Case Name: BORDEN, INC v. DEPARTMENT OF TREASURY
Court: Michigan Supreme Court
Jurisdiction: Michigan
Decision Date: 1974-05-21
Citations: 391 Mich. 495
Docket Number: No. 2; Docket No. 54,419
Parties: BORDEN, INC v DEPARTMENT OF TREASURY
Judges: T. G. Kavanagh and M. S. Coleman, JJ., concurred with Levin, J.
Reporter: Michigan Reports
Volume: 391
Pages: 495–532

Head Matter:
BORDEN, INC v DEPARTMENT OF TREASURY
Decision of the Court
1. Appeal and Error — Equally Divided Court.
Decision of the Michigan Court of Appeals affirming summary judgment for the plaintiff on its petition to review a determination by the Michigan Department of Treasury of its franchise fees is affirmed by an equally divided Court.
Opinion for Affirmance
T. G. Kavanagh, Levin, and M. S. Coleman, JJ.
2. Taxation — Corporations—Annual Report — Franchise Fee— Computation.
The Franchise Fee Division of the Department of Treasury exhausts its statutory authority when, following receipt of the annual report of a corporation, it "computes” the franchise fee of the corporation; the Division is not authorized to recompute the fee if it subsequently obtains what it regards as more accurate information.
3. Taxation — Corporations—Franchise Fee — Annual Report — Deficiency.
The Franchise Fee Division of the Department of Treasury and its predecessor, having computed the tax and accepted and died a corporation’s annual reports for the years in dispute, was without authority to compute the franchise fee a second time and, hence, was without authority to levy a dedciency.
4. Taxation — Statutes—Corporations—Franchise Fee — Field Audit.
The statutes establishing the procedures for the computation and collection of the corporate franchise fee contain no language expressly or impliedly authorizing deld audits (MCLA 450.301-450.310).
References for Points in Headnotes
5 Am Jur 2d, Appeal and Error §§ 901, 902.
51 Am Jur, Taxation §§ 794, 808-824.
5. Taxation — Franchise Fee — Computation.
It is too late for the Franchise Fee Division of the Department of Treasury to "work in conjunction” with the Department of Revenue in the "computation” of a franchise fee after it has been computed; whatever "work”is done "in conjunction” with the Department of Revenue manifestly is to be done before the Franchise Fee Division "computes” the fee and any information obtained after computation can be utilized only to assist the Division in the computation of fees for subsequent years.
6. Taxation — Corporations—Franchise Fee — Final Determination —Field Audit.
Statutory language requiring a corporation "to furnish detailed and exact information touching such several matters before making a fínal determination” did not contemplate computations of franchise fees based on held audits but, rather, computations based on information obtained without audits (1921 PA 85).
7. Taxation — Legislature—Franchise Fee — Corporations-—Annual Report.
The Legislature has failed to provide any means by which a different franchise fee can properly be computed after the fee has once been computed and the annual report of a corporation accepted.
8. Taxation — Statutes—Legislature.
The law of taxation is statutory, and historically the prerogative of the Iegislaiive branch.
Opinion for Reversal
T. M. Kavanagh, C. J., and Swainson and Williams, JJ.
9. Taxation — Statutes—Construction.
A general rule of construction is that revenue laws containing doubtful language are to be strictly construed against the taxing authority; therefore, the Michigan Supreme Court should resolve any and all doubts in favor of the taxpayer.
10. Taxation — Statutes—Construction.
Even when there is doubt in the interpretation of a revenue statute, the doubt is to be resolved in favor of the taxpayer only if such resolution gives a reasonable construction to the act.
11. Taxation — Statutes—Construction—Legislative Intent — Administrative Law.
In interpreting revenue laws, it may be important in attempting to construe the legislative purpose behind the laws to consider the interpretations of the administrative agencies which administer and enforce the laws.
12. Taxation — Statutes—Construction.
Overall, while doubtful language in a revenue statute is to be construed in favor of the taxpayer, this should be done in light of a reasonable construction insuring that the state receives all revenues justly due it; further executive interpretation and legislative acquiescence in that interpretation should be given great weight.
