Court Opinion

ID: 9726817
Source: CourtListenerOpinion
Date Created: 2023-08-26 13:09:41.239616+00
Date Added: 2024-06-11T18:25:31.070333
License: Public Domain

Edwards, J.
(dissenting). This appeal presents 2 questions of some considerable importance:
Was the corporation tax appeal board (hereinafter referred to as the “board”) consisting of the chief assistant attorney general, the deputy State treasurer, and the deputy auditor general lawfully *159constituted to hold a hearing and issue a decision as provided in PA 1921, No 85, § 9, as amended by PA 1954, No 153?
Was the item “Reserve for deferred Federal income taxes,” appearing on the appellant’s balance sheet in the amount of $13,712,026, properly included as “surplus” for franchise fee computation purposes under PA 1921, No 85, § 4, as amended by PA 1954, No 144?
Mr. Justice Kelly would hold that the corporation tax appeal board which heard this case was invalidly constituted because the deputy auditor general and the deputy State treasurer sat as members, and would remand this matter for hearing before a reconstituted board.
There is, of course, no doubt that the statute creating the board did not specifically authorize the deputies to substitute for their principals, the attorney general, the State treasurer, and the auditor general, who were named therein. CLS 1956, § 450-.309 (Stat Ann 1959 Cum Supp §21.210).
Justice Kelly, however, concedes that other legislation allowing the attorney general to appoint a deputy and assistant attorneys general also authorizes such assistants to sit on the corporation tax appeal board. See CLS 1956, § 14.35 (Stat Ann 1952 Rev § 3.188).
We think that the legislature, when it authorized the treasurer and auditor general to appoint deputies, likewise granted them the power to function for their, superiors in performing the duties legislatively assigned to the office.
Thus the statute authorizing the appointment of a deputy treasurer provides:
“The State treasurer may appoint a deputy, for whose acts he shall be responsible, and may revoke such appointment at pleasure; and such deputy may *160execute the duties of the office during the sickness or absence of the State treasurer.” CL 1948, § 12.9 (Stat Ann 1952 Rev § 3.83).
And the statute authorizing appointment of a deputy auditor general provides:
“The auditor general may appoint a deputy for whose acts he shall be responsible, and may revoke such appointment at pleasure; and such deputy may execute the duties of the office during the sickness or absence of the auditor general.” CL 1948, § 13.26 (Stat Ann 1952 Rev § 3.130).
It appears undisputed that since the creation of the corporation tax appeal board the administrative interpretation placed upon the above statutes was that membership upon the tax appeal board was one of the “duties of the office” within the meaning of the statutory provisions just quoted.
While such interpretation, even if as here undisputed for years, is not binding on this Court, it is entitled to respectful consideration. Boyer-Campbell Co. v. Fry, 271 Mich 282 (98 ALR 827).
In determining the legislative intent of these 2 provisions, we can properly take into account also the fact that the State treasurer is assigned ex-officio membership on 14 other boards and commissions by other legislative enactments, while the auditor general has 7 additional such assignments. Such a multiplicity of assignments suggests that the legislature could not reasonably expect them to be performed by 1 person.
The fact that this board obviously performs quasi-judicial functions is not determinative of the question as to whether or not a deputy may properly sit thereon. Mr. Justice Kelly recognizes this when he holds that the deputy attorney general was a properly qualified member.
*161The ALE annotation relied upon by Justice Kelly concerning this quasi-judicial distinction is entitled:
“Extent of power of tax commission or other officials primarily charged with duty of administering tax statute to deputize or delegate to others matters relating to computation of tax or extent of taxpayer’s liability.” 107 ALR 1482.
The annotation deals primarily with cases wherein deputies were administratively authorized and appointed. In such instances, the courts have held that such deputies could perform ministerial functions for their principal, but not the quasi-judicial duties assigned to him by statute. State Tax Commission of Utah v. Katsis, 90 Utah 406 (62 P2d 120, 107 ALR 1477); Woodman v. Auditor General, 52 Mich 28; Paldi v. Paldi, 84 Mich 346.
In the first case (cited as the leading case by appellant), the Utah court said (p 412):
“The fact that the legislature gave the tax commission authority to employ agents, statisticians, experts, attorneys, and other assistants and employees as may be necessary to perform its duties does not give the commission authority directly or by implication to deputize those matters which are quasi judicial in character. It takes authority from the legislature to appoint a general deputy, if such deputy may be appointed or the commission is given authority by the legislature to deputize quasi-judicial matters to others, it may do so. Dorr v. Clark, 7 Mich 310; Andres v. Ottawa Circuit Judge, 77 Mich 85 (6 LRA 238); Wilkerson v. Dennison, 113 Tenn 237 (80 SW 765, 106 Am St Rep 821, 3 Ann Cas 297); Steinke v. Graves, 16 Utah 293, (52 P 386).”
In our present case we deal with statutorily created deputies, statutorily authorized to perform “the duties” of the office.
*162We-find no need to amend the legislative authorization by judicially excepting the quasi-judicial duties assigned to the office.
.We hold that the corporation tax. appeal board which heard this cabe was properly constituted under the legislative enactments quoted.
As to the second question, which reaches the merits of the tax dispute, we can be more brief.
The essence of plaintiff’s contention is that $13,-712,026 which it has set aside on its' books as a “reserve for deferred Federal income taxes” should not be considered as a part of its “surplus” for purpose of computing the privilege fee required to be paid by PA 1921, No 85, as amended.
