HOUSE BILL No. 5948 September 26, 2000, Introduced by Rep. Schauer 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; to prescribe penalties and provide reme- dies; and to declare the effect of this act," by amending sections 25 and 28 (MCL 205.25 and 205.28), section 25 as amended by 1986 PA 58 and section 28 as amended by 1998 PA 221, and by adding section 30d. 05486'99 JLB 2 THE PEOPLE OF THE STATE OF MICHIGAN ENACT: 1 Sec. 25. (1) The commissioner, or an authorized 2 representative of the commissioner, may cause a demand to be made 3 on a taxpayer for the payment of a tax, unpaid account, or amount 4 due the state or any of its departments, institutions, or agen- 5 cies, subject to administration under this act. If the liability 6 remains unpaid for 10 days after the demand and proceedings are 7 not taken to review the liability, the commissioner or an autho- 8 rized representative of the commissioner may issue a warrant 9 under the official seal of that office. Except as provided in 10 subsection (5), the commissioner or an authorized representative 11 of the commissioner, through any state officer authorized to 12 serve process or through his or her authorized employees, may 13 levy on all property and rights to property, real and personal, 14 tangible and intangible, belonging to the taxpayer or on which a 15 lien is provided by law for the amount of the deficiency, and 16 sell the real and personal property of the taxpayer found within 17 the state for the payment of the amount due, the cost of execut- 18 ing the warrant, and the additional penalties and interest. 19 Except as provided in subsection(6)(7), the officer or agent 20 serving the warrant shall proceed upon the warrant in all 21 respects and in the same manner as prescribed by law in respect 22 to executions issued against property upon judgments by a court 23 of record. The state, through the commissioner or an authorized 24 representative of the commissioner, may bid for and purchase any 25 property sold pursuant to this section. 05486'99 3 1 (2) A person who refuses or fails to surrender any property 2 or rights to property subject to levy, upon demand by the 3 commissioner or an authorized representative of the commissioner, 4 is personally liable to the state in a sum equal to the value of 5 the property or rights not surrendered, but not exceeding the 6 amount due for which the levy was made, together with costs and 7 interest on the sum at the rate provided in section 23(2) from 8 the date of the levy. Any amount, other than costs, recovered 9 under this subsection shall be credited against the liability for 10 the collection of which the levy was made. 11 (3) In addition to the personal liability imposed by subsec- 12 tion (2), if a person required to surrender property or rights to 13 property fails or refuses to surrender the property or rights to 14 property without reasonable cause, the person shall be liable for 15 a penalty equal to 50% of the amount recoverable under subsection 16 (2), none of which penalty shall be credited against the liabil- 17 ity for the collection of which the levy was made. 18 (4) A person in possession of, or obligated with respect to, 19 property or property rights subject to levy and upon which a levy 20 has been made who, upon demand of the commissioner or an autho- 21 rized representative of the commissioner, surrenders the property 22 or rights to property or discharges the obligation to the commis- 23 sioner or an authorized representative of the commissioner or who 24 pays a liability under subsection (1) shall have his or her obli- 25 gation to a person delinquent in payment of a tax or other 26 account reduced in an amount equal to the property or rights to 27 property surrendered or amounts paid to the state. 05486'99 4 1 (5) There shall be exempt from levy under this section: 2 (a) For an unpaid tax, the type of property and the amount 3 of that property as provided in section 6334 of the internal rev- 4 enue code OF 1986. 