Opinion
No. 350248
02-04-2020
Andrew P. CAMPBELL, Petitioner-Appellee, v. MICHIGAN DEPARTMENT OF TREASURY, Respondent-Appellant.
Dana Nessel, Attorney General, Fadwa A. Hammoud, Solicitor General, Suzanne Sonneborn, Chief Legal Counsel, and James A. Ziehmer and Michael Hill, Assistant Attorneys General, for the Michigan Department of Treasury.
Dana Nessel, Attorney General, Fadwa A. Hammoud, Solicitor General, Suzanne Sonneborn, Chief Legal Counsel, and James A. Ziehmer and Michael Hill, Assistant Attorneys General, for the Michigan Department of Treasury.
Before: Boonstra, P.J., and Tukel and Letica, JJ.
Tukel, J. Respondent appeals by right the order of the Michigan Tax Tribunal (MTT) entitling petitioner to claim a 100% principal residence exemption (PRE) for tax year 2017 on certain real property. We affirm.
I. UNDERLYING FACTS
Petitioner is a lifelong Michigan resident who purchased property in Arizona in 2016. When petitioner purchased the Arizona property, the state of Arizona automatically gave him a $600 credit on his tax bill without petitioner's knowledge, apparently because it assumed the Arizona property was petitioner's primary residence. Petitioner claimed a PRE for his Michigan property when he filed his 2017 taxes, but respondent denied the exemption because petitioner had received a similar exemption from Arizona for that same tax year. After learning that Arizona considered his Arizona residence to be his primary residence, petitioner informed the treasurer of Maricopa County, Arizona, that he was not an Arizona resident. Petitioner's Arizona residency status was changed "within 24 hours." Despite Arizona changing petitioner's residency status, however, respondent still refused to grant petitioner a PRE for the Michigan property for tax year 2017.
Petitioner appealed this denial, and an "informal conference" was conducted in August 2018 with the parties participating by telephone. The referee recommended that the PRE for the Michigan property remain denied, and respondent's director of the Bureau of Tax Policy adopted the referee's recommendation. Petitioner then filed a petition for relief in the MTT in November 2018. The MTT held a telephonic hearing in May 2019 and issued a written order in July 2019. The MTT found that petitioner did not apply for the Arizona property tax exemption but that Arizona had automatically given it to him at closing. Nevertheless, the MTT found that even though petitioner had not applied for the exemption, under MCL 211.7cc(3), he still "claimed" an exemption similar to the PRE in another state for tax year 2017. See note 1 of this opinion. Accordingly, the property did not qualify for the PRE, and petitioner's rescission of the Arizona exemption had no effect on the Michigan PRE. Nonetheless, the MTT concluded that under MCL 211.7cc(4), petitioner's previous PRE for the Michigan property remained in effect through December 31, 2017. Thus, the tribunal ruled that the Michigan property was entitled to a 100% PRE for the 2017 tax year.
Respondent moved for reconsideration, and the MTT denied the motion. This appeal followed.
II. STANDARD OF REVIEW
Unless there is fraud, this Court's "review of MTT decisions is limited to determining whether the MTT erred in applying the law or adopted a wrong legal principle." VanderWerp v. Plainfield Charter Twp. , 278 Mich. App. 624, 627, 752 N.W.2d 479 (2008). If this Court's "review requires the interpretation and application of a statute, that review is de novo." Power v. Dep't of Treasury , 301 Mich. App. 226, 230, 835 N.W.2d 622 (2013). However, "[t]his Court will generally defer to the [MTT's] interpretation of a statute that it is charged with administering and enforcing." Twentieth Century Fox Home Entertainment, Inc. v. Dep't of Treasury , 270 Mich. App. 539, 541, 716 N.W.2d 598 (2006) (quotation marks and citation omitted; alteration in original). Additionally, " ‘statutes exempting persons or property from taxation must be narrowly construed in favor of the taxing authority.’ " Power , 301 Mich. App. at 230, 835 N.W.2d 622, quoting Liberty Hill Housing Corp. v. Livonia , 480 Mich. 44, 49, 746 N.W.2d 282 (2008). Finally, "[w]e deem the tribunal's factual findings conclusive if they are supported by ‘competent, material, and substantial evidence on the whole record.’ " Liberty Hill , 480 Mich. at 49, 746 N.W.2d 282 (quotation marks and citations omitted).
