August 17, 2005, Introduced by Rep. Condino and referred to the Committee on Tax Policy.
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, 24, and 31 (MCL 205.3, 205.4,
205.19, 205.24, and 205.31), section 3 as amended by 2003 PA 92,
sections 4, 19, and 31 as amended by 2002 PA 657, and section 24 as
amended by 2003 PA 201, and by adding section 30d.
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.
(c) The department may consult with the governor and the
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, 2005, 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 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.
(c) The notices of intent to assess issued after September 30,
2005, 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, 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 September 30, 2005, 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, 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, to a maximum of 50% of the tax.
(b)
For notices of intent to assess issued after February 28,
2003,
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
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.
Sec. 30d. (1) Notwithstanding its form of business
organization or the existence of an agency relationship or lack of
an agency relationship, a person subject to a tax administered
under this act and an out-of-state affiliate of that person that
meet 1 or more of the following criteria are jointly and severally
liable for any tax administered under this act:
(a) The person and the out-of-state affiliate of that person
use an identical or substantially similar name, trade name,
trademark, or goodwill to develop, promote, or maintain sales.
(b) The person and the out-of-state affiliate of that person
pay for each other's services in whole or in part contingent upon
the volume or value of sales.
(c) The person and the out-of-state affiliate of that person
share or exchange value in the operation of their businesses.
(d) The person and the out-of-state affiliate of that person
substantially coordinate common business plans.
(2) Notwithstanding its form of business organization or the
existence of an agency relationship or lack of an agency
relationship, an out-of-state affiliate of a person subject to a
tax administered under this act has substantial nexus with this
state for any tax administered under this act if the out-of-state
affiliate meets 1 or more of the criteria in subsection (1).
(3) As used in this section, "out-of-state affiliate of a
person subject to a tax administered under this act" means any out-
of-state person who directly, indirectly, or constructively owns or
controls, is owned or controlled by, or is under common ownership
or control with a person subject to a tax administered under this
act.
(4) Nothing in this section shall be interpreted to limit the
taxing jurisdiction of this state under the constitution of the
United States.
(5) This section applies for taxes collected under the use tax
act, 1937 PA 94, MCL 205.91 to 205.111, beginning October 1, 2005.
(6) This section applies for tax years that begin on or after
January 1, 2006 for taxes administered under this act, other than
taxes collected under the use tax act, 1937 PA 94, MCL 205.91 to
205.111.
Sec. 31. (1) If a taxpayer does not satisfy a tax liability or
makes an excessive claim for a refund as a result of reliance on
erroneous current written information provided by the department,
the state treasurer shall waive all criminal and civil penalties
provided by law for failing or refusing to file a return, for
failing to pay a tax, or for making an excessive claim for a refund
for a tax administered by the department of treasury pursuant to
this act if the taxpayer makes a written request for a waiver,
files a return or an amended return, and makes full payment of the
tax and interest.
(2)
For a period to be designated by the state treasurer of
not
less than 30 days and not more than 60 days, and ending before
September
30, 2002 Beginning January
1, 2006 and through February
28, 2006, there shall be an amnesty period during which the state
treasurer shall waive all criminal and civil penalties provided by
law for failing or refusing to file a return, for failing to pay a
tax, or for making an excessive claim for a refund for a tax
administered
by the revenue division of the department of
treasury under this act if the taxpayer makes a written request for
a waiver, files a return or an amended return, and makes full
payment in either a lump sum or installments as provided under
subsection
(9) (8), of the tax and interest due for any prior tax
year.
(3) This section applies to the nonreporting and
underreporting of tax liabilities and to the nonpayment of taxes
previously determined to be due, but only to the extent of the
penalties attributable to the taxes that were previously due and
that are paid during the amnesty period provided for in subsection
(2).
(4) The department shall administer this section.
(5)
Subsection (2) does not apply to taxes due after June 1,
2001
September 30, 2005.
(6)
There is appropriated from the revenues generated by taxes
paid
under subsection (2) the sum of $1,500,000.00 to the
department
of treasury for administration of the amnesty program
created
by the amendatory act that added this subsection. This
appropriation
is allotted for expenditure on and after October 1,
2001.
Only general purpose revenue generated by the amendatory act
that
added this subsection may be used to finance this
appropriation.
(6) (7)
The state treasurer shall not waive criminal and
civil penalties applicable to a tax under subsection (2) if 1 or
more of the following circumstances apply:
(a) If the taxpayer is eligible to enter into a voluntary
disclosure agreement under section 30c for that tax.
(b) If the tax is attributable to income derived from a
criminal act, if the taxpayer is under criminal investigation or
involved in a civil action or criminal prosecution for that tax, or
if the taxpayer has been convicted of a felony under this act or
the internal revenue code of 1986.
(7) (8)
The department shall provide reasonable notice to
taxpayers that may be eligible for the amnesty program at least 30
days before the start of the designated amnesty period.
Notification shall include, but is not limited to, a description of
the amnesty program on appropriate tax instruction forms and on the
internet.
(8) (9)
Under the amnesty program described in subsection
(2), a taxpayer may pay tax and interest due in installments if the
taxpayer meets 1 of the following:
(a) The taxpayer is an individual and submits the greater of
$10,000.00 or 50% of the tax and interest due with the request for
waiver under subsection (2) and pays the remaining tax and interest
due in 2 equal installments, the first installment due no later
than
August 15, 2002 February
15, 2006 and the second installment
due
no later than September 15, 2002 March 15, 2006.
(b) A taxpayer that is not an individual submits the greater
of $100,000.00 or 50% of the tax and interest due with the request
for waiver under subsection (2) and pays the remaining tax and
interest due in 2 equal installments, the first installment due no
later
than August 15, 2002 February
15, 2006 and the second
installment
due no later than September 15, 2002 March 15, 2006.