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A Better Partnership
March 22, 2015

COA holds that part of a facility may qualify for air pollution control tax exemptions but the State Tax Commission must seek MDEQ’s approval before granting such exemptions

The Michigan Court of Appeals in City of Sterling Heights v. Chrysler, No. 317310, held that a party may seek a tax exemption for air pollution control systems, and such systems need not be the purpose of the entire structure. Further, the Court held that before the State Tax Commission (“Commission”) grants an air pollution tax exemption, it must seek the approval of the Michigan Department of Environmental Quality (“MDEQ”).
 
Chrysler sought air pollution control tax exemptions for a new automobile painting facility in Sterling Heights. During the planning phases of the project it sought tax exemptions for some of its equipment at the new facility as the equipment would allegedly act as pollution control devices. The Commission granted the exemptions and Sterling Heights appealed the decision. It argued first that in order to qualify the entire building must be exempt, not merely parts of the building or the equipment therein. Second it argued that before approving the exemption, the Commission was required to seek the approval of the MDEQ.
 
The Court first determined that Chrysler could seek the exemption under MCL 324.5901 because a facility is defined in the statute as “equipment, structures, or any part or accessories of equipment.” Thus, the Court reasoned, the legislature clearly intended that the exemption apply both to structures as a whole and to portions of the structure such as the air pollution control equipment in this case.
 
The Court then considered whether the MDEQ must approve the exempt status of air pollution control devices prior to the Commission issuing the tax exemption; here it found in favor of Sterling Heights. It determined that although the legislature gave the MDEQ the authority to issue a list of commonly approved pollution control devices to the Commission, the list that MDEQ provided to the Commission was far too broad and generic to guide it properly. The Court held that in order for the MDEQ’s list to satisfy the statutory requirements it must “unequivocally list the specific equipment or parts of structures” that have prior approval. Here, the Court determined, the list did not satisfy this standard. Thus, the Court remanded the case to the Commission to seek approval from the MDEQ of the air pollution tax exemptions.

Judge Boonstra filed a concurring opinion.  He agreed with the majority’s ultimate holding.  He disagreed, however, that the MDEQ or the Commission had blank authority to pre-approve air pollution tax exemptions for facilities.


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