Legal and Accounting Issues in Nonprofit Corporation Mergers

Castellani, EdwardAttorney Edward J. Castellani recently spoke at the Michigan Association of Certified Public Accountants Nonprofit Conference on “Merger of Nonprofit Corporations – Legal and Accounting Issues”. The presentation addressed how two nonprofits can legally merge into one nonprofit entity. He also addressed the appropriate steps that need to be taken by both directorship and membership corporations for mergers to be approved by the Attorney General.

You can review the presentation HERE.

To learn more, contact attorney Ed Castellani at or 517.377.0845. In addition to having practiced law for more than 30 years, Ed is a certified public accountant. This dual background and experience provides his clients unique insight into business transactions, such as business entity formations, mergers, acquisitions, tax audits and appeals, and general business and tax planning for both profit and nonprofit corporations. Ed currently serves on Fraser Trebilcock’s Board of Directors as Vice President of the law firm.

Court of Appeals Upholds Retroactive Tax Legislation

McCord, PaulOn September 29, 2015, the Michigan Court of Appeals in Gillette Commercial Operations v Dep’t of  Treasury, No 325258 (consolidated with about 50 other cases), held that Michigan’s retroactive repeal of the Multistate Tax Compact (MTC) to avoid paying $1.1 billion in tax refunds did not violate the Contract Clause, or the Due Process Clause. Further, the Court of Appeals held that the retroactive repeal of the MTC did not violate the Separation of Powers Clause in the Michigan Constitution because it did not reverse or repeal the Michigan Supreme Court’s decision in IBM v Dep’t of Treasury.  In addition to these claims, the Court of Appeals also rejected a host of other theories advanced by taxpayers.

By way of background, businesses that operated in a number of states deal with an important question: How should their tax liability be spread across many states? In other words, what portion of their business activity should be subject to tax in Michigan? This question is frequently answered through the establishment of an “apportionment” formula contained in state law.

When Michigan adopted it’s now repealed Michigan Business Tax (MBT), that tax required multi-state businesses to apportion both their income and gross receipts to Michigan based on a single factor: their gross sales within Michigan. However, while enacting the MBT in 2008, the legislature made no changes to another state law relevant to business taxation – the MTC Act.  Michigan enacted the MTC Act in 1969 as part of a joint effort by many states to coordinate their tax policies and fend off federal efforts to preempt some state control over business tax provisions that were the subject of debate at that time. The MTC Act has its own provision regarding apportionment. That Act allows businesses that operate in two or more states to elect, at the businesses’ discretion, to apportion any “income tax” imposed by the state according to a three-factor apportionment that included sales, property, and payroll.

The apparent conflict between the MBT and MTC’s apportionment formula was addressed by the Michigan Supreme Court’s July 2014 decision in IBM v Dep’t Treasury.  That case allowed IBM to elect to use the Compact’s three-factor apportionment formula on its MBT return for the 2008 tax year.

Before the Supreme Court’s judgment became final, however, the Michigan legislature swiftly enacted legislation in September 2014 to prevent taxpayers from claiming MBT refunds based on the election to use the MTC’s three-factor apportionment formula.  Specifically, legislation retroactively repealed the MTC Act retroactively  to January 1, 2008.

IBM, along with a number of other business taxpayers including Gillette Commercial Operations, with pending tax refund claims challenged the legislature’s retroactive repeal in the Court of Claims.  The Court of Claims ruled in favor of the state and the various taxpayers appealed to the Court of Appeals.

Due process concerns are implicated when a retroactive law takes away a vested right.  That said, while due process protects vested property rights, it does not protect one’s mere expectation of a right.  Here, the taxpayers argued that they had a vested right to the tax refunds resulting from the MTC election.  But the Court of Appeals pointed out that Michigan has long held that taxpayers have no vested right in the tax laws and that the Legislature is free to take away any provision at any time.  Furthermore, correcting the Supreme Court’s arguable interpretative mistake, as well as protecting the public fisc were, according to the Court of Appeals, legitimate legislative purposes further by rational means.

The taxpayers also  argued that the Legislature’s retroactive action violated the separation of powers clause.  Specifically, that the Legislature overstepped its bounds as the retroactive legislation was an attempt to reach into pending court cases and direct the courts to find a different result.

In addressing the taxpayers separation of powers arguments, the Court of Appeals reasoned that the Legislature did not overturn IBM or overrule the Michigan Supreme Court’s final judgment.  Instead, the legislature acted within its authority to correct the Supreme Court’s misinterpretation of a statute.

The decision by the Court of Appeals was fairly anticipated and is consistent with the recent trend of taxpayer defeats on this issue in several states in the last 12 months. Taxpayers have suffered defeats in Minnesota, New York, Oregon, Texas, and Washington and have seen their overall chances of success on this issue decline significantly. The California Supreme Court is scheduled to take up the issue in October and the taxpayers in the Washington case have filed an application for cert to the US Supreme Court which is also scheduled to be addressed in October.  It is highly likely that the taxpayers in Gillette Commercial Operations and the consolidated cases, will appeal the Court of Appeals decision to the Michigan Supreme Court.

If you are interested in discussing this tax legislation or have any additional tax law questions, contact Fraser Trebilcock attorney Paul McCord at 517.377.0861 or

Don’t Be A Victim Of A Scam

Teahan, Marlaine C

imageProtect yourself from being a scam victim by arming yourself with information.

Be aware of warning signs that you are dealing with a scammer. Unsolicited mail and phone calls are the primary methods used to communicate scams. There are many scams in operation, and anyone can become a victim, including highly educated and intelligent people. Some are well-known, such as the Nigerian scams, but others are much rarer but also more convincing because they are carefully targeted, such as frauds involving grants for scientific research. There are several signs an offer is a scam. Here are 9 signs of a scam, taken from ScamGuard.

