New Covert Generating Company LLC v. Township of Covert

If this opinion indicates that it is “FOR PUBLICATION,” it is subject to

revision until final publication in the Michigan Appeals Reports.

STATE OF MICHIGAN

COURT OF APPEALS

NEW COVERT GENERATING COMPANY, LLC, FOR PUBLICATION

September 24, 2020

Petitioner-Appellee/Cross-Appellant, 9:05 a.m.

v No. 348720

Tax Tribunal

TOWNSHIP OF COVERT, LC No. 16-001888-TT

Respondent-Appellant/Cross-

Appellee,

and

COUNTY OF VAN BUREN,

Intervening Respondent-

Appellant/Cross-Appellee.

NEW COVERT GENERATING COMPANY, LLC,

Petitioner-Appellee,

v No. 348721

Tax Tribunal

TOWNSHIP OF COVERT, LC No. 12-000248-TT

Respondent-Appellant,

and

COUNTY OF VAN BUREN,

Intervening Respondent-Appellant.

Before: MURRAY, C.J., and CAVANAGH and SWARTZLE, JJ.

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PER CURIAM.

This dispute involves the tax assessed on an electric power plant owned by petitioner, New

Covert Generating Company. In Docket No. 348720, respondents, Covert Township and Van

Buren County, appeal by right the Tax Tribunal’s opinion and judgment setting the true cash value

of the personal property at issue for tax year 2016, and the Tax Tribunal’s order imposing sanctions

for the filing of frivolous motions. On cross-appeal in Docket No. 348720, New Covert Generating

appeals by right the Tax Tribunal’s opinion and judgment setting the true cash value of the personal

property for tax year 2016. In Docket No. 348721, the Township and County appeal by right the

Tax Tribunal’s orders imposing sanctions arising from motions filed in the dispute over tax years

2012 through 2015. We affirm.

I. STATEMENT OF FACTS

The present appeal involves a long-running dispute between New Covert Generating and

the local taxing authorities regarding the proper assessed value of New Covert Generating’s

industrial personal property and the proper application of any tax exemptions applicable to the

property. New Covert Generating owns real property in Covert Township, which is in Van Buren

County. The property has been improved with a natural gas-fired combined-cycle facility and

related equipment. Such power plants have two kinds of turbines: combustion turbines and steam

turbines. A generator converts the rotational energy of the turbines into electricity. New Covert

Generating is not a utility—it is a merchant generator of electricity that sells electricity on the open

market. New Covert Generating transitioned from selling in the Midcontinent Independent System

Operator (MISO) market to the PJM Interconnection (PJM) by June 2016, to increase profits and

work at a higher capacity. New Covert Generating had to build a new switchyard, the Segreto

switchyard, to make this transition.

II. PROCEDURAL HISTORY

A. CHALLENGES TO PROPERTY ASSESSMENTS

New Covert Generating has challenged the assessments of its real and personal property

for the years 2010 through 2016. In December 2012, the Tax Commission granted New Covert

Generating’s classification appeal for the years 2010 and 2011, ordering the Township to create a

separate personal property parcel for the turbines and generators, and classify that parcel as

industrial personal property. The classification change entitled New Covert Generating to receive

the state education tax and school operating millage exemptions to its personal property other than

its turbine property. But in January 2013, New Covert Generating challenged the 2011 and 2012

assessments on the ground that the taxing authorities failed to take into consideration the state

education tax and school operating millage exemptions for nonturbine personal property.

In May 2013, the Tax Tribunal issued its opinion setting the true cash value of the parcels

for 2010 and 2011, and New Covert Generating petitioned the Tax Tribunal to require the taxing

authorities to modify the assessed values for 2013 using the values established by the Tax Tribunal

for 2011 with appropriate adjustments.

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In February 2014, New Covert Generating filed a new petition with the Tax Tribunal

regarding its 2011 tax assessments by the Township and County. New Covert Generating stated

that the Township had assessed its real property at $193,970,800 and its personal property at

$6,552,240 for 2011. It noted that it had appealed to the Commission the Township’s decision to

classify its turbines, generators, and other machinery as real property. The Commission, it wrote,

had since granted the appeal, and ordered the Township to create a separate personal property

parcel for the turbines and generators. It also ordered the Township to classify the property as

industrial personal property. New Covert Generating alleged that the County thereafter issued a

new tax bill for 2011 that reallocated most of the value previously classified as real property to the

new personal property parcel created for the turbine personal property, which was not entitled to

tax exemptions. The new assessments provided:

Parcel Number Tax Year Actual Value/State Taxable Value

Equalized Value

80-07-004-003-03 2011 $8,016,600 $8,016,600

Real Property

80-07-900-084-00 2011 $6,663,600 $6,663,600

Personal Property

80-07-900-084-01 2011 $185,842,800 $185,842,800

Turbine Property

New Covert Generating alleged that the County lacked the authority to make the changes

and stated that, after the change, the Commission modified its order and required the Township to

assess the “turbines” alone under the new parcel—parcel 80-07-900-084-01—and to move the

other personal property from the real property parcel to the original personal property parcel

number, which was parcel 80-07-900-084-00. New Covert Generating alleged that the actions by

the Township and County did not constitute a final decision, ruling, or determination not already

subject to the Tax Tribunal’s jurisdiction, but it nevertheless stated that it was appealing the

reclassification in its petition as a precautionary measure.

This Court issued an opinion affirming the Tax Tribunal’s decision regarding the

assessments for 2010 and 2011. See New Covert Generating Co v Covert Twp, unpublished per

curiam opinion of the Court of Appeals, issued August 4, 2015 (Docket No. 320877). In that

decision we recognized that the Township had initially taxed two separate parcels owned by New

Covert Generating: one tax parcel for its industrial personal property and another for its real

property. See id. at 1. However, we recognized that the Commission ordered the Township to

establish a separate tax parcel for New Covert Generating’s industrial personal property that

constituted turbines beginning with the 2011 tax year. Id. at 1 n 1. The Court related that the

Commission ordered the Township to create the separate parcel because turbines were not exempt

property. Id. at 12-13. The case proceeded to trial before the Tax Tribunal, and the Tax Tribunal

ultimately set the true cash value of the property at $179,100,000 for 2010, and at $228,400,000

for 2011. Id. at 2.

The Township also argued in part that the Tax Tribunal did not have jurisdiction to consider

New Covert Generating’s petition because New Covert Generating did not file statements of

assessable property in 2010 and 2011. Id. This Court concluded that, under MCL 205.735a, New

Covert Generating properly invoked the Tax Tribunal’s jurisdiction without filing the statements,

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explaining that the statutory requirement that the petitioner file a statement of assessable property

applied only to appeals in which the petitioner appealed directly to the Tax Tribunal without first

protesting the assessment before the Board. Id. at 4. Because New Covert Generating had filed a

protest before the Board for the 2011 assessment, it could properly appeal that assessment to the

Tax Tribunal without filing a statement of assessable property. Id. at 5. Although New Covert

Generating did not protest the 2010 assessment to the Board, this Court concluded that New Covert

Generating complied with the requirement that it file a statement of assessable property by filing

the Commission’s Form 4175. Id. For these reasons, the Court concluded that the Tax Tribunal

had jurisdiction to consider the dispute. Id. at 5.

This Court also reviewed the Township’s challenges to the Tax Tribunal’s findings and

determined that the Tax Tribunal did not make any errors that warranted relief. Id. at 6-8. Finally,

this Court declined to interpret the meaning of the term “turbine” because the tax exemption at

issue did not become effective until December 31, 2011. Id. at 13. As such, it did not apply to the

tax years at issue. Id.

In May 2016, New Covert Generating filed a petition challenging the assessments of its

property for 2016. The Tax Tribunal thereafter consolidated all of the appeals involving tax claims

for years 2012 through 2015 into one appeal, and ultimately granted the County’s motion to

intervene.

B. MOTIONS FOR SUMMARY DISPOSITION

In February 2017, New Covert Generating moved for partial summary disposition in the

consolidated appeals and the appeal involving the 2016 tax year, asking the Tax Tribunal to

interpret the meaning of the term “turbine” as used in MCL 211.903(3)(b) and MCL

380.1211(10)(e)(ii), which excluded “turbines” from the industrial personal property that was

otherwise exempt from the state education tax and the school operating millage. New Covert

Generating stated that the Township had taken the position that the term applied to turbines and

all of the machinery attached to the turbine that was needed to generate electricity. New Covert

Generating argued that the term properly applied to a single machine—a rotor with vines or

blades—and it asked the Tax Tribunal to declare that that was the proper understanding of the

term.

To determine the proper interpretation of the term “turbine,” the Tax Tribunal found it

noteworthy that the Legislature had demonstrated its ability to identify energy systems involving

turbines in other statutes, but chose not to define the term to include an energy system in the

statutes at issue. Thus, the Tax Tribunal rejected the Township’s contention that the term applied

broadly “to include all parts necessary to generate electricity.” Relying on a dictionary definition,

the Tax Tribunal held that the term “turbine,” as used in MCL 211.903 and MCL 380.1211,

referred to a single piece of equipment: a rotary engine activated by the reaction or impulse or both

of a current of fluid such as water, steam, or air. Thus, the trial court granted partial summary

disposition to New Covert Generating Company.

Assertedly on the basis of several discovery disputes, the Township and County moved for

summary disposition on October 25, 2017. They argued that New Covert Generating did not have

standing to challenge the assessments because it was not a “party in interest” as that phrase is used

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in MCL 205.735a(6), as the evidence showed that it was allegedly a “shell entity,” as it had no

employees, did not possess any records, and did not operate any businesses. New Covert

Generating had claimed that it had no ability to respond to discovery, but the entities that actually

operated the plant claimed that they did not have to respond to discovery requests because the Tax

Tribunal had no jurisdiction over them. The Township and County filed a second motion for

summary disposition in November 2017, asserting that New Covert Generating was uncollectible

and had no standing.

The Tax Tribunal denied that motion for summary disposition, stating that it was

undisputed that New Covert Generating owned the property at issue. As such, it was a party in

interest as defined in Spartan Stores, Inc v Grand Rapids, 307 Mich App 565; 861 NW2d 347

(2014). The Tax Tribunal also concluded that the Township and County violated MCR 2.114—

now MCR 1.109(E)—by submitting a motion that was not grounded in fact or law because the

Township and County ignored the holding in Spartan Stores and improperly attempted to

distinguish it. Accordingly, the Tax Tribunal awarded New Covert Generating costs and fees.

New Covert Generating submitted a bill of costs and fees in the amount of approximately

$26,000. After the Township and County objected, the Tax Tribunal held an evidentiary hearing

on the reasonableness of New Covert Generating’s bill of costs, but withheld its decision until

entry of its final order and judgment resolving the appeals.

In June 2018, the Township and County again moved for summary disposition on the

ground that the Tax Tribunal lacked jurisdiction. They argued that the Commission requires

electric generating facilities to file three different statements of assessable property, and although

New Covert Generating filed the three forms, the filings were improper because two of the forms

were filed under protest, and inserted $0 as the value of the property, which was inaccurate.

Additionally, under MCL 205.735a(4)(b), they argued that New Covert Generating could not

invoke the Tax Tribunal’s jurisdiction without filing accurate statements of assessable property,

which it did not do.

New Covert Generating responded that the motion was patently frivolous, as the Township

and the County had asserted the same argument in the 2010 and 2011 proceedings, and both the

Tax Tribunal and this Court rejected that argument. It was undisputed that New Covert Generating

had filed the required forms for each of the years at issue and, it had protested to the Board for

each of the years except 2013. New Covert Generating asserted that the Township and County

knew that their motion was meritless, and requested sanctions.

In July 2018, the Tax Tribunal denied the outstanding motions for summary disposition by

the Township and County. The Tax Tribunal rejected the Township and County’s argument that

it had to order New Covert Generating to pay its taxes before it could consider New Covert

Generating’s appeals. It also recognized that this Court had already rejected the contention that

the Tax Tribunal lacked jurisdiction because New Covert Generating failed to file the properly

filled-out forms. The Tax Tribunal further opined that the timing and nature of the motion raised

concerns that the Township and County made it for an improper purpose, or knew that it was

frivolous. However, the Tax Tribunal held that issue in abeyance pending resolution of the

underlying tax disputes.

