HOUSE BILL No. 5036 July 12, 2001, Introduced by Rep. Shulman and referred to the Committee on Appropriations. A bill to amend 1941 PA 122, entitled "An act to establish a revenue division of the department of treasury; to prescribe its powers and duties as the revenue col- lection 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 create the position and to define the powers and duties of the state commissioner of revenue; 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 pro- vide procedures for the payment, administration, audit, assess- ment, 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 reme- dies; and to declare the effect of this act," by amending sections 24, 30c, and 31 (MCL 205.24, 205.30c, and 205.31), sections 24 and 31 as amended by 1993 PA 14 and section 30c as amended by 1998 PA 493. 04767'01 JLB 2 THE PEOPLE OF THE STATE OF MICHIGAN ENACT: 1 Sec. 24. (1) If a taxpayer fails or refuses to file a 2 return or pay a tax administered under this act within the time 3 specified, the department, as soon as possible, shall assess the 4 tax against the taxpayer and notify the taxpayer of the amount of 5 the tax. A liability for a tax administered under this act is 6 subject to the interest and penalties prescribed in 7 subsections (2) to (5). 8 (2) Except as provided in subsections (3) and (6), if a tax- 9 payer fails or refuses to file a return or pay a tax within the 10 time specified, a penalty of $10.00 or 5% of the tax, whichever 11 is greater, shall be added if the failure is for not more than 1 12 month, with an additional 5% penalty for each additional month or 13 fraction of a month during which the failure continues or the tax 14 and penalty is not paid, to a maximum of 50%. In addition to the 15 penalty, interest at the rate provided in section 23 for defi- 16 ciencies in tax payments shall be added on the tax from the time 17 the tax was due, until paid. After June 30, 1994, the penalty 18 prescribed by this subsection shall not be imposed until the 19 department submits for public hearing pursuant to the administra- 20 tive procedures act of 1969,Act No. 306 of the Public Acts of211969, being sections 24.201 to 24.328 of the Michigan Compiled22Laws1969 PA 306, MCL 24.201 TO 24.328, a rule defining what 23 constitutes reasonable cause for waiver of the penalty under sub- 24 section (4), which definition shall include illustrative 25 examples. 04767'01 3 1 (3) If a person is required to remit tax due pursuant to 2 section 19(2) and fails or refuses to pay the tax within the time 3 specified, a penalty of 0.167% of the tax shall be added for each 4 day during which the failure continues or the tax and penalty are 5 not paid, to a maximum of 50% of the tax.For reporting periods6beginning after August 31, 1991 and before November 1, 1991, the7commissioner shall not impose the penalty under this subsection8if the tax is remitted within 2 banking days of the date speci-9fied and the taxpayer demonstrates that the taxpayer's account at10their financial institution was charged for the tax owed on or11before the date the remittance was due.12 (4) If a return is filed or remittance is paid after the 13 time specified and it is shown to the satisfaction of the depart- 14 ment that the failure was due to reasonable cause and not to 15 willful neglect, the commissioner or an authorized representative 16 of the commissioner shall waive the penalty prescribed by 17 subsection (2). 18 (5) For failure or refusal to file an information return or 19 other informational report required by a tax statute, within the 20 time specified, a penalty of $10.00 per day for each day for each 21 separate failure or refusal may be added. The total penalty for 22 each separate failure or refusal shall not exceed $400.00. 23 (6) If a taxpayer fails to pay an estimated tax payment as 24 may be required by the income tax act of 1967,Act No. 281 of25the Public Acts of 1967, being sections 206.1 to 206.532 of the26Michigan Compiled Laws1967 PA 281, MCL 206.1 TO 206.532, a 27 penalty shall not be imposed if the taxpayer was not required to 04767'01 4 1 make estimated tax payments in the taxpayer's immediately 2 preceding tax year. 3 (7) IN ADDITION TO ANY OTHER INTEREST OR PENALTY PRESCRIBED 4 UNDER THIS SECTION, A TAXPAYER WHO HAS FAILED TO FILE A RETURN OR 5 PAY A TAX THAT WAS DUE BEFORE JUNE 1, 2001, DURING A PERIOD FOR 6 WHICH AMNESTY IS AVAILABLE UNDER SECTION 31(2), IS LIABLE FOR AN 7 ADDITIONAL PENALTY EQUAL TO 25% OF THE AMOUNT OF TAX DUE. 8 Sec. 30c. (1)Through December 31, 2003, theTHE commis- 9 sioner, or an authorized representative of the commissioner, on 10 behalf of the department, may enter into a voluntary disclosure 11 agreement with a person who makes application, who is a nonfiler, 12 and who meets 1 or more of the following criteria: 13 (a) Has a filing responsibility under nexus standards issued 14 by the department after December 31, 1997. 