HOUSE BILL No. 4735 May 27, 1999, Introduced by Reps. Quarles, Martinez, Hale, Cherry, Daniels, Jamnick, Bovin, Baird, O'Neil, Dennis and Lemmons and referred to the Committee on Tax Policy. A bill to amend 1941 PA 122, entitled "An act to establish a revenue division of the department of treasury; to prescribe its powers and duties as the revenue col- lection agency of the state; to prescribe certain powers and duties of the state treasurer; to regulate the importation, stamping, and disposition of certain tobacco products; to create the position and to define the powers and duties of the state commissioner of revenue; 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 pro- vide procedures for the payment, administration, audit, assess- ment, 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; and to declare the effect of this act," by amending sections 24 and 31 (MCL 205.24 and 205.31), as amended by 1993 PA 14. THE PEOPLE OF THE STATE OF MICHIGAN ENACT: 1 Sec. 24. (1) If a taxpayer fails or refuses to file a 2 return or pay a tax administered under this act within the time 00625'99 ** JLB 2 1 specified, the department, as soon as possible, shall assess the 2 tax against the taxpayer and notify the taxpayer of the amount of 3 the tax. A liability for a tax administered under this act is 4 subject to the interest and penalties prescribed in 5 subsections (2) to (5) AND (7). 6 (2) Except as provided in subsections (3) and (6), if a tax- 7 payer fails or refuses to file a return or pay a tax within the 8 time specified, a penalty of $10.00 or 5% of the tax, whichever 9 is greater, shall be added if the failure is for not more than 1 10 month, with an additional 5% penalty for each additional month or 11 fraction of a month during which the failure continues or the tax 12 and penalty is not paid, to a maximum of 50%. In addition to the 13 penalty, interest at the rate provided in section 23 for defi- 14 ciencies in tax payments shall be added on the tax from the time 15 the tax was due, until paid. After June 30, 1994, the penalty 16 prescribed by this subsection shall not be imposed until the 17 department submits for public hearing pursuant to the administra- 18 tive procedures act of 1969,Act No. 306 of the Public Acts of191969, being sections 24.201 to 24.328 of the Michigan Compiled20Laws1969 PA 306, MCL 24.201 TO 24.328, a rule defining what 21 constitutes reasonable cause for waiver of the penalty under sub- 22 section (4), which definition shall include illustrative 23 examples. 24 (3) If a person is required to remit tax due pursuant to 25 section 19(2) and fails or refuses to pay the tax within the time 26 specified, a penalty of 0.167% of the tax shall be added for each 27 day during which the failure continues or the tax and penalty are 00625'99 ** 3 1 not paid, to a maximum of 50% of the tax. For reporting periods 2 beginning after August 31, 1991 and before November 1, 1991, the 3 commissioner shall not impose the penalty under this subsection 4 if the tax is remitted within 2 banking days of the date speci- 5 fied and the taxpayer demonstrates that the taxpayer's account at 6 their financial institution was charged for the tax owed on or 7 before the date the remittance was due. 8 (4) If a return is filed or remittance is paid after the 9 time specified and it is shown to the satisfaction of the depart- 10 ment that the failure was due to reasonable cause and not to 11 willful neglect, the commissioner or an authorized representative 12 of the commissioner shall waive the penalty prescribed by 13 subsection (2). 