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C. THE CONTESTED HEARING

In July 2018, the Tax Tribunal held a contested hearing to determine the true cash value

and taxable values of the parcels at issue in the appeal for the 2016 tax year.1 Edward VanderVries

and Laureen Birdsall testified regarding the 2016 assessment of New Covert Generating’s

property—$660 million, but they allocated 3% of that total to real property, which left a value of

$638 million for the personal property.

The managing director of Duff & Phelps, hired by New Covert Generating to appraise the

plant, testified that there was enough data to support the use of all three valuation approaches for

New Covert Generating’s plant: income, cost, and sales. On the basis of these three approaches,

New Covert Generating’s property was worth $408 million. The Township and County presented

their rebuttal case before presenting testimony and evidence concerning their valuation of New

Covert Generating’s plant. Their experts reviewed the Duff & Phelps appraisal, and felt that there

were several errors and inaccuracies in each of the three valuation approaches.

D. POSTHEARING JUDGMENTS

In January 2019, the parties entered a stipulated judgment establishing the true cash values,

assessed values, and taxable values for all of the parcels involved in the tax appeals for tax years

2012 through 2015. They also stipulated to the amount of refund owing to New Covert Generating

for those tax years. The Tax Tribunal entered the stipulated judgment as a partial consent

judgment. The Tax Tribunal left the appeal open to consider the costs and fees to be awarded as

a sanction.

The Tax Tribunal subsequently issued its February 8, 2019 final opinion and judgment

establishing the true cash value and taxable values for the parcels at issue in the appeal for the

2016 tax year. The Tax Tribunal found that the parties’ experts agreed that the assessor’s value

($1,342,800) for the land was accurate, as was the value of the exempt pollution control assets

($46,320,249). The Tax Tribunal found that the assessment presented by the Township and

County was not supported by substantial, competent, or material evidence, and that while New

Covert Generating’s appraisal was not without its flaws, it did constitute substantial, competent,

and material evidence sufficient to clear the low hurdle of the burden going forward with the

evidence. For that reason, the Tax Tribunal rejected the Township and County’s request for a

directed verdict.

Turning to the parties’ appraisals, the Tax Tribunal generally found that the appraisal by

Duff & Phelps (New Covert Generating’s expert) was more reliable than the appraisal by

Concentric (the appraiser for the Township and County). The Tax Tribunal agreed that the sales

approach employed by Duff & Phelps was flawed, but accepted the cost approach as a reliable

approach in valuing the property. The Tax Tribunal explained that the only alternative to

purchasing an existing plant would be to purchase a new plant. In looking at the cost approach,

1

New Covert Generating’s parent company sold New Covert Generating along with other holding

companies to another entity in 2015. The transfer constituted an uncapping event, which led to

the revaluation of the property as of December 31, 2015. See MCL 211.27a(3).

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the Tax Tribunal found that Duff & Phelps’s use of the 2016 Annual Energy Outlook report was

relevant to determining the cost of a new plant on December 31, 2015. The Tax Tribunal found

that the costs associated with the construction of a new plant stated in the 2016 Annual Energy

Outlook report included the cost of a switchyard; as such, it agreed with Duff & Phelps’s

conclusion that the cost of a switchyard had to be deducted when determining the replacement

cost.

The Tax Tribunal did agree with two criticisms of Duff & Phelps’s cost approach. It

determined that it was reasonable to include owner’s profit in the cost to build a new plant. The

Tax Tribunal also did not agree with Duff & Phelps’s decision to deduct the cost of the Segreto

switchyard with regard to each of its valuation approaches. On the basis of these changes, the Tax

Tribunal revised the cost value calculated by Duff & Phelps from $423,000,000 to $510,000,000.

The Tax Tribunal next discussed Duff & Phelps’s income approach. It found that Duff &

Phelps’s capacity factor of 65% was more accurate than Concentric’s capacity factor of 87%. The

Tax Tribunal accepted Duff & Phelps’s use of the capital asset pricing model when calculating the

discount rate, but did not agree that it was inappropriate for Duff & Phelps to subtract the value of

New Covert Generating’s intangibles at an estimated 3%. According to the Tax Tribunal, Duff &

Phelps should not have deducted the costs associated with the Segreto switchyard when

determining value using the income approach. For that reason, the Tax Tribunal added $59 million

back to the value to reach a modified value of $509,000,000 for the income approach.

In the end, the Tax Tribunal concluded by weighing the two approaches equally and finding

that the true cash value of all the property was $509,500,000. The Tax Tribunal then turned to the

proper allocation of the value.

The Tax Tribunal employed Duff & Phelps’s method for determining the value of the real

property, which was to subtract the agreed value of the land, multiply the remainder by 3% to

calculate the value of the improved land, and then add the land value back to that total to get a real

estate value of $16,587,516. The total value of the personal property would then be $492,912,484.

After determining the value of the personal property, the Tax Tribunal subtracted the agreed value

of the tax-exempt pollution control property, which was $31,960,972. The remaining value of the

personal property was $460,951,512.

The Tax Tribunal did not agree with Duff & Phelps’s allocation of the remaining value

between the turbine personal property parcel and the nonturbine personal property parcel. The

Tax Tribunal determined that the law required it to value the turbine property as installed. It

determined that 46% of the value ought to be assigned to the turbine parcel, which resulted in a

value of $212,037,696 for that parcel.

At the same time it entered its final opinion and judgment for the 2016 tax year, the Tax

Tribunal entered its order awarding costs and fees as a sanction for the Township and County’s

motions for summary disposition in the appeals involving the 2012 through 2015 tax years. The

Tax Tribunal found that the litigation conduct of the County’s counsel called into question whether

the motions were interposed for an improper purpose. Specifically, the Township and County filed

six motions for summary disposition and a request for immediate consideration, and despite

counsel being familiar with Spartan Stores, he argued in direct contravention of its holding. The

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Tax Tribunal concluded that the Township and County had attempted to cast New Covert

Generating in a bad light.

The Tax Tribunal similarly found that the June 2018 motion was frivolous, reasoning that

that motion was completely unfounded and made for an improper purpose because it was identical

to motions previously filed and resolved, and those parties failed to acknowledge that the issue

had been decided previously by the Tax Tribunal and this Court. Their failure to cite to the

previous opinion led the Tax Tribunal to conclude that the motion was frivolous and imposed for

an improper purpose.

The Tax Tribunal found that $17,955 of the fees that New Covert Generating requested for

responding to the motion of October 2017 were reasonable. It ordered the signatory of that motion

to pay half the fees. The Tax Tribunal ordered a hearing to determine what fees would be

reasonable for the filing of the June 2018 motion. After the hearings, the Tax Tribunal entered an

order for sanctions arising from the June 2018 motion, rejecting the Township and County’s

request for a hearing, and instead granted relief on its earlier findings after a hearing to set the

hourly rate. It then considered the bill of costs and dramatically reduced it because it felt that the

hours billed were unreasonable given that the basis for the motion had been previously rejected.

The Tax Tribunal found that $5,580 of the fees were reasonable. It ordered that 50% be attributed

to each docket, and ordered the signatories to the motion to jointly pay the sanction.2

III. INVOKING THE TAX TRIBUNAL’S JURISDICTION

The Tax Tribunal did not commit an error of law when it concluded that it had jurisdiction

over the appeals.

This Court’s review of agency decisions involving property tax valuations is quite limited:

“In the absence of fraud, error of law or the adoption of wrong principles, no appeal may be taken

to any court from any final agency provided for the administration of property tax laws from any

decision relating to valuation or allocation.” Const 1963, art 6, § 28. Because these claims of

error involve whether the Tax Tribunal properly interpreted and applied the statutes governing its

jurisdiction, this Court’s review is limited to determining whether the Tax Tribunal committed an

error of law in its interpretation and application of the statutes. Mich Props, LLC v Meridian Twp,

491 Mich 518, 527-528; 817 NW2d 548 (2012). This Court reviews de novo whether the Tax

Tribunal erred as a matter of law when interpreting and applying statutes. Makowski v Governor,

317 Mich App 434, 441; 894 NW2d 753 (2016). Agency interpretations of a statute are entitled

to “respectful consideration, but they are not binding on courts and cannot conflict with the plain

meaning of the statute.” In re Complaint of Rovas Against SBC Mich, 482 Mich 90, 117-118; 754

NW2d 259 (2008).

2

The Tax Tribunal also entered an order granting New Covert Generating’s motion to correct

errata. It corrected the values attributed to the personal property parcels, and corrected a

misstatement in the opinion. This order resolved the last pending claim and closed the appeal for

the 2016 tax year, but it noted that it still had to resolve the outstanding motions for

reconsideration.

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Whether a tribunal had subject-matter jurisdiction may be raised at any time, even for the

first time on appeal. See Midwest Energy Co-op v Mich Pub Serv Comm, 268 Mich App 521, 523;

708 NW2d 147 (2005). This Court also reviews de novo as a question of law whether this Court

has subject-matter jurisdiction. Id.; Chen v Wayne State Univ, 284 Mich App 172, 191; 771 NW2d

820 (2009).

A. APPELLATE JURISDICTION

As a preliminary matter, we note that part of the appeal in Docket No. 348721 was

previously dismissed with regard to the claims involving the March 11, 2019 order. This Court

ordered that the appeal involving the order of February 8, 2019, remained pending. See New

Covert Generating Co, LLC v Covert Twp, unpublished order of the Court of Appeals, entered

May 14, 2019 (Docket No. 348721). What has not been decided is whether this Court lacked

jurisdiction to consider whether statements of assessable property must be filed to invoke

jurisdiction or whether New Covert Generating was a party in interest because the Township and

County did not timely appeal the consent judgment. We do so now.

This Court’s jurisdiction to hear an appeal of right is determined by application of the court

rules. See Chen, 284 Mich App at 192. This Court generally has jurisdiction of an appeal of right

from a final judgment or order, of the circuit court or of the court of claims, as defined under MCR

7.202(6). See MCR 7.203(A)(1). This Court also has jurisdiction to hear appeals of right from a

“judgment or order of a court or tribunal from which appeal of right to the Court of Appeals has

been established by law or court rule.” MCR 7.203(A)(2). The Legislature provided that the Tax

Tribunal is “the final agency for the administration of property tax laws.” MCL 205.753(1). And

it further provided that a party has an appeal by right in this Court from a “final order or decision

of the tribunal,” which “may be taken by filing an appeal in accordance with the Michigan court

rules after the entry of the order or decision appealed from or after denial of a motion for rehearing

timely filed.” MCL 205.753(2). Accordingly, an aggrieved party must file a claim of appeal

within 21 days of the entry of a final judgment or order. See MCR 7.203(A)(2); MCR

7.204(A)(1)(a).

Because the consent judgment disposed of all the claims and adjudicated all the rights and

liabilities of all the parties for the disputes involving tax years 2012 through 2015, it was a final

judgment as to those petitions. See MCR 7.202(6)(a)(i). We have jurisdiction to consider the first

two issues raised in Docket No. 348721 to the extent that those claims involve the Tax Tribunal’s

authority to enter the order compelling the payment of attorney fees because the Township and

County timely appealed that order. To the extent that the Township and County have impliedly

challenged the consent judgment by arguing that the Tax Tribunal should not have denied their

motions for summary disposition, this Court treats it as if on leave granted. See, e.g., Schultz v

Auto-Owners Ins Co, 212 Mich App 199, 200 n 1; 536 NW2d 784 (1995).

New Covert Generating also argues that this Court cannot consider any challenge to the

consent judgment because a party may not assert an error with regard to a judgment to which that

party consented. See Dora v Lesinski, 351 Mich 579, 582; 88 NW2d 592 (1958). However, a

party may raise a challenge to subject-matter jurisdiction at any time, and the parties cannot confer

subject-matter jurisdiction on the Tax Tribunal by their conduct or through waiver. See, e.g.,

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Paulson v Secretary of State, 154 Mich App 626, 630-631; 398 NW2d 477 (1986).3 Accordingly,

the Township and County may challenge the Tax Tribunal’s exercise of subject-matter jurisdiction

even though they did not reserve the right to appeal on that ground in the consent judgment. Id.

B. INVOKING THE TAX TRIBUNAL’S JURISDICTION

The Township and County argue that under MCL 205.735a(4)(b), which applies to disputes

involving industrial personal property, the filing of a properly completed statement of assessable

property is always a prerequisite to invoking the Tax Tribunal’s jurisdiction—whether as a direct

appeal or as an appeal after protest to the Board. They assert that MCL 205.735a(4)(b) requires

this result because the conditional clause at the end of the first sentence in subdivision (4)(b)

applies equally to a protest before the Board and a direct appeal to the Tax Tribunal. Moreover,

they argue that the failure to comply with that condition deprives the Tax Tribunal of subject-

matter jurisdiction and, for that reason, the prerequisites cannot be waived or forfeited.

