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United States of America v. Williamston Community Schools

Construction Article

This article was last updated on: January 2nd 2023

Image at the top of the screen.

A photo of Williamston High School.

Background

United States of America v. Williamston Community Schools was a lawsuit filed by the International Revenue Service against Williamston Community Schools. The IRS sought to recover federal taxes "erroneously refunded" to WCS. At the core of the issue was The Public School Employeers Retirement Act of 1979, which set up a retirement system for public employees. Public Act 75 of 2010 amended this law, now requiring school districts in Michigan to withhold 3% of employee wages for a retirement fund managed by the State of Michigan's Office of Retirement Services. This sparked several challenges by Michigan school employees against the State of Michigan, which resulted in several public acts in 2012 that overrode the 2010 act. Following this, the employees demanded that the collected funds taken from their wages from 2010 - 2012 be returned them. As a result, in 2014 school districts across the state amended their tax returns to regain funds forked over between 2010 - 2012, after they were told that the now overruled withholdings were exempt from Medicare and social security taxes.

For the next two years, lawsuits continued as the State of Michigan appealed the issue. In 2016, the Michigan Court of Appeals ruled the 2010 act unconstitutional for a second time. Shortly after this, the IRS decided to sue Haslett schools and later Williamston Community Schools over the 2014 repayments, claiming that the repayments should not have happened. The IRS demanded that the two school districts give back the regained funds plus interest.

While United States of America v. Williamston Community Schools was resolved in 2017, the issues that sparked the lawsuit in the first place continued to be argued in court until 2020.

Lawsuit

IRS Complaint

To Be Added

WCS Response

To Be Added

Outcome

On February 7th 2017, the lawsuit concluded. The ruling was a stipulation of dismissal with right to reinstate. Essentially, it was ruled that United States of America v. Williamston Community Schools would likely be resolved by other cases state that were ongoing at the time, so the case was dismissed. These cases were AFT Michigan, et al. v. State of Michigan; Timothy L. Johnson, et al. v. Public School Employees Retirement System, et al.; and Deborah McMillan, et al. v. Public School Employees Retirement System, et al. Should the Michigan Supreme Court deny the State of Michigan's application for leave to appeal on those cases, United States of America v. Williamston Community Schools could be reopened by either the IRS or WCS within 6 months.

Outcome of Related Cases

To Be Added

Sources

1. JUSTIA - United States of America v. Williamston Community Schools 2. Lansing State Journal - Feds sue Haslett schools over $57,000 in tax returns 3. Lansing State Journal - Second local school district sued over tax returns
4. Michigan Legislature - THE PUBLIC SCHOOL EMPLOYEES RETIREMENT ACT OF 1979 (EXCERPT) 5. Michigan.gov - Public Act 75 of 2010 Summary 6. Michigan.gov - Summary of Public Act 300 of 2012 and Public Act 359 of 2012
7. JUSTIA - AFT MICHIGAN V STATE OF MICHIGAN (Authored Opinion) 8. Court Listener - Timothy L Johnson v. Public School Employees Retirement System 9. Lansing State Journal - Appeals court rules for school employees on 3% refund