13. Statutes — General Corporation Act — Fees, Taxes and Charges Act — Annual Report.
A section of the General Corporation Act providing that a corporation’s annual report contain "[sjuch other information and facts as the Michigan corporation and securities commission may demand and need for the purpose of computing the annual privilege fee provided by law” and a portion of the fees, taxes and charges act providing ",'at the time of Sling the annual report with the Michigan corporation and securities commission, as required by §§ 81 and 82 of Act No. 327 of the Public Acts of 1931” are the cross-references in each act to the other act; a section of the General Corporation Act permits the request for the Sling of needed information other than that particularly speciSed in order to compute "the annual privilege fee as provided by law/’i.e. in the fees, taxes and charges act; a section of the fees, taxes and charges act' references a section of the General Corporation Act only to set a time at which fees required by the fees, taxes and charges act shall be paid (MCLA 450.82, 450.304).
14. Corporations — General Corporation Act — Statutes—Title of Act — Fees—Taxation.
The main purpose of the title and text of the General Corporation Act is the regulation of corporations and to provide information for the public about them; there is not a single word in the title of the Act about fees or taxes (MCLA 450.1 et seq.).
15. Taxation — Fees, Taxes and Charges Act.
The fees, taxes and charges act is an act with the purpose of raising revenue (MCLA 450.301 et seq.).
16. Statutes — In Pari Materia — Construction.
Statutes dealing with the same matter are in pari materia and must be construed together to reach a harmonious result.
17. Statutes — Construction.
If by any reasonable construction two statutes can be reconciled and a purpose to be served by each, both must stand and be given effect.
18. Statutes — Construction—General Corporation Act — Fees, Taxes and Charges Act.
If the General Corporation Act and the fees, taxes and charges act can be interpreted in such a way that neither denies the full effectiveness of the other, that is the way they both must be interpreted (MCLA 450.1 et seq., 450.301 et seq.).
19. Statutes — Construction—General Corporation Act — Fees, Taxes and Charges Act — Final Determination.
In seeking to give full purpose to the legislative intention in the General Corporation Act and the fees, taxes and charges act it makes more sense, and the laws of statutory interpretation require, that the "ñnal determination" concept of a section of the fees, taxes and charges act not be transposed into the General Corporation Act but be construed along with, and a part of, its own act (MCLA 450.1 et seq., 450.301 et seq.).
20. Taxation — Corporations—Field Audit — Annual Report.
A ñeld audit of corporation books for tax purposes after "acceptance" or "Ming" of an annual report is authorized just as one prior thereto.
21. Taxation — General Corporation Act — Privilege Taxes — Construction.
The corporation privilege tax statute should be read and administered to secure to the state all sums justly due it, but no more (MCLA 450.82).
22. Taxation — Corporations—Audit—Fraud—Error—Incorrectness — Mistake.
The Treasury Department is authorized to examine and audit corporate books for the purpose of determining "fraud", "error”, "incorrectness" or "mistake” either in favor of the state or the taxpayer.
23. Limitation of Actions — Fees, Taxes and Charges Act — Corporations — Franchise Fee.
The "as soon as practicable” language of a section of the fees, taxes and charges act which provides that "[ejvery corporation subject to the provisions of this act shall be notiñed as soon as practicable of the computation of its franchise fee” does not relate to the time within which the computation shall be made; it rather relates to notiñcation of the corporation after the computation is made whenever it is made; it cannot be said to be a statute of limitations as to when a final determination may be made as to any privilege tax filed (MCLA 450.309).
24. Action — Personal Action — Words and Phrases — Taxation— Privilege Taxes.
The term ''personal action” means an action brought for the recovery of personal property, for the enforcement of a contract or to recover damages for its breach,' or for the recovery of damages for the commission of an injury to the person or property; the collection of privilege taxes is a personal action.
25. Taxation — Corporations—Franchise Fee — Limitation of Actions — Annual Report — Audit.
The issuance by Treasury’s Corporation Franchise Fee Division of its determination of fees put the corporation taxpayer on notice that the state intended to collect further taxes in a deSnite amount from the taxpayer; with this issuance of determination of fees the state commenced the action; the claims arose when the annual reports for the years in question were accepted by the Department, for at this time the alleged wrong was done by the taxpayer to the detriment of the state though the state was not aware of any injury until the audit.