1. SUBJECT-MATTER JURISDICTION OR PROCEDURAL PREREQUISITE

Subject-matter jurisdiction involves a court or tribunal’s abstract power to try a case of the

kind or character of the one pending. Petersen Fin, LLC v Kentwood, 326 Mich App 433, 441;

928 NW2d 245 (2018). The Legislature provided for the Tax Tribunal’s subject-matter

jurisdiction under MCL 205.731. Hillsdale Co Senior Servs, Inc v Hillsdale Co, 494 Mich 46, 52-

53; 832 NW2d 728 (2013). That statute provides that the Tax Tribunal “has exclusive and original

jurisdiction over all of the following:”

(a) A proceeding for direct review of a final decision, finding, ruling,

determination, or order of an agency relating to assessment, valuation, rates, special

assessments, allocation, or equalization, under the property tax laws of this state.

(b) A proceeding for a refund or redetermination of a tax levied under the

property tax laws of this state.

(c) Mediation of a proceeding described in subdivision (a) or (b) before the

tribunal.

(d) Certification of a mediator in a tax dispute described in subdivision (c).

(e) Any other proceeding provided by law. [MCL 205.731.]

MCL 205.731 does not limit the Tax Tribunal’s jurisdiction on the basis of prerequisites to

the assertion of jurisdiction. The prerequisites to the assertion of jurisdiction appear under MCL

205.735 for appeals commenced before January 1, 2007, and under MCL 205.735a for appeals

commenced after December 31, 2006. Courts have long recognized that not all prerequisites to

3

This Court is not required to follow the rule of law established by an opinion of this Court

published before November 1, 1990. See MCR 7.215(J)(1). However, under traditional principles

of stare decisis, pre-1990 decisions continue to have precedential effect. MCR 7.215(C)(2).

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the assertion of jurisdiction reduce the subject-matter jurisdiction of a tribunal—some are merely

claim-processing rules that do not implicate subject-matter jurisdiction. See Union Pacific R Co

v Brotherhood of Locomotive Engineers and Trainmen Gen Comm of Adjustment, 558 US 67, 81-

82; 130 S Ct 584; 175 L Ed 2d 428 (2009).

Although it did not directly consider whether the Legislature intended to make the

prerequisites stated under MCL 205.735 jurisdictional, the Supreme Court has characterized them

as jurisdictional. Szymanski v Westland, 420 Mich 301, 303-305; 362 NW2d 224 (1984). This

Court has been inconsistent when interpreting whether the prerequisites to the Tax Tribunal’s

acquisition of jurisdiction stated under MCL 205.735 implicated subject-matter jurisdiction and,

therefore, could not be waived or forfeited, or were merely procedural and could be waived or

forfeited. Compare Parkview Mem Assoc v Livonia, 183 Mich App 116, 121; 454 NW2d 169

(1990) (holding that a failure to comply with a prerequisite under MCL 205.735, although stated

in terms of the acquisition of jurisdiction, were merely procedural and did not constitute a

limitation on subject-matter jurisdiction), with Leahy v Orion Twp, 269 Mich App 527, 532; 711

NW2d 438 (2006) (holding that a failure to comply with a prerequisite under MCL 205.735

deprived the Tax Tribunal of jurisdiction). The inconsistency has in part been the result of the

Supreme Court’s handling of these prerequisites. The Parkview Court relied in part on the

Supreme Court’s decision in W & E Burnside, Inc v Bangor Twp, 402 Mich 950l; 314 NW2d 196

(1978), where the Court reversed this Court’s decision to affirm the Tax Tribunal’s decision to

dismiss for lack of jurisdiction on the ground that the taxpayer did not protest before the board as

required under MCL 205.735(1). See id.; W & E Burnside, Inc v Bangor Twp, 77 Mich App 618,

624; 259 NW2d 160 (1977), rev’d 402 Mich 950l (1978). If the requirements stated under MCL

205.735 limited the Tax Tribunal’s subject-matter jurisdiction, then the failure to comply with

those requirements could not be waived. As such, the decision in W & E Burnside suggested that

the Supreme Court viewed the prerequisites as jurisdictional only in the looser sense.

In any event, and as discussed below, the Tax Tribunal did not err when it concluded that

New Covert Generating had met the requirements of MCL 205.735a(4)(b). Therefore, the Tax

Tribunal had the authority to consider the appeal.

2. ACQUIRING JURISDICTION

The resolution of this issue involves the proper interpretation of MCL 205.735a(4)(b). The

goal of statutory interpretation is to discern and give effect to the Legislature’s intent. See Sun

Valley Foods Co v Ward, 460 Mich 230, 236; 596 NW2d 119 (1999). The best indicator of the

Legislature’s intent is the language of the statute itself. Id. If the statute is unambiguous, this

Court must assume that the Legislature intended the meaning clearly expressed and must enforce

the statute as written. Id. Notably, a statute is not interpreted in a vacuum; rather, it must be

interpreted in context and with a view to the statute’s placement within the overall statutory

scheme. Manuel v Gill, 481 Mich 637, 650; 753 NW2d 48 (2008).

As part of the General Property Tax Act, see MCL 211.1 et seq., the Legislature created

boards of review for townships and other municipalities, the primary function of which is to

examine and review the accuracy of tax assessment rolls. MCL 211.29(1). The Legislature also

required boards of review to meet for limited periods to hear taxpayer protests of an assessment.

MCL 211.30(4). Normally, a board must afford an opportunity to be heard to any person who has

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appeared before the board to protest an assessment. MCL 211.30(3). But a Township may require

a taxpayer to first properly raise his or her claim to the assessor or another agency as a prerequisite

to filing a protest before the board. MCL 211.107(1); AERC of Mich, LLC v Grand Rapids, 266

Mich App 717, 722-723; 702 NW2d 692 (2005). The statutory provisions most directly addressing

a board’s authority do not otherwise impose any prerequisites that must be met before a person

may file a protest with the board.

The Legislature also created the Tax Tribunal through the Tax Tribunal Act, MCL 205.701

et seq. See MCL 205.721. The Tax Tribunal is a quasi-judicial agency, MCL 205.721(1), that has

exclusive jurisdiction “for direct review of a final decision, finding, ruling, determination, or order

of an agency relating to assessment, valuation, rates, special assessments, allocation, or

equalization, under the property tax laws of this state.” MCL 205.731(a). An agency is defined

to include boards of review. See MCL 205.703(a). Accordingly, the Legislature provided the Tax

Tribunal with the general authority to hear appeals from final decisions by boards of review.

Before January 1, 2007, the Tax Tribunal could only acquire jurisdiction over a tax dispute

involving an assessment or exemption if the aggrieved party first protested the assessment or

claimed the exemption before the appropriate board of review, see MCL 205.735(2), which was

consistent with the Legislature’s conferral of jurisdiction to hear appeals from final decisions and

orders. Although the Legislature generally continued to require petitioners to first protest to the

appropriate board of review for disputes arising after December 31, 2006, see MCL 205.735a(3),

the Legislature provided taxpayers with the option to appeal directly to the Tax Tribunal without

protesting to the board under certain circumstances:

(4) In the 2007 tax year and each tax year after 2007, all of the following

apply:

(a) For an assessment dispute as to the valuation or exemption of property

classified . . . as commercial real property, industrial real property, or

developmental real property, the assessment may be protested before the board of

review or appealed directly to the tribunal without protest before the board of

review as provided in subsection (6).

(b) For an assessment dispute as to the valuation or exemption of property

classified . . . as commercial personal property, industrial personal property, or

utility personal property, the assessment may be protested before the board of

review or appealed directly to the tribunal without protest before the board of

review as provided in subsection (6), if a statement of assessable property is filed

under [MCL 211.19], prior to the commencement of the board of review for the tax

year involved.

(c) For an assessment dispute as to the valuation of property that is subject

to taxation under . . . the commercial redevelopment act, . . . the enterprise zone

act, . . . the technology park development act, . . . the obsolete property

rehabilitation act, . . . the commercial rehabilitation act, . . . the assessment may be

protested before the board of review or appealed directly to the tribunal without

protest before the board of review as provided in subsection (6). This subdivision

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does not apply to property that is subject to the neighborhood enterprise zone

act . . . . [MCL 205.735a(4).]

Notably, the provisions of MCL 205.735a(4) are not framed as limitations on the

acquisition of jurisdiction. Rather, they are framed as exceptions to the general prerequisite to the

Tax Tribunal’s acquisition of jurisdiction over a tax dispute as provided under MCL 205.735a(3).

For tax disputes commenced after December 31, 2006, the Legislature reaffirmed that, except as

otherwise provided under MCL 205.735a or other law, “for an assessment dispute as to the

valuation or exemption of property, the assessment must be protested before the board of review”

before the Tax Tribunal could acquire jurisdiction of the dispute as provided under MCL

205.735a(6). See MCL 205.735a(3).

Under MCL 205.735a(4), the permissive “may” was used to establish exceptions to the

mandatory prerequisite to the acquisition of jurisdiction under MCL 205.735a(3). Walters v

Nadell, 481 Mich 377, 383; 751 NW 2d 431 (2008) (the term “may” ordinarily is permissive, not

mandatory). The Legislature provided that, for certain qualifying assessment and exemption

disputes, the assessment or exemption “may be protested before the board of review or appealed

directly to the tribunal without protest before the board of review.” See MCL 205.735a(4)(a) and

(c). The disjunctive “or” established that a taxpayer “may” do either of two things; the taxpayer

“may” protest the assessment “before the board of review” or the taxpayer “may” appeal directly

to the Tax Tribunal without protest before the board of review. In the former case, the Tax Tribunal

would not acquire jurisdiction until after the taxpayer completed the protest and filed a petition in

compliance with MCL 205.735a(6). In the latter case, the taxpayer could appeal directly to the

Tax Tribunal by filing a petition in compliance with MCL 205.735a(6), notwithstanding the

requirement stated under MCL 205.735a(3). Nothing within the statutory scheme suggests that

the taxpayer who elects the first option might not subsequently appeal to the Tax Tribunal. The

Legislature’s statement that the assessment may be protested to the board or appealed directly to

the Tax Tribunal without protest to the board demonstrates that the direct appeal is an exception

to, not a replacement of, the requirement stated under MCL 205.735a(3). See MCL 205.735a(4)(a)

and (c).

The only distinction between subdivisions (4)(a) and (c), and the exception stated in

subdivision (4)(b), is that, for the exception stated under subdivision (4)(b), the Legislature added

a limitation to the permissive language:

For an assessment dispute as to the valuation or exemption

of . . . commercial personal property, industrial personal property, or utility

personal property, the assessment may be protested before the board of review or

appealed directly to the tribunal without protest before the board of review as

provided in subsection (6), if a statement of assessable property is filed . . . . [MCL

205.735a(4)(b).]

If the Township and County’s preferred interpretation were correct, the exception stated

under MCL 205.735a(4)(b) would necessarily apply to both options; that is, it would have to be

understood to read that “the assessment may be protested before the board of review,” “if a

statement of assessable property is filed” before the commencement of the board of review, or the

assessment may be “appealed directly to the tribunal without protest before the board of review,”

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“if a statement of assessable property is filed” before the commencement of the board of review.

Under that interpretation, the statute would in effect impose a prerequisite on the taxpayer’s ability

to protest to the board of review.

But subdivision (4)(b) does not address the authority of boards of review to hear a protest;

it addresses the prerequisites applicable to the Tax Tribunal’s acquisition of jurisdiction under an

exception to the rule stated in MCL 205.735a(3). Tellingly, MCL 205.735a(3) already provides

that the Tax Tribunal acquires jurisdiction to hear appeals that have first been protested to the

board of review without imposing any such requirement. That is, if a petitioner first protested to

the board of review, the Tax Tribunal would subsequently acquire jurisdiction under MCL

205.735a(3) without any need to resort to any of the permissive exceptions provided under MCL

205.735a(4). Therefore, given the statutory scheme as a whole and interpreting the statute in

context, the condition applies to the last antecedent of the two antecedents separated by the

disjunctive “or”—namely, it applies only in those appeals in which the taxpayer has directly

appealed without making a protest to the board of review. See Kales v Oak Park, 315 Mich 266,

271; 23 NW2d 658 (1946) (stating that a modifying clause is confined to the last antecedent unless

there is something in the subject matter or dominant purpose that requires a different construction).

