@jagpreet71 ,
(a) While I don't know all the antecedents of the case ( except the items mentioned in this thread ), I happy that MI did take into consideration your father's situation and gave him " foreign tax credit" equivalent. I am hoping that this was the final determination. ( And not because the analyst read taxing "state"/ authority as Indiana -- IN -- instead of India-- dyslexia effect ?)
(b) I am quite surprised at the argument of your cpa on the definition of "state" and equating that to a state of the United States and /or its territories. In that particular definition the word "state" is being used in reference and use as an entity that can levy / impose/ collect taxes on incomes and NOT as equivalent to a "state" within the meaning of United "States" of America i.e. a state of the union. To me that is a misuse of the definition. Thus the state of Michigan is limiting the type of "entities" the taxes from whom are to recognized but says nothing about the "states" as used for purposes of tax credit i.e. for taxes paid to another "state". Please note that the "credit" related subsection of the code takes pains to define/ recognize the "states" ( of the union), DC, etc. the taxes paid to whom are eligible for tax credit.
@abhishtu2 , I wish you luck with your effort, esp. since the federal FTC is valid.
Namaste ji
pk
