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HB-5095, As Passed Senate, November 10, 2005

HOUSE SUBSTITUTE FOR SENATE SUBSTITUTE FOR

HOUSE BILL NO. 5095

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 the state; to prescribe certain powers

and duties of the state treasurer; 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 3, 4, 19, and 24 (MCL 205.3, 205.4, 205.19,

and 205.24), section 3 as amended by 2003 PA 92, sections 4 and 19

as amended by 2002 PA 657, and section 24 as amended by 2003 PA

201.

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

Sec. 3. The department shall have all the powers and perform

the duties formerly vested in a department, board, commission, or

other agency, in connection with taxes due to or claimed by this

state and in connection with unpaid accounts or amounts due to this

state or any of its departments, institutions, or agencies that may

be made payable to or collectible by the department created by this

act. The department has the power and authority incidental to the

performance of the following acts, duties, and services:

(a) The state treasurer or a duly appointed agent of the state

treasurer may examine the books, records, and papers ~~touching~~

concerning the matter at issue of any person or taxpayer subject to

any tax, unpaid account, or amount the collection of which is

charged to the department. The state treasurer or a duly appointed

agent of the state treasurer may issue a subpoena requiring a

person to appear and be examined ~~with reference to~~ concerning a

matter within the scope of the inquiry or investigation being

conducted by the department and to produce any books, records, or

papers. The state treasurer or a duly appointed agent, referee, or

examiner of the state treasurer may administer an oath to a witness

in any matter before the department. The department may invoke the

aid of the circuit court of this state in requiring the attendance

and testimony of witnesses and the ~~producing~~ production of books,

papers, and documents. The circuit court of this state within the

jurisdiction of which an inquiry is carried on, in case of

contumacy or refusal to obey a subpoena, may issue an order

requiring the person to appear before the department and produce

books and papers ~~if so ordered~~ and any evidence ~~touching~~

concerning the matter in question if so ordered, and the failure to

obey the order of the court may be punished by the court as a

contempt. A person shall not be excused from testifying or from

producing any books, papers, records, or memoranda in any

investigation, or upon any hearing when ordered to do so by the

state treasurer, upon the ground that the testimony or evidence,

documentary or otherwise, may tend to incriminate or subject him or

her to a criminal penalty. ~~, however~~ However, a person shall not

be prosecuted or subjected to any criminal penalty for or on

account of any transaction made or ~~thing~~ anything concerning

which he or she may testify or produce evidence, documentary or

otherwise, before the department or its agent. A person testifying

is not exempt from prosecution and punishment for perjury committed

while testifying.

(b) After reasonable notice and public hearing, the department

may promulgate rules consistent with this act in accordance with

the administrative procedures act of 1969, 1969 PA 306, MCL 24.201

to 24.328, necessary to the enforcement of the provisions of tax

and other revenue measures that are administered by the department.

legislature on the subject of taxation, revenue, and the

administration of the laws in relation to taxation and revenue, and

the progress of the work of the department, including the

furnishing of reports, information, and other assistance as the

governor may require.

(d) The department may investigate and study all matters of

taxation and revenue as the basis of recommending to the governor

and the legislature those changes and alterations in the tax laws

of this state ~~, as~~ that in the state treasurer's judgment may

bring about a more adequate and just system of state and local

taxation.

(e) The department may formulate a standard procedure that

requires the departments, commissions, boards, institutions, and

the agencies of this state that collect taxes, fees, or accounts

for this state to report all sums of money due and uncollected and

those uncollected items as prescribed by law and by the state

treasurer. The procedure prescribed in this subdivision shall

include a standard practice for receiving, receipting,

safeguarding, and periodically reporting all state revenue

receipts, whether current, delinquent, penalty, interest, or

otherwise, and the amounts, kinds, and terms of items either

collected, compromised, or still outstanding, to be summarized,

studied, and reported upon as the state treasurer considers

advisable.

(f) The department may periodically issue bulletins that index

and explain current department interpretations of current state tax

laws. Beginning ~~90 days after the effective date of the amendatory~~

~~act that added this sentence~~ October 24, 2003, each bulletin or

letter ruling issued by the department on or after August 18, 2000

shall be published and made available to the public in printed and

electronic formats and, beginning January 1, 2006, on the

department's website. The department may charge a reasonable fee

for subscriptions to this service not to exceed the cost of

printing. The money received from the sale of subscriptions shall

revert to the department and be placed in the taxation manual

revolving fund.

