February 24, 2020

February 24, 2020

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Detroit City Income Tax Alert: Detroit Aggressively Pursues Third Party Information

The City of Detroit has filed a lawsuit against Bedrock, a commercial real estate company owned by Dan Gilbert. The city has been seeking tenant information from Bedrock to determine whether the tenants have evaded Detroit City Income Tax by improperly claiming nonresident status, and the lawsuit resulted because Bedrock has not complied. The city has asserted that many residents of Bedrock's Detroit properties use addresses of friends or relatives outside of the city to falsely claim nonresident status. This is important to Detroit because a resident of the city pays 2.4 percent city income tax, while a non-resident is liable for city income tax at a rate of 1.2 percent. While a 1.2 percent difference in tax rate may not appear to be dramatic, the underlying privacy issues and potential for fraud or evasion charges could be very significant.

The lawsuit creates a tension between the city's efforts to enforce its tax and the privacy rights of third-party tenants of Bedrock properties. Gilbert released a statement indicating that, while he intends to continue to be as cooperative as possible with the city, his company cannot not release confidential tenant information without a valid and final court order. In addition to the lawsuit, Detroit has reportedly been working on a regulation that would require city landlords to report tenant information directly to the city's tax compliance division. 

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About this Author

Thomas J. Kenny, Varnum, Tax Litigation Attorney, Franchise Income Lawyer


om is a partner on the firm's Tax Practice Team. His practice includes civil and criminal tax litigation. Previously employed by the Department of Attorney General, Tom acted as legal counsel to the Department of Treasury in litigation matters before the Michigan Tax Tribunal, Court of Claims, Court of Appeals and Supreme Court. Prior to his employment with the Michigan Attorney General, he was an assistant prosecuting attorney in Detroit and handled criminal litigation and appeals.

Tom's tax practice focuses on the representation of Fortune 1000...

Eric M. Nemeth, Tax Planning Attorney, Varnum, Financial Controversy Lawyer

Eric is a partner and leads the tax team. He concentrates on tax and financial controversy (IRS and various States) from examinations appellate conferences, criminal investigations, witness representation and civil and criminal tax litigation. He works with government regulatory and general tax matters. He has served as Senior Trial Attorney for the District Counsel of the Internal Revenue Service and as Special Assistant U.S. Attorney for the Department of Justice. He is a frequent speaker on tax enforcement and has served as an expert witness and binding arbitrator.

Wayne D. Roberts, Corporate tax attorney, Varnum

Wayne is a member of Varnum’s Tax Team. His practice includes all aspects of federal and state tax planning and tax litigation. He represents both closely-held and Fortune 100 companies in tax disputes with the IRS, the Michigan Department of Treasury, and revenue departments in Pennsylvania, Indiana, Tennessee, New York, California and numerous other state and local taxing jurisdictions.