HB-4462, As Passed Senate, December 15, 2015

SENATE SUBSTITUTE FOR

HOUSE BILL NO. 4462

A bill to amend 1964 PA 284, entitled

"City income tax act,"

by amending sections 41, 43, 51, 52, 53, 60, 61, and 82 of chapter

2 (MCL 141.641, 141.643, 141.651, 141.652, 141.653, 141.660,

141.661, and 141.682), sections 41, 43, 60, 61, and 82 as amended

by 1996 PA 478, section 51 as amended by 1982 PA 124, and section

52 as amended by 1996 PA 442, and by adding sections 43a and 50 to

chapter 2; and to repeal acts and parts of acts.

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

CHAPTER 2

Sec. 41. (1) Every corporation doing business in the city and

every other person having income taxable under this ordinance in

any year before the 1997 tax year or in any tax year after the 1996

tax year for which the city has not entered into an agreement with

the department of treasury pursuant to section 9 of chapter 1,

shall make and file with the city an annual return for that year,

on a form furnished or approved by the city, on or before the last

day of the fourth month for the same calendar year, fiscal year, or

other accounting period, that has been accepted by the internal

revenue service for federal income tax purposes for the taxpayer.

For tax years after the 1996 tax year and for which a city has

entered into an agreement pursuant to section 9 of chapter 1, the

annual return required by this subsection shall be filed with the

city or the department as provided by the agreement on or before

the fifteenth day of the fourth month for the same calendar year,

fiscal year, or other accounting period that has been accepted by

the internal revenue service for federal income tax purposes for

the taxpayer.

(2) A ~~husband and wife~~ married couple may file a joint return

and, in such case, the tax liability is joint and several.

Sec. 43. (1) A balance of the tax that is due the city at the

time of filing an annual return shall be paid with the return

unless the balance is less than $1.00, in which case payment is not

required.

(2) If the annual return reflects an overpayment of the tax,

the declaration of the overpayment on the return constitutes a

claim for refund. Subject to subsection (6), if the city or the

department agrees that a claim is valid, the city or the department

shall apply the overpayment first to a delinquent tax liability

under this ordinance of the taxpayer to the city. The city shall

apply any remaining overpayment against a subsequent liability

under this ordinance or, at the election of the taxpayer and if

indicated on the return, shall refund the overpayment. However, the

city shall not pay a refund of less than $1.00.

(3) If Except as otherwise provided under section 43a, if a

valid claim for a refund of taxes, except a refund under section

61, due for the taxable year 1992 or a taxable year after 1992 is

filed, interest at the rate established in section 30(3) of ~~Act No.~~

~~122 of the Public Acts of 1941, being section 205.30 of the~~

~~Michigan Compiled Laws,~~ 1941 PA 122, MCL 205.30, shall be added to

the refund beginning 45 days after the claim is filed or 45 days

after the date established under this ordinance for the filing of

the return, whichever is later. For tax years after the 1996 tax

year and for which a city has entered into an agreement pursuant to

section 9 of chapter 1, a claim for refund shall be paid from money

in the city income tax trust fund.

(4) For tax years after the 1995 tax year and for which a city

has entered into an agreement pursuant to section 9 of chapter 1,

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

less than the sum of the declared tax liability under this act, and

the declared tax liability under the income tax act of 1967, ~~Act~~

~~No. 281 of the Public Acts of 1967, being sections 206.1 to 206.532~~

~~of the Michigan Compiled Laws,~~ 1967 PA 281, MCL 206.1 to 206.713,

and 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 this act and any remaining amount of payment shall

be applied to the taxpayer's tax liability under ~~Act No. 281 of the~~

~~Public Acts of 1967.~~ the income tax act of 1967, 1967 PA 281, MCL

206.1 to 206.713. The taxpayer's designation of a payee on a

payment is not a dispositive determination of the allocation of

that payment under this subsection.

(5) If the claim for refund is reflected on a joint tax

return, the administrator shall allocate to each joint taxpayer his

or her share of the refund. The amount allocated to each taxpayer

shall be applied to his or her respective liabilities under this

ordinance.

(6) If the administrator or the department determines that all

or a portion of a refund claimed on a joint tax return is subject

to application to a liability of an obligated spouse, the

administrator or the department shall notify the joint taxpayers by

first class mail sent to the address shown on the joint return. The

notice shall be accompanied by a nonobligated spouse allocation

form. The notice shall state all of the following:

(a) That all or a portion of the refund claimed by the joint

taxpayers is subject to interception to satisfy a liability or

liabilities of 1 or both spouses.

(b) The nature of the liability and the name of the obligated

spouse or spouses.

the refund by filing a nonobligated spouse allocation form with the

city or the department not more than 30 days after the date the

notice was mailed.

