STATE OF MICHIGAN

FRANK J. KELLEY, ATTORNEY GENERAL

Opinion No. 5902

May 14, 1981

CONSTITUTIONAL LAW:

Equal protection of the laws

Due process of laws

TAXATION:

Single business tax--tax year of taxpayer

1975 PA 228, Sec. 36, making single business tax credits available for all tax years beginning after December 31, 1976, does not deny equal treatment to a taxpayer who elects to file his tax returns for 1977 on a fiscal year basis.

Honorable Perry Bullard

State Representative

53rd District

The Capitol

Lansing, Michigan

You have requested my opinion concerning application of the Single Business Tax Act, 1975 PA 228, Sec. 36, as added by 1977 PA 273, MCLA 208.36; MSA 7.558(36), to tax returns covering all or a portion of the 1977 calendar year. 1977 PA 273 also amended a number of sections of 1975 PA 228, and 1977 PA 273, Sec. 2, expressly provided that the amendatory act shall take effect for all tax years beginning after December 31, 1976.

Your request states that a constituent taxpayer, whose fiscal year began on October 1, received only a three (3) month benefit for the 1977 calendar year as distinguished from a taxpayer filing a return on a calendar year basis who received a twelve (12) month benefit for the year 1977 as provided by 1975 PA 228, Sec. 36, as added by 1977 PA 273, supra.

You specifically inquire whether the Legislature may treat otherwise similar taxpayers differently because one taxpayer selects a fiscal year for his or her tax year while another selects the calendar year for the tax year.

1975 PA 228, Sec. 10(1), MCLA 208.10; MSA 7.558(10), provides that 'tax year' or 'taxable year' means calendar year or the fiscal year ending during the calendar year. The section further indicates that for those taxpayers who have elected to file their federal income tax returns on a fiscal year basis, the same fiscal year basis shall apply to returns filed under the Single Business Tax Act, supra.

The language of Section 10(1) of the Single Business Tax Act, supra, and the tax credit benefits provided by 1975 PA 228, Sec. 36, supra, were intended to apply equally to all taxpayers for the 1977 tax year.

The United States Supreme Court in Merchants' & Manufacturers' Bank v Pennsylvania, 167 US 461; 17 S Ct 829; 42 L Ed 236 (1897), has held that there is no lack of equal treatment of taxpayers where the statute treats all of them similarly by offering an election to all taxpayers and any difference in treatment results from the election made by the taxpayer. Miller v Heffernan, 173 Conn 506; 378 A2d 572 (1977).

Both the federal and Michigan courts have consistently held that differentiations for purposes of taxation are not violative of constitutional provisions where there exists a reasonable relationship to the subject of the particular legislation so that all persons in similar circumstances are treated equally. Ned's Auto Supply Co v Michigan Unemployment Compensation Commission, 313 Mich 66; 20 NW2d 813 (1945) Due process of law does not prevent the State and municipalities from adjusting their systems of taxation and administering tax laws in all proper and reasonable ways. Dooley v Detroit, 370 Mich 194; 121 NW2d 724 (1963); Kuhn v Department of Treasury, 15 Mich App 364; 166 NW2d 697 (1968); aff'd as modified, 384 Mich 378; 183 NW2d 796 (1971); Michigan Baptist Homes & Development Co v City of Ann Arbor, 55 Mich App 725; 223 NW2d 324 (1974), aff'd, 396 Mich 660; 242 NW2d 749 (1976); Detroit Edison Co v East China Township School District No. 3, 247 F Supp 296 (ED Mich, 1965), aff'd, 378 F2d 225 (CA 6), cert den, 389 US 932; 88 S Ct 296; 19 L Ed 2d 284 (1967); Lafayette Steel Co v Dearborn, 360 F Supp 1127 (ED Mich, 1973).

The application by the Legislature of the Single Business Tax Act, $ 36, supra, to individual business taxpayers during the year 1977, predicated upon the different accounting periods elected by such taxpayers to report business income, is a reasonable distinction for tax purposes.

It is my opinion, therefore, that 1975 PA 228, Sec. 36, supra, is not violative of equal protection or due process of law clauses under either the federal or state contributions.

Frank J. Kelley