III. ANALYSIS
As an initial matter, whether petitioner was properly denied the PRE is not at issue in this appeal. Respondent takes no issue with the portion of the MTT's decision that ruled the PRE was properly denied. The issue is whether the PRE, after being denied, should have continued through December of that tax year, 2017, or whether it should have ceased immediately upon the granting of the Arizona exemption.
PREs are created by and addressed under MCL 211.7cc of the General Property Tax Act, MCL 211.1 et seq. , which provides:
(1)A principal residence is exempt from the tax levied by a local school district for school operating purposes to the extent provided under ... MCL 380.1211, if an owner of that principal residence claims an exemption as provided in this section. Notwithstanding the tax day provided in [ MCL 211.2 ], the status of property as a principal residence shall be determined on the date an affidavit claiming an exemption is filed under subsection (2). [ MCL 211.7cc(1).]
The property owner is required to file an affidavit which, among other provisions, requires the owner to "state that the property is owned and occupied as a principal residence by that owner of the property on the date that the affidavit is signed and shall state that the owner has not claimed a substantially similar exemption, deduction, or credit on property in another state." MCL 211.7cc(2). There are a number of exclusions to a claimed PRE. See MCL 211.7cc(3). In relevant part, MCL 211.7cc(3) states:
For taxes levied after December 31, 2002, a person is not entitled to an exemption under this section in any calendar year in which any of the following conditions occur:
(a) That person has claimed a substantially similar exemption, deduction, or credit, regardless of amount, on property in another state. Upon request ... a person who claims an exemption under this section shall, within 30 days, file an affidavit on a form ... stating that the person has not claimed a substantially similar exemption, deduction, or credit on property in another state. A claim for a substantially similar exemption, deduction, or credit in another state occurs at the time of the filing or granting of a substantially similar exemption, deduction, or credit in another state. If the assessor of the local tax collecting unit, the department of treasury, or the county denies an existing claim for exemption under this section, an owner of the property subject to that denial cannot rescind a substantially similar exemption, deduction, or credit claimed in another state in order to qualify for the exemption under this section for any of the years denied....
(b) Subject to subdivision (a), that person or his or her spouse owns property in a state other than this state for which that person or his or her spouse claims an exemption, deduction, or credit substantially similar to the exemption provided under this section , unless that person and his or her spouse file separate income tax returns. [Emphasis added.]
MCL 211.7cc(4), which is at the heart of this appeal, provides:
Upon receipt of an affidavit filed under subsection (2) and unless the claim is denied under this section, the assessor shall exempt the property from the collection of the tax levied by a local school district for school operating purposes to the extent provided under ... MCL 380.1211, as provided in subsection (1) until December 31 of the year
in which the property is transferred or , except as otherwise provided in subsections (5), (32), and (33), is no longer a principal residence as defined in [ MCL 211.7dd ], or the owner is no longer entitled to an exemption as provided in subsection (3). [Emphasis added.]
The critical issues in this case are the meaning of the phrase "until December 31 of the year in which" certain events occur and whether that language applies only to the immediately connected phrase "the property is transferred" or whether it also applies to the following phrases, "is no longer a principal residence" and "the owner is no longer entitled to an exemption." Respondent asserts that the December 31 language modifies only the immediately connecting phrase and not the two following phrases. Accordingly, respondent argues, petitioner should not have received a PRE for 2017 because once he was no longer entitled to the exemption, the PRE immediately ceased.
This Court and our Supreme Court have not previously addressed whether the December 31 language in MCL 211.7cc(4) applies to one, two, or all three of the circumstances set forth in the statute. Accordingly, this is an issue of first impression.