26. Limitation of Actions — Taxation—Corporations—Annual Report — Final Determination.
The general six year limitation statute applied and, once a claim arose, by accepting the annual report of the corporation for Sling, the state had six years within which to make a Snal determination or be bound by the fee paid upon acceptance for Sling; in a case where the annual report for 1964 was accepted on July 29, 1964, the determination issued in November, 1969 was timely for the years 1964 through 1968 (MCLA 600.5813).
Appeal from Court of Appeals, Division 2, Bronson, P. J., and Danhof and Van Valkenburg, JJ., affirming Ingham, Donald L. Reisig, J.
Submitted September 4, 1973.
(No. 2
September Term 1973,
Docket No. 54,419.)
Decided May 21, 1974.
Rehearing denied June 25, 1974.
43 Mich App 106 affirmed by an equally divided Court.
Petition by Borden, Inc., to review a determination by the Michigan Department of Treasury of its franchise fees. Summary judgment for plaintiff. Defendant appealed to the Court of Appeals. Affirmed. Defendant appeals.
Affirmed by an equally divided Court.
Dickinson, Wright, McKean & Cudlip (by T. Donald Wade and Benjamin O. Schwendener, Jr.), for plaintiff.
Frank J. Kelley, Attorney General, Robert A. Derengoski, Solicitor General, and Richard R. Roesch and Charles E. Liken, Assistants Attorney General, for defendant.

Opinion:
Levin, J.
(for affirmance). When, following receipt of the annual report of a corporation, the Franchise Fee Division "computes" the franchise fee of the corporation, it exhausts its authority under the statute. The Division is not authorized to re-compute the fee if it subsequently obtains what it regards as more accurate information.
The Division (or its predecessor, the Michigan Corporation and Securities Commission) stamped on Borden's reports for each of the years 1964-1968 the date "filed" and the date "accepted". On each report there appears the "Tentative computation of fee by Corporation" and separately, in the handwriting of a state employee, the "Fee as computed by Franchise Fee Division" (or, for the first two years, "Fee as computed by the Michigan Corporation and Securities Commission"). (Em phasis supplied.) Before the reports were accepted, an overpayment was computed by the Franchise Fee Division for 1966, a deficiency by the Corpora tion and Securities Commission for 1964. The deficiency was paid and is not in dispute.
Borden was later notified, based on information obtained in subsequent field audits, of claimed deficiencies for the five years. From an adverse redetermination by the appeal board, it appealed to the circuit court. The circuit judge and, on further review, the Court of Appeals agreed with Borden that the Division and its predecessor, having computed the tax and accepted and filed Borden's annual reports for the years in dispute, was without authority to compute the tax a second time and, hence, was without authority to levy a deficiency. We would affirm those judgments.
I
The statutory provisions establishing the procedures for the computation and collection of the corporate franchise fee took their present form in 1921.
These provisions were structured on the premise that promptly after the filing of the annual report of a corporation, the franchise fee for the year would be computed by the Secretary of State (later the Michigan Corporation and Securities Commission, now the Corporate Franchise Fee Division of the Department of Treasury) after the receipt of such additional information as he (or his successors) requires.
The statutes contain no language expressly or impliedly authorizing field audits. The practice was not to conduct field audits.
Subsequently, with the enactment of the sales, use and other state taxes, field audits pertaining to those taxes were legislatively authorized.
In 1941 the Department of Revenue was created to coordinate the collection of state taxes and to avoid duplications in facilities for tax collections and audits. The administration of the sales, use and other taxes was transferred to this new department. *5 6The Department also succeeded to the functions and responsibilities of the Michigan Corporation and Securities Commission "over the enforcement, investigation and collection of past-due and delinquent corporate privilege and franchise fees and license fees of any nature." The Commission retained the duty to "compute" the franchise fee and collect franchise fees not "past-due and delinquent".
In 1952, in connection with a revision of the computation formula, it was provided that the Commission would continue to "compute" the franchise fee "working in conjunction with the state department of revenue." No other change was made in structure or procedure.
II
It is too late for the Franchise Fee Division to "work in conjunction" with the Department of Revenue in the "computation" of a franchise fee after it has been computed. Whatever "work" is done "in conjunction" with the Department of Revenue manifestly is to be done before the Franchise Fee Division "computes" the fee. Any information obtained after computation can be utilized only to assist the Division in the computation of fees for subsequent years.