In the previous appeal, this Court rejected the Township’s construction of MCL

205.735a(4) because that construction, in effect, read a limitation into MCL 205.735a(3) that did

not exist:

MCL 205.735a provides a general jurisdictional rule in § (3) that provides

that an assessment dispute must be protested before the board of review prior to the

Tax Tribunal acquiring jurisdiction in accordance with the petition filing

requirements of subsection (6). MCL 205.735a provides exceptions to the general

rule, however, in subsection (4). Each subsection restates the general jurisdictional

rule, but makes the general rule permissive rather than mandatory. Thus, while

protest before board of review is not required for property covered in each of the

three subsections prior to an appeal before the Tax Tribunal, protest before the

board of review remains an available course. Respondent’s proposed reading of

the exception in subsection (4)(b) would add a requirement to the exception that

does not exist in the general rule in section (3); that is, section (3) requires only that

a petitioner protest an assessment before the board of review and does not require

the filing of a statement of assessable personal property in order to allow the

tribunal to acquire jurisdiction of the dispute under MCR 205.735a(6) upon the

timely filing of a petition. Subsection (4)(b) similarly permits a petitioner to protest

an assessment before the board of review, but also offers a petitioner the option of

appealing to the tribunal without protest if an additional condition is satisfied: a

statement of assessable property must be filed under § 19 of the general property

tax act before commencement of the board of review for the particular tax year. . . .

[See New Covert Generating Co, unpub op at 4.]

When read in context and with a view to the role of the exceptions in the statutory scheme

as a whole, see Manuel, 481 Mich at 650, MCL 205.735a(4)(b) is not equally susceptible to more

than a single meaning. Alvan Motor Freight, Inc v Dep’t of Treasury, 281 Mich App 35, 39-40;

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761 NW2d 269 (2008).4 Rather, the plain language shows that the Legislature intended the

requirement that the taxpayer file a statement of assessable property to apply only in cases of a

direct appeal. MCL 205.735a(4)(b) plainly authorizes, but does not require, a taxpayer to appeal

directly to the Tax Tribunal if the taxpayer filed a statement of assessable property. In the

alternative, the taxpayer may protest to the board and, if he or she does so, the taxpayer has satisfied

the prerequisite to the Tax Tribunal’s acquisition of jurisdiction stated under MCL 205.735a(3).

Here, it is undisputed that New Covert Generating protested the assessments and

exemptions before the Board of Review for each petition. Consequently, the Tax Tribunal

acquired jurisdiction of the appeals consistent with MCL 205.735a(3) after a timely petition under

MCL 205.735a(6). For these reasons, the Tax Tribunal did not commit an error of law when it

determined that it had acquired jurisdiction of the appeals. See Mich Props, 491 Mich at 527-528.5

IV. “PARTY IN INTEREST”

The Tax Tribunal also did not commit an error of law or adopt wrong principles when it

concluded that New Covert Generating was a party in interest capable of invoking its jurisdiction.6

This Court reviews the Tax Tribunal’s judgment and orders for fraud, error of law, or the

adoption of wrong principles, Mich Props, LLC, 491 Mich at 527-528, while we review de novo

whether the Tax Tribunal erred as a matter of law when it interpreted or applied the relevant

statutes. Makowski, 317 Mich App at 441. This Court also reviews de novo as a question of law

whether the Tax Tribunal had subject-matter jurisdiction. Midwest Energy, 268 Mich App at 523.

The Legislature provided, in relevant part, that the jurisdiction of the Tax Tribunal “is

invoked by a party in interest, as petitioner, filing a written petition . . . .” MCL 205.735a(6). In

Spartan Stores, 307 Mich App at 566, the Court had to determine whether Spartan Stores, Inc.,

which indirectly owned Family Fare, LLC, was a party in interest sufficient to invoke the Tax

Tribunal’s jurisdiction over the assessment of property in which Family Fare held a leasehold

4

The Township, County, and Amici suggest adoption of their alternate construction of the statute

because that construction would encourage disclosures and support the laudable goals of

uniformity of practice in the assessment of taxes. Whether those policies might be better served

by precluding a taxpayer from asserting an appeal before the Tax Tribunal for those years when

the taxpayer did not file a statement of assessable property, or filed a noncompliant statement, are

policy arguments, which have no relevance when determining the proper construction of a statute.

Stabley v Huron-Clinton Metro Park Auth, 228 Mich App 363, 370; 579 NW2d 374 (1998) (stating

that this Court will not impose a policy-driven interpretation of a statute when the Legislature has

already chosen among competing policy considerations).

5

This resolves this issue on appeal, and therefore we need not address New Covert Generating’s

argument regarding collateral estoppel, or the Township and County’s argument that the

statements of assessable property filed by New Covert Generating did not satisfy the requirements

of MCL 205.735a(4)(b).

6

As noted above, to the extent that the Township and County’s appeal in Docket No. 348721 was

untimely, we treat the appeal as on leave granted. Schultz, 212 Mich App at 200 n 1.

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interest. Id. at 566-567. It also had to determine whether Family Fare was a party in interest even

though it did not own the underlying property. Id. at 566-567.

The Spartan Stores Court examined the methods by which an appeal typically proceeded

to the Tax Tribunal, and noted that taxpayers previously had to protest an assessment before the

local board of review before the taxpayer could proceed to the Tax Tribunal. Id. at 571, citing

MCL 205.735(2). The Court recognized that MCL 211.30(4) authorized only those persons (or

their agents) whose property had been assessed to protest before boards of review; that is, only the

actual owner of the property assessed could protest to the board. See id. at 570. The interplay

between these statutes, the Court related, generally made it unnecessary to define the scope of the

phrase “party in interest”:

[H]istorically it was unnecessary for courts to define the use of “party in interest”

in MCL 205.735(3) with any more specificity, because the term necessarily

encompassed only those parties that had protested before the board of review—i.e.,

the property owner or its agent. MCL 211.30(4). In other words, the board of

review’s strict limit on which parties could contest property-tax assessments served

as a screen on which parties could appeal those assessments to the Tax Tribunal,

and necessarily limited the scope of the phrase “party in interest” in MCL

205.735(3) to property owners or their agents. [Id. at 571-572.][7]

The Court held that the phrase “party in interest” should not be limited to the actual owner

of the property assessed, explaining that the phrase referred more broadly to any person who held

any property interest in the property assessed. Id. at 575-576. The Court held that a leasehold

interest was such a property interest: “Michigan courts have long held that leaseholds manifestly

are ‘interests,’ in that they are ‘part of a legal . . . claim to or right in property.’ Most importantly,

for the purposes of our case, ‘the word “interest” as applied to land embraces and includes

leasehold interests and rights derived therefrom . . . .’ ” Id. at 575 (citations omitted; ellipsis in

original). Because Family Fare held a leasehold interest in the assessed property, the Court held

that Family Fare was a party in interest within the meaning of MCL 205.735a(6), even though it

did not own the underlying real property assessed. Id. at 577. The Court, however, rejected the

contention that Spartan was a party in interest as the indirect owner of Family Fare, as Michigan

courts respect the separate existence of artificial entities and, because Spartan was not the actual

owner of the real property and did not enter into the lease agreement, it did not have a property

interest in the assessed property. Id. at 577-578. For that reason, the Court concluded, Spartan

was not a party in interest within the meaning of MCL 205.735a(6). Id. at 578.

Returning to our case, it is undisputed that New Covert Generating was the actual owner

of the real and personal property that had been assessed. Therefore, it was plainly a party in interest

under both the original understanding of that phrase and the broadened construction of that phrase

7

The Court recognized that it had discussed the phrase “party in interest,” as used under MCL

205.735, in Jefferson Schs v Detroit Edison Co, 154 Mich App 390; 397 NW2d 320 (1986), but it

concluded that that decision did not provide any clarity to the proper understanding of the phrase

because it discussed the phrase before there was a direct appeal to the Tax Tribunal without protest

before the board. See Spartan Stores, 307 Mich App at 574 n 7.

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given by the Spartan Stores Court. Contrary to the Township and County’s assessment, the

Court’s discussion of the law applicable to disregarding the separate existence of entities did not

indicate that such an ownership interest may be insufficient when there has been an abuse of the

corporate form. See Spartan Stores, 307 Mich App at 577 n 13.

Instead, the Spartan Stores Court stated that it could not conclude that Spartan had an

interest in the property because it had to respect Spartan’s separate existence from Family Fare.

Id. It did not suggest that Family Fare’s status as a party in interest would be lost if Family Fare’s

separate existence were disregarded. Id. Similarly, here there had been no underlying action

involving a request to disregard the separate existence of New Covert Generating from the entities

that directly or indirectly own and control it. Gallagher v Persha, 315 Mich App 647, 654, 664-

666; 891 NW2d 505 (2016) (stating that the equitable doctrine of piercing the corporate veil is a

remedy that may be invoked in a separate action to redress an underlying wrong). As such, the

Tax Tribunal did not commit an error of law when it respected New Covert Generating’s separate

existence, as it was required to do, see Green v Ziegelman, 310 Mich App 436, 450-451; 873

NW2d 794 (2015), and determined that New Covert Generating was a party in interest that had

the right to invoke the Tax Tribunal’s jurisdiction consistent with Spartan Stores, 307 Mich App

at 575-577, and MCL 205.735a(6). New Covert Generating was the record owner of the property

assessed and, therefore, was necessarily a party in interest within the meaning of MCL

205.735a(6).

We reject the Township and County’s argument that it would be absurd to allow a so-called

“shell” corporation to invoke the Tax Tribunal’s jurisdiction. Although the undisputed evidence

showed that New Covert Generating outsourced its operations and management to related entities,

it was also undisputed that New Covert Generating actually owned the real and personal property

at issue, which was worth hundreds of millions of dollars. Given the value of these properties,

New Covert Generating had a powerful incentive to comply with the tax laws and to adhere to the

Tax Tribunal’s orders and judgments in order to protect its property from liens, foreclosure, or

seizure. See MCL 211.40 (providing that the failure to pay taxes assessed on real and personal

property creates a lien on the real and personal property by operation of law, and the liens take

precedence over all other claims to the property) and MCL 211.47 (authorizing taxing authorities

to seize and sell personal property for unpaid taxes and providing a cause of action against the

entity assessed for unpaid taxes). And if New Covert Generating’s owners abused New Covert

Generating’s separate existence and recognition of its separate existence would be inequitable, the

Township and County could seek to have a circuit court disregard New Covert Generating’s

separate existence and enforce a judgment for unpaid taxes against the owners. See Gallagher,

315 Mich App at 664-666; Green, 310 Mich App at 450-451.

The Tax Tribunal additionally had the authority to penalize New Covert Generating for

discovery violations occasioned by its failure or refusal to authorize or cause the entities with

whom it contracts to provide relevant discovery, should the taxing authorities be unable to get the

discovery directly from those contracting entities. See MCL 205.732(c) (“Granting other relief or

issuing writs, orders, or directives that it deems necessary or appropriate in the process of

disposition of a matter over which it may acquire jurisdiction.”). Although the Township and

County make much of New Covert Generating’s purported discovery violations, which they argue

prevented a fair hearing in the Tax Tribunal, they have not appealed any of the Tax Tribunal’s

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discovery orders. Accordingly, there is no basis for concluding that New Covert Generating

committed discovery violations that prevented a fair hearing.

V. PROPER CONSTRUCTION OF TERM “TURBINE”

We next turn to whether the Tax Tribunal committed an error of law when it gave the term

“turbine” its ordinary meaning.

Before 2007, the Legislature imposed a state education tax on property classified as

industrial personal property, see MCL 211.903(1), and allowed local taxing authorities to impose

a school operating tax on industrial personal property of up to 18 mills, see MCL 380.1211(1). As

part of a tax reform, the Legislature amended those statutes to exempt personal property classified

as industrial property from both taxes. See 2007 PA 37 (amending MCL 380.1211(1), in relevant

part, to include an exemption for industrial personal property) and 2007 PA 38 (adding Subsection

(3) to MCL 211.903, which exempted industrial personal property from the state education tax).

The Legislature amended the statutes to exclude turbine personal property from the exemptions

otherwise applicable to industrial personal property. After the amendment, MCL 211.903

provided:

(3) For taxes levied after December 31, 2007, the following property is

exempt from the tax levied under this act:

(a) Except as otherwise provided in subdivision (b), personal property

classified under . . . MCL 211.34c, as industrial personal property.