(d) A statement of the penalties under subsection (9).

(7) A nonobligated spouse who wishes to claim his or her share

of a tax refund shall file with the city or the department a

nonobligated spouse allocation form. The nonobligated spouse

allocation form shall be in a form specified by the administrator

or the department and shall require the spouses to state the amount

of income or other tax base and all adjustments to the income or

other tax base, including all subtractions, additions, deductions,

credits, and exemptions, stated on the joint tax return that is the

basis for the claimed refund, and an allocation of those amounts

between the obligated and nonobligated spouse. In allocating these

amounts, all of the following apply:

(a) Individual income shall be allocated to the spouse who

earned the income. Joint income shall be allocated equally between

the spouses.

(b) Each spouse shall be allocated the personal exemptions he

or she would be entitled to claim if separate federal returns had

been filed, except that dependency exemptions shall be prorated

according to the relative income of the spouses.

to the spouse who claimed income from the business.

(d) Ownership of other assets relevant to the allocation shall

be disclosed upon request of the administrator or the department.

(8) A nonobligated spouse allocation form shall be signed by

both joint taxpayers. However, the form may be submitted without

the signature of the obligated spouse if his or her signature

cannot be obtained. The nonobligated spouse shall certify that he

or she has made a good faith effort to obtain the signature of the

obligated spouse and shall state the reason that the signature was

not obtained.

(9) A person who knowingly makes a false statement on a

nonobligated spouse allocation form is subject to a penalty of

$25.00 or 25% of the excessive claim for his or her share of the

refund, whichever is greater, and other penalties as provided in

this ordinance.

(10) A nonobligated spouse to whom the administrator or the

department has sent a notice under subsection (6), who fails to

file a nonobligated spouse allocation form within 30 days after the

date the notice was mailed, shall be barred from commencing any

action against the city or the department to recover an amount

withheld to satisfy a liability of the obligated spouse to which a

joint tax refund is applied under this section. The payment by the

city or the department of any amount applied to a liability of a

taxpayer under this section shall release the department or the

city and the administrator from all liability to the obligated

spouse, the nonobligated spouse, and any other person having or

claiming any interest in the amount paid. A payment by the

department of treasury under this subsection shall be made from the

city income tax trust fund created in section 5 of chapter 1.

(11) As used in this section:

(a) "Nonobligated spouse" means a person who has filed a joint

city income tax return and who is not liable for an obligation of

his or her spouse described in this ordinance.

(b) "Obligated spouse" means a person who has filed a joint

city income tax return and who is liable for an obligation

described in this ordinance for which his or her spouse is not

liable.

Sec. 43a. If a valid claim for a refund of taxes, except a

refund under section 61, due for the taxable year 2017 or a taxable

year after 2017 is filed, interest at the rate and in the manner

established in section 30(3) of 1941 PA 122, MCL 205.30, shall be

added to the refund.

Sec. 50. (1) For the 2016 tax year and each tax year after

2016 through the 2020 tax year, a city may enter into a written

agreement with the owner of property located in the city on behalf

of a qualified employer or with a qualified employer to provide for

the advance payment of the tax required to be withheld pursuant to

section 51 for all employees, who are either residents or

nonresidents, equal to the nonresident rate for the duration of the

written agreement. The written agreement shall not be for a period

of more than 25 years and shall specify the amount of the advance

payment to be paid and whether the owner of the property or the

qualified employer is responsible for paying the agreed-upon

amount. The written agreement may include a reconciliation

provision as described in section 61(5).

(2) As used in this section:

(a) "Casino" means a casino regulated by this state under the

Michigan gaming control and revenue act, 1996 IL 1, MCL 432.201 to

432.226, and all property associated or affiliated with the

operation of a casino, including, but not limited to, a parking

lot, hotel, motel, or retail store.

(b) "Qualified employer" means an employer other than an owner

or operator of a casino, retail establishment, professional sports

stadium, or that portion of a business used exclusively for retail

sales.

Sec. 51. (1) An Unless an advance payment of the tax required

to be withheld under this section has already been paid to the city

pursuant to an agreement entered under section 50, an employer

doing business or maintaining an establishment within the city

shall withhold from each payment to the employer's employees on and

after the effective date of this ordinance the tax on their

compensation subject to the tax, after giving effect to exemptions,

as follows:

(a) Residents.

(i) At a rate equal to the rate set by ordinance to be levied

against resident individuals under this ordinance, but not to

exceed 3%, of all compensation paid to the employee who is a

resident of the city, if the employee is not subject to withholding

in any other city levying the tax.