"When interpreting a statute, [this Court] must ascertain the Legislature's intent," which is accomplished "by giving the words selected by the Legislature their plain and ordinary meanings, and by enforcing the statute as written." Griffin v. Griffin , 323 Mich. App. 110, 120, 916 N.W.2d 292 (2018) (quotation marks and citation omitted). If a statute is unambiguous, it must be applied as plainly written. McQueer v. Perfect Fence Co. , 502 Mich. 276, 286, 917 N.W.2d 584 (2018). This Court may not read something into the statute "that is not within the manifest intent of the Legislature as derived from the words of the statute itself." Id. (quotation marks and citation omitted). Additionally, this Court should "consider both the plain meaning of the critical word or phrase as well as its placement and purpose in the statutory scheme. As far as possible, effect should be given to every phrase, clause, and word in the statute." In re AGD, Minor , 327 Mich. App. 332, 343, 933 N.W.2d 751 (2019) (quotation marks and citation omitted).
The last-antecedent rule "provides that a modifying clause is confined to the last antecedent unless something in the subject matter or dominant purpose [of the statute] requires a different interpretation." Dessart v. Burak , 470 Mich. 37, 41, 678 N.W.2d 615 (2004) (quotation marks and citations omitted; alteration in original). However, this rule does not apply when the modifying clause is set off by punctuation, "such as a comma ...." Cameron v. Auto Club Ins. Ass'n , 476 Mich. 55, 71, 718 N.W.2d 784 (2006), overruled on other grounds by Univ. of Mich. Regents v. Titan Ins. Co. , 487 Mich. 289, 791 N.W.2d 897 (2010), overruled on other grounds by Joseph v. Auto Club Ins. Ass'n , 491 Mich. 200, 815 N.W.2d 412 (2012). A dependent clause set off by commas from the rest of the sentence is not to be viewed as an independent clause operating separately but, rather, as "part of the complex sentence overall." See In re AGD , 327 Mich. App. at 346-347, 933 N.W.2d 751. Finally, the word "or" is a disjunctive word that is "used to indicate a disunion, a separation, an alternative." Jesperson v. Auto Club Ins. Ass'n , 499 Mich. 29, 35, 878 N.W.2d 799 (2016) (quotation marks and citations omitted).
The principal statutory provision at issue, MCL 211.7cc, thoroughly and comprehensively addresses the availability of and mechanism for seeking and granting a PRE. The statute first states the general rule that "[a] principal residence is exempt from the tax levied ... if an owner of that principal residence claims an exemption as provided in this section." MCL 211.7cc(1). Subsection (2) provides that an exemption, once granted, continues until an event makes the property ineligible for the exemption, without any requirement that the owner do anything further to maintain the exemption. See MCL 211.7cc(2) ("Except as otherwise provided in subsection (5), an owner of property may claim 1 exemption under this section ... for the immediately succeeding summer tax levy and all subsequent tax levies ... [and] for the immediately succeeding winter tax levy and all subsequent tax levies ....") (emphasis added).
Subsection 3 then sets forth specific limitations barring an exemption. Those exceptions include the situation involved here, in which the person "has claimed a substantially similar exemption, deduction, or credit, regardless of amount, on property in another state." MCL 211.7cc(3)(a). An exemption also is not available if the person files a nonresident Michigan income tax return, MCL 211.7cc(3)(c), or the person has filed an income tax return in another state as a resident, MCL 211.7cc(3)(d).
In the trial court, petitioner asserted and respondent did not contest that the exemption in Arizona was granted without petitioner's knowledge or request, and the tribunal accepted that fact. Whether or not petitioner sought the exemption is not relevant to whether or not he "claimed a substantially similar exemption, deduction, or credit, regardless of amount, on property in another state." MCL 211.7cc(3)(a). As a matter of law, the granting of the exemption in Arizona constituted a "claim" because "[a] claim for a substantially similar exemption, deduction, or credit in another state occurs at the time of the filing or granting of a substantially similar exemption, deduction, or credit in another state." Id. Regardless of whether petitioner sought or even knew of the granting of the exemption in Arizona, the exemption undisputedly was granted. And once the Arizona exemption was granted and the Michigan exemption denied, "an owner of the property subject to that denial cannot rescind a substantially similar exemption, deduction, or credit claimed in another state in order to qualify for the exemption under this section for any of the years denied." Id.
