HOUSE BILL No. 5109 September 30, 1997, Introduced by Rep. Profit and referred to the Committee on Tax Policy. A bill to amend 1967 PA 281, entitled "Income tax act of 1967," by amending sections 351 and 365 (MCL 206.351 and 206.365), sec- tion 351 as amended by 1996 PA 264 and section 365 as amended by 1996 PA 448. THE PEOPLE OF THE STATE OF MICHIGAN ENACT: 1 Sec. 351. (1) Every employer in this state required under 2 the provisions of the internal revenue code to withhold a tax on 3 the compensation of an individual, except as otherwise provided, 4 shall deduct and withhold a tax in an amount computed by apply- 5 ing, except as provided by subsection (7), the rate prescribed in 6 section 51 to the remainder of the compensation after deducting 7therefromFROM THAT COMPENSATION the same proportion of the 8 total amount of personal and dependency exemptions of the 9 individual allowed under this act that the period of time covered 04310'97 RJA 2 1 by the compensation is of 1 year. The commissioner may prescribe 2 withholding tables that may be used by employers to compute the 3 amount of tax required to be withheld. 4 (2) The taxes withheld under this section shall accrue to 5 the state on the last day of the month in which the taxes are 6 withheld but shall be returned and paid to the department by the 7 employer within 15 days after the end of any month or as provided 8 in section 355, except prior to July 1, 1993, taxes deposited 9 pursuant to section 19(2) ofAct No. 122 of the Public Acts of101941, being section 205.19 of the Michigan Compiled Laws1941 PA 11 122, MCL 205.19, are accrued on the last day of the filing 12 period. 13 (3) An employer required by this section to deduct and with- 14 hold taxes on compensation holds the amount of tax withheld as a 15 trustee for the state, is liable for the payment of the tax to 16 the state, and is not liable to any individual for the amount of 17 the payment. 18 (4) An employer in this state is not required to deduct and 19 withhold a tax on the compensation paid to a nonresident individ- 20 ual employee, who, under section 256, may claim a tax credit 21 equal to or in excess of the tax estimated to be due for the tax 22 year or is exempted from liability for the tax imposed by this 23 act. In each tax year, the nonresident individual shall furnish 24 to the employer, on a form approved by the department, a verified 25 statement of nonresidence. 26 (5) If an employer is a corporation and does not for any 27 reason file the returns or pay the tax due under this act, any of 04310'97 3 1 the officers of the corporation having control, supervision of, 2 or charged with the responsibility for making the returns or pay- 3 ments shall be personally liable for a failure to file or pay. 4 The dissolution of a corporation does not discharge a corporate 5 officer's liability for the failure of the corporation to file a 6 return or remit the tax that was due before dissolution. The sum 7 due for any liability imposed upon a corporate officer under this 8 subsection may be assessed and collected as provided in sections 9 23 and 24 ofAct No. 122 of the Public Acts of 1941, being sec-10tions 205.23 and 205.24 of the Michigan Compiled Laws1941 PA 11 122, MCL 205.23 AND 205.24. 12 (6) An employer required to withhold a tax under this act, 13 by the fifteenth day of the following month, shall provide the 14 department with a copy of any exemption certificate on which the 15 employee claims more than 9 personal or dependency exemptions, 16 claims a status that exempts the employee from withholding under 17 this section, or elects to pay the tax imposed by this act calcu- 18 lated under section 51a. 19 (7) An employer shall deduct and withhold the tax imposed by 20 this act calculated under section 51a for a resident who files an 21 exemption certificate under subsection (6) to elect to pay the 22 tax calculated under section 51a. 23 (8) The exemption certificate required by this section shall 24 include the following statement, "Electing to file using the 25 no-form option may not be for everyone who is eligible. If a 26 taxpayer chooses the no-form option, he or she may not be 27 eligible for some of the credits allowed under this act including 04310'97 4 1 the property tax credit allowed under sections 520 and 522, the 2 tuition tax credit allowed under section 274, and the city income 3 tax credit allowed under section 257.". 