(ii) At a rate equal to the difference in the percentage rate

of tax on resident individuals as set by ordinance to be levied

under this ordinance less the percentage rate of tax levied by any

other city in which the employee works, on all compensation earned

by the resident in another city.

(b) Nonresidents. At a rate equal to the rate set by ordinance

to be levied under this ordinance on nonresidents but not to exceed

50% of the percentage rate imposed on resident individuals of the

compensation paid to the employee for work done or services

performed in the city designated by the employee as the employee's

predominant place of employment. The withholding rate shall be

applied to the percentage of the employee's total compensation

equal to the employee's estimated percentage of work to be done or

services to be performed in the city for that employer, but no

withholding shall be required if the estimated percentage of work

is less than 25%.

(2) An employer withholding the tax is deemed to hold the tax

as a trustee for the city.

(3) An employer who is required to withhold and who fails or

refuses to deduct and withhold is liable for the payment of the

amount required to be withheld. The liability shall be discharged

upon payment of the tax by the employee but the employer is not

relieved of penalties and interest provided in this ordinance for

this failure or refusal.

Sec. 52. Employers shall not withhold any tax from the

following payments or persons:

(a) Compensation paid to domestic help.

(b) Compensation paid to a person who is not an employee,

including an independent contractor.

for expenses necessarily and actually incurred by the employee in

the actual performance of his or her services, and that is

deductible by the employer.

(d) A qualified taxpayer. "Qualified taxpayer" means that term

as defined in section 35(12)(c)(i) of this chapter.

(e) Compensation paid to an employee for whom an advance

payment of the tax has already been made on behalf of the employee

pursuant to an agreement entered under section 50 of this chapter.

Sec. 53. (1) If the tax is not withheld, an employee is not

excused from filing a return and paying the tax on his or her

compensation. If the tax is withheld but an employer fails to pay

the tax to the city, the employee is not liable for the tax so

withheld.

(2) Any tax that has been paid pursuant to an agreement

entered into under section 50 on behalf of an employee is

considered to be tax withheld by the employer and the employee is

not liable for the tax withheld and paid to the city on his or her

behalf. However, an employee for whom the tax has already been paid

pursuant to an agreement entered into under section 50 shall file a

return and, if he or she is a resident of the city, shall pay

remaining tax due on his or her compensation from that employer.

Sec. 60. (1) Except as provided in subsection (2) or (3), an

employer shall file a return, furnished by or obtainable on request

from the city, and pay to the city the full amount of the tax

withheld on or before the last day of the month following the close

of each calendar quarter.

(2) For tax years after the 1996 tax year and for which a city

has entered into an agreement pursuant to section 9 of chapter 1,

an employer shall file a return and pay the tax withheld for each

calendar month on or before the fifteenth day of the month

following the close of each calendar month to the department by

means of an electronic funds transfer method approved by the state

commissioner of revenue.

(3) An employer subject to an agreement entered into pursuant

to section 50 shall file a return in a manner and form as

prescribed by the city unless otherwise provided pursuant to the

agreement.

Sec. 61. (1) An Except as otherwise provided under subsection

(5), an employer shall file with the city or the department a

reconciliation of quarterly returns on or before the last day of

February following each calendar year in which the employer has

withheld from an employee's compensation. A deficiency is due when

the reconciliation is filed. If the employer made quarterly

payments in excess of the amount withheld from an employee's

compensation, the city or the department upon proper verification

shall refund the excess to the employer.

(2) In addition to the reconciliation, the employer shall file

with the city or the department an information return for each

employee from whom the city income tax has been withheld and each

employee subject to withholding under this ordinance, setting forth

his or her name, address, and social security number, the total

amount of compensation paid him or her during the year, and the

amount of city income tax withheld. The information return shall be

on a copy of the federal W-2 form or on a form furnished or

approved by the city or the department. A copy of the information

return shall be furnished to the employee.

(3) Except as provided in subsection (4), if an employer goes

out of business or otherwise ceases to be an employer,

reconciliation forms and the information return forms shall be

filed with the city by the date the final withholding return and

payment are due.

(4) For tax years after the 1996 tax year and for which a city

has entered into an agreement pursuant to section 9 of chapter 1,

if an employer goes out of business or otherwise ceases to be an

employer, reconciliation forms and the information return forms

shall be filed with the department within 30 days after the

employer goes out of business or ceases to be an employer.

(5) For an employer subject to an agreement entered into

pursuant to section 50, the city may require, upon request, that

the qualified employer file an annual reconciliation return with

the city on or before the last day of February following each

calendar year that includes, at a minimum, the calculation of the

amount due pursuant to the agreement and the payment made pursuant

to the agreement. In addition to the reconciliation, the city may

also require the employer to file an information return for each

employee covered by the agreement, setting forth his or her name,

address, and social security number, and the total amount of

compensation paid to him or her during the year. The information

return shall be on a copy of the federal W-2 form or on a form

furnished or approved by the city. A copy of the information return

shall be furnished to the employee.

