a single meaning.’” In re Application of Indiana Mich Po wer Co for a Certificate of Necessity

, 869 NW2d 276, 277; __ NW2d __ (2015), quoting Koontz , 446 Mich at 318. “When there is an ambiguity, tax laws are generally construed in favor of the tax payer, Lear Corp , 299 Mich App at 537, but “tax statutes that gr ant tax credits or exemptions are to be narrowly c onstrued in favor of the taxing authority because such statutes reduce the amount of tax imposed,” Alliance Obstetrics & Gynecology v Dep't of Treasury , 285 Mich App 284, 286; 776 NW2d 160 (2009). However, “[w]hile tax-exemption statutes are strictly construed in favor of the government, they are to be interpreted according to ordinary rules of statutory construction.” Inter Co-op Council v Tax Tribunal Dept of Treasury , 257 Mich App 219, 223; 668 NW2d 181 (2003). We note as well that an administrative agency’s “interpretation is entitle d to respectful consideration and, if persuasive, should not be overruled without cogent reasons.” Younkin v Zimmer , 497 Mich 7, 10; 857 NW2d 244 (2014) (citation omitted).

In this case, the statute a t issue is MCL 208.1403(1), which p rovides in full:

Notwithstanding any other provision in this act, the credits provided in this section shall be taken before any other credit under this act . Except as otherwise provided in [MCL 208. 403(6)], for the 2008 tax year, the total
combined credit allowed under this section shall not exceed 50% of the tax liability imposed under this act before the imposition and levyof the surcharge
under section 281. For the 2009 ta x year and each tax year aft er 2009, the total
combined credit allowed under this section shall not exceed 52% of the tax liability imposed under this act before the imposition and levyof the surcharge under section 281. [Emphasis added.]

Considering the plain language of the statute, we conclude tha t the Court of Claims correctly recognized that MCL 208.1403(1) placed the compensati on credits and investment credits in a “‘super’ priority” position relative to all other credits a taxpayer might claim under the BTA. That is, it is unmistakable that the credits describe d in MCL 208.1403(1), i.e., compensation credits and investment credits, must be taken before “any other credit under this act.” Further, in our judgment it is equally clear that “any o ther credit under this act” refers to any credit described in a section of the BTA other than MCL 208 .1403. The term “this act” obviously denotes the BTA. See MCL 208.1101(1). And, for a cr edit to be “under” the BTA, it-4- must be “within the group or designation of” the BTA or “subjec t to the authority, control, guidance, or instruction of” the BTA. See Merriam-Webster’s Collegiate Dictionary (2014) (defining the word “under”). Given this ordinary understanding of what it means to be “under” the BTA, we agree with the Court of Claims conclusion that the brownfield rehabilitation credits and carryforward credits constitu te other credits under the BTA . The BTA expressly provides for the carryforward credits under MCL 208.1401 and for brownfi eld rehabilitation credits under
MCL 208.1437. Both MCL 208.1401 a nd MCL 208.1437 are containedwithin the BTA and more specifically within the chapter entitled “credits,” meanin g that, quite simply, these are credits “under” the BTA. As such, it is clear that these credi ts are also subject to the ordering provision found in MCL 208.1403(1) b ecause they are included in the phrase “any other credit[s] under [the BTA].” Consequently, Ashely Capital correctly order ed its credits when it claimed the compensation credits and inve stment credits before the brow nfield rehabilitation credits and carryforward credits. See MCL 208.1403(1).

In contrast to this conclusion, the treasury department mainta ins that only credits created by the BTA are a “credit under this act.” However, this interp retation impermissibly reads additional language into the stat ute, which we will not do. Se e Book-Gilbert v Greenleaf , 302 Mich App 538, 542; 840 NW2d 743 (2013). Had the Legislature on ly intended to place the compensation credits and investment credits before those credit s created by the BTA, it would have so specified. Instead, it chose the phrase “under this ac t,” which clearly encompasses all credits provided for under the BTA, including the brownfield re habilitation credits and carryforward credits. Indeed, although it is tru e that these c redits originated under the SBTA, the SBTA has been repealed. See Int’l Bus Machines Corp , 496 Mich at 649 & n 21, citing 2006 PA 325. Consequently, while the credits in question might have or iginated under the SBTA, as of January 1, 2008, the SBTA no longer existed and these credits w ere then governed solely by the BTA. In these circumstances, these credits exist “under” the B TA such that they are covered by the ordering provision of MCL 208.1403(1).