(b) Beginning December 31, 2011, a turbine powered by gas, steam, nuclear

energy, coal, or oil the primary purpose of which is the generation of electricity for

sale is not eligible for the exemption under this subsection.

After its amendment, MCL 380.1211 provided, in relevant part:

(1) Except as otherwise provided in this section and [under MCL

380.1211(c)], the board of a school district shall levy not more than 18 mills for

school operating purposes or the number of mills levied in 1993 for school

operating purposes, whichever is less. A principal residence, qualified agricultural

property, qualified forest property, supportive housing property, property occupied

by a public school academy, and industrial personal property are exempt from the

mills levied under this subsection except for the number of mills by which that

exemption is reduced under this subsection. . . . .

* * *

(10) As used in this section:

* * *

(e) “Industrial personal property” means the following:

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(i) Except as otherwise provided in subparagraph (ii), property classified as

industrial personal property under . . . MCL 211.34c.

(ii) Beginning December 31, 2011, industrial personal property does not

include a turbine powered by gas, steam, nuclear energy, coal, or oil the primary

purpose of which is the generation of electricity for sale.

The definition of industrial personal property is quite broad; it includes: “[a]ll machinery

and equipment, furniture and fixtures, and dies on industrial parcels, and inventories not exempt

by law.” See MCL 211.34c(3)(c)(i). However, the Legislature chose to exclude turbines from the

definition of industrial personal property, which in effect excluded turbines from the exemption

from taxation for industrial personal property. Both of the exclusions to the exemption state that

“industrial personal property,” as defined under MCL 211.34c, does not include “a turbine

powered by gas, steam, nuclear energy, coal, or oil the primary purpose of which is the generation

of electricity for sale.” See MCL 211.903(3)(b); MCL 380.1211(10)(e)(ii). The dispute on appeal

involves the proper interpretation of the term “turbine” as used in these two statutes.

When interpreting a statute, this Court’s goal is to determine the Legislature’s intent. Sun

Valley Foods, 460 Mich at 236. The best indicator of the Legislature’s intent is the language of

the statute itself. Id. If the statute is not ambiguous, this Court must assume that the Legislature

intended the meaning clearly expressed and must enforce the statute as written. Id. A statute is

ambiguous only when it irreconcilably conflicts with another provision or is equally susceptible to

more than a single meaning. Alvan Motor Freight, 281 Mich App at 39-40. Notably, when

construing a statute, this Court does not interpret the statute in a vacuum; rather, it must interpret

the statute in context and with a view to the statute’s placement within the overall statutory scheme.

Manuel, 481 Mich at 650.

The Legislature did not define the word “turbine” under MCL 211.34c, MCL 211.903, or

MCL 380.1211, or any related statute. And there is no basis for concluding that the term has

acquired a technical meaning. As such, this Court must construe the term according to the common

and approved usage of the language. MCL 8.3a; see also Krohn v Home-Owners Ins Co, 490 Mich

145, 156; 802 NW2d 281 (2011). The Tax Tribunal looked to a dictionary for evidence of the

common usage for the term “turbine,” which was proper. Krohn, 490 Mich at 156. A turbine is

defined as “a rotary engine actuated by the reaction or impulse or both of a current of fluid (such

as water, steam, or air) subject to pressure and [usually] made with a series of curved vanes on a

central rotating spindle,” Merriam Webster’s Collegiate Dictionary (11th ed), or “[a]ny of various

machines in which the kinetic energy of a moving fluid is converted to rotary mechanical power,”

The American Heritage College Dictionary (3d ed). Accordingly, reduced to its simplest terms,

the ordinary meaning of the term “turbine” is a machine or engine that is rotated by moving fluids.

The Legislature further provided that only those turbines that were “powered by gas, steam,

nuclear energy, coal, or oil the primary purpose of which is the generation of electricity for sale”

were excluded from the exemption. MCL 211.903(3)(b); MCL 380.1211(10)(e)(ii). Contrary to

the contention of the Township and County before the Tax Tribunal and on appeal, this qualifying

language did not expand the ordinary meaning of the term “turbine.” A turbine remained an engine

or machine that was rotated by fluids. Read in context, it is beyond reasonable dispute that the

Legislature added the qualifying clause to limit the exclusion to a particular class of turbines.

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Given its common meaning, the term turbine applies to a wide variety of engines or machines that

are rotated by moving fluids—everything from a waterwheel to a wind turbine. But the Legislature

chose not to exclude waterwheels and wind turbines from classification as industrial personal

property. Rather, it chose to limit the exclusion to those turbines that met two criteria: turbines

that were (1) “powered” by “gas, steam, nuclear energy, coal, or oil,” and (2) that have the primary

purpose of “the generation of electricity for sale.” Although the limiting language refers to the

generation of electricity, the qualifying language cannot be understood to expand the ordinary

understanding of the term “turbine” to encompass property that would be needed to enable the

turbine to generate electricity. Applying the only reasonable construction, it is evident that the

limiting language was intended only to limit the type of turbine that was excluded from the

definition of industrial personal property—it was not intended to expand the types of property

excluded from the definition of industrial personal property.

New Covert Generating urges a construction of the statute that goes beyond the plain

meaning of the statute. New Covert Generating argues that the statutory language requires the Tax

Tribunal to determine the value of the turbine as an isolated piece of equipment, and then subtract

that value from the value of the industrial personal property as a whole.

As the Township and County correctly note, MCL 211.903 and MCL 380.1211 do not

prescribe valuation methods. Rather, those statutes establish two things: that industrial personal

property is exempt from the education taxes, and that a certain class of turbines are not industrial

personal property. Those statutes, accordingly, only establish which industrial personal property

was excluded from the exemption provided for industrial personal property. They do not establish

the manner for calculating the taxable value of the property excluded from the exemption.

Additionally, New Covert Generating’s construction ignores the fact that the statutes do

provide that a turbine will not be excluded from the definition of industrial personal property unless

“powered” by, in relevant part, gas or steam. The use of the past participle indicates that the

turbines will only be excluded from the definition of industrial personal property when actually

used in the manner described (i.e., when powered by gas or steam for the primary purpose of

generating electricity for sale on the market). See MCL 211.903(3)(b); MCL 380.1211(10)(e)(ii).

Therefore, the limiting language provides that only installed turbines of the class described are

excluded from the exemption.

The conclusion that the turbines must be valued in relation to a functioning power plant

also follows from the statutes governing the proper valuation of personal property. True cash value

is defined as the “usual selling price at the place where the property to which the term is applied

is at the time of assessment, being the price that could be obtained for the property at private sale,

and not at auction sale except as otherwise provided in this section, or at forced sale.” MCL

211.27(1). And the testimony and evidence at trial established that the value of the plant as a

whole was inherently linked to the value of the turbines within the plant’s system for generating

electricity.

Extensive testimony was put before the Tribunal establishing that the value of the plant

depended almost entirely on the attributes and condition of the plant’s turbines. The experts agreed

that the expected lifespan and depreciation applicable to the turbines affected the value of the plant

as a whole, and that the plant’s capacity, efficiency (its heat rate), and its economic obsolescence

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were related to its turbines and significantly affected the plant’s value. There was also testimony

that the long-term service plan for the turbines also affected the value of the plant. Therefore, the

testimony and evidence established that persons who value and purchase power plants value the

plant and its equipment as a whole, and do so in significant part on the basis of installed and

functioning turbines. Consequently, the “usual selling price at the place where the property to

which the term is applied,” MCL 211.27(1), for a turbine that is “powered by gas, steam, nuclear

energy, coal, or oil the primary purpose of which is the generation of electricity for sale,” MCL

211.903(3)(b); MCL 380.1211(10)(e)(ii), is the price that a buyer would pay for the turbine as a

functioning component part of a power plant.

New Covert Generating’s argument that such a valuation indirectly causes the value of the

turbine to include the value of ancillary equipment, in violation of the exclusions stated under

MCL 211.903 and MCL 380.1211, is not well-taken. The statutes, when read in harmony,

necessarily require the valuation of the turbine in relation to the value of a functioning whole—

that is, the value of the turbine must be ascertained as part of the value of the plant that “powered”

the turbine by “gas” or “steam” for the primary purpose of generating electricity for sale on the

market because only turbines powered in this way are excluded from the definition of industrial

personal property. See MCL 211.903(3)(b) and MCL 380.1211(10)(e)(ii). With New Covert

Generating’s preferred construction, the value of the turbines would have to be determined without

reference to their value as a component of a functioning plant. That construction results in an

overstatement of the value of the other industrial personal property of the plant, the value of which

was valued as part of a functioning whole. Indeed, without a functioning turbine, the other

property might have no value at all—the plant might, as one witness opined, be “shot.” Likewise,

that construction dramatically undervalues the turbines themselves because they are not valued as

a functioning component part of a power plant, but as an isolated piece of equipment that had been

used and was subject to depreciation and obsolescence. As the Township and County correctly

observe, that construction essentially results in valuing the turbines as scrap and not according to

the price that a seller would be willing to pay for the turbines as part of a functioning unit.

New Covert Generating also suggests that valuing the turbines as a component of a

functioning plant runs afoul of the doctrine of uniformity in taxation, see Const 1963, art 9, § 3,

because the value includes the costs of installation, which may vary from developer to developer.

New Covert Generating’s contention relies on a false premise. All other variables being the same,

two turbines in two different plants would have the same value without regard to how much was

paid to install them by the original developer. The value of the turbine as part of a functioning

unit simply does not vary on the basis of the amount paid to install it. Rather, when proper

valuation techniques are applied, the value of the turbine as a component of a functioning power

plant will comply with the requirement of uniformity in taxation because similarly situated

taxpayers will be assessed according to the value of the turbine as a component of a functioning

whole. See Armco Steel Corp v Dep’t of Treasury, 419 Mich 582, 592; 358 NW2d 839 (1984)

(stating that the controlling principle is one of equal treatment for similarly situated taxpayers).

The Tax Tribunal did not commit an error of law when it interpreted the statutes to apply

to a machine or engine rotated by fluid that was powered by—in relevant part—gas or steam and

with a primary purpose of generating electricity. As such it did not commit an error of law when

it concluded that the term did not apply to ancillary equipment necessary to enable the turbine to

generate electricity. The Tax Tribunal also did not commit an error of law when it determined that

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the value of the turbines at issue had to be ascertained by reference to their value as a component

part of a functioning power plant. See Mich Props, 491 Mich at 527-528.

VI. TAX TRIBUNAL’S FINDINGS AND DETERMINATIONS OF VALUE

As already noted, Michigan’s Constitution limits this Court’s ability to review “any

[agency] decision relating to valuation or allocation” of taxes to review for “fraud, error of law or

the adoption of wrong principles.” Const 1963, art 6, § 28. An agency commits an error of law

or adopts wrong principles when the agency’s findings are not supported by competent, material,

and substantial evidence on the whole record. See Fisher-New Ctr Co v Mich State Tax Comm

(On Rehearing), 381 Mich 713, 715; 167 NW2d 263 (1969), and Mich Props, 491 Mich at 527-

528.

The nature of the review required under the substantial-evidence test was articulated in

Mich Employment Relations Comm v Detroit Symphony Orchestra, Inc, 393 Mich 116; 223 NW2d

283 (1974), where the Court explained that, although review was not de novo, it nevertheless must

be thorough and required assessment of the evidence as a whole:

What the drafters of the Constitution intended was a thorough judicial review of

administrative decision, a review which considers the whole record—that is, both

sides of the record—not just those portions of the record supporting the findings of

the administrative agency. Although such a review does not attain the status of de

novo review, it necessarily entails a degree of qualitative and quantitative

evaluation of evidence considered by an agency. Such review must be undertaken

with considerable sensitivity in order that the courts accord due deference to

administrative expertise and not invade the province of exclusive administrative

fact-finding by displacing an agency’s choice between two reasonably differing

views. Cognizant of these concerns, the courts must walk the tightrope of duty

which requires judges to provide the prescribed meaningful review. [Id. at 124.]