Subsection (4) is the critical provision for this appeal. That subsection involves exemptions that are subsequently lost because they no longer qualify as exemptions and defines the date on which the effectiveness of the exemption ceases. Under Subsection (4), once an exemption is validly begun through the filing of an affidavit and provided that the claim is not denied under any provision of MCL 211.7cc, "the assessor shall exempt the property from the collection of the tax ... until December 31 of the year in which the property is transferred or, except as otherwise provided in subsections (5), (32), and (33), is no longer a principal residence as defined in [ MCL 211.7dd ], or the owner is no longer entitled to an exemption as provided in subsection (3)." Respondent argues that the language "until December 31 of the year in which" applies only to the first of the situations set forth in that section, i.e., when the property is transferred, and the other phrases involving the filing of tax returns and the catchall disallowance of certain exemptions are not modified by the December 31 language. Under this view, Subsection (4) essentially states as follows:
That section provides:
Upon receipt of an affidavit filed under subsection (2) and unless the claim is denied under this section, the assessor shall exempt the property from the collection of the tax levied by a local school district for school operating purposes to the extent provided under [MCL 380.1211 ] as provided in subsection (1) until December 31 of the year in which the property is transferred or, except as otherwise provided in subsections (5), (32), and (33), is no longer a principal residence as defined in [MCL 211.7dd ], or the owner is no longer entitled to an exemption as provided in subsection (3).
If the exemption is proper, it continues until:
(I) the property is transferred, in which case the exemption is valid through December 31 of the year in which the property is transferred; or
(II) the property is no longer a principal residence, in which case the exemption
is valid until the time at which the property ceases being a principal residence; or
(III) if the owner is no longer entitled to an exemption under Subsection (3) other than because the property is transferred, the exemption is valid until the time at which the property is transferred.
Petitioner's claimed exemption comes within Subsection (4). Subsection (4) incorporates by reference any exemption under Subsection (3) to which the person is no longer entitled; Subsection (3) specifically delineates that an exemption is lost if a substantially similar exemption is granted in another state. Reading the incorporated portion of Subsection (3) in conjunction with Subsection (4), petitioner lost his exemption because of the granting of the Arizona exemption. The only question is when the loss of that exemption became effective. Under respondent's reading of the statute, petitioner's exemption would become ineffective upon the granting of the Arizona exemption, rather than on December 31, because in respondent's view, the December 31 language applies only to the first situation set forth in Subsection (4) (transfer of the property), and not the later provision of Subsection (4) applicable here (the owner is no longer entitled to an exemption as provided in Subsection (3)). Respondent's position fails for a number of reasons.
To begin with, and consistently with basic rules of statutory interpretation, Subsection (4) should be read in a way that harmonizes with the rest of the statute. See, e.g., Radina v. Wieland Sales, Inc. , 297 Mich. App. 369, 373, 824 N.W.2d 587 (2012) ("[I]n determining the Legislature's intent, statutory provisions must be read in the context of the whole statute and harmonized with the statute's other provisions."). When examined in light of the preceding subsections, Subsection (4) clearly works in harmony with them to create a uniform taxation scheme that promotes ease of administration. As noted, Subsection (1) states the general rule that an exemption is available under certain circumstances; Subsection (2) provides that a properly granted exemption generally continues without requiring any further action by the owner; Subsection (3) creates carve-outs or exceptions under which an exemption is not permitted; and Subsection (4) provides a uniform formula for determining the date on which an exemption that has become invalid ceases to apply.
Respondent's interpretation would destroy the uniformity that Subsection (4) seemingly created for the implementation of the phasing out of exemptions that are no longer valid. Under respondent's view, for example, if 50 home owners bought property in another state and received an exemption in each of those other states, all of the Michigan properties would lose their exemptions, but such exemptions would be lost on each of the various dates on which the out-of-state exemptions were issued. The Legislature was evidently concerned with the difficulty that taxing authorities would have in trying to keep track of such varying dates. Therefore, in Subsection (2), the Legislature took great pains to establish a clear and easily administered comprehensive formula for a uniform effective date of an exemption. That formula provides that an owner may claim an exemption if the affidavit is filed "on or before June 1 for the immediately succeeding summer tax levy"; and the formula provides that an owner may claim an exemption if the affidavit is filed "on or before November 1 for the immediately succeeding winter tax levy ...." There is no ambiguity in that scheme, and it makes the outcome uniform regardless of filing date, so long as the filing takes place prior to the deadline. As we read Subsection (4), it provides the mirror image to Subsection (2), providing a uniform date not for the commencement of an exemption but for its termination. Respondent's reading of the statute would destroy that uniformity and ease of administration for taxing authorities. See Heidelberg Bldg., L.L.C. v. Dep't of Treasury , 270 Mich. App. 12, 19-20, 714 N.W.2d 664 (2006) (holding that ease of administration is a legitimate government purpose for a tax statute).
