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Supreme Court of Michigan.

NACG LEASING f/k/a Celtic Leasing, LLC, Petitioner–Appellee, v. DEPARTMENT OF TREASURY, Respondent–Appellant.

Docket No. 146234.

    Decided: February 06, 2014


The issue in this case is whether the execution of a lease of tangible personal property in Michigan constitutes “use” for purposes of the Use Tax Act (UTA).1 Petitioner, a Michigan corporation, purchased an aircraft from one company and immediately executed a five-year lease to another company that already had possession of the aircraft. The Department of Treasury assessed a use tax against petitioner based on the lease transaction, and the Michigan Tax Tribunal ultimately upheld the assessment. The Court of Appeals reversed, holding that petitioner did not “use” the aircraft because it ceded total control of the aircraft to the lessee by virtue of the lease and the lessee had uninterrupted possession of the aircraft before and during the lease.2 We granted leave, directing the parties to “address the applicability of the use tax to a transaction where tangible personal property is purchased by one party and leased to another party when the purchaser/lessor does not obtain actual possession of the property.”3 We reverse and remand.

This case requires us to interpret and apply the pertinent statutory provisions of the UTA. When interpreting a statute, this Court's primary goal “is to give effect to the Legislature's intent, focusing first on the statute's plain language.”4 When the words of a statute are unambiguous, we must enforce them as written and no further judicial construction is permitted.5

Under the UTA, a 6% tax is levied “for the privilege of using, storing, or consuming tangible personal property in this state․”6 The UTA defines “use,” in pertinent part, as:

[T]he exercise of a right or power over tangible personal property incident to the ownership of that property including transfer of the property in a transaction where possession is given.[7 ]

In light of this statutory definition, we must determine whether petitioner exercised a right or power incident to ownership in Michigan when it executed a lease of the aircraft in question.

It is a basic precept of property law that a property owner has the right to the use and enjoyment of his or her personalty.8 A corollary to this right is the property owner's right to allow others to use his or her property in exchange for consideration.9 One way in which a property owner exercises this right is by executing a lease.10 Therefore, because the right to allow others to use one's personal property is a right incident to ownership, and a lease is an instrument by which an owner exercises that right, it follows that the execution of a lease is an “exercise of a right or power over tangible personal property incident to the ownership of that property․”11

In arriving at the opposite conclusion, the Court of Appeals relied on WPGP1, Inc v. Dep't of Treasury,12 and Czars, Inc v. Dep't of Treasury,13 two cases that distinguished between partial and total relinquishment of control of an aircraft for purposes of assessing the use tax.14 According to those cases, when an out-of-state owner allows another person to use his or her aircraft, and that person uses the aircraft in Michigan, the owner is subject to Michigan use tax unless the owner can show that he or she previously relinquished total control.15 However, we find those cases factually distinguishable because, unlike the present case, neither involved the execution of a lease in Michigan. In applying Czars and WPGP1 to the facts of this case, the Court of Appeals failed to recognize that the act of ceding control of an aircraft can, itself, be an exercise of a right incident to ownership.16 In this case, petitioner relinquished control of its property by executing a lease in Michigan. As previously discussed, that act, alone, is sufficient to constitute “use” under the UTA.

The Court of Appeals also maintained that “a transfer of property unaccompanied by a transfer of possession is simply not ‘use’ that is subject to the tax.”17 The basis for this conclusion was the emphasized portion of the statutory definition of “use”:

[T]he exercise of a right or power over tangible personal property incident to the ownership of that property including transfer of the property in a transaction where possession is given.[18 ]

The statutory language on which the Court of Appeals relied is introduced by the term “including.” As we have stated previously, “including” is a term of enlargement, not limitation.19 Thus, a transaction in which possession is transferred is but one way to satisfy “use” under the UTA; it is not the only way, as the Court of Appeals erroneously held.20

The execution of a lease in Michigan is the exercise of a right incident to property ownership and, therefore, falls squarely within the statutory definition of “use.” We hold that petitioner “used” the aircraft in question for purposes of the UTA when it executed a lease of the aircraft in Michigan, regardless of whether it ever had actual possession of the aircraft. We reverse the judgment of the Court of Appeals and remand the case to that Court to consider petitioner's alternative claim challenging the calculation of the assessment amount.21


1.  MCL 205.91 et seq.

2.  NACG Leasing v. Dep't of Treasury, unpublished opinion per curiam of Court of Appeals, issued October 16, 2012 (Docket No. 306773), unpub op at 4.