This Court has characterized the substantial-evidence test as requiring evidence that a “

‘reasoning mind’ ” would accept as sufficient to support a conclusion. See Black v Dep’t of Social

Servs, 195 Mich App 27, 30; 489 NW2d 493 (1992), citing Soto v Director, Mich Dep’t of Social

Servs, 73 Mich App 263, 271; 251 NW2d 292 (1977). Evidence that a reasoning mind would

accept as sufficient is more than a scintilla, but less than a preponderance. See Black, 195 Mich

App at 30. Further, it is not this Court’s place to resolve conflicts in the evidence or pass on the

credibility of witnesses—that is, if there was adequate evidence to support the agency’s decision,

then this Court cannot substitute its judgment for the agency’s judgment. Id.

A. REPLACEMENT COST: SWITCHYARD

The Township and County first argue that the Tax Tribunal should not have deducted the

costs associated with the construction of a new switchyard from the base cost estimate for a new

plant stated in the Energy Information Administration’s 2016 Annual Energy Outlook report

because there was insufficient evidence to support a $41 million deduction from the base cost.

It was undisputed that New Covert Generating’s tax parcels did not include the switchyard

for operation in the PJM market on the valuation date. In calculating the value of New Covert

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Generating using the replacement cost method for valuation, the experts examined the estimated

cost to build a state-of-the-art plant, and then adjusted the value of that plant to reflect the actual

condition of the New Covert Generating plant. Both appraisers used the Energy Information

Administration’s Annual Energy Outlook reports to obtain a baseline estimated cost for a new

plant. However, Duff & Phelps chose to use the 2016 Report, whereas Concentric chose to use

the 2013 Report.

New Covert Generating’s expert testified that the estimated cost for a new plant stated in

the reports included the costs associated with the construction of a switchyard. Because New

Covert Generating did not own a switchyard for its market, and the existing switchyard had no

value to New Covert Generating, he opined that the cost included in the reports for a switchyard

had to be deducted to reflect New Covert Generating’s actual situation on the valuation date.

The record evidence reveals that the Tax Tribunal had to decide between two diametrically

opposed positions: one stating that the Tax Tribunal should deduct $41 million to subtract out the

costs associated with a new switchyard, and the other stating that the Tax Tribunal should make

no adjustments to the baseline cost of a new plant to reflect the inclusion of equipment for a

switchyard. Given the testimony supporting the conclusion that the Energy Information

Administration’s report included some costs associated with a switchyard or switchyard

equipment, the Tax Tribunal cannot be faulted for concluding that the baseline cost stated in those

reports had to be adjusted to subtract those costs. Similarly, one of New Covenant Generating’s

experts clarified how Duff & Phelps concluded that more than $41 million should be deducted

from the baseline cost. His testimony, when considered with the exhibits underlying his opinion,

was evidence that a reasonable mind would consider sufficient to justify the deduction of 3.74%

from the base replacement cost provided in the report, notwithstanding the contrary testimony and

evidence. See Black, 195 Mich App at 30.

The Township and County further argue that there was no evidence that the MISO

switchyard actually cost $41 million, and that there was evidence that suggested that it had a much

lower original cost. That argument is inapposite. Testimony made it clear that the 3.74% was

applied to the baseline replacement cost of a new plant as a way to calculate the amount included

within the total cost that reflected the costs of a new switchyard. That is, the deduction did not

reflect the value of the actual MISO switchyard.

They similarly complain that New Covert Generating never disclosed how much it cost to

build the MISO switchyard. The cost to build a specific switchyard at some point long before the

valuation date was, however, not relevant to determining the amount of costs relating to a

switchyard that were included in the Energy Information Administration’s cost estimate in the

2016 Annual Energy Outlook report. Because the cost of the original switchyard was irrelevant

to determining how much of the cost estimate for a new plant reflected the cost of a new

switchyard, the Tax Tribunal had no obligation to discuss the MISO switchyard’s value or justify

the apparent difference between that value and the calculated value of a new switchyard that was

included in the cost estimate for a new plant. See MCL 205.751(1); Oldenburg v Dryden Twp,

198 Mich App 696, 699-700; 499 NW2d 416 (1993) (stating that the Tax Tribunal’s concise

statement of facts and determinations of law need only be sufficient to facilitate meaningful

appellate review).

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The Township and County presented testimony and evidence to undermine the view that

the cost of a new plant estimated in the 2016 Report included approximately $41 million in costs

associated with the construction of a new switchyard. That being said, the expert adequately

explained the basis of his opinion, and there was underlying evidence from the reports to support

his testimony. As such, the dispute was a matter of the weight and credibility of the evidence,

which was for the Tax Tribunal to resolve. Black, 195 Mich App at 30.

There was competent, material, and substantial evidence to support the Tax Tribunal’s

resolution of the amount of any adjustment to the baseline estimated replacement cost for a new

plant to reflect the fact that the existing plant did not include a switchyard. Therefore, it did not

commit an error of law by resolving that dispute in New Covert Generating’s favor. See Mich

Props, 491 Mich at 527-528.

B. INTANGIBLES

Michigan’s Constitution provides that the Legislature must provide for the taxation of only

real property and tangible personal property. See Const 1963, art 9, § 3. As such, to the extent

the valuations at issue included value for intangible assets that were not a value-influencing factor

that had to be accounted for in calculating the value of tangible property, see Meadowlanes Ltd

Dividend Housing Ass’n v Holland, 437 Mich 473, 495-496; 473 NW2d 636 (1991), it was proper

to reduce those values by the amount attributable to the intangible assets. Here, the Tax Tribunal

accepted Duff & Phelps’s contention that it was reasonable to reduce New Covert Generating’s

value by 3% for the approximate value of its intangibles. The Tax Tribunal explained that there

was evidence of substantial intangible assets, such as the service contract and Mitsubishi warranty,

customized software, emission permits, fuel supply contracts, and the interconnection agreement.

The Township and County argue that there was no evidentiary support for a 3% reduction

for intangibles. More specifically, they state that there was no evidence for specific intangibles

that were applicable to New Covert Generating, and no study to support the use of a generic 3%

estimate. They also contend that the Tax Tribunal accepted New Covert Generating’s deductions

for expenses related to the intangibles when calculating the value using the income approach and

then deducted 3% for the value of the intangibles, which resulted in a double deduction.

As the Township and County correctly note, two experts testified that New Covert

Generating did not have intangibles that warranted a deduction. However, one of those experts

also agreed that power plants typically have intangibles, that the most important intangibles for

power plants involved contracts, and that 3% was a standard figure (though commonly applicable

to a business that owned multiple plants).

Although there was testimony admitting that New Covert Generating had a trained

workforce in place, the undisputed evidence showed that New Covert Generating outsourced its

management and operations to other entities, and had no employees of its own. Similarly, while

there was testimony that it did not matter that the workforce belonged to another entity, there was

no basis for valuing that workforce’s training and experience as an intangible asset of New Covert

Generating because New Covert Generating had no ability to control the workforce beyond the

terms of the agreement with the employees’ employer. That is, any value arising from the

workforce was derived from the agreement that New Covert Generating had with the employees’

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employer. The same is true for the other intangible assets that might be owned by the entities with

which New Covert Generating contracted to operate its plant. Nevertheless, there was evidence

that New Covert Generating had intangible assets in the form of such contracts. There was also

evidence that those contracts would have some value. Indeed, one expert used the long-term

service agreement with Mitsubishi to estimate New Covert Generating’s future maintenance

expenses, and rejected a sales comparison approach to valuing New Covert Generating on the

ground that power plants were unique, and that the value of a power plant could be affected by

undisclosed data, such as the value of undisclosed contracts. Similarly, another expert agreed that

New Covert Generating had a long-term service agreement with warranties that had some value.

Additionally, there was evidence that New Covert Generating had other valuable contracts and

permits of which the value should be excluded.

The Township and County claim that the Tax Tribunal erred by accepting Duff & Phelps’s

deduction of the expenses associated with maintaining the intangible assets while at the same time

deducting the value of those assets. The two concepts are distinct, as New Covert Generating

explains on appeal. The expenses associated with maintaining an asset are expenses that reduce

net income, which necessarily affects a valuation premised on income. But those expenses are

distinct from the value of the asset itself, and the expenses do not implicate whether the value of

the asset is subject to taxation. As such, it did not amount to an error of law or the adoption of a

wrong principle to deduct the value of nontaxable assets even though the expenses associated with

the maintenance of those assets were deducted under the income approach to valuation. Mich

Props, 491 Mich at 527-528.

In sum, expert testimony confirmed that power plants like New Covert Generating

frequently have valuable intangible assets in the form of contractual rights, and that 3% of total

value was a commonly used estimate for the value of the intangible property. Given the testimony

and evidence that New Covert Generating owned valuable contract rights, a reasonable person

could conclude that some value should be deducted to reflect the value of the intangible property

that was not subject to taxation. See Black, 195 Mich App at 30. And whether the general figure

should be modified on the specific facts applicable to New Covert Generating was a matter of the

evidence’s weight and credibility to be resolved by the Tax Tribunal, which this Court will not

second guess on appeal. See id. That testimony, when considered in light of the evidence

concerning Duff & Phelps’s experience and the other testimony and evidence, constituted

competent, material, and substantial evidence to support a finding that 3% of New Covert

Generating’s value could be attributed to its intangible assets. Mich Props, 491 Mich at 527-528.

C. WORKING CAPITAL

The Township and County also argue that the Tax Tribunal erred when it accepted Duff &

Phelps’s deduction for working capital, asserting that the evidence showed that New Covert

Generating did not need significant working capital because PJM paid New Covert Generating on

a weekly or bimonthly basis, which was adequate to cover New Covert Generating’s monthly

operating expenses.

The expert testimony offered by the Township and County suggested that New Covert

Generating might not need substantial working capital because its revenue stream was adequate to

finance its needs. But they did not relate their opinions to all the expenses that New Covert

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Generating might have had—such as its labor costs, management costs, or costs arising from

contractual agreements. Moreover, the testimony of a New Covert Generating expert was adequate

to establish that the generally applicable estimate of working capital accurately modeled New

Covert Generating’s actual working capital needs. Because there was competent evidence to

support either position, it was for the Tax Tribunal to resolve the conflicting evidence, and this

Court cannot substitute its judgment for that of the Tax Tribunal. Black, 195 Mich App at 30. The

Tax Tribunal did not commit an error of law when it accepted Duff & Phelps’s handling of this

disputed calculation. Mich Props, 491 Mich at 527-528.

D. COST TO FINANCE

The Tax Tribunal’s decision to accept Duff & Phelps’s estimate for the cost to finance a

new construction project was also supported by competent, material, and substantial evidence on

the whole record. In accepting an incredibly low rate of 1.02%, they maintain, the Tax Tribunal

also mischaracterized the rate that Concentric actually applied as 12%.

As discussed, the parties relied on Annual Energy Outlook reports by the Energy

Information Administration when calculating the base cost for a new plant. Those reports state

the “overnight cost” of a plant, which is the estimate of all the costs for everything that one would

need to build a plant on the day of valuation. The overnight cost, according to one expert, did not

include the expenses associated with the actual construction, such as the expenses related to

financing the project. Accordingly, the parties agreed that the base cost for a new plant should be

adjusted to reflect the costs associated with the financing for the project.

Duff & Phelps viewed the cost a bit differently for purposes of the valuation; it chose to

determine the cost by looking at the owner’s lost opportunity to invest the amount needed to

develop the new plant in a long-term interest rate vehicle. It calculated the lost interest over the

development period to be $16 million on an investment of a “billion 92 million.”

By contrast, an expert for the Township and County assumed that a typical developer would

finance 38% of the project with equity and the remaining percentage with construction loans, and

calculated the total cost to finance the approximately $690 million expense over a construction

term of three years using interest rates that began at 7.23% and gradually rose to 7.86%. The total

cost under that approach amounted to more than $62 million. Because the hypothetical owner of

the new plant developed the plant in part using equity, the cost was increased by the owner’s

expected profit.

The Tax Tribunal accepted Duff & Phelps’s treatment of the cost to finance as the more

reasonable approach. In explaining its reasoning, the Tax Tribunal stated that Concentric placed

the interest rate at 12%, which was not the actual rate assigned in Concentric’s appraisal. The Tax

Tribunal rejected that rate, not only because it felt that the rate was unreasonable, but also because

a market-based interest rate was highly variable and depended in significant measure on who the

developer was, rather than the nature of the property itself. As such, the Tax Tribunal determined,

application of a market rate would run afoul of the doctrine of uniformity in taxation.

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Additionally, the Tax Tribunal indicated in its opinion denying reconsideration that the

reference to 12% interest did not warrant any relief because it had properly rejected the application

of a market rate as violative of the doctrine that taxation should be uniform.

