HB-5543, As Passed House, May 31, 2012

 

 

 

 

 

 

 

 

 

 

 

 

SUBSTITUTE FOR

 

HOUSE BILL NO. 5543

 

 

 

 

 

 

 

 

 

 

 

 

      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 section 27a (MCL 205.27a), as amended by 2011 PA 304.

 

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

 


 1        Sec. 27a. (1) If a person liable for a tax administered

 

 2  under this act sells out his or her business or its stock of

 

 3  goods or quits the business, the person shall make a final return

 

 4  within 15 days after the date of selling or quitting the

 

 5  business. The purchaser or succeeding purchasers, if any, who

 

 6  purchase a going or closed business or its stock of goods shall

 

 7  escrow sufficient money to cover the amount of taxes, interest,

 

 8  and penalties as may be due and unpaid until the former owner

 

 9  produces a receipt from the state treasurer or the state

 

10  treasurer's designated representative showing that the taxes due

 

11  are paid, or a certificate stating that taxes are not due. Upon

 

12  the owner's written waiver of confidentiality, the department may

 

13  release to a purchaser a business's known tax liability for the

 

14  purposes of establishing an escrow account for the payment of

 

15  taxes. If the purchaser or succeeding purchasers of a business or

 

16  its stock of goods fail to comply with the escrow requirements of

 

17  this subsection, the purchaser is personally liable for the

 

18  payment of the taxes, interest, and penalties accrued and unpaid

 

19  by the business of the former owner. The purchaser's or

 

20  succeeding purchaser's personal liability is limited to the fair

 

21  market value of the business less the amount of any proceeds that

 

22  are applied to balances due on secured interests that are

 

23  superior to the lien provided for in section 29(1).

 

24        (2) A deficiency, interest, or penalty shall not be assessed

 

25  after the expiration of 4 years after the date set for the filing

 

26  of the required return or after the date the return was filed,

 

27  whichever is later. The taxpayer shall not claim a refund of any

 


 1  amount paid to the department after the expiration of 4 years

 

 2  after the date set for the filing of the original return. A

 

 3  person who has failed to file a return is liable for all taxes

 

 4  due for the entire period for which the person would be subject

 

 5  to the taxes. If a person subject to tax fraudulently conceals

 

 6  any liability for the tax or a part of the tax, or fails to

 

 7  notify the department of any alteration in or modification of

 

 8  federal tax liability, the department, within 2 years after

 

 9  discovery of the fraud or the failure to notify, shall assess the

 

10  tax with penalties and interest as provided by this act, computed

 

11  from the date on which the tax liability originally accrued. The

 

12  tax, penalties, and interest are due and payable after notice and

 

13  hearing as provided by this act.

 

14        (3) The running of the statute of limitations is suspended

 

15  for the following:

 

16        (a) The period pending a final determination of tax,

 

17  including audit, conference, hearing, and litigation of liability

 

18  for federal income tax or a tax administered by the department

 

19  and for 1 year after that period.

 

20        (b) The period for which the taxpayer and the state

 

21  treasurer have consented to in writing that the period be

 

22  extended.

 

23        (4) The running of the statute of limitations is suspended

 

24  only as to those items that were the subject of the audit,

 

25  conference, hearing, or litigation for federal income tax or a

 

26  tax administered by the department.

 

27        (5) If a corporation, limited liability company, limited

 


 1  liability partnership, partnership, or limited partnership liable

 

 2  for taxes administered under this act fails for any reason to

 

 3  file the required returns or to pay the tax due, any of its

 

 4  officers, members, managers, or partners who the department

 

 5  determines, based on either an audit or an investigation, have

 

 6  control or supervision of, or responsibility for, making the

 

 7  returns or payments is personally liable for the failure. The

 

 8  signature of any corporate officers, members, managers, or

 

 9  partners on returns or negotiable instruments submitted in

 

10  payment of taxes is prima facie evidence of their responsibility

 

11  for making the returns and payments. The dissolution of a

 

12  corporation, limited liability company, limited liability

 

13  partnership, partnership, or limited partnership does not

 

14  discharge an officer's, member's, manager's, or partner's

 

15  liability for a prior failure of the corporation, limited

 

16  liability company, limited liability partnership, partnership, or

 

17  limited partnership to make a return or remit the tax due. The

 

18  sum due for a liability may be assessed and collected under the

 

19  related sections of this act.

 

20        (6) Notwithstanding the provisions of subsection (2), a

 

21  claim for refund based upon the validity of a tax law based on

 

22  the laws or constitution of the United States or the state

 

23  constitution of 1963 shall not be paid unless the claim is filed

 

24  within 90 days after the date set for filing a return.

