News & Information

Collection of an Unlawful Millage is Not a “Mutual Mistake of Fact” for Purposes of Extending the Period Within Which a Taxpayer May File a Claim for a Refund. In the case of Briggs Tax Service LLC v Detroit Public Schools (March 30, 2010), the Michigan Supreme Court reversed the Court of Appeals and reinstated the decision of the Tax Tribunal dismissing the petitioner’s refund claim on the ground that the claim was not filed within the applicable limitations period.

Despite the fact that voter approval for a school operating millage expired on June 30, 2002, Detroit Public Schools (“DPS”) continued to levy an unauthorized 18-mill tax in tax years 2002, 2003 and 2004. DPS apparently believed that, when voters approved Proposal A, local school district electors no longer needed to approve a tax rate of 18 mills.

The petitioner in the Briggs case sought a refund of the unauthorized taxes levied and collected by DPS. The Tax Tribunal dismissed petitioner’s refund claim on the ground that it had not been filed within the general limitations period of 30 days from the issuance of the applicable tax bills. (The general limitations period was extended from 30 to 35 days on May 30, 2006, by Act 174 of the Public Acts of Michigan of 2006.)

The Court of Appeals reversed the judgment of the Tax Tribunal, holding that the petitioner was entitled to pursue a claim for a refund under Section 53a of the Act, which provides that a taxpayer who is assessed and pays excess taxes “because of a mutual mistake of fact made by the assessing officer and the taxpayer may recover the excess so paid, without interest, if suit is commenced within 3 years from the date of payment.” The court reasoned that the mistake regarding the validity of imposing the tax was a mutual mistake of fact between the taxpayer and the assessor, because “both parties erroneously believed that [petitioner] was required to pay the disputed taxes in 2002, 2003, and 2004, although [petitioner] had no such obligation.”

In reversing the decision of the Court of Appeals and reinstating the decision of the Tax Tribunal, the Supreme Court held, first, that the mistake at issue was not “mutual” because it was “attributable to DPS alone, whose CEO certified the tax.” According to the Court, the assessor did not make a mistake in assessing and collecting the tax because he was required by statute to do so. Second, the Court held that the mistake was not one “of fact”; rather, “collection of an unauthorized tax constitutes a mistake of law.” For these reasons, the Court concluded that no mutual mistake of fact occurred within the meaning of Section 53a of the Act and, accordingly, the petitioner’s refund claim was subject to the general limitations period.