In earlier proceedings, a federal district court allowed the lawsuit to move forward, ruling that the college was not required to demonstrate a flawless administrative record to seek penalty relief. However, the court dismissed constitutional arguments asserting that the penalty violated excessive fine protections, ruling that such claims should have been raised during administrative appeals.
The litigation continued through several years of procedural review. In January 2026, both parties announced that they had reached a settlement agreement under which the United States would refund an undisclosed portion of the amount sought by the college.
Court documents did not reveal the exact financial value of the government’s payment, but the resolution effectively ended the dispute without further trial proceedings.
Representatives for Schoolcraft Community College District and the U.S. Department of Justice did not provide immediate public comment following the settlement announcement.
The case highlights compliance risks associated with large-scale payroll reporting and underscores the importance of internal coordination when institutions manage employment tax documentation involving thousands of workers.