The Tax Tribunal did not err when it rejected the market rate approach to calculating the

costs associated with financing the development of a new plant. As the evidence showed, there

were many different debt instruments available to finance a new project. Yet, in assessing the

value of property, the Tax Tribunal had to ensure that valuation method ensured uniformity in

taxation, but a valuation that varied significantly on the basis of an interest rate calculation would

violate that requirement. See Meadowlanes, 437 Mich at 493. The approach taken by Duff &

Phelps avoided the problem of varying interest rates by assuming that the developer could finance

the entire project with equity, and then measuring the expense by calculating the lost revenue from

investment in a treasury bond. The Tax Tribunal found that Duff & Phelps’s approach better

conformed to the uniformity requirement and resulted in a more reasonable approximation of the

base cost for a new plant. Because there was testimony supporting that proposition that was

adequate to permit a reasonable mind to find that the $16 million cost adjustment accurately

represented the cost to finance, the Tax Tribunal did not commit an error of law when it adopted

that approach. Black, 195 Mich App at 30.

E. PLANT EFFICIENCY AND FUEL COSTS

The Township and County finally argue that the Tax Tribunal adopted a wrong principle

when it accepted Duff & Phelps’s heat rate for a new plant that used a turbine that did not exist on

the valuation date and which did not reflect real working conditions.

The Tax Tribunal determined that, of the two Annual Energy Outlook reports that the

parties used to calculate the base cost of a new plant, Duff & Phelps’s use of the 2016 report

reflected a more accurate assessment of the cost of a new plant on the valuation date of

December 31, 2015. The Tax Tribunal reasoned that the information contained in the 2016 report

was relevant, even though issued some months after the valuation date, and better reflected the

technology available in 2015.

The Tax Tribunal’s rationale was adequate to justify its decision to accept Duff & Phelps’s

use of the 2016 report. The 2013 report reflected data for a new plant that was available in 2012—

it did not reflect the advancements that occurred in the years since. Further, there was testimony

that the data reflected in the 2016 report was collected in 2015. Therefore, even though the report

itself did not get released until 2016, the underlying data could have been collected by a

hypothetical developer and used to calculate the cost of a new plant for purposes of valuing an

existing plant on December 31, 2015. Moreover, even though the report was not released until

some months after the valuation date, as the Tax Tribunal properly recognized, that fact did not

make the report irrelevant. Rather, it was a factor to consider in assigning the weight afforded to

the information contained in the report. Jones & Laughlin Steel Corp v Warren, 193 Mich App

348, 354; 483 NW2d 416 (1992).

The Township and County attempt to distinguish Jones & Laughlin on the basis that the

data at issue there involved an actual sale, not a report that discussed a technology that was not in

existence. The attempt is unavailing, as the Jones & Laughlin Court held that evidence is not

-27-

automatically rendered irrelevant because the evidence involved events occurring after the

valuation date. Id. at 354. Under that holding, the Tax Tribunal did not commit an error of law

when it determined that the data from that report was relevant to the findings of fact necessary to

calculate the replacement cost of New Covert Generating’s plant on December 31, 2015. MRE

401; MRE 402. Indeed, the Tax Tribunal determined that the data from the 2016 report better

reflected the costs and heat rate for a plant on December 31, 2015, than did the 2013 report, which

necessarily reflected technology that was several years out of date by the valuation date. As such,

the Tax Tribunal’s finding that the 2016 report was more credible and worthier of greater weight

was supported by competent, material, and substantial evidence. Black, 195 Mich App at 30.

Similarly, whether there should be additional modifications to the data reflected in the report to

better reflect real-world operating conditions was a matter of the weight and credibility of the data

related in the report, which was within the province of the Tax Tribunal to resolve. Id. The Tax

Tribunal did not commit an error of law or adopt a wrong principle in its handling of the 2016

report. Mich Props, 491 Mich at 527-528.

F. OWNER’S PROFIT

On cross-appeal, New Covert Generating argues that the Tax Tribunal erred by including

in the cost of a new plant an amount attributable to the owner’s profit. It maintains that, in Meijer,

Inc v Midland, 240 Mich App 1; 610 NW2d 242 (2000), this Court held that owner’s profit would

be applicable only under circumstances when the property was developed to make a profit from

sale and there was evidence that the market price would bear inclusion of the owner’s profit. New

Covert Generating argues that the Tax Tribunal erred by failing to consider these factors and erred

because there was no evidentiary support for them. Finally, it argues that there was no evidentiary

support for the 5% figure actually selected for owner’s profit.

In Meijer, we analyzed whether the Tax Tribunal erred when it accepted a valuation that

added “five percent for entrepreneurial profit” to the cost approach for valuing a property, id. at 8,

agreeing with foreign authorities that the “true cash value of developed real estate may not always

be reflected by the cost of the project without the inclusion of entrepreneurial profit.” Id. at 10.

The Court stated that the Tax Tribunal, however, could not mechanically include an

entrepreneurial or owner’s profit, and it warned that determining when it was proper to include

owner’s profit in the cost calculation might be difficult. Id. Thus, we held that an owner’s profit

may be included where a developer might develop the property in order to profit from its sale, id.

at 11, but there must be “some evidence upon which one can support the conclusion that the market

would bear the inclusion of entrepreneurial profit,” or the inclusion of such profit would amount

to pure speculation. Id. at 12. Because there was no evidence that a developer would develop a

180,000-square-foot retail building for profit, the Tax Tribunal had erred by including a 5%

owner’s profit. Id. at 13.

Here, although the Tax Tribunal adopted Duff & Phelps’s approach to valuation using the

cost approach, it determined that that approach was flawed to the extent that it did not include

“owner’s profit” because “no one would build a plant for free.” The Tax Tribunal accepted

Concentric’s included owner’s profit of $53,853,870. When New Covert Generating challenged

this decision in its motion for reconsideration, the Tax Tribunal clarified that entrepreneurial

incentives were appropriate because the property was specifically developed as a merchant

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generator operating in the private market. For that reason, it concluded that the plant was intended

to earn a return on its owner’s investment.

Although it may be true generally that regulated utilities do not develop property for profit

from sale, that is not necessarily the case for the development of a merchant generator. Rather, as

the parties’ experts related, a merchant generator competes in the market and hopes to profit from

the sale of electricity. And a developer may develop a merchant generator with the expectation to

sell it for a profit to an entity that specializes in the energy market, or to transfer it to a related

company to serve as part of its energy portfolio. Indeed, there was evidence in the record that

supported an inference that New Covert Generating was acquired, marketed, and transferred for

profit, which included an effort to profit from the sale of the plant.

Duff & Phelps calculated the replacement cost by first determining the cost to develop a

new and state-of-the art plant with a similar nameplate capacity, and chose not to increase the cost

of development by the cost to finance some or all of the project, which impliedly meant that its

appraisal involved a hypothetical developer who financed the project with its own resources. Duff

& Phelps assumed that the developer’s only cost beyond the investment of more than $1 billion in

the project itself would be the lost opportunity to invest the $1 billion in treasury bonds. However,

it is reasonable to assume that a developer with more than $1 billion to invest would likely not

choose to invest in the development of a for-profit merchant generator if it could not realize a profit

greater than the interest that it might receive from investing its $1 billion in treasury bonds.

Accordingly, under the development model advanced by Duff & Phelps, an accurate baseline cost

should include some profit beyond the lost opportunity to invest.

Both the Tax Tribunal and the New Jersey Tax Court have recognized that entrepreneurial

profit must be included when calculating the cost of a new development under like conditions:

“ ‘When the direct and indirect costs of developing a property are used to provide an indication of

value, the appraiser must also include an economic reward sufficient to induce an entrepreneur to

incur the risk associated with a building project.’ ” Metuchen I, LLC v Borough of Metuchen, 21

NJ Tax 283, 292 (2004),8 quoting American Institute of Real Estate Appraisers, The Appraisal of

Real Estate 360 (12th ed 2001). The court in Metuchen I further observed:

Entrepreneurial profit is compensation for risk and expertise associated with

development. Therefore, a realistic cost approach must recognize adequate

compensation to the entrepreneur to induce him to organize the project. It is

necessary to include a figure which reflects the time, effort, and incidental expense

of the owner in the development of the property. [Metuchen I, 21 NJ Tax at 292

(citations omitted).]

Accordingly, there was record support for the Tax Tribunal’s decision to include entrepreneurial

profit in the base cost of the cost to develop a new power plant. See Meijer, 240 Mich App at 11.

8

“Cases from other jurisdictions are not binding precedent, but we may consider them to the extent

this Court finds their legal reasoning persuasive.” Auto Owners Ins Co v Seils, 310 Mich App 132,

147 n 5; 871 NW2d 530 (2015).

-29-

The Tax Tribunal accepted Concentric’s assessment of the cost of equity that an investor

would expect to receive for developing a merchant electric-generator. In doing so, it impliedly

adopted Concentric’s underlying rationale and data, which it could do to satisfy its duty to state

the facts consistent with MCL 205.751(1). See, e.g., Consol Aluminum Corp v Dep’t of Treasury,

206 Mich App 222, 238; 521 NW2d 19 (1994) (stating that the Tax Tribunal may adopt findings

and conclusions of law by reference, and, when it does, it need only make separate findings and

conclusions with regard to those areas with which it disagrees with the adopted rationale).

Although Duff & Phelps presented testimony to undermine Concentric’s position regarding the

inclusion of owner’s profit, expert testimony and Concentric’s appraisal were sufficient—

notwithstanding the contrary evidence—to permit a reasonable mind to find that the base cost of a

new plant should include the costs associated with the equity investors’ expected return, and that

a reasonably approximate proxy group would expect a return of about 5%. See Black, 195 Mich

App at 30. Therefore, because there was competent, material, and substantial evidence to support

its findings and conclusions, the Tax Tribunal did not commit an error of law when it included

owner’s profit in the cost of a new plant. Mich Props, 491 Mich at 527-528.

G. SEGRETO SWITCHYARD

Finally, New Covert Generating argues that the Tax Tribunal erred in its treatment of the

expenses associated with the construction of the Segreto switchyard. It maintains that the Tax

Tribunal itself recognized that New Covert Generating had to spend at least an additional $12

million to complete the project, but did not reduce the cost to reflect that obligation, even though

a prospective buyer would take that expense into consideration. New Covert Generating further

argues that the Tax Tribunal should have deducted the full $58,915,530 because that expenditure

was necessary to ensure that the property was fit for its highest and best use.

On appeal, New Covert Generating makes much of the fact that a purchaser would

normally account for the costs that it would have to pay after purchasing the plant in order to

operate at its highest and best use. But the testimony and evidence supported a finding that the

costs associated with the PJM Interconnection, which included the Segreto switchyard, had already

been paid by the valuation date. As such, there was evidence that a purchaser would not have to

account for the costs when purchasing the plant. Rather, the purchaser would value the plant on

the basis of the completed interconnection project. New Covert Generating’s mere disagreement

with the Tax Tribunal’s findings does not establish that the Tax Tribunal committed an error of

law or adopted a wrong principle. Black, 195 Mich App at 30.

New Covert Generating also concludes that the Tax Tribunal must have erred in its findings

because the Tax Tribunal admitted as much on reconsideration. In its opinion and judgment, the

Tax Tribunal found that the costs associated with the Segreto switchyard had already been paid

before the valuation date and, for that reason, should not be deducted from the valuation of New

Covert Generating. A different judge reviewed the motions for reconsideration, and opined that

the first judge erred by making that finding because the evidence showed that additional amounts

would be due in 2016. However, that judge did not have the opportunity to hear the witnesses and

assess their credibility. That judge also did not acknowledge that the report that purportedly

established the costs associated with the interconnection project was a cost estimate prepared some

years earlier and did not involve actual data. Given the lack of evidence that New Covert

Generating had actual obligations arising from the construction of the Segreto switchyard after the

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valuation date, the original judge could properly find that the obligations had been paid before the

valuation date and, on that basis, could determine that it was inappropriate to value New Covert

Generating by deducting expenses already paid, or on the assumption that it would have future

expenses related to another entity’s property. On this record, there was competent, material, and

substantial evidence to support the Tax Tribunal’s decision to exclude any deductions for costs

associated with the Segreto switchyard. Consequently, the Tax Tribunal did not commit an error

of law when it chose not to deduct any amount from the value of New Covert Generating on the

basis of the interconnection project. Mich Props, 491 Mich at 527-528.