15 (b) Has a reasonable basis to contest liability, as deter- 16 mined by the commissioner, for a tax or fee administered under 17 this act. 18 (2) All taxes and fees administered under this act are eli- 19 gible for inclusion in a voluntary disclosure agreement. 20 (3) To be eligible for a voluntary disclosure agreement, 21 subject to subsection (1), a person must meet all of the follow- 22 ing requirements: 23 (a) Except as otherwise provided in this subdivision, has 24 had no previous contact by the department or its agents regarding 25 a tax covered by the agreement. For purposes of this subdivi- 26 sion, a letter of inquiry, whether a final letter or otherwise, 27 requesting information under section 21(2)(a) that was sent to a 04767'01 5 1 nonfiler shall not be considered a previous contact under this 2 subdivision if the nonfiler sends a written request to the 3 department to enter into a voluntary disclosure agreement not 4 later than June 30, 1999. 5 (b) Has had no notification of an impending audit by the 6 department or its agents. 7 (c) Is not currently under audit by the department of trea- 8 sury or under investigation by the department of state police, 9 department of attorney general, or any local law enforcement 10 agency regarding a tax covered by the agreement. 11 (d) Is not currently the subject of a civil action or a 12 criminal prosecution involving any tax covered by the agreement. 13 (e) Has agreed to register, file returns, and pay all taxes 14 due in accordance with all applicable laws of this state for all 15 taxes administered under this act for all periods after the look- 16 back period. 17 (f) Has agreed to pay all taxes due for each tax covered 18 under the agreement for the lookback period, plus statutory 19 interest as stated in section 23, within the period of time and 20 in the manner specified in the agreement. 21 (g) Has agreed to file returns and worksheets for the look- 22 back period as specified in the agreement. 23 (h) Has agreed not to file a protest or seek a refund of 24 taxes paid to this state for the lookback period based on the 25 issues disclosed in the agreement or based on the person's lack 26 of nexus or contacts with this state. 04767'01 6 1 (4) If a person satisfies all requirements stated in 2 subsections (1) and (3), the department shall enter into a 3 voluntary disclosure agreement with that person providing the 4 following relief: 5 (a) Notwithstanding section 28(1)(e) of this act, the 6 department shall not assess any tax, delinquency for a tax, pen- 7 alty, or interest covered under the agreement for any period 8 before the lookback period identified in the agreement. 9 (b) The department shall not assess any applicable discre- 10 tionary or nondiscretionary penalties for the lookback period. 11 (c) The department shall provide complete confidentiality of 12 the agreement and shall also enter into an agreement not to dis- 13 close, in accordance with section 28(1)(f), any of the terms or 14 conditions of the agreement to any tax authorities of any state 15 or governmental authority or to any person except as required by 16 exchange of information agreements authorized under section 17 28(1)(f), including the international fuel tax agreement under 18 chapter 317 of title 49 of the United States Code, 49 19 U.S.C. 31701 to 31708. The department shall not exchange infor- 20 mation obtained under this section with other states regarding 21 the person unless information regarding the person is specifi- 22 cally requested by another state. 23 (5) The department shall not bring a criminal action against 24 a person for failure to report or to remit any tax covered by the 25 agreement before or during the lookback period if the facts 26 established by the department are not materially different from 27 the facts disclosed by the person to the department. 