Pursuant to MCR 7.215(H)(3), this special panel was convened to resolve a conflict between this Court’s prior, vacated opinion in Elenbaas v Dep’t of Treasury, 231 Mich App 801 (1998), and this Court’s earlier decision in Cook v Dep’t of Treasury, 229 Mich App 653; 583 NW2d 696 (1998). In accordance with MCR 7.215(H)(1), the prior Elenbaas panel was required to follow the precedent of Cook, supra. Were it not for MCR 7.215(H)(1), the previous panel would have affirmed the decision of the lower court.
The facts of this case were set out in this Court’s previous opinion:
After this Court’s ruling in Bauer v Dep’t of Treasury, 203 Mich App 97; 512 NW2d 42 (1993), plaintiffs filed amended income tax returns for 1990, 1991, 1992, and 1993, seeking refunds for income taxes paid on their gross receipts from oil and gas production. In Bauer, this Court determined that § 15 of the severance tax act, MCL 205.315; MSA 7.365, allows an individual who pays the severance tax on royalties received from oil and gas leases to be exempt from paying income tax on those royalties. Id. at 99. This Court held that § 15 was clear and unambiguous and that, when it applies, the severance tax is to be paid in lieu of all other taxes. Id. at 100. No exception is made for the income tax. Id. at 101. Because plaintiffs had paid both the severance tax and the income tax on the gross receipts from their oil and gas production in those years, they filed amended income tax returns. Plaintiffs calculated the amount of their claimed refunds by subtracting the amount of their gross receipts from oil and gas production, which receipts had been taxed pursuant to the severance tax act, from the total taxable income on the returns for each year. They then recalculated the amount of income tax owed.
Defendant failed to issue the full amount of the refunds claimed for 1990, 1991, and 1992 and failed to issue any refund for 1993. It determined that the amount of gross *375receipts should not have been deducted from the total taxable income, but rather the amount of net income derived from oil and gas production for each year should be subtracted. This resulted in less of a refund for 1990, 1991, and 1992. In 1993, plaintiff's did not enjoy net income from their oil and gas production, but rather had a net loss. Defendant determined that the net loss should be added to their total taxable income for 1993 and thus, plaintiffs owed additional taxes for that year. The Court of Claims determined that plaintiffs were entitled to the full refunds claimed, which refunds were calculated by subtracting the gross receipts from oil and gas production from their total taxable income. [Elenbaas, swpra at 801-802.]
The conflict at issue is over whether plaintiffs were entitled to deduct oil and gas expenses when calculating their 1993 Michigan income tax or to include those expenses when calculating their net operating loss for Michigan income tax purposes. The Cook panel held that subsection 265(a)(1) of the federal Internal Revenue Code1 generally applies, under subsection 2(3) of the Michigan Income Tax Act (ita),2 to prevent taxpayers from deducting expenses related to exempt classes of income. The prior Elenbaas panel disagreed, noting that plaintiffs were entitled to deduct oil and gas production expenses when calculating their federal adjusted gross income and that oil and gas receipts are taxed in Michigan under the severance tax act, MCL 205.301 et seq.; MSA 7.351 et seq.
Following an order by the Court of Appeals en banc invoking the conflict resolution procedure of MCR 7.215(H)(3)-(6), this case was reconsidered by this special panel. After due consideration, we are persuaded that the Cook panel reached the correct *376result. We therefore hold, for the reasons set forth in Cook, that the trial court erred in finding that plaintiffs were entitled to deduct the expenses associated with oil and gas production in computing a net operating loss.3 In all other respects, we adopt the opinion of the prior Elenbaas panel as our own.
Affirmed in part, reversed in part, and remanded for further proceedings consistent with this opinion. We do not retain jurisdiction.
Holbrook, Jr., Gribbs, Griffin, and Fitzgerald, JJ., concurred.26 USC 265(a)(1).
MCL 206.2(3); MSA 7.557(102)(3).
The prior Elenbaas panel and our dissenting colleagues disagree with Cook in part because oil and gas gross receipts are taxed under the severance tax act. We are not convinced by this argument. Subsection 2(3) of the ita does not say that, after considering all available Michigan tax schemes, Michigan taxpayers should be treated the same as they would under the federal tax scheme. Instead, subsection 2(3) clearly states that “the income subject to tax [shall] be the same as taxable income as defined and applicable to the subject taxpayer in the internal revenue code.” MCL 206.2(3); MSA 7.557(102)(3). We therefore conclude that the taxation of a taxpayer under a different tax scheme, such as the severance tax act, is irrelevant.