SB-0064, As Passed House, December 12, 2013

 

 

 

 

 

 

 

 

 

 

 

HOUSE SUBSTITUTE FOR

 

SENATE BILL NO. 64

 

 

 

 

 

 

 

 

 

 

 

      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 2012 PA 211.

 

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

 

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

 


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

 

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

 

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

 

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

 

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

 

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

 

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

 

 8  produces a receipt from the state treasurer or the state

 

 9  treasurer's designated representative showing that the taxes due

 

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

 

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

 

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

 

13  purposes of establishing an escrow account for the payment of

 

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

 

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

 

16  this subsection, the purchaser is personally liable for the

 

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

 

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

 

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

 

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

 

21  are applied to balances due on secured interests that are

 

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

 

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

 

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

 

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

 

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

 

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

 


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

 

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

 

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

 

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

 

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

 

 6  notify the department of any alteration in or modification of

 

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

 

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

 

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

 

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

 

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

 

12  hearing as provided by this act.

 

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

 

14  for the following:

 

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

 

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

 

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

 

18  and for 1 year after that period.

 

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

 

20  treasurer have consented to in writing that the period be

 

21  extended.

 

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

 

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

 

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

 

25  tax administered by the department.

 

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

 

27  liability partnership, partnership, or limited partnership

 


Senate Bill No. 64 (H-2) as amended December 12, 2013

 1  business liable for [            taxes administered under this act

 

 2                             ] fails, for any reason after

 

 3  assessment, to file the required returns or to pay the tax due ,

 

 4  any of its officers, members, managers of a manager-managed

 

 5  limited liability company, or partners who the department

 

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

 

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

 

 8  returns or payments is a responsible person is personally liable

 

 9  for the failure [For the taxes described in subsection (14)]. The

    signature of any corporate officers,

 

10  members, managers, or partners on returns or negotiable

 

11  instruments submitted in payment of taxes is prima facie evidence

 

12  of their responsibility for making the returns and payments. The

 

13  dissolution of a corporation, limited liability company, limited

 

14  liability partnership, partnership, or limited partnership

 

15  business does not discharge an officer's, member's, manager's, or

 

16  partner's a responsible person's liability for a prior failure of

 

17  the corporation, limited liability company, limited liability

 

18  partnership, partnership, or limited partnership to make business

 

19  to file a return or remit pay the tax due. The sum due for a

 

20  liability may be assessed and collected under the related

 

21  sections of this act. The department shall provide a responsible

 

22  person assessed under this section with notice of any amount

 

23  collected by the department from any other responsible person

 

24  determined to be liable under this subsection or purchaser

 

25  determined to be liable under subsection (1) that is attributable

 

26  to the assessment. The department shall not assess a responsible

 

27  person under this section more than 4 years after the date of the

 


 1  assessment issued to the business. A responsible person may

 

 2  challenge the validity of an assessment to the same extent that

 

 3  the business could have challenged that assessment under sections

 

 4  21 and 22 when originally issued. The department has the burden

 

 5  to first produce prima facie evidence or establish a prima facie

 

 6  case that the person is the responsible person under this

 

 7  subsection. In a separate proceeding before the circuit court, a

 

 8  responsible person found to be liable for the assessment under

 

 9  this section may recover from other persons an amount equal to

 

10  the assessment or portion of the assessment based on that

 

11  person's proportionate liability for the assessment as determined

 

12  in that proceeding. Before assessing a responsible person as

 

13  liable under this subsection for the tax assessed to the

 

14  business, the department shall first assess a purchaser or

 

15  succeeding purchaser of the business personally liable under

 

16  subsection (1) if the department has information that clearly

 

17  identifies a purchaser or succeeding purchaser under subsection

 

18  (1) and establishes that the assessment of the purchaser or

 

19  succeeding purchaser would permit the department to collect the

 

20  entire amount of the tax assessment of the business. The

 

21  department may assess a responsible person under this subsection

 

22  notwithstanding the liability of a purchaser or succeeding

 

23  purchaser under subsection (1) if the purchaser or succeeding

 

24  purchaser fails to pay the assessment.

 

25        (6) Notwithstanding any other provision of this act, upon

 

26  request of a responsible person who was issued an intent to

 

27  assess by the department under section 21 for liability under

 


 1  subsection (5), the department shall disclose any documents

 

 2  considered in the department's audit or investigation in

 

 3  determining that the person is a responsible person and is

 

 4  personally liable for the assessment and any other documents that

 

 5  the tribunal or court determines are necessary for a fair

 

 6  adjudication of a person's liability under subsection (5).

 

 7        (7) (6) Notwithstanding the provisions of subsection (2), a

 

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

 

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

 

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

 

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

 

12        (8) (7) Subsection (6) (7) does not apply to a claim for the

 

13  refund of a tax paid for the 1984 tax year or a tax year after

 

14  the 1984 tax year on income received as retirement or pension

 

15  benefits from a public retirement system of the United States

 

16  government if the claimant waives any claim for the refund of

 

17  such a tax paid for a tax year before 1984. Claims for refunds to

 

18  which this subsection applies shall be paid in accordance with

 

19  the following schedule:

 

 

20                  Refunds for              Payable on

21                   tax year:                or after:

22                  1988 and 1987            July 1, 1990

23                  1986                     July 1, 1991

24                  1985                     July 1, 1992

25                  1984                     July 1, 1993

 

 

26        (9) (8) Notwithstanding any other provision in this act, for

 


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

 

 2  included in the tax return an entity disregarded for federal

 

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

 

 4  following shall apply:

 

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

 

 6  additional tax or reduce an overpayment because the taxpayer

 

 7  included an entity disregarded for federal income tax purposes on

 

 8  its tax return filed under former 1975 PA 228.

