HB-5025, As Passed Senate, December 13, 2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

HOUSE BILL No. 5025

 

September 27, 2017, Introduced by Rep. Byrd 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 this state; to prescribe certain

powers and duties of the state treasurer; to establish the

collection duties of certain other state departments for money or

accounts owed to this state; 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 section 30a (MCL 205.30a), as amended by 1995 PA 116.

 

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

     Sec. 30a. (1) If a taxpayer claims a refund that the

 

department determines is valid as provided in section 30(2), and

 

the department identifies a liability of the taxpayer described in

 

subsection (2), the department shall first apply the amount of the

 

refund as provided in subsections (2) and (3), and the excess, if

 

any, shall be refunded or credited as provided in section 30.

 

     (2) The amount of a refund described in subsection (1) shall

 

be applied to the following in the order of priority stated:

 

     (a) Any other known tax liability of the taxpayer to this

 

state.

 

     (b) Any other known liability of the taxpayer to this state,

 

including a liability to pay support if the right to receive the

 

support has been assigned to the state and the liability is the

 

basis of a request for tax refund offset from the office of child

 

support.

 

     (c) Any of the following in the order of priority received,

 

unless otherwise provided by law:

 

     (i) A support liability of the taxpayer that is the basis of a

 

request for tax refund offset from the office of child support,

 

other than as provided by subdivision (b).

 

     (ii) A writ of garnishment or other valid court order issued

 

by a court of competent jurisdiction and directed to this state or

 

the state treasurer to satisfy a liability of the taxpayer.

 

     (iii) A known city income tax liability for a tax administered

 

by the department through an agreement entered into under section 9

 

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

 

     (iv) (iii) A levy of the internal revenue service to satisfy a

liability of the taxpayer.

 

     (v) (iv) A liability to repay benefits obtained under the

 

Michigan employment security act, Act No. 1 of the Public Acts of

 

the Extra Session of 1936, being sections 421.1 to 421.75 of the

 

Michigan Compiled Laws, 1936 (Ex Sess) PA 1, MCL 421.1 to 421.75,

 

to which the taxpayer was not entitled, upon a request for tax

 

refund offset from the Michigan employment security

 

commission.unemployment insurance agency.

 

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

 

return, the department 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 in the order

 

of priority stated in subsection (2).

 

     (4) If 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 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 other liability or liabilities and the

 

name of the obligated spouse or spouses.

 

     (c) That a nonobligated spouse may claim his or her share of

 

the refund by filing a nonobligated spouse allocation form with the

department of treasury not more than 30 days after the date the

 

notice was mailed.

 

     (d) A statement of the penalties under subsection (7).

 

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

 

of a tax refund shall file with the department a nonobligated

 

spouse allocation form. The nonobligated spouse allocation form

 

shall be in a form specified by 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 their joint income tax return or other 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) A federal deduction for 2-income married persons shall be

 

allocated to the spouse with the lower income who claims the

 

deduction.

 

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

 

earned the income. Joint income shall be allocated equally between

 

the spouses. The tax base appropriate to tax other than income tax

 

shall be similarly allocated.

 

     (c) 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.

 

     (d) Adjustments resulting from a business shall be allocated

 

to the spouse who claimed income from the business.

     (e) A homestead property tax credit shall be allocated to the

 

spouse who owned the title or held the leasehold interest in the

 

property claimed as a homestead. A homestead property tax credit

 

for property jointly owned or leased shall be allocated jointly

 

between the spouses.

 

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

 

be disclosed upon request of the department.

 

     (6) 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 and

 

shall state the reason that the signature was not obtained.

 

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

 

nonobligated spouse allocation form shall be 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 act.

 

     (8) A nonobligated spouse to whom the department has sent a

 

notice under subsection (4), 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 this

 

state or the state treasurer 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 this state of

 

any amount applied to a liability of a taxpayer under this section

 

shall release this state and the state treasurer from all liability

to the obligated spouse, the nonobligated spouse, and any other

 

person having or claiming any interest in the amount paid.

 

     (9) The department shall promulgate rules under the

 

administrative procedures act of 1969, Act No. 306 of the Public

 

Acts of 1969, being sections 24.201 to 24.328 of the Michigan

 

Compiled Laws, 1969 PA 306, MCL 24.201 to 24.328, as necessary to

 

implement this section. The rules shall include a procedure for

 

assuring that a taxpayer subject to application of a refund under

 

this section and section 30 has received or will receive notice and

 

an opportunity for a hearing with respect to the liability to which

 

the refund is to be applied.

 

     (10) As used in this section:

 

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

 

income tax return or other joint state tax return and who is not

 

liable for an obligation of his or her spouse described in

 

subsection (2).

 

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

 

income tax return or other joint state tax return and who is liable

 

for an obligation described in subsection (2) for which his or her

 

spouse is not liable.

 

     (c) "Office of child support" means the agency created in

 

section 2 of the office of child support act, Act No. 174 of the

 

Public Acts of 1971, being section 400.232 of the Michigan Compiled

 

Laws.1971 PA 174, MCL 400.232.

 

     Enacting section 1. This amendatory act does not take effect

 

unless House Bill No. 4618 of the 99th Legislature is enacted into

 

law.