Bill Text: MI SB0841 | 2009-2010 | 95th Legislature | Introduced

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Bill Title: Taxation; other; tax amnesty and voluntary disclosure; provide for and modify. Amends secs. 24, 30c & 31 of 1941 PA 122 (MCL 205.24 et seq.).

Spectrum: Partisan Bill (Democrat 1-0)

Status: (Introduced - Dead) 2009-09-17 - Referred To Committee On Finance [SB0841 Detail]

Download: Michigan-2009-SB0841-Introduced.html

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SENATE BILL No. 841

 

 

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.