Supreme Court Will Not Rule on Retroactive Tax Legislation

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We previously wrote about a legal challenge brought by a number of corporations concerning changes to Michigan tax law. The U.S. Supreme Court has now declined to hear this challenge. Because of this, the changes to Michigan laws will stand.

Changes on retroactive legislation

These changes in law resulted in some of these businesses retroactively owing back taxes. Michigan legislators passed such legislation in 2007 and 2014, and our courts in turn upheld such laws. The 2007 laws went into effect at the beginning of 2008. This led to some businesses, in compliance with the rules at the time, finding out later they owed more money due to changes in the law.

The companies challenging the retroactive legislation included AT&T Inc.’s DirecTV unit, Aetna Inc.’s Coventry unit, and Goodyear Tire & Rubber Co. These businesses felt such retroactive legislation was in violation of the due-process clause of the U.S. Constitution in that it resulted in disrupting “settled expectations.”

A retroactive change in tax law, resulting in back taxes owed, should cause consternation among taxpayers. It may seem unfair that a taxpayer who complied with all reporting requirements at the time later find that they owe more money.

Contact a tax lawyer

Imagine, for example, that you followed every step required by law in paying your taxes. Then in 2017, legislators passed a new law resulting in you owing more taxes concerning returns of the past decade. Under such circumstances, you may wish to turn to an experienced tax attorney to find all of your legal options.

While this particular decision primarily involved large corporations doing business in multiple states, it is easy to envision other changes in the law that may retroactively penalize other taxpayers as well.

Managing Partner of Silver Tax Group, author of the book “Stop the IRS”. Practicing a variety of tax issues, regulations, laws and rights. Specializing exclusively on tax matters involving IRS audits, negotiation, settlements & compromises.

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