3.  NACG Leasing v. Dep't of Treasury, 494 Mich. 851 (2013).

4.  Malpass v. Dep't of Treasury, 494 Mich. 237, 247–248; 833 NW2d 272 (2013).

5.  Id. at 249.

6.  MCL 205.93(1).

7.  MCL 205.92(b).

8.  See, e.g., Daugherty v. Thomas, 174 Mich. 371, 375; 140 NW 615 (1913); Continental Motors Corp v. Muskegon Twp, 376 Mich. 170, 182; 135 NW2d 908 (1965) (ADAMS, J., dissenting) (“Property, as the word is commonly used, denotes an entire object. In its legal sense the object is broken down into various attributes—such as the right to use, the right to mortgage, the right to lease, et cetera. These rights, viewed together, are referred to as the bundle of rights involved in the ownership of property.”); 20 Mich. Civ Jur, Personal Property, § 6, pp 153–154.

9.  Attorney General v. Pere Marquette R Co, 263 Mich. 431, 433; 248 NW 860 (1933) (“An incident of ownership is the right to sell or lease or use the property in any lawful way.”). See also Eastbrook Homes, Inc v. Dep't of Treasury, 296 Mich.App 336, 348; 820 NW2d 242 (2012) (“Important rights flowing from property ownership include the right to exclusive possession, the right to personal use and enjoyment, the right to manage its use by others, and the right to income derived from the property.”).

10.  Black's Law Dictionary (9th ed) (defining “lease” as “[a] contract by which a rightful possessor of personal property conveys the right to use and occupy the property in exchange for consideration ․”).

11.  MCL 205.92(b).

12.  WPGP1, Inc v. Dep't of Treasury, 240 Mich.App 414; 612 NW2d 432 (2000).

13.  Czars, Inc v. Dep't Treasury, 233 Mich.App 632; 593 NW2d 209 (1999).

14.  NACG Leasing, unpub op at 3, citing WPGP1, 240 Mich.App at 417–419, and Czars, 233 Mich.App at 639.

15.  WPGP1, 240 Mich.App at 418–419 (holding that the out-of-state plaintiff did not “use” the aircraft because a preexisting lease executed out of state gave the lessee total control of the aircraft, including their routes and flight schedules); Czars, 233 Mich.App at 639 (upholding the use-tax assessment and noting the lack of evidence showing that the plaintiff “totally or permanently relinquished control of the aircraft” to an out-of-state entity).

16.  See Fisher & Co, Inc v. Dep't of Treasury, 282 Mich.App 207, 212–213; 769 NW2d 740 (2009) (“Entering into a contract to give up some of one's rights to possession or control is, itself, an exercise of those rights.”).

17.  NACG Leasing, unpub op at 5.

18.  MCL 205.92(b) (emphasis added).

19.  Mich Bell Tel Co v. Dep't of Treasury, 445 Mich. 470, 479; 518 NW2d 808 (1994).

20.  Furthermore, the panel's interpretation of § 92(b) in this regard implicitly assumes that the word “possession” in the statutory definition means “actual possession.” However, there is no indication that the statutory language contemplates, much less requires, transfer of actual possession. In addition, the Legislature's reference to “actual” possession elsewhere in the UTA is a strong textual indication that the term “possession” in MCL 205.92(b) does not refer to actual possession. See MCL 205.94(k) (exempting from the use tax “[p]roperty purchased for use in this state where actual personal possession is obtained outside this state, the purchase price or actual value of which does not exceed $10.00 during 1 calendar month”) (emphasis added). Reading “possession” in § 92(b) to mean “actual possession” would render the Legislature's use of “actual possession” in other statutory provisions mere surplusage, something courts must avoid when interpreting statutory language. Klapp v. United Ins Group Agency, Inc, 468 Mich. 459, 468; 663 NW2d 447 (2003).

21.  Because the Court of Appeals held that petitioner was not subject to the use tax, it declined to address petitioner's challenge to the amount of the final assessment. Petitioner requests a remand to the Tax Tribunal so that this claim can be litigated. However, the Department counters that, among other things, petitioner failed to challenge the assessment amount in the Tax Tribunal. On remand, the Court of Appeals will have the opportunity to weigh both parties' arguments and determine whether the case should be remanded to the Tax Tribunal.



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