September 17, 2009, Introduced by Senator CHERRY and referred to the Committee on Finance.
A bill to amend 1941 PA 122, entitled
"An act to establish the revenue collection duties of the
department of treasury; to prescribe its powers and duties as the
revenue collection agency of this state; to prescribe certain
powers and duties of the state treasurer; to establish the
collection duties of certain other state departments for money or
accounts owed to this state; to regulate the importation, stamping,
and disposition of certain tobacco products; to provide for the
transfer of powers and duties now vested in certain other state
boards, commissions, departments, and offices; to prescribe certain
duties of and require certain reports from the department of
treasury; to provide procedures for the payment, administration,
audit, assessment, levy of interests or penalties on, and appeals
of taxes and tax liability; to prescribe its powers and duties if
an agreement to act as agent for a city to administer, collect, and
enforce the city income tax act on behalf of a city is entered into
with any city; to provide an appropriation; to abolish the state
board of tax administration; to prescribe penalties and provide
remedies; and to declare the effect of this act,"
by amending sections 24, 30c, and 31 (MCL 205.24, 205.30c, and
205.31), section 24 as amended by 2003 PA 201, section 30c as
amended by 2007 PA 194, and section 31 as amended by 2002 PA 657.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
Sec. 24. (1) If a taxpayer fails or refuses to file a return
or pay a tax administered under this act within the time specified,
the department, as soon as possible, shall assess the tax against
the taxpayer and notify the taxpayer of the amount of the tax. A
liability for a tax administered under this act is subject to the
interest and penalties prescribed in subsections (2) to (5).
(2) Except as provided in subsections (3), (6), and (7), if a
taxpayer fails or refuses to file a return or pay a tax within the
time specified for notices of intent to assess issued on or before
February 28, 2003, a penalty of $10.00 or 5% of the tax, whichever
is greater, shall be added if the failure is for not more than 1
month, with an additional 5% penalty for each additional month or
fraction of a month during which the failure continues or the tax
and penalty is not paid, to a maximum of 50%. Except as provided in
subsections (3), (6), and (7), if a taxpayer fails or refuses to
file a return or pay a tax within the time specified for notices of
intent to assess issued after February 28, 2003, a penalty of 5% of
the tax shall be added if the failure is for not more than 2
months, with an additional 5% penalty for each additional month or
fraction of a month during which the failure continues or the tax
and penalty is not paid, to a maximum of 25%. In addition to the
penalty, interest at the rate provided in section 23 for
deficiencies in tax payments shall be added on the tax from the
time the tax was due, until paid. After June 30, 1994, the penalty
prescribed by this subsection shall not be imposed until the
department submits for public hearing pursuant to the
administrative procedures act of 1969, 1969 PA 306, MCL 24.201 to
24.328, a rule defining what constitutes reasonable cause for
waiver of the penalty under subsection (4), which definition shall
include illustrative examples.
(3) If a person is required to remit tax due pursuant to
section 19(2) and fails or refuses to pay the tax within the time
specified, a penalty of 0.167% of the tax shall be added for each
day during which the failure continues or the tax and penalty are
not paid as follows:
(a) For notices of intent to assess issued on or before
February 28, 2003, to a maximum of 50% of the tax.
(b) For notices of intent to assess issued after February 28,
2003, to a maximum of 25% of the tax.
(4) If a return is filed or remittance is paid after the time
specified and it is shown to the satisfaction of the department
that the failure was due to reasonable cause and not to willful
neglect, the state treasurer or an authorized representative of the
state treasurer shall waive the penalty prescribed by subsection
(2).
(5) For failure or refusal to file an information return or
other informational report required by a tax statute, within the
time specified, a penalty of $10.00 per day for each day for each
separate failure or refusal may be added. The total penalty for
each separate failure or refusal shall not exceed $400.00.
(6) If a taxpayer fails to pay an estimated tax payment as may
be required by the income tax act of 1967, 1967 PA 281, MCL 206.1
to 206.532, a penalty shall not be imposed if the taxpayer was not
required to make estimated tax payments in the taxpayer's
immediately preceding tax year.
(7) Notwithstanding any other provision of this act, for any
return or tax remittance due on August 15, 2003 that was filed or
remitted not later than August 22, 2003, the department shall waive
all interest and penalty for the failure to file or remit for the
period of August 15, 2003 through August 22, 2003.
(8) In addition to any other interest or penalty prescribed
under this section, a taxpayer who has failed to file a return or
pay a tax that was due before July 1, 2009, during a period for
which amnesty is available under section 31(2), is liable for an
additional penalty equal to 25% of the amount of tax due.