Sec. 4. (1) Not later than 1 year after the effective date of

this section, the department of treasury shall submit rules for a

public hearing pursuant to the administrative procedures act of

1969, 1969 PA 306, MCL 24.201 to 24.328, that provide for all of

the following:

(a) Standards to be followed by department officers and

employees for the fair and courteous treatment of the public, and a

system for monitoring compliance with those standards.

(b) The procedures governing an informal conference held under

section 21. These procedures shall include at least all of the

following:

(i) A method by which the department attempts to schedule the

informal conference at a mutually convenient time and place.

(ii) A requirement that the department include in the notice

for the informal conference the scope and nature of the subject of

the informal conference.

(iii) Authorization for the taxpayer at whose request the

informal conference is being held to make a sound recording of the

informal conference with prior notice to the department and for the

department to do the same with prior notice to the taxpayer.

(2) Not later than 1 year after the effective date of this

section, the department shall develop guidelines to govern

departmental employee responses to inquiries from the public and

standards for tax audit activities. The guidelines shall explicitly

exclude the use of a collection goal or quota for evaluating an

employee. The department shall assemble the guidelines required by

this subsection into an employee handbook. However, the handbook

shall not disclose information or parameters excluded from

disclosure under section 28(1)(f). The department shall distribute

the handbook to all departmental employees involved in the

collection or auditing of taxes and shall make the handbook

available to the public.

(3) The department shall publish a handbook for taxpayers and

tax preparers. The handbook shall be made available on the

department's website and at a reasonable cost, not to exceed the

actual cost of publication, and shall contain all of the following:

(a) The audit and collection procedures used by the

department.

(b) The procedures governing departmental communications with

taxpayers in the audit and collection process.

Sec. 19. (1) All remittances of taxes administered by this act

shall be made to the department payable to the state of Michigan by

bank draft, check, cashier's check, certified check, money order,

cash, or electronic funds transfer. The money received shall be

credited as provided by law. A remittance other than cash or

electronic funds transfer shall not be a final discharge of

liability for the tax assessed and levied until the instrument

remitted has been honored.

(2) For reporting periods beginning after August 31, 1991, a

taxpayer other than a city or a county who paid in the immediately

preceding calendar year an average of $40,000.00 or more per month

in income tax withholding pursuant to the income tax act of 1967,

1967 PA 281, MCL 206.1 to 206.532, shall deposit Michigan income

tax withholding either in the same manner and according to the same

schedule as deposits of federal income tax withholding or in

another manner that has been approved by the department.

(3) For failure to remit a tax administered by this act with a

negotiable remittance, the following penalty may be added in

addition to any other penalties imposed by this act:

(a) For notices of intent to assess issued on or before

February 28, 2003, 25% of the tax due.

(b) ~~For~~ Except as provided in subdivision (c), for notices

of intent to assess issued after February 28, 2003, $50.00.

2003, for income tax withholding under the income tax act of 1967,

1967 PA 281, MCL 206.1 to 206.532, for sale taxes under the general

sales tax act, 1933 PA 167, MCL 205.51 to 205.78, or for use tax

liability of $300.00 or more per year under the use tax act, 1937

PA 94, MCL 205.91 to 205.111, due before October 1, 2005, 25% of

the tax due.

(4) The department may require that all money collected by the

taxpayer for taxes administered by this act that has not been paid

to the department of treasury is public money and the property of

this state, and shall be held in trust in a separate account and

fund for the sole use and benefit of this state until paid over to

the department of treasury.

(5) For tax years after the 1995 tax year for which taxes are

collected under an agreement entered into pursuant to section 9 of

chapter 1 of the city income tax act, 1964 PA 284, MCL 141.509, if

a taxpayer pays, when filing his or her annual return, an amount

less than the sum of the declared tax liability under the city

income tax act, 1964 PA 284, MCL 141.501 to 141.787, and the

declared tax liability under the income tax act of 1967, 1967 PA

281, MCL 206.1 to 206.532, and if there is no indication of the

allocation of payment between the tax liabilities against which the

payment should be applied, the amount paid shall first be applied

against the taxpayer's tax liability under the city income tax act,

1964 PA 284, MCL 141.501 to 141.787, and any remaining amount of

the payment shall be applied to the taxpayer's tax liability under

the income tax act of 1967, 1967 PA 281, MCL 206.1 to 206.532. The

taxpayer's designation of a payee on a payment is not a dispositive

determination of the allocation of that payment under this

subsection.