The "final determination" language goes back to the original enactment in 1921; it is part of a sentence authorizing the Michigan Corporation and Securities Commission to require the corpora tion itself to furnish information in addition to that required in the annual report:
"[T]o furnish detailed and exact information touching such several matters before making a final determination."
Clearly that language did not contemplate computations based on field audits but, rather, computations based on information obtained without audits. Nor could this language — enacted two decades before the Department of Revenue was created— set the stage for recomputations based on Revenue Department audits.
The foregoing construction of this 1921 enactment finds support in the fact that 14 years later field audits were still thought to be impractical:
"The statute does not provide, in express language or by authorization of expense, for the impractical procedure of audit and appraisal of each corporation each year by the State. It contemplates that the tax shall be found from the annual report of the corporation to the Secretary of State supplemented by the further facts demanded ." In re Appeal of Hoskins Manufacturing Co, 270 Mich 592, 596-597; 259 NW 334 (1935).
This Court has said: "Tax exactions, property or excise, must rest upon legislative enactment, and collecting officers can only act within express authority conferred by law. Tax collectors must be able to point to such express authority so that it may be read when it is questioned in court. The scope of tax laws may not be extended by implication or forced construction. Such laws may be made plain, and the language thereof, if dubious, is not resolved against the taxpayer." In re Dodge Brothers, 241 Mich 665, 669; 217 NW 777 (1928), an appeal from a computation of a corporate franchise fee pursuant to 1921 PA 85.
Ill
The Franchise Fee Division stresses the need for prompt filing and acceptance of the annual report, the impracticability of auditing a corporation's books every year and the utility of combining an audit for other tax purposes with an audit for corporate franchise fee purposes. These are entirely valid considerations but they overlook the history of the franchise fee.
The franchise fee was initially a license fee— sometimes called a privilege fee — to be paid in advance for the privilege of exercising the franchise during the ensuing year. The procedures for computation of the fee contemplate that it will be determined promptly after the annual report is filed and before the franchise is exercised. The annual report division has consistently administered its responsibilities in this manner. Only in subsequent years did the fee become a revenue raising measure, but the authority of the tax collector — the Franchise Fee Division and its predecessors — was not enlarged, the statutory procedures have not been changed. Only recently, many years after the 1952 amendment (see text follow ing fn 6) has the Franchise Fee Division sought, based on field audits for other tax purposes, to recompute a franchise fee it had previously computed.
While it may make sense to utilize field audits in determining the correct fee, the Legislature has failed to provide, any means by which a different fee can properly be computed after the fee has once been computed and the annual report accepted.
The Attorney General would have us revise the procedures so that this seemingly desirable safeguard of the revenues can be implemented. When confronted with the need for finality and the absence of a statute of limitations other than the limitation implicit in the obligation to compute the fee promptly before acceptance of the annual report, he suggests the six-year statute applicable to personal actions.
Only by a strained construction can that limitation period — applicable to actions commenced in a court — be applied to the determination of a tax deficiency which a department of government claims it is authorized to make without commencing an action and, if it is correct in its thesis, once made is final unless the taxpayer appeals. A determination so made may never reach a court, and then only upon appeal from an adverse administrative determination, not as an action commenced in court. 11
IV
Courts are, indeed, sometimes constrained to supply a gap in legislation, particularly legislation which, builds on common-law doctrine. The law of taxation is statutory, and historically the prerogative of the legislative branch.
The Attorney General and the Franchise Fee Division ask us not just to improvise to provide for utilization of an audit capability which did not exist when the corporate franchise fee procedures took their present form in 1921, but to change a long established feature of the administration of the franchise fee. They ask us to eliminate the finality, absent fraud or administrative appeal, of the computation made early in the year the franchise is exercised, and to substitute a relatively long six-year statute of limitations.
If the present system does not adequately safeguard the revenue, the Division may present the evidence to the Legislature. The Legislature will be as concerned about protecting the revenue as the Department of the Treasury and the Attorney General. It has not been demonstrated that there is need for judicial improvisation pending a legislative solution. A legislative solution has the advantage that at the same time there can be enacted a statute of limitations expressive of legislative choice concerning an appropriate limitation period.
