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Revenue Administrative Bulletin 1989-69


Approved: October 11, 1989


RAB-89-69. This Bulletin contain a notice to single business tax taxpayers concerning the decision of the Michigan Court of Claims in the case of Caterpillar Inc. v Michigan Department of Treasury (hereafter referred to as Caterpillar) and advice in filing returns in light of the Caterpillar litigation.

Caterpillar Litigation

The Michigan Court of Claims has ruled that the capital acquisition deduction, contained in MCL 208.23(a),(c); MSA 7.558(23)(a),(c), violates the Commerce Clause of the United States Constitution, and must be severed from the Single Business Tax Act (hereafter referred to as the Act). The Court gave its decision prospective application and denied the out-of-state taxpayer’s claim for refund. The Court’s order stated: “For all tax years beginning after September 30, 1989, the Capital Acquisition Deduction in subsection 23(a) and (c) of 1975 PA 228, as amended shall not be permitted for any taxpayer.”

An appeal from the Court’s decision has been filed in the appellate courts.

Advice in Filing Returns

Until the litigation is concluded by a final order of the highest appellate court that will review the case. The Department advises taxpayers to file their single business tax returns, both quarterly and annual returns, in accordance with existing law which allows the capital acquisition deduction.

If the Court of Claims decision is ultimately upheld in its entirety, the Department will assess taxpayers that have claimed the deduction for tax years beginning after September 30, 1989. The Department will waive interest and penalty for the additional tax attributable to the disallowed deduction of the Caterpillar litigation, provided that the taxpayer files, within 120 days of the final judgement of the highest appellate court, amended returns and payment for tax years that begin after September 30, 1989.