Given the clarity with which the Legislature spoke in creating a uniform date regarding the commencement of exemptions, and given the statutory language at issue, we do not believe that the Legislature intended for the cessation of exemptions to have no such uniform application. Indeed, if respondent's position were correct, the statute would be lacking in significant direction to taxing authorities as to how to proceed. Would authorities prorate taxes depending on the percentage of the year that had already passed when an exemption ceased to be effective? Or would they use some other formula? And would there be any statutory basis for requiring all tax officials from across the state to use the same formula? The statute is silent as to those questions. Given the overall structure and comprehensiveness of MCL 211.7cc, particularly in Subsection (2), we interpret that lack of direction in the statute to bespeak a legislative intent that any and all exemptions that are lost and that fall under Subsection (4) continue through December 31 of the year in which such an exemption is lost, to maintain uniformity and to ease administration.
In addition, the last-antecedent rule supports reading December 31 as modifying all of the events in Subsection (4) that terminate an exemption. As already stated, the last-antecedent rule "provides that a modifying clause is confined to the last antecedent, unless something in the subject matter or dominant purpose [of the statute] requires a different interpretation." Dessart , 470 Mich. at 41, 678 N.W.2d 615 (quotation marks and citations omitted; alteration in original). In this case, the last antecedent regarding the December 31 language relates to transfer of the property. However, as noted, the dominant purpose and structure of the statute supports reading Subsection (4) in conjunction with the other sections of the statute to provide uniform rules for the commencement and termination of exemptions, thus making the last-antecedent rule inapplicable.
In addition, the last-antecedent rule does not apply when the modifying clause is set off by punctuation, "such as a comma ...." Cameron , 476 Mich. at 71, 718 N.W.2d 784. A dependent clause set off by commas from the rest of the sentence is not to be viewed as an independent clause operating separately but, rather, as "part of the complex sentence overall." See In re AGD , 327 Mich. App. at 346-347, 933 N.W.2d 751. The various clauses of Subsection (4), providing for various reasons an exemption shall be rescinded, are set off by commas. See MCL 211.7cc(4) (providing that property is exempt "until December 31 of the year in which the property is transferred or, except as otherwise provided in subsections (5), (32), and (33), is no longer a principal residence as defined in section 7dd, or the owner is no longer entitled to an exemption as provided in subsection (3)") (emphasis added).
Finally, although this Court reviews de novo the interpretation of a statute, it will "generally defer to the [MTT's] interpretation of a statute that it is charged with administering and enforcing." Twentieth Century Fox , 270 Mich. App. at 541, 716 N.W.2d 598 (quotation marks and citation omitted). The MTT interpreted the December 31 language as applying to all of the exceptions set forth in Subsection (4); therefore, in this case, deference to the MTT's interpretation would bolster rather than be in derogation of our construction of the statute. Because deference to the MTT's interpretation of the statute would not assist respondent's position, we need not decide whether to give such deference in the case. Whether or not we give such deference, the interpretation would be the same—the no-longer-valid exemption remained in effect through December 31 of the 2017 tax year. Accordingly, petitioner is entitled to 100% of the PRE for that year.
Our decision here, of course, is based on our understanding of the public-policy choices made by the Legislature in the statutes at issue. See Robinson v. City of Detroit , 462 Mich. 439, 474, 613 N.W.2d 307 (2000) ( Corrigan , J., concurring) ("[A] Court exceeds the limit of its constitutional authority when it substitutes its policy choice for that of the Legislature.").
Affirmed.
Boonstra, P.J., and Letica, J., concurred with Tukel, J.