Sec. 82. (1) All taxes imposed in a taxable year before the

1992 taxable year on a taxpayer and money withheld by an employer

under this ordinance and remaining unpaid after the taxes or money

withheld are due bear interest from the due date at the rate of 1/2

of 1% per month until paid. For the 1992 taxable year and each

subsequent taxable year before the 1997 taxable year, all taxes

imposed on a taxpayer and money withheld by an employer under this

ordinance and remaining unpaid after the taxes or money withheld

are due bear interest from the due date at the current monthly rate

of 1 percentage point above the adjusted prime rate per annum per

month until the tax or money is paid. For taxable years after the

1996 taxable year, if the amount of a tax paid is less than the

amount that should have been paid or an excessive claim for credit

has been made, the deficiency and interest on the deficiency at the

current monthly interest rate of 1 percentage point above the

adjusted prime rate per annum from the time the tax was due, and

until paid, are due and payable after a final assessment as

provided in section 85. A deficiency in an estimated payment

required by this ordinance shall be treated in the same manner as a

tax due and is subject to the same current monthly interest rate of

1 percentage point above the adjusted prime rate per annum from the

time the payment was due, until paid. The term "adjusted prime

rate" means the average predominant prime rate quoted by not less

than 3 commercial banks to large businesses, as determined by the

department of treasury. For tax years before the 1997 tax year, the

adjusted prime rate is to be based on the average prime rate

charged by not less than 3 commercial banks during the 12-month

period ending on September 30. One percentage point shall be added

to the adjusted prime rate, and the resulting sum shall be divided

by 12 to establish the current monthly interest rate. The resulting

current monthly interest rate based on the 12-month period ending

September 30 becomes effective on January 1 of the following year.

For tax years after the 1996 tax year, "adjusted prime rate" means

that term as defined in and determined under section 23(2) of ~~Act~~

~~No. 122 of the Public Acts of 1941, being section 205.23 of the~~

~~Michigan Compiled Laws.~~1941 PA 122, MCL 205.23.

(2) A person who fails to file a return, pay the tax, or remit

withholding, when due, is liable, in addition to the interest, to a

penalty of 1% of the amount of the unpaid tax for each month or

fraction of a month, not to exceed a total penalty of 25% of the

unpaid tax. If a return is filed or remittance is paid after the

time specified and it is shown to the satisfaction of the city or

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

to willful neglect, the penalty shall be waived by the

administrator or the department. If the total interest or interest

and penalty to be assessed is less than $2.00, the administrator or

the department shall instead assess $2.00.

(3) Except as provided in subsection (4), if any part of the

deficiency or an excessive claim for credit is due to negligence,

but without intent to defraud, a penalty of $10.00 or 10% of the

total amount of the deficiency in the tax, whichever is greater,

plus interest as provided in subsection (1), shall be added. The

penalty becomes due and payable after a final assessment is issued

as provided in section 85. If a taxpayer subject to a penalty under

this subsection demonstrates to the satisfaction of the

administrator or the department that the deficiency or excess claim

for credit was due to reasonable cause, the administrator or the

department shall waive the penalty.

(4) If any part of the deficiency or an excessive claim for

credit is due to intentional disregard of this ordinance, but

without intent to defraud, a penalty of $25.00 or 25% of the total

amount of the deficiency in the tax, whichever is greater, plus

interest as provided in subsection (1), shall be added. The penalty

becomes due and payable after a final assessment is issued as

provided in section 85. If a penalty is imposed under this

subsection and the taxpayer subject to the penalty successfully

disputes the penalty, the administrator or the department shall not

impose a penalty prescribed by subsection (3) to the tax otherwise

due.

(5) If any part of the deficiency or an excessive claim for

credit is due to fraudulent intent to evade the tax imposed under

this ordinance, or to obtain a refund for a fraudulent claim, a

penalty of 100% of the deficiency, plus interest as provided in

subsection (1), shall be added. The penalty becomes due and payable

after a final assessment is issued as provided in section 85.

(6) An employer who fails or refuses to file a reconciliation

or information return upon request pursuant to section 61(5),

within the time specified, is subject to a penalty of $10.00 per

day for each day for each separate failure or refusal, which

penalty may be added to the tax due. The total penalty for each

separate failure or refusal shall not exceed $400.00.

Enacting section 1. Section 43a of chapter 2 of the city

income tax act, 1964 PA 284, MCL 141.643a, is repealed effective

December 31, 2016.