T. G. Kavanagh and M. S. Coleman, JJ., concurred with Levin, J.
1964 report: The report was received from Borden on May 8, 1964. A deficiency was computed and Borden notified on July 8, 1964. The deficiency was paid July 15, 1964 and the report was filed July 29, 1964:
1965 report: Received and filed'without change:
1966 report: An overpayment was computed by the Division and refund was made after the report was filed:
1967 report: Received and filed without change:
1968 report: Received and filed without change after further infornation was furnished by Borden:
See fn 1.
1921 PA 85; MCLA 450.301-450.310; MSA 21.201-21.210(1).
It is clear both from the language of the annual report forms (see fn 1) and of the statutes (infra, this footnote) that the key word is "computation".
The corporate franchise fee is initially self-assessed. The taxpayer is required to file an annual report supplying information from which the fee can be computed, and is further required to pay the fee it computes as shown on the annual report when it is filed. The statute specifies in some detail the information to be set forth in the annual report, additionally requiring "[s]uch other information and facts as the department of treasury may demand and need for the purpose of computing the annual privilege fee provided by law." (Emphasis supplied.) 1970 CL 450.82; MSA 21.82, now MCLA 450.1911; MSA 21.200(911); MCLA 450.304; MSA 21.205.
The collector of the corporate franchise fee is not bound by the amount shown on the report; the taxpayer can be required to furnish additional information. It is provided that the "Michigan corporation and securities commission shall in all such cases be authorized to require the corporation to furnish detailed and exact information touching such several matters before making a final determination of the privilege fee to be paid by such corporation." (Emphasis supplied.) MCLA 450.304; MSA 21.205.
It was also provided that such reports shall be carefully examined and "if upon such examination they shall be found to comply with all the requirements of this act" the report shall be filed and a copy forwarded to the county where the corporation has its registered office. 1970 CL 450.84; MSA 21.84, now MCLA 450.1131; MSA 21.200(131).
It is further provided that "[i]n the case of computing the annual franchise fee such computations shall be made by the Michigan corporation and securities commission, working in conjunction with the state department of revenue". (Emphasis supplied.) MCLA 450.305; MSA 21.208.
It is further provided that the corporation "shall be notified as soon as practicable of the computation of its franchise fee pursuant [to the last mentioned provisions] in the event it has remitted an amount in excess of the proper fee or has any further liability with respect thereto"; provision is made for refund or credit of any excess paid; and any corporation "may apply for a redetermination of its franchise fee by filing a written request therefor with the corporation and securities commission within 20 days after receipt of notice of the original computation above referred to". The commission "shall promptly redetermine the liability of such corporation." The corporation may then appeal to the appeal board; the appeal board "shall recompute the liability of the taxpayer". (Emphasis supplied.) MCLA 450.309; MSA 21.210.
1941 PA 122.
In contrast with the statutory provisions relating to the franchise fee, the Sales Tax Act (MCLA 205.68, 205.72; MSA 7.539, 7.543), the intangibles tax act (MCLA 205.141, 205.143; MSA 7.556[11], 7.556[13]), and the Income Tax Act (MCLA 206.455, 206.408; MSA 7.557[1455], 7.557[1408]), provide for audit and assessment of deficiencies.
MCLA 205.13; MSA 7.657(13).
The deficiencies sought to be levied against Borden are based on field audits, not on information furnished by Borden in response to inquiries from the Franchise Fee Division "touching such several matters".
In both Hoskins and McLouth Steel Corp v Corporation & Securities Commission, 372 Mich 76; 124 NW2d 900 (1963), the proceedings concern computations of franchise fees before acceptance and filing of annual reports, not an attempted recomputation.
Initially, the fee was not less than $50 nor more than $10,000 (1921 PA 85, § 4); subsequently the minimum amount was reduced to $10 and the maximum amount was increased to $50,000 (1923 PA 233) and still later the maximum amount was eliminated (1951 PA 277).
"All other personal actions shall be commenced within the period of 6 years after the claims accrue ." MCLA 600.5813; MSA 27A.5813.
In re MacDonald Estate, 341 Mich 382; 67 NW2d 227 (1954), dealt with the applicability of the general statute of limitations in the context of an action commenced in the probate court.
The decedent's will was admitted to probate on petition filed with that court. The estate had never been closed. The probate court had cited the surety on the executrix's bond and had ordered the surety to pay inheritance tax based on a determination made 28 years after the death of the deceased; the order was set aside on appeal.
The extent of the revenue loss under the system established by the Legislature is unclear.