Sec. 30c. (1) The state treasurer, or an authorized
representative of the state treasurer, on behalf of the department,
may enter into a voluntary disclosure agreement pursuant to
subsections (2) to (11) or an agreement with a federally recognized
Indian tribe within the state of Michigan pursuant to subsections
(12) and (13).
(2) A voluntary disclosure agreement may be entered into with
a person who makes application, who is a nonfiler, and who meets 1
or more of the following criteria:
(a) Has a filing responsibility under nexus standards issued
by the department after December 31, 1997.
(b) Has a reasonable basis to contest liability, as determined
by the state treasurer, for a tax or fee administered under this
act.
(3) All taxes and fees administered under this act are
eligible for inclusion in a voluntary disclosure agreement.
(4) To be eligible for a voluntary disclosure agreement,
subject to subsection (1), a person must meet all of the following
requirements:
(a) Except as otherwise provided in this subdivision, has had
no previous contact by the department or its agents regarding a tax
covered by the agreement. For purposes of this subdivision, a
letter of inquiry, whether a final letter or otherwise, requesting
information under section 21(2)(a) that was sent to a nonfiler
shall not be considered a previous contact under this subdivision
if the nonfiler sends a written request to the department to enter
into
a voluntary disclosure agreement not later than June 30, 1999
2006.
(b) Has had no notification of an impending audit by the
department or its agents.
(c) Is not currently under audit by the department of treasury
or under investigation by the department of state police,
department of attorney general, or any local law enforcement agency
regarding a tax covered by the agreement.
(d) Is not currently the subject of a civil action or a
criminal prosecution involving any tax covered by the agreement.
(e) Has agreed to register, file returns, and pay all taxes
due in accordance with all applicable laws of this state for all
taxes administered under this act for all periods after the
lookback period.
(f) Has agreed to pay all taxes due for each tax covered under
the agreement for the lookback period, plus statutory interest as
stated in section 23, within the period of time and in the manner
specified in the agreement.
(g) Has agreed to file returns and worksheets for the lookback
period as specified in the agreement.
(h) Has agreed not to file a protest or seek a refund of taxes
paid to this state for the lookback period based on the issues
disclosed in the agreement or based on the person's lack of nexus
or contacts with this state.
(5) If a person satisfies all requirements stated in
subsections (1), (2), and (4), the department shall enter into a
voluntary disclosure agreement with that person providing the
following relief:
(a) Notwithstanding section 28(1)(e) of this act, the
department shall not assess any tax, delinquency for a tax,
penalty, or interest covered under the agreement for any period
before the lookback period identified in the agreement.
(b) The department shall not assess any applicable
discretionary or nondiscretionary penalties for the lookback
period.
(c) The department shall provide complete confidentiality of
the agreement and shall also enter into an agreement not to
disclose, in accordance with section 28(1)(f), any of the terms or
conditions of the agreement to any tax authorities of any state or
governmental authority or to any person except as required by
exchange of information agreements authorized under section
28(1)(f), including the international fuel tax agreement under
chapter
317 of title 49 of the United States Code, 49 USC 31701 to
31707. The department shall not exchange information obtained under
this section with other states regarding the person unless
information regarding the person is specifically requested by
another state.
(6) The department shall not bring a criminal action against a
person for failure to report or to remit any tax covered by the
agreement before or during the lookback period if the facts
established by the department are not materially different from the
facts disclosed by the person to the department.
(7) A voluntary disclosure agreement is effective when signed
by the person subject to the agreement, or his, her, or its lawful
representative, and returned to the department within the time
period specified in the agreement. The department shall only
provide the relief specified in the executed agreement. Any verbal
or written communication by the department before the effective
date of the agreement shall not afford any penalty waiver, limited
lookback period, or other benefit otherwise available under this
section.
(8) A material misrepresentation of the fact by an applicant
relating to the applicant's current activity in this state renders
an agreement null and void and of no effect. A change in the
activities or operations of a person after the effective date of
the agreement is not a material misrepresentation of fact and shall
not affect the agreement's validity.
(9) The department may audit any of the taxes covered by the
agreement within the lookback period or in any prior period if, in
the department's opinion, an audit of a prior period is necessary
to determine the person's tax liability for the tax periods within
the lookback period or to determine another person's tax liability.
(10) Nothing in subsections (2) to (9) shall be interpreted to
allow or permit unjust enrichment as that term is defined in
subsection (15). Any tax collected or withheld from another person
by an applicant shall be remitted to the department without respect
to whether it was collected during or before the lookback period.