The applicable • statutory definition of “surplus” is as follows:
“The term ‘surplus,’ as used in this act, shall be taken and deemed to mean the net value of the corporation’s property, less its outstanding indebtedness and paid-up capital; but in no case, either as to domestic or as to foreign corporations, shall any deduction be made from the item of paid-up capital, in computing the franchise fee thereon, by reason of any impairment of the same.” CLS 1956, § 450-304 (Stat Ann 1959 Cum Supp § 21.205).
We have recently construed this definition in these terms:
“The corporation privilege tax statute should be read and administered to secure to the State all sums justly due it, but no more.
“Surplus, as that term is used in determining the privilege fee payable by a corporation for doing business in this State, is the difference between assets and liabilities plus paid-up capital.” Duluth, South Shore & Atlantic R. Co. v. Corporation & Securities Commission (syllabi), 353 Mich 636.
The only substantial question presented here is whether or not the “reserve” set up on appellant’s *163books is an “outstanding indebtedness” within the meaning of the statute. In determining the answer, the corporation and securities commission was not required to accept at face value the accounting labels on appellant’s balance sheet. In re Appeal of Hoskins Manufacturing Co., 270 Mich 592.
There is no need to use complex language to describe an essentially simple situation. The Detroit Edison has in past years built additional physical facilities for the purposes of its business of supplying power and light. In computing its Federal income taxes it has elected (as it was legally entitled to do) to employ 2 accelerated methods of depreciation. These methods of depreciation had the effect of allowing it to charge off the cost of these facilities in 5 years. The effect of this accelerated depreciation was to reduce the Federal income tax which Detroit Edison actually paid in each of these years as compared to what it would have had to pay without this accelerated depreciation.
Upon accountants’ advice, Detroit Edison set up an account to which were charged a portion of such tax savings. The purpose claimed for this “reserve” was to enable Detroit Edison more easily to meet the possibility of higher income taxes in future years when these accelerated depreciation benefits were exhausted.
We are not concerned with whether or not this is a sound accounting practice or good business, or even whether or not it is a procedure required by orders of the public service commission. Assuming the truth of all of appellant’s contentions in these matters, none of them has the effect of turning this “reserve” into “an outstanding indebtedness,” or of removing these funds from the definition of surplus which we have cited.
*164The corporation tax appeal board found:
“In the instant case the Federal income taxes for which the reserve of $13,712,026 has been segregated were not owing and unpaid as of the date of the annual report, December 31, 1955.
“For all of the reasons hereinbefore assigned, it is the conclusion of the appeal board that the sum of $13,712,026 did not constitute an outstanding indebtedness at the date of the annual report and that appellee was correct in including this sum as a part of the surplus of the appellant.”
Appellee’s expert witnesses testified as to the reserve in question (Lyle D. Hepfer):
“Q. (By Mr. Dexter, continuing): Now, getting to your opinion, Mr. Hepfer, as an expert, I believe, you stated that in your opinion this reserve was not •a liability, in the generally accepted sense of that term?
“A. It is my opinion that it is not a liability, at the balance sheet date, payable as a current obligation to the United States treasury department.
“Q. Is there any outstanding obligation existing at the balance sheet date to which this item could be related?
“A. I see no existing liability at the balance sheet date.”
(Samuel Beglin):
“Q. Now, in your opinion, what is the nature of the charge to be made to this reserve for deferred Federal income taxes?
“A. You mean the credit to this account?
“Q. Yes. * * *
“A. In my opinion, I would not consider this as being an outstanding indebtedness of the company.”
An expert witness, Philip R. Potter, testified:
“Q. Now, would you care to express an opinion on that, as to whether or not at December 31, 1955, *165this reserve might not be properly considered part ■ of the stockholders’ equity as of that date — not thinking in terms of regulatory purposes, but I am thinking of you, as an expert accountant?
“A. * * * Insofar as The Detroit Edison Company is concerned, at December 31, 1955, if it went into liquidation, it is doubtful whether the internal revenue department has any claim on any accumulated reserve at that point.
“Q. Well, it is a fact that they do not, isn’t it? I mean, this is not a deferred item in reference to anything — in reference to any tax liability incurred on past transactions, as such, is it?
“A. * * * I know of nothing in the internal revenue code from which I draw the conclusion that there is a tax liability presently.
“Q. And nothing would indicate that in the present code ?
“A. Nothing that I know of. I may have overlooked something, hut I know of nothing presently, as the code is presently promulgated, that ■ would' make that a liability of The Detroit Edison Company,, if, at December 31, 1955, they .liquidated.”- ■
This record leaves no doubt but that Detroit Edison had clear title to these funds, and that they are unencumbered by any present legal obligation..
Where there is competent evidence to support the findings of fact of the board, this Court does not’ reverse. Duluth, South Shore & Atlantic R. Co. v. Corporation & Securities Commission, supra.
Nor was the Tax Appeal Board in error in recomputing the liability of the taxpayer and including several smaller items which the Michigan corporation and securities commission had mistakenly excluded from plaintiff’s surplus account.
Section 9 says:
- ■ “The appeal board shall recompute the liability of the taxnayer.” CLS 1956, § 450.309 (Stat Ann 1959 Cum Supp § 21.210).
*166This language is ample to authorize the recompu-tation made here.
The decision should be affirmed. No costs, matters of statutory construction being involved.
Smith, J., concurred with Edwards, J.
Kavanagh, J., did not sit.