In a different formulation of essentially the same argument, t he treasury department also argues that the Legislature inte nded a textual distinction betw een a “carryforward” from the
SBTA and a “credit” under the BTA such that credits carried for ward from the SBTA cannot be considered a “credit” for purposes of the BTA. 3 This argument from the treasury department draws a distinction without a difference. Under the BTA, the c arryforward credits, brownfield rehabilitation credits, investment credits, and compensation cr edits are all available to offset taxpayer liability under the BTA. The mere fact that some cred its were carried forward by the Legislature from the SBTA does not obviate the clear fact that such carryforwards are nonetheless credits which, like o ther credits, may be used unde r the BTA to offset liability arising under the BTA. Indeed, MCL 208.1403(1) refers broadly to “ any other credit under this

3 For example, regarding carryforward credits, MCL 208.1401 stat es that “[e]xcept as otherwise provided under this act, any unused carryforward for any credit under former 1975 PA 228 may be applied for the 2008 and 2009 tax years and any unused carry forward after 2009 shall be extinguished.” The treasury depa rtment asserts that given this phrasing there is a distinction
between a “credit” and an “unused c arryforward for any credit.”-5- act,” and it makes no distinction between those credits carried forward from the SBTA and those originating under the BTA. We d ecline to read such language in to the statute. See Book-Gilbert

, 302 Mich App at 542. Because the brownfield rehabilitation cre dits and carryforward credits may be used under the BTA to offset liability arising from the BTA, they plainly constitute
“credits” under the BTA.

Finally, the treasury departme nt asserts that its interpretat ion of MCL 208.1403(1) should prevail because the treasury department was delegated th e discretionary authority to administer the BTA, including the authority to prescribe forms for use in effectuating the BTA. In these circumstances, the treasury department maintains that its interpretation is entitled to respectful consideration and its forms delineating the ordering of credits should be subjected to a
rational basis review.

It is clear that the treasury department has authority to admi nister the tax imposed by the BTA, MCL 208.1513(1), to “prescribe forms for use by taxpayers, ” MCL 208.1513(3), and to “promulgate rules in conformity with” the BTA, MCL 208.1513(3). Moreover, “[a]gencies have the authority to interpret the statutes they are bound to admin ister and enforce.” By Lo Oil Co v Dep’t of Treasury , 267 Mich App 19, 46; 703 NW2d 822 (2005). However, the Admin istrative Procedures Act (APA), MCL 24.201, et seq ., provides that an administrative agency’s “form with instructions, an interpretive statement, a guideline, and informational pamphlet . . . [is not a promulgated rule and] does not hav e the force and effect of law but is merely explanatory.” MCL 24.207(h). Further, although t he treasury department has a uthority to prescribe forms under the BTA, its designation in those forms of the order in w hich credits should be taken is not subject to rational-basis review because the Legislature expres sly set the order of credits in the BTA and did not grant such discretion to the treasury departmen t. See MCL 208.1403(1). Cf. Guardian Indus Corp v Dep’t of Treasury , 198 Mich App 363; 499 NW2d 349 (1993) (holding that where the statute granted the commissioner of revenue disc retion to require a taxpayer to consolidate tax returns, rationa l-basis review of decision to n ot apply decision r etroactively was appropriate). Ultimately, while the treasury department’s inte rpretation of the BTA is entitled to respectful consideration, it is simply not persuasive because i t does not comport with the plain language of the statute. See Younkin , 497 Mich at 10; Kmart Mich Prop Servs, LLC v Dep't of Treasury , 283 Mich App 647, 651; 770 NW2d 915 (2009). Consequently, be cause there are cogent reasons why the treasury de partment’s interpretation sho uld not be upheld, the Court of Claims properly applied the plai n language of the statute and g ranted summary disposition to Ashley Capital.

Affirmed.

/s/ Michael F. Gadola
/s/ Joel P. Hoekstra /s/ Michael J. Kelly