In an unpublished opinion, the Michigan Court of Appeals affirmed a lower court holding that E I Du Pont de Nemours (DuPont) was not unitary with its subsidiary, DuPont Pharmaceuticals Company (DPC). E I Du Pont de Nemours & Co. v. Dep’t of Treasury, Dkt. No. 304758 (Mich. Ct. App. 2012) (unpublished). Because the two businesses were not unitary, Michigan could not subject the proceeds from DuPont’s sale of DPC to the Single Business Tax. The Court of Appeals upheld the lower court’s findings that the two entities were not in the same line of business, there was no synergy between them, and the flow of capital from parent to subsidiary merely served an investment, rather than an operational, function. The Court of Appeals also refused to consider additional evidence that the state Department of Treasury attempted to include in its argument on appeal on the ground that the additional evidence, though in the record, was not presented to or addressed by the lower court.
The court also found in favor of the taxpayer on the issue of whether profits from currency exchanges on foreign exchange contracts (FECs) should have been included in the sales factor for purposes of the Single Business Tax. The court held that the FECs should have been included because the term “sales” is broadly defined to include consideration from the use of tangible personal property, and the contracts involved exchanging U.S. dollars for foreign currency, which involves the use of tangible property.