BillCam

HB-4976, As Passed House, October 11, 2017

SUBSTITUTE FOR

HOUSE BILL NO. 4976

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 sections 21 and 28 (MCL 205.21 and 205.28), section 21

as amended by 2014 PA 35 and section 28 as amended by 2017 PA 111.

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

Sec. 21. (1) If a taxpayer fails or refuses to make a return

or payment as required, in whole or in part, or if the department

has reason to believe that a return made or payment does not supply

sufficient information for an accurate determination of the amount

of tax due, the department may obtain information on which to base

an assessment of the tax. By its duly authorized agents, the

department may examine the books, records, and papers and audit the

accounts of a person or any other records pertaining to the tax. A

taxpayer who has been audited by the department or its agent or a

taxpayer whose books, records, and papers have been examined by the

department shall, upon request, be provided a complete copy in

printed or electronic format of the complete audit work papers and

the audit report of findings. Any audit performed by the department

or its duly authorized agents under section 3(a) shall be performed

in accordance with auditing standards which shall include, but are

not limited to, confidentiality, technical training, independence,

due professional care, planning, supervision, understanding of the

entity audited including internal control and an assessment of

risk, audit evidence and documentation, sampling and sampling

projections, and elements of the audit report of findings. The

department shall promulgate administrative rules on audit standards

within 1 year of the date of enactment of the amendatory act that

added this sentence.

(2) In carrying out this section, the department and the

taxpayer shall comply with the following procedure:

(a) The department shall send to the taxpayer a letter of

inquiry stating, in a courteous and nonintimidating manner, the

department's opinion that the taxpayer needs to furnish further

information or owes taxes to the state, and the reason for that

opinion. A letter of inquiry shall also explain the procedure by

which the person may initiate communication with the department to

resolve any dispute. This subdivision does not apply in any of the

following circumstances:

(i) The taxpayer files a return showing a tax due and fails to

pay that tax.

(ii) The deficiency resulted from an audit of the taxpayer's

books and records by this state.

(iii) The taxpayer otherwise affirmatively admits that a tax

is due and owing.

(b) If the dispute is not resolved within 30 days after the

department sends the taxpayer a letter of inquiry or if a letter of

inquiry is not required pursuant to subdivision (a), the

department, after determining the amount of tax due from a

taxpayer, shall give notice to the taxpayer of its intent to assess

the tax. The notice shall include the amount of the tax the

department believes the taxpayer owes, the reason for that

deficiency, and a statement advising the taxpayer of a right to an

informal conference, the requirement of a written request by the

taxpayer for the informal conference that includes the taxpayer's

statement of the contested amounts and an explanation of the

dispute, and the 60-day time limit for that request.

within 60 days after the taxpayer receives a notice of intent to

assess, remits the uncontested portion of the liability, and

provides a statement of the contested amounts and an explanation of

the dispute, the taxpayer is entitled to an informal conference on

the question of liability for the assessment.

(d) Upon receipt of a taxpayer's written notice, the

department shall set a mutually agreed upon or reasonable time and

place for the informal conference and shall give the taxpayer

reasonable written notice not less than 20 days before the informal

conference. The notice shall specify the intent to assess, type of

tax, and tax year that is the subject of the informal conference.

The informal conference provided for by this subdivision is not

subject to the administrative procedures act of 1969, 1969 PA 306,

MCL 24.201 to 24.328, but is subject to the rules governing

informal conferences as promulgated by the department in accordance

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

24.201 to 24.328. The taxpayer may appear or be represented by any

person before the department at an informal conference, and may

present testimony and argument. At the party's own expense and with

advance notice to the other party, a taxpayer or the department, or

both, may make an audio recording of an informal conference. A

taxpayer who has made a timely request for an informal conference

may at any time withdraw that request by filing written notice with

the department. Upon receipt of the request for withdrawal from the

informal conference process, the department shall issue a decision

and order of determination and, where appropriate, a final

assessment, from which a taxpayer may seek an appeal as provided

under section 22.