(11) The department shall not require a person who enters into
a voluntary disclosure agreement to make any filings that are
additional to those otherwise required by law.
(12) The department may enter into a tribal agreement with a
federally recognized Indian tribe specifying the applicability of a
tax administered under this act to that tribe, its members, and any
person conducting business with them. The tribe, its members, and
any person conducting business with them shall remain fully subject
to this state's tax acts except as otherwise specifically provided
by an agreement in effect for the period at issue. A tribal
agreement shall include all of the following:
(a) A statement of its purpose.
(b) Provisions governing duration and termination that make
the agreement terminable by either party if there is noncompliance
and terminable at-will after a period of not more than 2 years.
(c) Provisions governing administration, collection, and
enforcement. Those provisions shall include all of the following:
(i) Collection of taxes levied under the general sales tax act,
1933 PA 167, MCL 205.51 to 205.78, or the use tax act, 1937 PA 94,
MCL 205.91 to 205.111, on the sale of tangible personal property or
the storage, use, or consumption of tangible personal property not
exempt under the agreement.
(ii) Collection of taxes levied on tobacco products under the
tobacco products tax act, 1993 PA 327, MCL 205.421 to 205.436, and
taxes levied under the motor fuel tax act, 2000 PA 403, MCL
207.1001 to 207.1170, and the motor carrier fuel tax act, 1980 PA
119, MCL 207.211 to 207.234, on sales of tobacco products or motor
fuels not exempt under the agreement.
(iii) Withholding and remittance of income taxes levied under
the income tax act of 1967, 1967 PA 281, MCL 206.1 to 206.532, from
employees not exempt under the agreement.
(iv) Reporting of gambling winnings to the same extent and in
the same manner as reported to the federal government.
(v) A waiver of tribal sovereign immunity sufficient to make
the agreement enforceable against both parties.
(d) Provisions governing disclosure of information between the
department and the tribe as necessary for the proper administration
of the tribal agreement.
(e) A provision ensuring that the members of the tribe will be
bound by the terms of the agreement.
(f) A designation of the agreement area within which the
specific provisions of the tribal agreement apply.
(13) A tribal agreement authorized under subsection (12) may
include 1 or more of the following:
(a) A provision for dispute resolution between this state and
the tribe, which may include a nonjudicial forum.
(b) A provision for the sharing between the parties of certain
taxes collected by the tribe and its members.
(c) Any other provisions beneficial to the administration or
enforcement of the tribal agreement.
(14) A tribal agreement authorized under subsection (12) shall
not authorize the approval of a class III gaming compact negotiated
under
the Indian gaming regulatory act, Public Law 100-497. ,
102
Stat.
2467.
(15) As used in this section:
(a) "Lookback period" means 1 or more of the following:
(i) The most recent 48-month period as determined by the
department or the first date the person subject to an agreement
under this section began doing business in this state if less than
48 months.
(ii) For business taxes levied under the former single business
tax act, 1975 PA 228, or the Michigan business tax act, 2007 PA 36,
MCL 208.1101 to 208.1601, the lookback period shall be the 4 most
recent completed fiscal or calendar years over a 48-month period or
the first date the person subject to an agreement under this
section began doing business in this state if less than 48 months.
(iii) Notwithstanding subparagraphs (i), (ii), and (iv), the most
recent 36-month period as determined by the department or the first
date the person subject to an agreement under this section began
doing business in this state if less than 36 months, if tax returns
filed in another state for a tax based on net income that included
sales in the numerator of the apportionment formula that now must
be included in the numerator of the apportionment formula under the
former single business tax act, 1975 PA 228, or the Michigan
business tax act, 2007 PA 36, MCL 208.1101 to 208.1601, and those
sales increased the net tax liability payable to that state.
(iv) If there is doubt as to liability for the tax during the
lookback period, another period as determined by the state
treasurer to be in the best interest of this state and to preserve
equitable and fair administration of taxes.
(b) "Nonfiler" for a particular tax means, beginning July 1,
1998, a person that has not filed a return for the particular tax
being disclosed for periods beginning after December 31, 1988.
Nonfiler also includes a person whose only filing was a single
business tax estimated tax return filed before January 1, 1999.
(c) "Person" means an individual, firm, bank, financial
institution, limited partnership, copartnership, partnership, joint
venture, association, corporation, limited liability company,
limited liability partnership, receiver, estate, trust, or any
other group or combination acting as a unit.