1. The Offer Seems Too Good to be True
If it seems too good to be true, it almost certainly is. Examples include money left to you from an unknown relative, being awarded a loan or grant you haven’t applied for, winning a lottery you’ve never entered, and being selected to receive a share in funds in return for using your bank account.
2. They Want Private Information
Many scams involve getting hold of your bank account details. Scams involving identity theft also seek personal information, like your social security number.
3. Grammatical Errors
Scammers may be intelligent, but they are not always well educated and don’t always have English as their first language, and their grammatical errors can give them away. If the correspondence you receive is full of errors, be very suspicious.
4. Requests for Fees
Scammers will want advance payments or fees to clear the funds or complete their offer. Never pay fees or taxes in advance unless you are 100% certain it is not a scam.
5. Suspicious Email Domains
Look carefully at the domain name of every contact you receive from a suspected scammer. Suspect any free email address such as hotmail, aim, yahoo, gmail. Other domain names not connected with the name of the company are also suspicious.
6. Suspicious or No Addresses
If there is no physical address and your contacts won’t give you one, it’s a sure bet you’re being scammed.
7. Request for Access to Your Computer
A common scam is a phone call from someone claiming to be a technician who has detected problems with your computer and would like to fix them for you free. Never give anyone remote access to your computer unless you have contacted them and are 100% certain they are not a scammer.
8. Untraceable Payment Method
Scammers prefer payment methods that are untraceable, such as Western Union. Don’t pay anyone advance fees by any means if you have the slightest suspicion it is a scam.
9. Pressure
Scammers will often put pressure on their victims and urge them to pay immediately or lose the opportunity. A genuine business making a genuine offer will never pressure you to act immediately.

• Give any caller your social security number!
• Give your credit card number or bank account number!
• Pay processing or administrative fees, for customs, for taxes, or any other reason as a requirement before collecting a prize or award.
• Make a charitable donation with first checking with the Better Business Bureau Wise (BBB) Giving Alliance, which offers information about national charities. Call 703-276-0100 or go to to find out if the “charity” really is a charity.
• Send your payment by a private courier or wire money to someone you don’t know.
• Never click on links or attachments in emails from people you don’t know or you risk your computer becoming infected by viruses, trojans, or other malware.

Be aware of the prevalent scams in your area. Here is a sampling of current scams in our area:
• Grandparents Scam. A grandparent receives a frantic call from someone they believe to be their grandchild, who claims to be in some type of trouble while traveling, such as being arrested, or in a car accident, or needing emergency car repairs. The caller asks the grandparent to immediately wire money to help them and keep it a secret from their parents. Alternatively, the scammer may pretend to be a family friend or neighbor. A common theme is the caller’s request that funds be wired through Western Union or MoneyGram or that bank account routing numbers be provided. Wiring money is like sending cash, there are no protections for the sender.
• IRS Scam. There are several reports of telephone calls from people posing as IRS callers and stating that there is an arrest warrant for owed taxes. If you don’t owe taxes, report the incident.
• Real Estate Scam. Homes, which appear to be unoccupied, are being fraudulently sold by suspects posing as the homeowners to prospective buyers. Exchange of the home is being done at the prospective residence and no legal review of ownership is being done in advance. Be sure you are dealing with the actual owner or representative of property; consult with a legal professional or real estate agent first.
• Home Repair Scams. Be wary of door-to-door solicitations for home repairs. Obtain 2-3 estimates. Ask to see the contractor’s license and check on to be sure they are in fact licensed. Do not leave home repair workers alone in your home.
• Foreign Lottery Scams.
• Luxury Dream Vacation Offers/Winnings
• Investment Scams promising amazing profits.
• Charity Scams like the “Firefighters Scholarship Fund.” Often firefighters actually receive very little money from these scammers.

Be aware of how to handle a scammer once you have spotted one.
• Say no thank you, ask to be taken off their call list and hang up. Do not wait for their reply.
• Sometimes a polite no thank you is taken as an invitation to keep trying to persuade you – with this type of caller the best response is rudeness – just hang up.
• If all else fails, indicate that you are going to call the police. This approach should end the call rather quickly.

Make a complaint. Contact Michigan’s Attorney General’s Consumer Protection Division, P.O. Box 30213, Lansing, MI 48909, 517-373-1140, or file the complaint directly online at this  LINK, or the Federal Trade Commission, 1-877-FTC-HELP (1-877-382-4357); TTY: 1-866-653-4261, or online.

Be aware of how to get off of the mailing lists and phone call lists. Before you become a victim, get off of as many phone/mailing lists as possible.
• Sign up for the national “do not call” registry. It’s free. Call 1-888-382-1222 from the phone number you want to register or register online at
• To opt out on having your name included on lists used by creditors or insurers to make unsolicited offers of credit or insurance (“Firm Offers”) to you, go to and click the button to Opt Out or call 1-888-567-8688. By doing so, the consumer credit reporting companies (Equifax, Experian, Innovis, and TransUnion) are prevented from providing your credit file information for Firm Offers for five years. To Opt-Out permanently, you must mail a completed Permanent Opt-Out Election Form, which is available on the website.
• Meanwhile, until your name appears on the above do not call lists, whenever you receive a junk phone call, ask the person to place you on their “do not call list.”
• Opt out of having your personal information being shared [read that “sold”] by your bank, your credit card company, the phone company, etc.
• Do not provide personal information that is not necessary to the transaction you are engaged in. (For example – when a retailer asks you for your phone number or email address, say no thank you.)

For more information, email the attorneys at Fraser Trebilcock. Marlaine C. Teahan chairs the Trusts and Estates practice and can be reached at Melisa M.W. Mysliwiec can be contacted at