04767'01 7 1 (6) A voluntary disclosure agreement is effective when 2 signed by the person subject to the agreement, or his, her, or 3 its lawful representative, and returned to the department within 4 the time period specified in the agreement. The department shall 5 only provide the relief specified in the executed agreement. Any 6 verbal or written communication by the department before the 7 effective date of the agreement shall not afford any penalty 8 waiver, limited lookback period, or other benefit otherwise 9 available under this section. 10 (7) A material misrepresentation of the fact by an applicant 11 relating to the applicant's current activity in this state 12 renders an agreement null and void and of no effect. A change in 13 the activities or operations of a person after the effective date 14 of the agreement is not a material misrepresentation of fact and 15 shall not affect the agreement's validity. 16 (8) The department may audit any of the taxes covered by the 17 agreement within the lookback period or in any prior period if, 18 in the department's opinion, an audit of a prior period is neces- 19 sary to determine the person's tax liability for the tax periods 20 within the lookback period or to determine another person's tax 21 liability. 22 (9) Nothing in this section shall be interpreted to allow or 23 permit unjust enrichment as that term is defined in subsection 24 (11). Any tax collected or withheld from another person by an 25 applicant shall be remitted to the department without respect to 26 whether it was collected during or before the lookback period. 04767'01 8 1 (10) The department shall not require a person who enters 2 into a voluntary disclosure agreement to make any filings that 3 are additional to those otherwise required by law. 4 (11) As used in this section: 5 (a) "Lookback period" means 1 or more of the following: 6 (i) The most recent 48-month period as determined by the 7 department or the first date the person subject to an agreement 8 under this section began doing business in the state if less than 9 48 months. 10 (ii) For single business taxes levied under the single busi- 11 ness tax act, 1975 PA 228, MCL 208.1 to 208.145, the lookback 12 period shall be the 4 most recent completed fiscal or calendar 13 years over a 48-month period or the first date the person subject 14 to an agreement under this section began doing business in this 15 state if less than 48 months. 16 (iii) Notwithstanding subparagraphs (i), (ii), and (iv), the 17 most recent 36-month period as determined by the department or 18 the first date the person subject to an agreement under this sec- 19 tion began doing business in this state if less than 36 months, 20 if tax returns filed in another state for a tax based on net 21 income that included sales in the numerator of the apportionment 22 formula that now must be included in the numerator of the appor- 23 tionment formula under the single business tax act, 1975 PA 228, 24 MCL 208.1 to 208.145, and those sales increased the net tax 25 liability payable to that state. 26 (iv) If there is doubt as to liability for the tax during 27 the lookback period, another period as determined by the 04767'01 9 1 commissioner to be in the best interest of this state and to 2 preserve equitable and fair administration of taxes. 3 (b) "Nonfiler" for a particular tax is a person that has 4neverNOT filed a return for the particular tax being disclosed 5 FOR PERIODS BEGINNING AFTER DECEMBER 31, 1988. NONFILER ALSO 6 INCLUDES A PERSON WHOSE ONLY FILING WAS A SINGLE BUSINESS TAX 7 ESTIMATED TAX RETURN FILED BEFORE JANUARY 1, 1999. 8 (c) "Person" means an individual, firm, bank, financial 9 institution, limited partnership, copartnership, partnership, 10 joint venture, association, corporation, limited liability com- 11 pany, limited liability partnership, receiver, estate, trust, or 12 any other group or combination acting as a unit. 13 (d) "Previous contact" means any notification of an impend- 14 ing audit pursuant to section 21(1), review, notice of intent to 15 assess, or assessment. Previous contact also includes final let- 16 ters of inquiry pursuant to section 21(2)(a) or a subpoena from 17 the department. 18 (e) "Unjust enrichment" includes the withholding of income 19 tax under the income tax act of 1967, 1967 PA 281, MCL 206.1 to 20 206.532, and the collection of any other tax administered by this 21 act that has not been remitted to the department. 