States are increasingly passing tax legislation with retroactive periods that are longer than those periods that have been allowed by prior court rulings. This case is about such a tax in Michigan.
When DaimlerChrysler won a refund in state court for an unlawful state sales tax, the legislature changed the law for all other taxpayers. When Ford tried to get a similar refund, the court refused, citing the new law.
The NAM and the Council on State Taxation filed an amicus brief on 11/12/2010 urging the U.S. Supreme Court to review that ruling. First, the new law has a retroactive period of 6 to 10 years, which is significantly longer than the 1- to 2-year periods permitted in prior cases. Second, Michigan essentially induced taxpayers to wait in line and rely on remedies to be determined in the first litigation for a tax refund, then changed the rules for all other taxpayers after that case’s resolution. This bait-and-switch tactic encourages races to the courthouse, fosters clogging of the court system, discourages tax compliance, and treats similar taxpayers differently.
We argued that retroactive legislation must have a rational legislative purpose that does not deprive taxpayers of their Due Process rights to challenge illegal taxes already imposed. In addition, the period of retroactivity must be “modest” in length, and the Supreme Court should review the case to set some constitutional limits on aggressive state court rulings that allow retroactive periods as long as 9 years.
The petition was denied on January 18, 2011.