(e) After a timely request for an informal conference has been

made under subdivision (c), the taxpayer and the department may

seek to settle any or all issues in dispute by submitting a written

settlement offer to the other party in accordance with the

following:

(i) The taxpayer shall submit a written settlement offer no

later than 21 days after the informal conference. The settlement

offer must identify the issues in dispute to be settled, the amount

of the settlement offer, and the factual and legal bases supporting

the taxpayer's settlement offer, and include any supporting

documents. The state treasurer or the state treasurer's designee or

designees shall review the settlement offer and the department's

recommendation regarding the offer. The state treasurer or the

state treasurer's designee or designees shall determine whether to

accept, reject, or counter the settlement offer. The department

shall notify the taxpayer in writing of the department's

acceptance, rejection, or counter-offer. If the department does not

accept the taxpayer's offer, the department shall include in its

written notification the factual and legal bases for the

department's rejection or counter-offer. The taxpayer may accept,

reject, or counter the department's counter-offer and proceed in

accordance with subparagraph (iii).

(ii) The informal conference referee or the administrator of

the department's hearings division or its successor unit may submit

a written report to the state treasurer or the state treasurer's

designee or designees that identifies the relevant facts and issues

involved in the dispute, the factual and legal bases supporting

settlement of any or all of the issues, and a settlement

recommendation. Doubt as to collectability shall not be a reason

for settlement under this subdivision. If the state treasurer or

the state treasurer's designee or designees determines to pursue a

settlement, the department shall notify the taxpayer in writing of

the department's settlement offer, to be determined by the state

treasurer or the state treasurer's designee or designees. The

department's written settlement offer shall include the factual and

legal bases supporting the department's settlement offer. The

taxpayer, in writing, may accept, reject, or counter the

department's settlement offer and proceed in accordance with

subparagraph (iii).

(iii) If the department rejects the taxpayer's settlement

offer or counter-offer or the taxpayer rejects the department's

settlement offer or counter-offer, the informal conference process

shall proceed as provided under this section unless the taxpayer

files a written notice to withdraw the request for an informal

conference as provided in subdivision (d). If the department

accepts the taxpayer's settlement offer or counter-offer or the

taxpayer accepts the department's settlement offer or counter-

offer, the department and the taxpayer shall execute a written

agreement outlining all of the terms of the settlement. If the

agreement settles all of the issues in dispute, then the written

agreement is also the taxpayer's written notice to withdraw its

request for an informal conference. Then the department shall,

where appropriate, issue a final assessment that reflects the

agreement and the agreed-upon amount of liability as to the settled

issues. The department's final assessment issued under this

subdivision is not subject to challenge or appeal under this act or

reviewable in any court by mandamus, appeal, or other method of

direct or collateral attack. With respect to any issues in dispute

that are not included in the settlement agreement, the informal

conference process shall proceed as provided under this section

unless the taxpayer files a written notice to withdraw the request

for an informal conference as provided in subdivision (d).

(iv) The taxpayer's and the department's settlement offers,

counter-offers, and responses to those offers and counter-offers,

the disposition of a settlement offer or counter-offer under this

subdivision, and settlement agreements, may not be offered by any

party in any proceeding before the Michigan tax tribunal, the court

of claims, or any court of competent jurisdiction as proof of the

validity of the department's decision, order, or assessment, or of

the proper amount of the taxpayer's tax liability.

(v) Settlement offers, counter-offers, responses thereto,

settlement agreements, and reports of the informal conference

referee, the administrator, or the department related to

settlements under this subdivision are exempt from disclosure under

the freedom of information act, 1976 PA 442, MCL 15.231 to 15.246,

and may not be obtained through discovery in any proceeding.

(f) (e) After Except for those issues that were settled

pursuant to subdivision (e), after the informal conference, the

department shall render a decision and order in writing, setting

forth the reasons and authority, and shall assess the tax,

interest, and penalty found to be due and payable. The decision and

order are limited to the subject of the informal conference as

included in the notice under subdivision (d).

(g) (f) If the taxpayer does not protest the notice of intent

to assess within the time provided in subdivision (c), the

department may assess the tax and the interest and penalty on the

tax that the department believes are due and payable. An assessment

under this subdivision or subdivision (e) (f) is final and subject

to appeal as provided in section 22. The final notice of assessment

shall include a statement advising the person of a right to appeal.