14 (5) For failure or refusal to file an information return or 15 other informational report required by a tax statute, within the 16 time specified, a penalty of $10.00 per day for each day for each 17 separate failure or refusal may be added. The total penalty for 18 each separate failure or refusal shall not exceed $400.00. 19 (6) If a taxpayer fails to pay an estimated tax payment as 20 may be required by the income tax act of 1967,Act No. 281 of21the Public Acts of 1967, being sections 206.1 to 206.532 of the22Michigan Compiled Laws1967 PA 281, MCL 206.1 TO 206.532, a pen- 23 alty shall not be imposed if the taxpayer was not required to 24 make estimated tax payments in the taxpayer's immediately preced- 25 ing tax year. 26 (7) IN ADDITION TO ANY OTHER INTEREST OR PENALTY PRESCRIBED 27 UNDER THIS SECTION, A TAXPAYER WHO HAS FAILED TO FILE A RETURN OR 00625'99 ** 4 1 PAY A TAX THAT WAS DUE BEFORE JANUARY 1, 1999 DURING A PERIOD FOR 2 WHICH AMNESTY IS AVAILABLE UNDER SECTION 31(2) IS LIABLE FOR AN 3 ADDITIONAL PENALTY EQUAL TO 25% OF THE AMOUNT OF TAX DUE. 4 Sec. 31. (1) If a taxpayer does not satisfy a tax liability 5 or makes an excessive claim for a refund as a result of reliance 6 on erroneous current written information provided by the depart- 7 ment, the commissioner shall waive all criminal and civil penal- 8 ties provided by law for failing or refusing to file a return, 9 for failing to pay a tax, or for making an excessive claim for a 10 refund for a tax administered by the revenue division of the 11 department of treasury pursuant to this act if the taxpayer makes 12 a written request for a waiver, files a return or an amended 13 return, and makes full payment of the tax and interest. 14 (2) EXCEPT AS PROVIDED IN SUBSECTION (3), THE COMMISSIONER 15 SHALL WAIVE ALL CRIMINAL AND CIVIL PENALTIES PROVIDED BY LAW FOR 16 FAILING OR REFUSING TO FILE A RETURN, FOR FAILING TO PAY A TAX, 17 OR FOR MAKING AN EXCESSIVE CLAIM FOR A REFUND FOR A TAX ADMINIS- 18 TERED BY THE REVENUE DIVISION OF THE DEPARTMENT OF TREASURY UNDER 19 THIS ACT FOR TAXES DUE BEFORE JANUARY 1, 1999, IF AFTER JULY 30, 20 1999 AND BEFORE OCTOBER 1, 1999, THE TAXPAYER MAKES A WRITTEN 21 REQUEST FOR A WAIVER, FILES A RETURN OR AN AMENDED RETURN, AND 22 MAKES FULL PAYMENT OF THE TAX AND INTEREST OR A PARTIAL PAYMENT 23 OF TAX AND INTEREST PURSUANT TO AN INSTALLMENT PLAN EXECUTED BY 24 THE TAXPAYER AND THE COMMISSIONER OR HIS OR HER DESIGNEE. 25 (3) SUBSECTION (2) APPLIES TO THE NONREPORTING AND UNDERRE- 26 PORTING OF TAX LIABILITIES OR TO THE NONPAYMENT OF TAXES 27 PREVIOUSLY DETERMINED TO BE DUE, BUT ONLY TO THE EXTENT OF THE 00625'99 ** 5 1 PENALTIES ATTRIBUTABLE TO THE TAXES THAT WERE DUE BEFORE 2 JANUARY 1, 1999 AND THAT ARE PAID DURING THE TIME PERIOD PROVIDED 3 FOR IN SUBSECTION (2). SUBSECTION (2) DOES NOT APPLY TO ANY TAX 4 DUE BY THE TAXPAYER THAT IS UNDER CRIMINAL INVESTIGATION, OR 5 INVOLVED IN A CIVIL ACTION OR CRIMINAL PROSECUTION. 