SB-0064, As Passed Senate, May 22, 2013

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SENATE BILL No. 64

 

 

January 23, 2013, Introduced by Senator BRANDENBURG and referred to the Committee on Finance.

 

 

 

      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

 

 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

 

 2  business liable for taxes administered under this act collects a

 

 3  tax from another person but fails, for any reason after

 

 4  assessment, to file the required returns or to pay the collected

 

 5  tax due to this state, any of its officers, members, managers of

 

 6  a manager-managed limited liability company, or partners who the

 

 7  department determines, based on either an audit or an

 

 8  investigation, have control or supervision of, or responsibility

 

 9  for, making the returns or payments was the responsible person is

 

10  personally liable for the failure to this state for the amount of

 

11  taxes collected and unpaid. The signature of any corporate

 

12  officers, members, managers, or partners on returns or negotiable

 

13  instruments submitted in payment of taxes is prima facie evidence

 

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

 

15  dissolution of a corporation, limited liability company, limited

 

16  liability partnership, partnership, or limited partnership does

 

17  not discharge an officer's, member's, manager's, or partner's

 

18  liability for a prior failure of the corporation, limited

 

19  liability company, limited liability partnership, partnership, or

 

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

 

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

 

22  related sections of this act. The department may not assess a

 

23  responsible person under this section more than 4 years after the

 

24  date of the assessment issued to the person's business. If a

 

25  responsible person under this subsection and a purchaser under

 

26  subsection (1) are both liable for the tax assessed to the

 

27  business, the department shall first assess the purchaser liable

 


 1  under subsection (1) before assessing the responsible person

 

 2  under this subsection. If there is more than 1 responsible person

 

 3  under this subsection, the department shall not collect more than

 

 4  the amount of the collected tax that was not remitted by the

 

 5  business, and the department shall report all payments of the

 

 6  collected tax made by any responsible person or purchaser on the

 

 7  monthly billing statement issued to each responsible person and

 

 8  purchaser and shall correct the total amount of unpaid collected

 

 9  tax that remains due and owing. At any conference, contested case

 

10  hearing, or trial, the department has the burden to first produce

 

11  prima facie evidence or establish a prima facie case that a

 

12  person is a responsible person under this subsection and that the

 

13  department provided notice of the assessment under sections 8 and

 

14  28(1)(b) to the business and to the responsible person assessed

 

15  under this subsection. A responsible person may challenge the

 

16  validity of an assessment to the same extent that the business

 

17  could have challenged that assessment under sections 21 and 22

 

18  when originally issued.

 

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

 

20  request of a responsible person assessed under subsection (5),

 

21  the department shall disclose all of the following:

 

22        (a) The name of any other person determined to be liable

 

23  under subsection (5) and the name of any purchaser determined to

 

24  be liable under subsection (1), the description of its collection

 

25  activities attempted against each responsible person and

 

26  purchaser and the assessments issued to each responsible person

 

27  and purchaser.

 


 1        (b) All background file documents considered in the

 

 2  department's audit or investigation, including all tax returns,

 

 3  negotiable instruments, and correspondence made by the business

 

 4  and assessments issued to the business for the same taxes and

 

 5  periods assessed to the responsible person under subsection (5),

 

 6  and any other documents that the tribunal or court determines are

 

 7  necessary for a fair adjudication of a person's liability under

 

 8  subsection (5).

 

 9        (7) If more than 1 responsible person under subsection (5)

 

10  is liable for the tax assessed to the business, each responsible

 

11  person shall be entitled to the following remedies:

 

12        (a) Following an informal conference requested by the

 

13  responsible person under section 21, the department shall, based

 

14  on the information available, determine and apportion liability

 

15  to an amount equal to the responsible person's proportionate

 

16  share of the tax assessed.

 

17        (b) In a proceeding in which the responsible person's

 

18  liability is to be adjudicated, the tribunal or court shall limit

 

19  the amount of taxes assessed to the responsible person to an

 

20  amount equal to the person's proportionate share of the tax

 

21  assessed.

