HB-5193, As Passed Senate, December 12, 2007

SUBSTITUTE FOR

HOUSE BILL NO. 5193

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 22, 30b, and 30c (MCL 205.22, 205.30b, and

205.30c), section 22 as amended by 1993 PA 13, section 30b as added

by 1986 PA 58, and section 30c as amended by 2002 PA 616.

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

Sec. 22. (1) A taxpayer aggrieved by an assessment, decision,

or order of the department may appeal the contested portion of the

assessment, decision, or order to the tax tribunal within 35 days,

or to the court of claims within 90 days after the assessment,

decision, or order. The uncontested portion of an assessment,

order, or decision shall be paid as a prerequisite to appeal.

However, an action shall be commenced in the court of claims within

6 months after payment of the tax or an adverse determination of

the taxpayer's claim for refund, whichever is later, if the payment

of the tax or adverse determination of the claim for refund

occurred under the former single business tax act, ~~Act No. 228 of~~

~~the Public Acts of 1975, being sections 208.1 to 208.145 of the~~

~~Michigan~~ ~~Compiled Laws~~ 1975 PA 228, and before May 1, 1986.

(2) An appeal under this section shall be perfected as

provided under the tax tribunal act, ~~Act No. 186 of the Public Acts~~

~~of 1973, as amended, being sections 205.701 to 205.779 of the~~

~~Michigan~~ ~~Compiled Laws~~ 1973 PA 186, MCL 205.701 to 205.779, and

rules promulgated under that act for the tax tribunal, or chapter

64 of the revised judicature act of 1961, ~~Act No. 236 of the Public~~

~~Acts of 1961, as amended, being sections 600.6401 to 600.6475 of~~

~~the~~ ~~Michigan~~ ~~Compiled Laws~~ 1961 PA 236, MCL 600.6401 to 600.6475,

and rules adopted under that chapter for the court of claims. In an

appeal to the court of claims, the appellant shall first pay the

tax, including any applicable penalties and interest, under protest

and claim a refund as part of the appeal.

(3) A taxpayer or the department may take an appeal by right

from a decision of the tax tribunal or the court of claims to the

court of appeals. The appeal shall be taken on the record made

before the tax tribunal or the court of claims. The taxpayer or

department may take further appeal to the supreme court in

accordance with the court rules provided for appeals to the supreme

court.

(4) The assessment, decision, or order of the department, if

not appealed in accordance with this section, is final and is not

reviewable in any court by mandamus, appeal, or other method of

direct or collateral attack.

(5) An assessment is final, conclusive, and not subject to

further challenge after 90 days after the issuance of the

assessment, decision, or order of the department, and a person is

not entitled to a refund of any tax, interest, or penalty paid

pursuant to an assessment unless the aggrieved person has appealed

the assessment in the manner provided by this section.

Sec. 30b. (1) Within 45 days after the publication of the

comprehensive annual financial report by the director of the

department of management and budget pursuant to section 494 of ~~Act~~

~~No. 431 of the Public Acts of 1984, being section 18.1494 of the~~

~~Michigan~~ ~~Compiled Laws~~ the management and budget act, 1984 PA 431,

MCL 18.1494, the director of the department of management and

budget and the state treasurer shall issue a report regarding the

application of the revenue limitation in section 26 of article IX

of the state constitution of 1963 to the fiscal year for which the

comprehensive annual financial report applies. Within 30 days after

the director of the department of management and budget and the

state treasurer issue their report, the auditor general shall audit

that report. This audit shall examine the past and present

methodology of calculating revenues and comment on differences, if

any, from past practices.

(2) If a refund is required by section 26 of article IX of the

state constitution of 1963, a taxpayer shall petition for the

refund by filling out the appropriate line to be provided on the

annual income tax ~~or single~~ return, single business tax return, or

Michigan business tax ~~returns~~ return. The amount of refund shall be

based on the tax liability for the taxpayer's year commencing in

the state's fiscal year in which the revenue limit was exceeded.

Failure to fill out the appropriate line on the annual income tax

~~or single~~ return, single business tax return, or Michigan business

tax return shall not extinguish the taxpayer's right to petition

for the refund pursuant to ~~Act No. 34 of the Public Acts of 1980,~~

~~being sections 21.221 to 21.224 of the Michigan Compiled Laws~~

section 350d of the management and budget act, 1984 PA 431, MCL

18.1350d.

(3) If before November 1, 1986, a final determination is made

that the method of refund provided for in subsection (2) is

unconstitutional, the state treasurer shall cause the refunds due,

if any, to be paid for the state fiscal year 1984-85 beginning

January 1, 1987 and through February 28, 1987.

(4) The governor may create an escrow account in the general

fund and set aside in that account an amount equal to the refunds

required by section 26 of article IX of the state constitution of

1963.

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.

(b) Has had no notification of an impending audit by the

department or its agents.

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.

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 ~~U.S.C.~~ USC

31701 to ~~31708~~ 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.

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.

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 ~~single~~ business taxes levied under the former single

business tax act, 1975 PA 228, ~~MCL 208.1 to 208.145~~ 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, ~~MCL 208.1 to 208.145~~

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.

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