This dispute arose from a disagreement between plaintiff Ford Motor Company and the Department of Treasury as to whether Ford had to pay single business tax (SBT) on certain contributions that it made to its Voluntary Employees’ Beneficiary Association (VEBA) trust fund between 1997 and 2001. Ford paid the tax under protest, and then filed a lawsuit in the Court of Claims to obtain a ruling on its SBT obligation. The Court of Claims ruled in the Department’s favor, but the Court of Appeals reversed, holding that Ford was entitled to a refund of the SBT that it paid under protest. It remanded the case to the Court of Claims for further proceedings.
On remand, Ford filed a motion asking the Court of Claims to determine the amount of its refund, including the amount of “overpayment interest” owed by the Department. When a taxpayer has made a payment under protest to the Department, and that payment is later refunded, the taxpayer is entitled to overpayment interest to compensate for its loss of the use of the money. Under MCL 205.30(3), overpayment interest on a refund begins to accrue 45 days “after the claim [for refund] is filed . . . .” The parties did not agree on the amount of overpayment interest due under MCL 205.30(3), because they did not agree on the date on which Ford filed its claim for refund.
Ford argued that it made its claim for refund when it responded to the Department’s August 3, 2005 audit determination letter. In the letter, the Department informed Ford that it had determined that Ford’s contributions to its VEBA trust fund were taxable under the SBT. Ford checked the box on the letter marked “disagrees with this determination” and returned the letter to the Department on the same day. Ford argued that this amounted to filing a claim for a refund, and that overpayment interest therefore began to accrue 45 days after the date of its response to the audit determination letter, or on September 17, 2005.
The Department argued that Ford’s response to the letter did not constitute a valid claim of refund. The “checked box” response was not detailed enough to give adequate notice of a claim for refund of overpayment of tax, the Department claimed. And while Ford had filed a request on November 17, 2005 for an informal conference with the Department in order to contest the SBT assessment, it later withdrew that request. The correct date, according to the Department, was 45 days after Ford filed its December 13, 2006 complaint with the Court of Claims.
The Court of Claims agreed with Ford’s analysis, and ruled that Ford made its claim for refund in its August 3, 2005 response to the Department’s audit determination letter. Accordingly, the Court of Claims held that the total refund owed to Ford was $17,538,978.68 as of September 15, 2011, plus overpayment interest of $206.73 each day after until the Department paid the full amount owed to Ford. The Court of Claims also ordered the Department to pay the attorney fees Ford incurred in bringing the motion, which the parties later agreed was $35,000.
The Department appealed and, in an unpublished opinion per curiam, the Court of Appeals reversed the Court of Claims on the calculation of overpayment interest. The panel determined that “adequate notice” of Ford’s claim for refund was received on December 13, 2006 – the date that Ford filed its Court of Claims complaint. The panel rejected the September 17, 2005 accrual date because Ford’s “check-the-box response was a statement of such broad disagreement” with the Department’s assessment that it “cannot be considered to adequately notify [the Department] that [Ford] was claiming a refund.” In checking the box, Ford was merely giving notice that it intended to contest the assessment. “Rather, overpayment interest began to accrue 45 days after December 13, 2006, the date when [Ford] filed its complaint. This was the first time that [Ford] truly provided [the Department] with adequate notice of a claim for refund,” the panel held. The Court of Appeals also vacated the attorney fee award, because the Court of Claims had offered “no reasons” for the award. It remanded that question to the Court of Claims for further consideration.
Ford appealed to the Michigan Supreme Court. On September 25, 2013, the Supreme Court granted leave to appeal, stating that “[t]he parties shall include among the issues to be briefed: (1) whether the plaintiff taxpayer’s response to the defendant Department of Treasury’s August 3, 2005 audit determination letter – in light of events and communications that preceded that response, including information provided to the defendant by the plaintiff and the contents of the defendant’s Audit Report of Findings – was a ‘petition . . . for refund’ or ‘claim for refund’ for purposes of the calculation of overpayment interest under MCL 205.30, and (2) alternatively, whether the plaintiff’s November 17, 2005 request for an informal conference with the defendant, in spite of its later withdrawal of that request, was such a petition or claim.”