Case Name: BOISE CASCADE CORPORATION v. DEPARTMENT OF TREASURY
Court: Michigan Court of Appeals
Jurisdiction: Michigan
Decision Date: 1979-02-20
Citations: 88 Mich. App. 626
Docket Number: Docket No. 78-405
Parties: BOISE CASCADE CORPORATION v DEPARTMENT OF TREASURY
Judges: Before: Danhof, C.J., and R. M. Maher and D. C. Riley, JJ.
Reporter: Michigan appeals reports; cases decided in the Michigan Court of Appeals.
Volume: 88
Pages: 626–632

Head Matter:
BOISE CASCADE CORPORATION v DEPARTMENT OF TREASURY
Docket No. 78-405.
Submitted December 12, 1978, at Detroit.
Decided February 20, 1979.
Leave to appeal applied for.
Boise Cascade Corporation and Boise Cascade Home and Land Corporation do business in Michigan and other states. They filed suit against the Michigan Department of Treasury to compel the refund of intangible taxes which were paid under protest. Plaintiffs own certain income producing property (receivables) located outside the State of Michigan. At issue is whether these intangibles have a situs in Michigan subjecting them to the intangibles tax act. Defendant collected the taxes on the theory that the use in Michigan of the income from those receivables establishes a sufficient nexus between this state and the property to warrant imposition of the tax. Summary judgment for plaintiffs, Wayne Circuit Court, Patrick J. Duggan, J. Defendant appeals. Held:
The use of income in Michigan from intangible property located in another state does not generate a Michigan tax situs in that property.
Affirmed.
Danhof, C.J., dissents. He would hold that for the tax period involved in the instant case the actual use of income from intangible property located in another state by a Michigan business establishes a Michigan tax situs for the assessment of intangible taxes. He would reverse the lower court and remand for a trial to determine whether such use has been made by the plaintiffs.
Opinion of the Court
1. Taxation — Intangible Property — Situs — Nonresident Business — Jurisdiction.
A situs for taxable jurisdiction is not established for an intangi bles tax where the only connection between the state and intangible property of a nonresident business is that the interest produced by the intangibles is available as part of the general cash account for use by the Michigan branch of the nonresident business.
References for Points in Headnotes
71 Am Jur 2d, State and Local Taxation §§ 671-674.
Property tax: Business situs of intangibles held in trust in state other than beneficiary’s domicil. 59 ALR3d 837.
71 Am Jur 2d, State and Local Taxation § 666.
2. Taxation — Intangible Property — Situs — Nonresident Business — Jurisdiction.
A situs for taxable jurisdiction is not established where the state treasury’s assessment is based upon a number of nonresident receivables which bear no relation to Michigan other than the fact that income from interest paid on these-receivables is sent to Michigan for use in the taxpayer’s Michigan operations; the use of income in Michigan from intangible property located in another state does not generate a Michigan tax situs in that property.
Dissent by Danhof, C.J.
3. Taxation — Intangible Property — Situs — Nonresident Business — Jurisdiction.
A Michigan tax situs for assessment of intangible taxes is established where the income from intangible property located in another state is used in a Michigan business.
Roger K. Timm, for plaintiffs.
Frank J. Kelley, Attorney General, Robert A. Derengoski, Solicitor General, and Lawrence W. Morgan, Assistant Attorney General, for defendant.
Before: Danhof, C.J., and R. M. Maher and D. C. Riley, JJ.

Opinion:
Riley, J.
Plaintiffs, Delaware corporations doing business in Michigan and other states, filed suit to compel the refund of intangible taxes which were paid under protest. Plaintiffs' motion for summary judgment was granted and defendant appeals as of right.
It is uncontested that plaintiffs own certain income producing intangible property, i.e. receivables, located outside the State of Michigan. At issue is whether these intangibles have a "situs" in Michigan subjecting them to the intangibles tax act, MCL 205.131 et seq.; MSA 7.556(1) et seq. Defendant alleges that the use in Michigan of the income from those receivables establishes a sufficient nexus between this state and the property to warrant imposition of the tax. We do not agree.
In pertinent part, MCL 205.131(c); MSA 7.556(l)(c) states:
"Provided, [t]hat in the case of intangible personal property used in connection with the conduct of the owner's business both within and outside the state of Michigan, all such property shall be deemed to have a 'situs' in this state to the extent of the percentage of the whole of such property as determined by the allocation formula set forth in section 12 of this act." (Emphasis supplied.)
In construing this provision, The E F MacDonald Co v Dep't of Treasury, 62 Mich App 626, 637; 233 NW2d 678 (1975), held that
"Where the only connection between the state and the intangibles is that the interest produced by the intangibles is available as part of the general cash account for use by the Michigan branch of the nonresident business, a situs for taxable jurisdiction is not established."
In MacDonald the note receivable from a company which did not operate in Michigan, to the taxpayer, was made in Ohio and arose from business activities in California. The only connection between the note and the State of Michigan was that the income from the receivable was available for use, as part of MacDonald's general cash ac count, by the Michigan branch of the business, as well as branches in other states. No other use of the receivable in connection with the conduct of MacDonald's Michigan business was demonstrated. Similarly, in this case the treasury's assessment is based on a number of receivables which bear no relation to Michigan other than the fact that the income from interest paid on those notes is sent to Michigan for the use of the taxpayers' Michigan operations.
In making its determination the MacDonald Court affirmed the Board of Tax Appeals decision which it described as follows:
"The Board applied the facts of the case to the proviso clause of the statute and decided that the record did not support the conclusion that the intangible assets were 'used in the conduct' of MacDonald's business in Michigan. The use in Michigan of income of the intangible, as compared with use of the intangible itself, was held to be insufficient to constitute situs under the statute(Emphasis supplied.) 62 Mich App at 633-634.
See also, National Gypsum Co v Dep't of Treausry, State Board of Tax Appeals, docket #953 (1977).
Defendant maintains that MacDonald is not controlling since the income from that case was merely "available" and not actually used in Michigan as it purports to show here. This contention is without merit. Our reading of MacDonald persuades us that it did not intend to make such a distinction. The use of income in Michigan from intangible property located in another state does not generate a Michigan tax situs in that property. The trial court's order of summary judgment is therefore affirmed.
R. M. Maher, J., concurred.