(d) "Previous contact" means any notification of an impending
audit pursuant to section 21(1), review, notice of intent to
assess, or assessment. Previous contact also includes final letters
of inquiry pursuant to section 21(2)(a) or a subpoena from the
department.
(e) "Unjust enrichment" includes the withholding of income tax
under the income tax act of 1967, 1967 PA 281, MCL 206.1 to
206.532, and the collection of any other tax administered by this
act that has not been remitted to the department.
(f) "Voluntary disclosure agreement" or "agreement" means a
written agreement that complies with this act.
(16) The department of treasury shall post a copy of each
tribal agreement and any changes to a tribal agreement on the
department of treasury's website not later than 60 days after the
tribal agreement takes effect or the changes to the tribal
agreement take effect.
(17) Not later than January 31 of each year, the department of
treasury shall report to each house of the legislature, including
the majority leader and minority leader of the senate and the
speaker and minority leader of the house of representatives, on the
tribal agreement and changes to the tribal agreement entered into
during the immediately preceding calendar year. The report shall
include all of the following:
(a) A copy of the tribal agreement.
(b) A summary of the changes since the immediately preceding
report.
(c) A detailed listing and description of changes to any
agreement areas described in a tribal agreement.
Sec. 31. (1) If a taxpayer does not satisfy a tax liability or
makes an excessive claim for a refund as a result of reliance on
erroneous current written information provided by the department,
the state treasurer shall waive all criminal and civil penalties
provided by law for failing or refusing to file a return, for
failing to pay a tax, or for making an excessive claim for a refund
for a tax administered by the department of treasury pursuant to
this act if the taxpayer makes a written request for a waiver,
files a return or an amended return, and makes full payment of the
tax and interest.
(2) For a period to be designated by the state treasurer of
not less than 30 days and not more than 60 days, and ending before
September
November 30, 2002 2009, there shall be an amnesty period
during which the state treasurer shall waive all criminal and civil
penalties provided by law for failing or refusing to file a return,
for failing to pay a tax, or for making an excessive claim for a
refund
for a tax administered by the revenue division of the
department of treasury under this act if the taxpayer makes a
written request for a waiver, files a return or an amended return,
and makes full payment in either a lump sum or installments as
provided under subsection (9), of the tax and interest due for any
prior tax year.
(3) This section applies to the nonreporting and
underreporting of tax liabilities and to the nonpayment of taxes
previously determined to be due, but only to the extent of the
penalties attributable to the taxes that were previously due and
that are paid during the amnesty period provided for in subsection
(2).
(4) The department shall administer this section.
(5)
Subsection (2) does not apply to taxes due after June 1,
2001
30, 2009.
(6)
There For the fiscal year
ending September 30, 2010, there
is appropriated from the revenues generated by taxes paid under
subsection (2) the sum of $1,500,000.00 to the department of
treasury for administration of the amnesty program created by the
amendatory
act that added amended this subsection. This
appropriation is allotted for expenditure on and after October 1,
2001
2009. Only general purpose revenue generated by the
amendatory
act
that added amended this subsection may be used to finance this
appropriation.
(7) The state treasurer shall not waive criminal and civil
penalties applicable to a tax under subsection (2) if 1 or more of
the following circumstances apply:
(a) If the taxpayer is eligible to enter into a voluntary
disclosure agreement under section 30c for that tax.
(b) If the tax is attributable to income derived from a
criminal act, if the taxpayer is under criminal investigation or
involved in a civil action or criminal prosecution for that tax, or
if the taxpayer has been convicted of a felony under this act or
the internal revenue code of 1986.
(8) The department shall provide reasonable notice to
taxpayers that may be eligible for the amnesty program at least 30
days before the start of the designated amnesty period.
Notification shall include, but is not limited to, a description of
the amnesty program on appropriate tax instruction forms and on the
internet.
(9) Under the amnesty program described in subsection (2), a
taxpayer may pay tax and interest due in installments if the
taxpayer meets 1 of the following:
(a) The taxpayer is an individual and submits the greater of
$10,000.00 or 50% of the tax and interest due with the request for
waiver under subsection (2) and pays the remaining tax and interest
due in 2 equal installments, the first installment due no later
than
August November 15, 2002 2009 and the second
installment due
no
later than September December
15, 2002 2009.
(b) A taxpayer that is not an individual submits the greater
of $100,000.00 or 50% of the tax and interest due with the request
for waiver under subsection (2) and pays the remaining tax and
interest due in 2 equal installments, the first installment due no
later
than August November 15, 2002 2009 and the second
installment
due
no later than September December
15, 2002 2009.