Yesterday I reported on the Form Motor Credit decision of the Michigan Court of Appeals.  On an almost identical issue, the Court of Appeals in Daimler Chrysler Services of North America, LLC, a/k/a DaimlerChrysler Services North America, LLC v. Department of Treasury, Michigan Court of Appeals, Docket No. 288347, January 21, 2010 ruled that a sales finance company was not entitled to a bad debt deduction on transactions involving repossessed vehicles. 

This case was previously decided by the Court of Appeals in DaimlerChrysler v. Department of Treasury, 271 Mich App 625 , 723 NW2d 569 (2006) with regard to a separate issue, that the taxpayer was entitled to a bad debt deduction on vehicles that it had financed and that later defaulted.  The statute in question was later amended to place limitations on the person that may be characterized as a “taxpayer” for purposes of the bad debt deduction.

On remand for a determination of the amount of refund due, the Court of Claims erred in finding that transactions involving repossessed vehicles are includible in the calculation of a refund under the bad debt statute [MCL 205.54i].  The version of the bad debt statute in effect at the time the refund claims were filed clearly states that for purposes of the bad debt deduction, a bad debt does not include repossessed property.