 

22        (c) In a separate proceeding in circuit court, the

 

23  responsible person may recover from other persons, whether or not

 

24  those persons were also assessed under subsection (5), an amount

 

25  equal to the excess of the amount paid by the person over the

 

26  person's proportionate share of the tax assessed.

 

27        (8) (6) Notwithstanding the provisions of subsection (2), a

 


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

 

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

 

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

 

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

 

 5        (9) (7) Subsection (6) (8) does not apply to a claim for the

 

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

 

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

 

 8  benefits from a public retirement system of the United States

 

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

 

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

 

11  which this subsection applies shall be paid in accordance with

 

12  the following schedule:

 

 

13

 

Refunds for

Payable on

14

 

 tax year:

 or after:

15

 

1988 and 1987

July 1, 1990

16

 

1986

July 1, 1991

17

 

1985

July 1, 1992

18

 

1984

July 1, 1993

 

 

19        (10) (8) Notwithstanding any other provision in this act,

 

20  for a taxpayer that filed a tax return under former 1975 PA 228

 

21  that included in the tax return an entity disregarded for federal

 

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

 

23  following shall apply:

 

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

 

25  additional tax or reduce an overpayment because the taxpayer

 

26  included an entity disregarded for federal income tax purposes on

 


 1  its tax return filed under former 1975 PA 228.

 

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

 

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

 

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

 

 5        (11) (9) Notwithstanding any other provision in this act, if

 

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

 

 7  included in the tax return an entity disregarded for federal

 

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

 

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

 

10  for federal income tax purposes under the internal revenue code

 

11  filing a separate return as a distinct taxpayer.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

20  this subsection, all of the following apply:

 

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

 

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

 

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

 

24  the following:

 

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

 

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

 

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

 


 1  business operations.

 

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

 

 3  business from stock and securities of any foreign or domestic

 

 4  corporation and dividend and interest income.

 

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

 

 6  divisions, or other infrequently occurring dispositions,

 

 7  transfers, or transactions involving tangible, intangible, or

 

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

 

 9  trade or business operation.

 

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

 

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

 

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

 

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

 

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

 

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

 

16  amounts derived from the following:

 

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

 

18  royalties, and gains from an investment portfolio or retirement

 

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

 

20  trade or business.

 

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

 

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

 

23  residence or personal assets.

 

24        (13) (11) Notwithstanding any other provision in this act,

 

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

 

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

 

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

 


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

 

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

 

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

 

 4  by a person that is organized exclusively to conduct investment

 

 5  activity and that does not conduct investment activity for any

 

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

 

 7  individual or by a common trust fund established under the

 

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

 

 9  555.113. For purposes of this subsection, a person is related to

 

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

 

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

 

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

 

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

 

14  that individual.

 

15        (14) (12) The filing of a return includes the filing of a

 

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

 

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

 

18  in the tax line including zero.

 

19        (15) As used in subsections (5), (6), and (7):

 

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

 

21  company, limited liability partnership, partnership, or limited

 

22  partnership.

 

23        (b) "Responsible person" means the person legally designated

 

24  or appointed for the business as an officer, member, manager of a

 

25  manager-managed limited liability company, or partner during the

 

26  time period of default by the business and that controlled or

 

27  supervised the collection, accounting, or filing of tax returns

 


 1  for the collected taxes during the time period of default and

 

 2  willfully failed to pay the collected taxes for the business. The

 

 3  signature of any corporate officers, members, managers of

 

 4  manager-managed limited liability companies, or partners of the

 

 5  business on returns or negotiable instruments submitted in

 

 6  payment of the collected taxes during the time period of default

 

 7  is prima facie evidence of their responsibility for making the

 

 8  returns and payments, except that a signature on an installment

 

 9  agreement, on a collection statement, or on an amended return

 

10  prepared after the period of default shall not be used as

 

11  evidence of their responsibility for making the returns and

 

12  payments during the time period of default by the business.

 

13        (c) "Time period of default" means the time period on which

 

14  date the return was due to be filed and the collected tax was due

 

15  to be paid to this state.