6 (4) THE COMMISSIONER SHALL ADMINISTER THE TAX AMNESTY PRO- 7 GRAM DESCRIBED IN SUBSECTION (2). A TAXPAYER WHO PAYS ALL OR A 8 PORTION OF A TAX SUBJECT TO THE TAX AMNESTY PROGRAM DESCRIBED IN 9 SUBSECTION (2), IN ADDITION TO ALL OTHER FORMS OF PAYMENT AUTHO- 10 RIZED UNDER THIS ACT, MAY PAY BY CREDIT CARD OR DEBIT CARD AND 11 THE COMMISSIONER SHALL ACCEPT PAYMENT BY CREDIT CARD OR DEBIT 12 CARD. THE COMMISSIONER MAY ENTER INTO AN INSTALLMENT PAYMENT 13 PLAN FOR TAX PAYMENTS FOR WHICH THE CRIMINAL AND CIVIL PENALTIES 14 ARE WAIVED UNDER SUBSECTION (2). IF THE TAXPAYER FULLY COMPLIES 15 WITH THE INSTALLMENT PLAN EXECUTED WITH THE DEPARTMENT OF TREA- 16 SURY, ALL CRIMINAL AND CIVIL PENALTIES ARE WAIVED. IF THE TAX- 17 PAYER DOES NOT FULLY COMPLY WITH THE INSTALLMENT PLAN EXECUTED 18 WITH THE DEPARTMENT OF TREASURY, ALL CRIMINAL AND CIVIL PENALTIES 19 ARE NOT WAIVED AND THE DEPARTMENT OF TREASURY MAY COLLECT THE TAX 20 LIABILITY AND IMPOSE ALL CRIMINAL AND CIVIL PENALTIES AS PROVIDED 21 BY LAW. 22 (5) THERE IS APPROPRIATED FROM THE REVENUES GENERATED BY 23 THIS ACT THE SUM OF $5,000,000.00 TO THE DEPARTMENT OF TREASURY 24 FOR ADMINISTRATION. THIS APPROPRIATION IS ALLOTTED FOR EXPENDI- 25 TURE ON THE EFFECTIVE DATE OF THIS AMENDATORY ACT. ANY UNENCUM- 26 BERED FUNDS MAY BE CARRIED OVER INTO THE 1999-2000 FISCAL YEAR. 27 ONLY GENERAL PURPOSE REVENUE GENERATED BY THE AMNESTY PROGRAM 00625'99 ** 6 1 PROVIDED FOR IN SUBSECTION (2) MAY BE USED TO FINANCE THIS 2 APPROPRIATION. 3 (6) REVENUES RECEIVED AS A RESULT OF THE TAX AMNESTY PROGRAM 4 DESCRIBED IN SUBSECTION (2), EXCEPT THOSE OTHERWISE DEDICATED BY 5 LAW, SHALL BE CREDITED TO A SEPARATE ACCOUNT IN THE STATE SCHOOL 6 AID FUND ESTABLISHED UNDER SECTION 11 OF ARTICLE IX OF THE STATE 7 CONSTITUTION OF 1963, TO BE USED ONLY FOR ELEMENTARY AND SECOND- 8 ARY SCHOOL SUPPORT SERVICES, SCHOOL NURSES, SCHOOL SOCIAL WORK- 9 ERS, AND SCHOOL PSYCHOLOGISTS. 10 (7) NOT LATER THAN 7 DAYS BEFORE THE TAX AMNESTY PERIOD 11 DESCRIBED IN SUBSECTION (2) BEGINS, THE DEPARTMENT OF TREASURY 12 SHALL NOTIFY, IN WRITING, ALL TAXPAYERS WHO COULD BENEFIT FROM 13 THE TAX AMNESTY PROGRAM DESCRIBED IN THIS SECTION. THE NOTIFICA- 14 TION SHALL INCLUDE A COMPLETE DESCRIPTION OF THE TAX AMNESTY PRO- 15 GRAM AND ITS REQUIREMENTS AND BENEFITS. 16 (8) NOT LATER THAN 7 DAYS BEFORE THE TAX AMNESTY PERIOD 17 DESCRIBED IN SUBSECTION (2) BEGINS, THE DEPARTMENT OF TREASURY 18 SHALL ESTABLISH A TOLL-FREE TELEPHONE SERVICE TO ANSWER QUESTIONS 19 ABOUT THE TAX AMNESTY PROGRAM AND ITS REQUIREMENTS AND BENEFITS. 20 (9) A STATE ELECTED OFFICIAL SERVING AFTER JUNE 27, 1999 21 SHALL NOT UTILIZE THE TAX AMNESTY PROGRAM DESCRIBED IN THIS ACT. 22 (10) THE COMMISSIONER SHALL NOT WAIVE CRIMINAL AND CIVIL 23 PENALTIES UNDER SUBSECTION (2) FOR TAXES ATTRIBUTABLE TO INCOME 24 DERIVED FROM A CRIMINAL ACT OR FOR A PERSON WHO HAS BEEN CON- 25 VICTED OF A FELONY UNDER THIS ACT OR THE INTERNAL REVENUE CODE OF 26 1986. 00625'99 ** Final page. JLB