5 (b) For an unpaid account, or amount due the state or any of 6 its departments other than an unpaid tax, disposable earnings to 7 the extent provided in section 303 of TITLE III OF the consumer 8 credit protection act, PUBLIC LAW 90-321, 15 U.S.C. 1673. 9 (c) The effect of a levy on salary or wages shall be contin- 10 uous from the date the levy is first made until the liability out 11 of which the levy arose is satisfied. 12 (6) A LEVY UNDER THIS SECTION SHALL NOT BE MADE ON THE PROP- 13 ERTY OF ANY TAXPAYER WITH RESPECT TO ANY UNPAID TAX UNDER THE 14 INCOME TAX ACT OF 1967, 1967 PA 281, MCL 206.1 TO 206.532, DURING 15 THE PERIOD THAT AN OFFER-IN-COMPROMISE UNDER SECTION 30D IS 16 PENDING. 17 (7)(6)A warrant-notice of levy may be served by certi- 18 fied mail, return receipt requested, on any person in possession 19 of, or obligated with respect to, property and rights to proper- 20 ty, real and personal, tangible and intangible, belonging to the 21 taxpayer or on which a lien is provided by law. The date of 22 delivery on the receipt shall be the date the levy is made. A 23 person may, upon written notice to the commissioner, have all 24 notices of levy by mail sent to 1 designated office. 25 Sec. 28. (1) The following conditions apply to all taxes 26 administered under this act unless otherwise provided for in the 27 specific tax statute: 05486'99 5 1 (a) Notice, if required, shall be given either by personal 2 service or by certified mail addressed to the last known address 3 of the taxpayer. Service upon the commissioner may be made in 4 the same manner. 5 (b) An injunction shall not issue to stay proceedings for 6 the assessment and collection of a tax. 7 (c) In addition to the mode of collection provided in this 8 act, the department may institute an action at law in any county 9 in which the taxpayer resides or transacts business. 10 (d) The commissioner may request in writing information or 11 records in the possession of any other department, institution, 12 or agency of state government for the performance of duties under 13 this act. Departments, institutions, or agencies of state gov- 14 ernment shall furnish the information and records upon receipt of 15 the commissioner's request. Upon request of the commissioner, 16 any department, institution, or agency of state government shall 17 hold a hearing under the administrative procedures act of 1969, 18 1969 PA 306, MCL 24.201 to 24.328, to consider withholding a 19 license or permit of a person for nonpayment of taxes or accounts 20 collected under this act. 21 (e) Except as otherwise provided insectionSECTIONS 30c 22 AND 30D, the commissioner or an employee of the department shall 23 not compromise or reduce in any manner the taxes due to or 24 claimed by the state or unpaid accounts or amounts due to any 25 department, institution, or agency of state government. This 26 subdivision does not prevent a compromise of interest or 27 penalties, or both. 05486'99 6 1 (f) Except as otherwise provided in this subdivision, an 2 employee, authorized representative, or former employee or autho- 3 rized representative of the department or anyone connected with 4 the department shall not divulge any facts or information 5 obtained in connection with the administration of a tax or infor- 6 mation or parameters that would enable a person to ascertain the 7 audit selection or processing criteria of the department for a 8 tax administered by the department. A person may disclose infor- 9 mation described in this subdivision if the disclosure is 10 required for the proper administration of a tax law administered 11 under this act, pursuant to a judicial order sought by an agency 12 charged with the duty of enforcing or investigating support obli- 13 gations pursuant to an order of a court in a domestic relations 14 matter as that term is defined in section312 of the friend of 15 the court act, 1982 PA 294, MCL552.531552.502, or pursuant to 16 a judicial order sought by an agency of the federal, state, or 17 local government charged with the responsibility for the adminis- 18 tration or enforcement of criminal law for purposes of investi- 19 gating or prosecuting criminal matters or for federal or state 20 grand jury proceedings or PURSUANT TO a judicial order if the 21 taxpayer's liability for a tax administered under this act is to 22 be adjudicated by the court that issued the judicial order. 