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MITA Continues Work on MBT Fix, False Claims Act; Courts Clarify Construction Lein Act

Wednesday, April 2, 2008   (0 Comments)
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MITA Continues Work on MBT Fix

While the state Senate is off on break for the next two weeks, MITA continues to push forward on the MBT Materials Deduction fix highlighted in recent bulletins.

Before the Senate went on break last week, a motion was made to discharge the legislation (SB 1217) from committee and report it to the floor. (Click here to download a copy of the soon-to-be adopted substitute bill.) A discharge is a rarely-used procedural maneuver designed to avoid the committee process and gain quick approval on the Senate floor. MITA has requested that the bill be put on the fast track and quickly be signed into law before legislators leave for summer recess.

MITA was prepared to give committee testimony on the bill when in committee last week, but an improper committee posting wouldn’t allow a vote to take place on that last day of session before break. Therefore, legislators instead opted for a discharge.

MITA has also been working with legislators on a grandfather clause for projects that were bid on prior to the original MBT passage. The industry has argued that companies should not be forced to pay significant unanticipated business taxes from a project bid that was offered and approved under the old Single Business Tax. The grandfather language was not included in SB 1217 because it would amend a separate section of law, but the language has been inserted in another MBT fix bill pending in the Legislature.

Contractors are encouraged to offer feedback to MITA on the effects of the MBT so that we can continue to represent your interests as various MBT changes are debated in the Legislature in the coming weeks and months.

Appeals Court Clarifies Construction Lien Act Requirements

The Court of Appeals said this week that a list of subcontractors who worked on a project should be signed and notarized under the Construction Lien Act (CLA), but failure to get a notary's signature does not invalidate the list under the law.
In a published opinion released Wednesday, April 2, 2008, (The Big L v. Courtland Construction, COA docket No. 271880), the three-judge panel said that the Legislature was flexible in the law, mandating that a list of contractors and subcontractors must be "substantially" similar to the form exemplified in the CLA, but it did not have to be exact.

The court said that the lack of a notary stamp doesn't change the purpose of the list, which is to notify the property owner and bank of each contractor working on the project and the amount of work they have done.

MITA thought it was important to continue providing updates on developments of the Construction Lien Act with members of the industry.

MITA Lobbies against Proposed State False Claims Act

MITA told Senate Judiciary Chairman Kuipers in a meeting last week that legislation passed by the House (H.B.  4773) would require a contractor to pay three times the damages if they were found to have submitted an unintentional false claim for work done for the state. 

MITA pointed to previous frivolous false claims suits under the federal False Claims Act and other state False Claims Acts as well as cases of abuse of power used to deny legitimate construction claims.  The industry indicated that absent any widespread fraud against Michigan, the bill appears to be a punishment looking for a crime.

Kuipers heard concerns that estimates often done in the construction process are later adjusted to reflect actual quantities.  The initial estimate could be considered a false claim under the act and subject to strong penalties due to the legislation including “unintentional” claims as part of the language.

The bill has passed the House and is now pending in Senate committee.

Please contact Mike Nystrom at or Keith Ledbetter at or call the MITA office at 517-347-8336 with any questions or comments.

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