4 (9) AN EMPLOYER IN THIS STATE IS NOT REQUIRED TO DEDUCT AND 5 WITHHOLD A TAX ON COMPENSATION PAID TO A PERSON WHO IS OLDER THAN 6 55 YEARS OF AGE IF THAT PERSON HAS INDICATED ON HIS OR HER WITH- 7 HOLDING CERTIFICATE THAT HE OR SHE IS OLDER THAN 55 YEARS OF AGE 8 AND DESIRES THAT WITHHOLDING NOT BE DEDUCTED FROM HIS OR HER 9 COMPENSATION. EACH YEAR THAT PERSON SHALL FURNISH TO HIS OR HER 10 EMPLOYER OR OTHER SOURCE OF TAXABLE INCOME, ON A FORM APPROVED BY 11 THE DEPARTMENT, A VERIFIED STATEMENT THAT HE OR SHE ELECTS TO 12 HAVE NO WITHHOLDING DEDUCTED FROM ANY COMPENSATION. 13 Sec. 365. (1) Every employer required by this act to deduct 14 and withhold taxes for a tax year on compensation shall furnish 15 to each employee on or before January 31 of the succeeding year a 16 statement in duplicate of the total compensation paid during the 17 tax year and the amount deducted or withheld, or, if employment 18 is terminated before the close of a calendar year by an employer 19 who goes out of business or permanently ceases to be an employer 20 in this state, within 30 days after the last payment of 21 compensation. A duplicate of a statement made pursuant to this 22 section and an annual reconciliation return, MI-W3, shall be 23 filed with the department by February 28 of the succeeding year 24 except that an employer who goes out of business or permanently 25 ceases to be an employer shall file the statement and the annual 26 reconciliation return within 30 days after going out of business 27 or permanently ceasing to be an employer. 04310'97 5 1 (2) Every employer required by this act to deduct or 2 withhold taxes from compensation shall make a return or report in 3 form and content and at times as prescribed by the department. 4 (3) Every employee shall furnish to his or her employer 5 information required for the employer to make an accurate 6 withholding. An employee shall file with his or her employer 7 revised information within 10 days after a decrease in the number 8 of exemptions or a change in status from a nonresident to a 9 resident. An employee shall file revised information with his or 10 her employer within 10 days after the employee completes the res- 11 idency requirements under section 31(11)(d), and when a change of 12 status occurs from resident of a renaissance zone to nonresident 13 of a renaissance zone. Within 10 days after an employer receives 14 revised information from an employee who completes the residency 15 requirements under section 31(11)(d), the employer shall forward 16 a copy of that revised information to the department. The 17 employee may file revised information when the number of exemp- 18 tions increases or when a change in status occurs from that of a 19 resident of this state to a nonresident of this state. Revised 20 information shall not be given retroactive effect for withholding 21 purposes. An employer shall rely on this information for with- 22 holding purposes unless directed by the department to withhold on 23 some other basis. If an employee fails or refuses to furnish 24 information, the employer shall withhold the full rate of tax 25 from the employee's total compensation. As used in this subsec- 26 tion, "renaissance zone" means a renaissance zone designated 27 pursuant to the Michigan renaissance zone act,Act No. 376 of04310'97 6 1the Public Acts of 1996, being sections 125.2681 to 125.2696 of2the Michigan Compiled Laws1996 PA 376, MCL 125.2681 TO 3 125.2696. 4 (4) AN EMPLOYER OR OTHER PERSON NOT REQUIRED TO DEDUCT AND 5 WITHHOLD TAXES FOR AN INDIVIDUAL WHO QUALIFIES FOR THE EXEMPTION 6 FROM WITHHOLDING UNDER SECTION 351(9) FOR A TAX YEAR SHALL FUR- 7 NISH THAT INDIVIDUAL ON OR BEFORE JANUARY 31 OF THE SUCCEEDING 8 YEAR A STATEMENT IN DUPLICATE OF THE TOTAL COMPENSATION PAID TO 9 THAT INDIVIDUAL DURING THE TAX YEAR. 04310'97 Final page. RJA