Sec. 24. (1) If a taxpayer fails or refuses to file a return

or pay a tax administered under this act within the time specified,

the department, as soon as possible, shall assess the tax against

the taxpayer and notify the taxpayer of the amount of the tax. A

liability for a tax administered under this act is subject to the

interest and penalties prescribed in subsections (2) to (5).

(2) Except as provided in subsections (3), (6), and (7), if a

taxpayer fails or refuses to file a return or pay a tax within the

time specified for notices of intent to assess issued on or before

February 28, 2003, a penalty of $10.00 or 5% of the tax, whichever

is greater, shall be added if the failure is for not more than 1

month, with an additional 5% penalty for each additional month or

fraction of a month during which the failure continues or the tax

and penalty is not paid, to a maximum of 50%. Except as provided in

subsections (3), (6), and (7) and as otherwise provided in this

subsection, if a taxpayer fails or refuses to file a return or pay

a tax within the time specified for notices of intent to assess

issued after February 28, 2003, a penalty of 5% of the tax shall be

added if the failure is for not more than 2 months, with an

additional 5% penalty for each additional month or fraction of a

month during which the failure continues or the tax and penalty is

not paid, to a maximum of 25%. Except as provided in subsections

(3), (6), and (7), if a taxpayer fails or refuses to file a return

or pay a tax within the time specified for notices of intent to

assess issued after February 28, 2003, for income tax withholding

under the income tax act of 1967, 1967 PA 281, MCL 206.1 to

206.532, for sale taxes under the general sales tax act, 1933 PA

167, MCL 205.51 to 205.78, or for use tax liability of $300.00 or

more per year under the use tax act, 1937 PA 94, MCL 205.91 to

205.111, due before October 1, 2005, a penalty of $10.00 or 5% of

the tax, whichever is greater, shall be added if the failure is for

not more than 1 month, with an additional 5% penalty for each

additional month or fraction of a month during which the failure

continues or the tax and penalty is not paid, to a maximum of 50%.

In addition to the penalty, interest at the rate provided in

section 23 for deficiencies in tax payments shall be added on the

tax from the time the tax was due, until paid. After June 30, 1994,

the penalty prescribed by this subsection shall not be imposed

until the department submits for public hearing pursuant to the

administrative procedures act of 1969, 1969 PA 306, MCL 24.201 to

24.328, a rule defining what constitutes reasonable cause for

waiver of the penalty under subsection (4), which definition shall

include illustrative examples.

(3) If a person is required to remit tax due pursuant to

section 19(2) and fails or refuses to pay the tax within the time

specified, a penalty of 0.167% of the tax shall be added for each

day during which the failure continues or the tax and penalty are

not paid as follows:

(a) For notices of intent to assess issued on or before

February 28, 2003, or after February 28, 2003 for taxes described

in this subsection that are due before October 1, 2005, to a

maximum of 50% of the tax.

(b) For notices of intent to assess issued after February 28,

2003 for taxes described in this subsection that are due on or

after October 1, 2005, to a maximum of 25% of the tax.

(4) If a return is filed or remittance is paid after the time

specified and it is shown to the satisfaction of the department

that the failure was due to reasonable cause and not to willful

neglect, the state treasurer or an authorized representative of the

state treasurer shall waive the penalty prescribed by subsection

(2).

(5) For failure or refusal to file an information return or

other informational report required by a tax statute, within the

time specified, a penalty of $10.00 per day for each day for each

separate failure or refusal may be added. The total penalty for

House Bill No. 5095 (H-3) as amended November 10, 2005

each separate failure or refusal shall not exceed $400.00.

(6) If a taxpayer fails to pay an estimated tax payment as may

be required by the income tax act of 1967, 1967 PA 281, MCL 206.1

to 206.532, a penalty shall not be imposed if the taxpayer was not

required to make estimated tax payments in the taxpayer's

immediately preceding tax year.

(7) Notwithstanding any other provision of this act, for any

return or tax remittance due on August 15, 2003 that was filed or

remitted not later than August 22, 2003, the department shall waive

all interest and penalty for the failure to file or remit for the

period of August 15, 2003 through August 22, 2003.

Enacting section 1. This amendatory act does not take effect

unless all of the following bills of the 93rd Legislature are

enacted into law:

(a) House Bill No. 4342.

(b) House Bill No. 4972.

(d) House Bill No. 4980.

(e) House Bill No. 5096.

(f) House Bill No. 5097.

(g) House Bill No. 5098.

(h) House Bill No. 5106.

(i) House Bill No. 5107.

(j) House Bill No. 5108.

(k) Senate Bill No. 633.

[(l) Senate Bill No. 634.]