 

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

 

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

 

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

 

12        (10) (9) Notwithstanding any other provision in this act, if

 

13  a taxpayer 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, then the

 

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

 

17  for federal income tax purposes under the internal revenue code

 

18  filing a separate return as a distinct taxpayer.

 

19        (11) (10) Notwithstanding any other provision in this act,

 

20  the department shall not assess a tax or reduce an overpayment,

 

21  and shall approve a claim for a refund of any tax paid, under

 

22  former 1975 PA 228 and subject to the statute of limitations for

 

23  an individual, estate, or person organized for estate or gift

 

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

 

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

 

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

 

27  this subsection, all of the following apply:

 


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

 

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

 

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

 

 4  the following:

 

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

 

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

 

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

 

 8  business operations.

 

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

 

10  business from stock and securities of any foreign or domestic

 

11  corporation and dividend and interest income.

 

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

 

13  divisions, or other infrequently occurring dispositions,

 

14  transfers, or transactions involving tangible, intangible, or

 

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

 

16  trade or business operation.

 

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

 

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

 

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

 

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

 

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

 

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

 

23  amounts derived from the following:

 

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

 

25  royalties, and gains from an investment portfolio or retirement

 

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

 

27  trade or business.

 


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

 

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

 

 3  residence or personal assets.

 

 4        (12) (11) Notwithstanding any other provision in this act,

 

 5  the department shall not assess a tax or reduce an overpayment,

 

 6  and shall approve a claim for a refund for any tax paid, under

 

 7  former 1975 PA 228 and subject to the statute of limitations for

 

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

 

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

 

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

 

11  by a person that is organized exclusively to conduct investment

 

12  activity and that does not conduct investment activity for any

 

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

 

14  individual or by a common trust fund established under the

 

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

 

16  555.113. For purposes of this subsection, a person is related to

 

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

 

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

 

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

 

20  trust benefiting that individual or 1 or more persons related to

 

21  that individual.

 

22        (13) (12) The filing of a return includes the filing of a

 

23  combined, consolidated, or composite return whether or not any

 

24  tax was paid and whether or not the taxpayer reported any amount

 

25  in the tax line including zero.

 

26        (14) Subsection (5) applies to all of the following taxes

 

27  administered under this act:

 


Senate Bill No. 64 (H-2) as amended December 12, 2013

 1        [(a) For assessments issued to responsible persons before January

 

 2  1, 2014, taxes administered under this act.

 

 3        (b) For assessments issued to responsible persons after December

 

 4   31, 2013, all of the following:

 

 5        (i) Taxes levied under the general sales tax act, 1933 PA 167, MCL

 

 6   205.51 to 205.78.

 

 7        (ii) Taxes levied under the use tax act, 1937 PA 94, MCL 205.91 to

 

 8  205.111, that are required to be collected or were collected from or on

 

 9   behalf of a third person for remittance to the state.

 

10        (iii) Taxes levied under the tobacco products tax act, 1993 PA 327,

 

11  MCL 205.421 to 205.436.

 

12        (iv) Taxes levied under the motor fuel tax act, 2000 PA 403, MCL

 

13  207.1001 to 207.1170.

 

14        (v) Taxes levied under the motor carrier fuel tax act, 1980 PA 119,

 

15  MCL 207.211 to 207.234.

 

16        (vi) Withholding and remittance of income taxes levied under the

 

17  income tax act of 1967, 1967 PA 281, MCL 206.1 to 206.713.

          (vii) Any other tax administered under this act that a person is

    required to collect from or on behalf of a third person, to truthfully

    account for and to pay over to this state.]

 

18        (15) As used in subsections (5) and (6):

 

19        (a) "Business" means a corporation, limited liability

 

20  company, limited liability partnership, partnership, or limited

 

21  partnership.

 

22        (b) "Responsible person" means an officer, member, manager

 

23  of a manager-managed limited liability company, or partner for

 

24  the business who controlled, supervised, or was responsible for

 

25  the filing of returns or payment of taxes administered under this

 

26  act during the time period of default and who, during the time

 

27  period of default, willfully failed to file a return or pay the

 


Senate Bill No. 64 (H-2) as amended December 12, 2013

 1  tax due for any of the taxes described in subsection (14). The

 

 2  signature[, including electronic signature,] of any officer, member,

    manager of a manager-managed

 

 3  limited liability company, or partner on returns or negotiable

 

 4  instruments submitted in payment of taxes of the business during

 

 5  the time period of default, is prima facie evidence that the

 

 6  person is a responsible person, except that a signature on a

 

 7  document prepared after the period of default shall not be used

 

 8  as [PRIMA FACIE] evidence of his or her responsibility for making the

    returns

 

 9  and payments during the time period of default by the business.

 

10        (c) "Time period of default" means the tax period for which

 

11  the business failed to file the return or pay the tax due under

 

12  subsection (5) and through the date upon which penalty or

 

13  interest accrues for the tax period.

 

14        (d) "Willful" or "willfully" means the person knew or had

 

15  reason to know of the obligation to file a return or pay the tax,

 

16  but intentionally or recklessly failed to file the return or pay

 

17  the tax.

 

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