22 (f) "Voluntary disclosure agreement" or "agreement" means a 23 written agreement that complies with this act. 24 Sec. 31. (1) If a taxpayer does not satisfy a tax liability 25 or makes an excessive claim for a refund as a result of reliance 26 on erroneous current written information provided by the 27 department, the commissioner shall waive all criminal and civil 04767'01 10 1 penalties provided by law for failing or refusing to file a 2 return, for failing to pay a tax, or for making an excessive 3 claim for a refund for a tax administered by the revenue division 4 of the department of treasury pursuant to this act if the tax- 5 payer makes a written request for a waiver, files a return or an 6 amended return, and makes full payment of the tax and interest. 7 (2) FOR A PERIOD TO BE DESIGNATED BY THE STATE TREASURER OF 8 NOT LESS THAN 30 DAYS AND NOT MORE THAN 60 DAYS, AND ENDING 9 BEFORE SEPTEMBER 30, 2002, THERE SHALL BE AN AMNESTY PERIOD 10 DURING WHICH THE COMMISSIONER SHALL WAIVE ALL CRIMINAL AND CIVIL 11 PENALTIES PROVIDED BY LAW FOR FAILING OR REFUSING TO FILE A 12 RETURN, FOR FAILING TO PAY A TAX, OR FOR MAKING AN EXCESSIVE 13 CLAIM FOR A REFUND FOR A TAX ADMINISTERED BY THE REVENUE DIVISION 14 OF THE DEPARTMENT OF TREASURY UNDER THIS ACT IF THE TAXPAYER 15 MAKES A WRITTEN REQUEST FOR A WAIVER, FILES A RETURN OR AN 16 AMENDED RETURN, AND MAKES FULL PAYMENT IN EITHER A LUMP SUM OR 17 INSTALLMENTS AS PROVIDED UNDER SUBSECTION (9), OF THE TAX AND 18 INTEREST DUE FOR ANY PRIOR TAX YEAR. 19 (3) THIS SECTION APPLIES TO THE NONREPORTING AND UNDERRE- 20 PORTING OF TAX LIABILITIES AND TO THE NONPAYMENT OF TAXES PREVI- 21 OUSLY DETERMINED TO BE DUE, BUT ONLY TO THE EXTENT OF THE PENAL- 22 TIES ATTRIBUTABLE TO THE TAXES THAT WERE PREVIOUSLY DUE AND THAT 23 ARE PAID DURING THE AMNESTY PERIOD PROVIDED FOR IN SUBSECTION 24 (2). 25 (4) THE COMMISSIONER SHALL ADMINISTER THIS SECTION. 26 (5) SUBSECTION (2) DOES NOT APPLY TO TAXES DUE AFTER JUNE 1, 27 2001. 04767'01 11 1 (6) THERE IS APPROPRIATED FROM THE REVENUES GENERATED BY 2 TAXES PAID UNDER SUBSECTION (2) THE SUM OF $1,000,000.00 TO THE 3 DEPARTMENT OF TREASURY FOR ADMINISTRATION OF THE AMNESTY PROGRAM 4 CREATED BY THE AMENDATORY ACT THAT ADDED THIS SUBSECTION. THIS 5 APPROPRIATION IS ALLOTTED FOR EXPENDITURE ON AND AFTER OCTOBER 1, 6 2001. ONLY GENERAL PURPOSE REVENUE GENERATED BY THE AMENDATORY 7 ACT THAT ADDED THIS SUBSECTION MAY BE USED TO FINANCE THIS 8 APPROPRIATION. 9 (7) THE COMMISSIONER SHALL NOT WAIVE CRIMINAL AND CIVIL PEN- 10 ALTIES APPLICABLE TO A TAX UNDER SUBSECTION (2) IF 1 OR MORE OF 11 THE FOLLOWING CIRCUMSTANCES APPLY: 12 (A) IF THE TAXPAYER IS ELIGIBLE TO ENTER INTO A VOLUNTARY 13 DISCLOSURE AGREEMENT UNDER SECTION 30C FOR THAT TAX. 14 (B) IF THE TAX IS ATTRIBUTABLE TO INCOME DERIVED FROM A 15 CRIMINAL ACT, IF THE TAXPAYER IS UNDER CRIMINAL INVESTIGATION OR 16 INVOLVED IN A CIVIL ACTION OR CRIMINAL PROSECUTION FOR THAT TAX, 17 OR IF THE TAXPAYER HAS BEEN CONVICTED OF A FELONY UNDER THIS ACT 18 OR THE INTERNAL REVENUE CODE OF 1986. 19 (8) THE DEPARTMENT SHALL PROVIDE REASONABLE NOTICE TO TAX- 20 PAYERS THAT MAY BE ELIGIBLE FOR THE AMNESTY PROGRAM AT LEAST 30 21 DAYS BEFORE THE START OF THE DESIGNATED AMNESTY PERIOD. 22 NOTIFICATION SHALL INCLUDE, BUT IS NOT LIMITED TO, A DESCRIPTION 23 OF THE AMNESTY PROGRAM ON APPROPRIATE TAX INSTRUCTION FORMS AND 24 ON THE INTERNET. 25 (9) UNDER THE AMNESTY PROGRAM DESCRIBED IN SUBSECTION (2), A 26 TAXPAYER MAY PAY TAX AND INTEREST DUE IN INSTALLMENTS IF THE 27 TAXPAYER MEETS 1 OF THE FOLLOWING: 04767'01 12 1 (A) THE TAXPAYER IS AN INDIVIDUAL AND SUBMITS THE GREATER OF 2 $10,000.00 OR 50% OF THE TAX AND INTEREST DUE WITH THE REQUEST 3 FOR WAIVER UNDER SUBSECTION (2) AND PAYS THE REMAINING TAX AND 4 INTEREST DUE IN 2 EQUAL INSTALLMENTS, THE FIRST INSTALLMENT DUE 5 NO LATER THAN AUGUST 15, 2002 AND THE SECOND INSTALLMENT DUE NO 6 LATER THAN SEPTEMBER 15, 2002. 7 (B) A TAXPAYER THAT IS NOT AN INDIVIDUAL SUBMITS THE GREATER 8 OF $100,000.00 OR 50% OF THE TAX AND INTEREST DUE WITH THE 9 REQUEST FOR WAIVER UNDER SUBSECTION (2) AND PAYS THE REMAINING 10 TAX AND INTEREST DUE IN 2 EQUAL INSTALLMENTS, THE FIRST INSTALL- 11 MENT DUE NO LATER THAN AUGUST 15, 2002 AND THE SECOND INSTALLMENT 12 DUE NO LATER THAN SEPTEMBER 15, 2002. 04767'01 Final page. 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