 

25        (7) Subsection (6) does not apply to a claim for the refund

 

26  of a tax paid for the 1984 tax year or a tax year after the 1984

 

27  tax year on income received as retirement or pension benefits

 


 1  from a public retirement system of the United States government

 

 2  if the claimant waives any claim for the refund of such a tax

 

 3  paid for a tax year before 1984. Claims for refunds to which this

 

 4  subsection applies shall be paid in accordance with the following

 

 5  schedule:

 

 

                 Refunds for              Payable on

                  tax year:                or after:

                 1988 and 1987            July 1, 1990

                 1986                     July 1, 1991

10                  1985                     July 1, 1992

11                  1984                     July 1, 1993

 

 

12        (8) Notwithstanding any other provision in this act, for a

 

13  taxpayer that filed a tax return under former 1975 PA 228 that

 

14  included in the tax return an entity disregarded for federal

 

15  income tax purposes under the internal revenue code, both of the

 

16  following shall apply:

 

17        (a) The department shall not assess the taxpayer an

 

18  additional tax or reduce an overpayment because the taxpayer

 

19  included an entity disregarded for federal income tax purposes on

 

20  its tax return filed under former 1975 PA 228.

 

21        (b) The department shall not require the entity disregarded

 

22  for federal income tax purposes on the taxpayer's tax return

 

23  filed under former 1975 PA 228 to file a separate tax return.

 

24        (9) Notwithstanding any other provision in this act, if a

 

25  taxpayer filed a tax return under former 1975 PA 228 that

 

26  included in the tax return an entity disregarded for federal

 


 1  income tax purposes under the internal revenue code, then the

 

 2  taxpayer shall not claim a refund based on the entity disregarded

 

 3  for federal income tax purposes under the internal revenue code

 

 4  filing a separate return as a distinct taxpayer.

 

 5        (10) Notwithstanding any other provision in this act, the

 

 6  department shall not assess a tax or reduce an overpayment, and

 

 7  shall approve a claim for a refund of any tax paid, under former

 

 8  1975 PA 228 and subject to the statute of limitations for an

 

 9  individual, estate, or person organized for estate or gift

 

10  planning purposes for amounts received, income, or gain other

 

11  than those from transactions, activities, and sources in the

 

12  regular course of the person's trade or business. For purposes of

 

13  this subsection, all of the following apply:

 

14        (a) Receipts, income, and gain that are from transactions,

 

15  activities, and sources in the regular course of the person's

 

16  business include, but are not limited to, amounts derived from

 

17  the following:

 

18        (i) Tangible and intangible property if the acquisition,

 

19  rental, lease, management, or disposition of the property

 

20  constitutes integral parts of the person's regular trade or

 

21  business operations.

 

22        (ii) Transactions in the course of the person's trade or

 

23  business from stock and securities of any foreign or domestic

 

24  corporation and dividend and interest income.

 

25        (iii) Isolated sales, leases, assignments, licenses,

 

26  divisions, or other infrequently occurring dispositions,

 

27  transfers, or transactions involving tangible, intangible, or

 


 1  real property if the property is or was used in the person's

 

 2  trade or business operation.

 

 3        (iv) The sale of an interest in a business that constitutes

 

 4  an integral part of the person's regular trade or business.

 

 5        (v) The lease or rental of real property.

 

 6        (b) Receipts, income, and gain that are not from

 

 7  transactions, activities, and sources in the regular course of

 

 8  the person's trade or business include, but are not limited to,

 

 9  amounts derived from the following:

 

10        (i) Investment activity, including interest, dividends,

 

11  royalties, and gains from an investment portfolio or retirement

 

12  account, if the investment activity is not part of the person's

 

13  trade or business.

 

14        (ii) The disposition of tangible, intangible, or real

 

15  property held for personal use and enjoyment, such as a personal

 

16  residence or personal assets.

 

17        (11) Notwithstanding any other provision in this act, the

 

18  department shall not assess a tax or reduce an overpayment, and

 

19  shall approve a claim for a refund for any tax paid, under former

 

20  1975 PA 228 and subject to the statute of limitations for

 

21  receipts, income, or gain derived from investment activity other

 

22  than receipts, income, or gain from transactions, activities, and

 

23  sources in the regular course of the person's trade or business

 

24  by a person that is organized exclusively to conduct investment

 

25  activity and that does not conduct investment activity for any

 

26  person other than an individual or a person related to that

 

27  individual or by a common trust fund established under the

 


House Bill No. 5543 (H-2) as amended May 29, 2012

 

 1  collective investment funds act, 1941 PA 174, MCL 555.101 to

 

 2  555.113. For purposes of this subsection, a person is related to

 

 3  an individual if that person is a spouse, brother or sister,

 

 4  whether of the whole or half blood or by adoption, ancestor,

 

 5  lineal descendant of that individual or related person, or a

 

 6  trust benefiting that individual or 1 more persons related to

 

 7  that individual.

 

 8        (12) The filing of a return includes the filing of a

 

 9  combined, consolidated, [OR COMPOSITE            ] return whether

 

10  or not any tax was paid and whether or not the taxpayer reported

 

11  any amount in the tax line including zero.

 

12        Enacting section 1. Section 27a(12) of 1941 PA 122, MCL

 

13  205.27a, as added by this amendatory act, is retroactive and is

 

14  effective for all tax years that are open under the statute of

 

15  limitations provided in section 27a of 1941 PA 122, MCL 205.27a,

 

16  for all matters regarding the filing of a return under this

 

17  section. However, this amendatory act is not intended to affect a

 

18  refund required by a final order of a court of competent

 

19  jurisdiction for which all rights of appeal have been exhausted

 

20  or have expired before [May 1, 2012].