VII. SANCTIONS

The Township and County have not shown that the Tax Tribunal erred when it determined

that the filing of the motions at issue warranted sanctions.

Although this Court’s review of a Tax Tribunal’s findings of fact and application of law is

generally quite limited, those limitations apply only to decisions relating to valuation or allocation

of taxes, see Const 1963, art 6, § 28, which is not at issue for an order of sanctions. This Court

reviews de novo whether the Tax Tribunal properly interpreted and applied the court rules, and the

Tax Tribunal’s findings underlying its application of the court rules for clear error. See Johnson

Family Ltd Partnership v White Pine Wireless, LLC, 281 Mich App 364, 387; 761 NW2d 353

(2008). A finding is clearly erroneous when, on review of the whole record, this Court is left with

the definite and firm conviction that the Tax Tribunal made a mistake. Id.

The Legislature has authorized the Tax Tribunal to issue any order that it deems necessary

or appropriate in the process of disposition of a matter over which it has jurisdiction. MCL

205.732(c). Additionally, the Tax Tribunal has promulgated its own rules, and Rule 215 provides

that the Michigan Court Rules apply in the absence of an applicable tribunal rule. Rule 792.10215.

The Tax Tribunal has not promulgated specific rules governing sanctions for filing frivolous

documents, so the court rules apply to the Tax Tribunal’s decision.

The Tax Tribunal sanctioned the Township, County, and counsel under what was then

MCR 2.114(D), which has since been relocated to MCR 1.109(E).9 The court rules provide that,

by signing a document filed with the court, the signer certifies that, “to the best of his or her

knowledge, information, and belief formed after reasonable inquiry, the document is well

grounded in fact and is warranted by existing law or a good-faith argument for the extension,

modification, or reversal of existing law[,]” MCR 1.109(E)(5)(b), and that he or she has not

interposed the document “for any improper purpose, such as to harass or to cause unnecessary

delay or needless increase in the cost of litigation[,]” MCR 1.109(E)(5)(c). If a signatory signs a

document in violation of the rule, the court “shall impose upon the person who signed it, a

represented party, or both, an appropriate sanction, which may include an order to pay to the other

party or parties the amount of the reasonable expenses incurred because of the filing of the

document, including reasonable attorney fees.” MCR 1.109(E)(6).

9

Because the substantive provisions are the same, we will cite to the current court rule.

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“An attorney has an affirmative duty to conduct a reasonable inquiry into the factual and

legal viability of a pleading before it is signed.” LaRose Market, Inc v Sylvan Ctr, Inc, 209 Mich

App 201, 210; 530 NW2d 505 (1995). “The reasonableness of the attorney’s inquiry is determined

by an objective standard, not the attorney’s subjective good faith.” Meisner Law Group, PC v

Weston Downs Condo Ass’n, 321 Mich App 702, 731; 909 NW2d 890 (2017). “A court must

determine whether a claim or defense is frivolous on the basis of the circumstances at the time it

was asserted.” Id. at 732. “[A] claim is devoid of arguable legal merit if it is not sufficiently

grounded in law or fact, such as when it violates basic, longstanding, and unmistakably evident

precedent.” Adamo Demolition Co v Dep’t of Treasury, 303 Mich App 356, 369; 844 NW2d 143

(2013) (quotation marks and citations omitted).

The Township and County filed two motions that the Tax Tribunal determined warranted

sanctions. They filed a motion for summary disposition in October 2017, concerning New Covert

Generating’s status as a party in interest, and they filed a motion for summary disposition in June

2018, arguing that the Tax Tribunal lacked jurisdiction because New Covert Generating had not

filed statements of personal property.

In its brief in support of its motion for summary disposition involving whether New Covert

Generating was a party in interest, the Township and County acknowledged the decision in Spartan

Stores, 307 Mich App 565, but argued that that case had not involved a shell corporation. They

also noted that the Spartan Stores Court had stated that the separate existence of an entity could

be disregarded. The Township and County indicated that all of the elements necessary to disregard

New Covert Generating’s separate existence were present, and that the Legislature did not intend

to allow shell companies to invoke the Tax Tribunal’s jurisdiction. Both parties asked the Tax

Tribunal to dismiss New Covert Generating’s petitions for lack of jurisdiction.

Although the Township and County mentioned the decision in Spartan Stores, they did not

discuss it in any meaningful way. Moreover, they ignored the actual holdings in Spartan Stores—

this Court expanded the concept of party in interest to include not only the actual owner of the

property assessed, but also any entity that held an interest in the property. See Spartan Stores, 307

Mich App at 575-576. The Township and County also ignored the fact that the Spartan Stores

Court held that Spartan was not a party in interest because it indirectly owned the entity that owned

the leasehold interest, Family Fare, which was insufficient to establish an interest in the property

because courts must generally respect the separate existence of artificial entities. Id. at 577 n 13.

The Township and County also did not examine the actual language of the statute, and did

not identify the terms that demonstrated that the statute actually barred so-called “shell” companies

from being a party in interest. Rather, they appeared to argue that the Tax Tribunal should treat

the record owner of the property assessed as though it were not a party in interest—even though

caselaw clearly established that it was a party in interest—because New Covert Generating was an

asset-holding entity that used other entities to run its day-to-day operations, which made discovery

complicated. Notably, the Township and County did not sue to have New Covert Generating’s

separate existence disregarded. Indeed, they did not even address whether the Tax Tribunal had

the authority to disregard New Covert Generating’s separate existence. See Electronic Data Sys

Corp v Flint Twp, 253 Mich App 538, 548; 656 NW2d 215 (2002) (stating that the Tax Tribunal

does not have equitable powers).

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Examining the actual arguments made in their motion for summary disposition premised

on MCL 205.735a(6), there was no basis in fact or law for the motion. Because it is well settled

that courts respect the separate existence of an artificial entity except in certain exceptional cases,

the Tax Tribunal had no choice but to respect New Covert Generating’s separate existence. See

Green, 310 Mich App at 450-451. Additionally, the Court in Spartan Stores held that an entity—

such as New Covert Generating—with an interest in the property assessed was a party in interest.

See Spartan Stores, 307 Mich App at 575-576. Consequently, the Township and County’s motion

for summary disposition was not well grounded in fact or law, and there was nothing in the motion

to suggest that the Township and County were urging a good-faith extension, modification, or

reversal of the existing law. See MCR 1.109(E)(5)(b). Indeed, the Tax Tribunal aptly

characterized the motion as arising from discovery disputes that it had addressed and would

continue to address, if necessary. The Tax Tribunal also did not err when it determined that the

Township and County essentially ignored the holding in Spartan Stores. The Tax Tribunal

recognized that the Township and County did not explain how the title owner of the property

assessed could ever be found not to be a party in interest. Because the Township and County’s

motion premised on New Covert Generating’s status as a party in interest was not well grounded

in fact or law, the Tax Tribunal had to apply an appropriate sanction for the filing of the October

2017 motion. See MCR 1.109(E)(6).

In their June 2018 motion for summary disposition premised on jurisdiction, the Township

and County argued—as they had in the previous litigation—that a taxpayer could not invoke the

Tax Tribunal’s jurisdiction without first filing statements of assessable property. They maintained

that New Covert Generating had to file Forms L4175, 3991, and 4094, as promulgated by the State

Tax Commission. They acknowledged that New Covert Generating had filed all three forms, even

if under protest, but maintained that the filings did not comply with the instructions for completing

the forms. They then argued that the filings were inadequate to meet what they believed was

required under MCL 205.735a(4)(b) to invoke the Tax Tribunal’s jurisdiction.

The Tax Tribunal relied on this Court’s decision in the appeal involving the petitions from

2010 and 2011, and concluded that New Covert Generating did not have to file statements of

assessable property before directly appealing to the Tax Tribunal because it was undisputed that

New Covert Generating had protested the tax years at issue before the Board. The Tax Tribunal

also noted that this Court had stated that the only form that New Covert Generating had to file was

Form 4175, which it did. Accordingly, it denied the motion.

The Township and County’s preferred construction—although implausible, as discussed

above—was not so implausible that counsel could not advocate for that position without running

afoul of MCR 1.109(D). Therefore, the Tax Tribunal erred to the extent that it determined that the

motion was not well grounded in fact or law. To the extent that the Tax Tribunal relied on

counsel’s purportedly inconsistent positions in different cases involving different parties, that too

was error. Counsel had every right to advance the lawful objectives of his clients by every

reasonably available means permitted by law, even if that position was inconsistent with the

position that counsel advanced on behalf of a different client. See MRPC 1.2(a). Therefore, the

trial court clearly erred when it determined that the filing of the June 2018 motion for summary

disposition was not well grounded in fact or law. Nevertheless, that was not the only basis for the

Tax Tribunal’s decision to impose sanctions.

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In determining that sanctions were warranted, the Tax Tribunal initially stated that the

timing of the June 2018 motion just before the July 2018 contested hearing raised the issue as to

whether it was filed for an improper purpose, such as to delay or harass New Covert Generating.

It also indicated that the motion might be frivolous given this Court’s previous decision in the prior

appeal. However, the Tax Tribunal withheld resolution of those issues.

In its opinion applicable to tax year 2016, the Tax Tribunal provided a further rationale for

its decision to sanction the Township and County for the motions for summary disposition filed in

October 2017 and June 2018. It first discussed the motion filed in October 2017, and considered

the manner by which counsel for the County conducted the litigation, and noted that counsel had

filed what was in effect six motions for summary disposition in addition to requests for leave to

appeal. It further wrote that counsel had used motions for immediate consideration in a way that

compelled New Covert Generating to respond within seven days. The Tax Tribunal also cited

counsel’s conduct in other litigation, which suggested that counsel was familiar with the holding

in Spartan Stores, and stated that counsel used allegations of fact and innuendo to cast New Covert

Generating in a bad light. The Tax Tribunal found that the purpose of the motion was to “poison

the well at [the] hearing, rather than to win on the merits of the motion.”

With regard to the motion filed in June 2018, the Tax Tribunal determined that that motion

was also frivolous, and further found that it was “imposed for an improper purpose.” The Tax

Tribunal reiterated these determinations and findings for the order applicable to tax years 2012

through 2015. Finally, on reconsideration, the Tax Tribunal stated in relevant part that the

Township and County could not reasonably cite the discovery disputes as justification for the

motions because the Tax Tribunal had resolved the discovery disputes. Additionally, the Tax

Tribunal again cited counsel’s positions in other litigation regarding the holding in Spartan Stores

as evidence that counsel’s purpose for filing the motion was improper.

Based on the entire record, the Tax Tribunal’s findings for both motions were not clearly

erroneous. The Township and County had been involved in long, ongoing and contentious tax

disputes with New Covert Generating. As the Tax Tribunal noted, the Township and County filed

three motions for summary disposition in each of the tax appeals, even though it subsequently

withdrew one. When the timing is considered in relation to the stage of the dispute, the discovery

battles, and the date scheduled for the contested hearing, the Tax Tribunal could reasonably

conclude that the motions were filed for ulterior motives: namely, to poison the well before the

hearing, harass New Covert Generating, and increase the cost of litigating the valuation dispute.

The Tax Tribunal was familiar with the present litigation, the past litigation, the parties, and their

counsel. As such, it was in the best position to assess the credibility and motivation of the parties

and counsel. See MCR 2.613(C). MCR 1.109(E)(5) provides that the effect of a signature on a

document represents that the signer read the document, it was well grounded in fact and law, “and”

it was not filed for an improper purpose. Therefore, although the Tax Tribunal clearly erred in

determining that the June 2018 motion for summary disposition was not well grounded in fact and

law, it could still properly impose sanctions based on its finding that the motion was filed for an

improper purpose. On this record, the Court is not left with the definite and firm conviction that

the Tax Tribunal clearly erred in its findings. See Johnson Family Ltd Partnership, 281 Mich App

at 387.

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Once the Tax Tribunal found that counsel filed the motions for an improper purpose, it had

to impose an appropriate sanction, even if the motion was otherwise well grounded in fact and law.

See MCR 1.109(E)(6). Moreover, the Township and County have not challenged the propriety of

the actual sanctions or the amount of the sanction. As such, they have not identified a basis for

reversing the Tax Tribunal’s orders imposing sanctions.

Affirmed.

/s/ Christopher M. Murray

/s/ Mark J. Cavanagh

/s/ Brock A. Swartzle

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