The Michigan Court of Appeals ruled in favor of Ford Motor Company in a dispute against the state over nearly $22 million in taxes the state said the automaker owed from the late 1990s.
A state audit determined that Ford owed the state $21,726,713 under the Single Business Tax for 1997 to 1999 for billions of dollars in payments made to the Voluntary Employee Beneficiary Association (VEBA), a trust fund that administers health insurance plans for UAW members.
Ford paid the additional tax under protest and filed suit in state court to get the money back, arguing that those contributions to VEBA did not constitute employee compensation under the terms of the law and therefore were not subject to taxation. The court of claims ruled in favor of the state initially, but now the appeals court has reversed that ruling and said that Ford must be refunded the money.
The appeals court concluded that “the VEBA merely served as a savings fund implemented to facilitate the payment of plaintiff’s employees’ future health care services. ‘Compensation’ taxable under the SBTA is defined to include ‘payments made in the taxable
year on behalf of or for the benefit of employees.’ In this context, ‘compensation’ equates to the payment of actual health care costs incurred by plaintiff’s employees, not the setting aside of money intended to serve as a source of proceeds for the payment of future health care costs.”
There is no word yet on whether the state will appeal the case to the Michigan Supreme Court.