23 However, the commissioner or a person designated by the commis- 24 sioner may divulge information set forth or disclosed in a return 25 or report or by an investigation or audit to any department, 26 institution, or agency of state government upon receipt of a 27 written request from a head of the department, institution, or 05486'99 7 1 agency of state government if it is required for the effective 2 administration or enforcement of the laws of this state, to a 3 proper officer of the United States department of treasury, and 4 to a proper officer of another state reciprocating in this 5 privilege. The commissioner may enter into reciprocal agreements 6 with other departments of state government, the United States 7 department of treasury, local governmental units within this 8 state, or taxing officials of other states for the enforcement, 9 collection, and exchange of data after ascertaining that any 10 information provided will be subject to confidentiality restric- 11 tions substantially the same as the provisions of this act. 12 (2) A person who violates subsection (1)(e) or (1)(f) is 13 guilty of a felony, punishable by a fine of not more than 14 $5,000.00, or imprisonment for not more than 5 years, or both, 15 together with the costs of prosecution. In addition, if the 16 offense is committed by an employee of this state, the person 17 shall be dismissed from office or discharged from employment upon 18 conviction. 19 (3) A person liable for any tax administered under this act 20 shall keep accurate and complete records necessary for the proper 21 determination of tax liability as required by law or rule of the 22 department. 23 SEC. 30D. (1) THE DEPARTMENT MAY COMPROMISE ANY CIVIL OR 24 CRIMINAL CASE ARISING UNDER THE INCOME TAX ACT OF 1967, 1967 PA 25 281, MCL 206.1 TO 206.532, BEFORE REFERRING THE CASE TO THE 26 ATTORNEY GENERAL FOR PROSECUTION OR DEFENSE. THE ATTORNEY 05486'99 8 1 GENERAL MAY COMPROMISE ANY SUCH CASE AFTER THE CASE HAS BEEN 2 REFERRED TO THE ATTORNEY GENERAL FOR PROSECUTION OR DEFENSE. 3 (2) IF A COMPROMISE IS MADE UNDER SUBSECTION (1), THE DIVI- 4 SION SHALL PLACE ON FILE A STATEMENT OF ALL OF THE FOLLOWING: 5 (A) THE AMOUNT OF TAX ASSESSED. 6 (B) THE AMOUNT OF INTEREST OR PENALTY IMPOSED ON THE 7 TAXPAYER. 8 (C) THE AMOUNT ACTUALLY PAID UNDER THE TERMS OF THE 9 COMPROMISE. 10 (3) PURSUANT TO THE ADMINISTRATIVE PROCEDURES ACT OF 1969, 11 1969 PA 306, MCL 24.201 TO 24.328, THE COMMISSIONER SHALL ADOPT 12 GUIDELINES FOR OFFICERS AND EMPLOYEES OF THE DIVISION TO DETER- 13 MINE WHETHER AN OFFER-IN-COMPROMISE TO RESOLVE A DISPUTE UNDER 14 THE INCOME TAX ACT OF 1967, 1967 PA 281, MCL 206.1 TO 206.532, IS 15 ADEQUATE AND SHOULD BE ACCEPTED. 16 (4) THE GUIDELINES UNDER SUBSECTION (3) SHALL PROHIBIT AN 17 OFFICER OR EMPLOYEE OF THE DIVISION FROM REJECTING AN OFFER-IN- 18 COMPROMISE FROM A LOW-INCOME TAXPAYER SOLELY ON THE BASIS OF THE 19 AMOUNT OF THE OFFER. IN ADDITION, IN THE CASE OF AN OFFER-IN- 20 COMPROMISE FROM ANY TAXPAYER THAT RELATES ONLY TO ISSUES OF 21 LIABILITY OF THE TAXPAYER, THE GUIDELINES SHALL PROHIBIT BOTH OF 22 THE FOLLOWING: 23 (A) THE REJECTION OF THE OFFER-IN-COMPROMISE SOLELY BECAUSE 24 THE DEPARTMENT IS UNABLE TO LOCATE THE TAXPAYER'S RETURN OR 25 RETURN INFORMATION FOR VERIFICATION OF LIABILITY. 26 (B) A REQUIREMENT THAT THE TAXPAYER PROVIDE A FINANCIAL 27 STATEMENT. 05486'99 9 1 (5) THE COMMISSIONER SHALL ESTABLISH PROCEDURES FOR AN 2 INDEPENDENT ADMINISTRATIVE REVIEW OF A REJECTION OF A PROPOSED 3 OFFER-IN-COMPROMISE UNDER SUBSECTION (1) BEFORE THE REJECTION IS 4 COMMUNICATED TO THE TAXPAYER. 05486'99 Final page. JLB