(3) If as a result of an audit it is determined that a

taxpayer is owed a refund, the department shall send a notice to

the taxpayer stating the amount of the refund the department

believes is owed to the taxpayer as a result of the audit. The

notice shall inform the taxpayer of his or her appeal rights. If

the taxpayer disputes the findings of the audit, the taxpayer may

serve written notice upon the department in the same manner as

provided for in subsection (2)(c) and the taxpayer is entitled to

the same informal conference and subsequent appeals as provided for

in this section.

(4) If a protest to the notice of intent to assess the tax is

determined by the department to be a frivolous protest or a desire

by the taxpayer to delay or impede the administration of taxes

administered under this act, a penalty of $25.00 or 25% of the

amount of tax under protest, whichever is greater, shall be added

to the tax.

(5) During the course of the informal conference under

subsection (2)(d), the taxpayer by written notice may convert his

or her contest of the assessment to a claim for a refund. The

written notice shall be accompanied by payment of the contested

amount. The informal conference shall continue and the department

shall render a decision and issue an order regarding the claim for

refund.

(6) For audits commenced after September 30, 2014, the

department must complete fieldwork and provide a written

preliminary audit determination for any tax period no later than 1

year after the period provided for in section 27a(2) without regard

to the extension provided for in section 27a(3). The limitation

described in this subsection does not apply to any tax period in

which the department and the taxpayer agreed in writing to extend

the statute of limitations described in section 27a(2).

(7) For audits commenced after September 30, 2014, unless

otherwise agreed to by the department and the taxpayer, the final

assessment issued under subsection (2)(f) (2)(g) must be issued

within 9 months of the date that the department provided the

taxpayer with a written preliminary audit determination unless the

taxpayer, for any reason, requests reconsideration of the

preliminary audit determination or the taxpayer requests an

informal conference under subsection (2)(c). A request for

reconsideration by a taxpayer permits, but does not require, the

department to delay the issuance of a final assessment under

subsection (2)(f).(2)(g).

(8) The department shall publish semiannually on the

department's website a report containing the following information:

(a) The aggregate amount of the department's original

determinations of liability attributed to settlements entered into

during the reporting period.

(b) The aggregate settled amount of liability attributed to

the settlements entered into during the reporting period.

the department entered into during the reporting period is 5 or

more, include the actual number of settlements. If the number of

settlements is less than 5, the department shall state "less than

5".

(9) Except as otherwise provided under this subsection, the

settlement process established under subsection (2)(e) only applies

to taxes subject to administration under this act. The settlement

process established under subsection (2)(e) does not apply to

matters arising under the general property tax act, 1893 PA 206,

MCL 211.1 to 211.155, the state real estate transfer tax act, 1993

PA 330, MCL 207.521 to 207.537, the tobacco products tax act, 1993

PA 327, MCL 205.421 to MCL 205.436, the health insurance claims

assessment act, 2011 PA 142, MCL 550.1731 to 550.1741, and the city

income tax act, 1964 PA 284, MCL 141.501 to 141.787.

Sec. 28. (1) The following conditions apply to all taxes

administered under this act unless otherwise provided for in the

specific tax statute:

(a) Notice, if required, must be given either by personal

service or by certified mail addressed to the last known address of

the taxpayer. Service upon the department may be made in the same

manner.

(b) An injunction shall not issue to stay proceedings for the

assessment and collection of a tax.

act, the department may institute an action at law in any county in

which the taxpayer resides or transacts business.

(d) The state treasurer may request in writing information or

records in the possession of any other department, institution, or

agency of state government for the performance of duties under this

act. Departments, institutions, or agencies of state government

shall furnish the information and records upon receipt of the state

treasurer's request. Upon request of the state treasurer, any

department, institution, or agency of state government shall hold a

hearing under the administrative procedures act of 1969, 1969 PA

306, MCL 24.201 to 24.328, to consider withholding a license or

permit of a person for nonpayment of taxes or accounts collected

under this act.

(e) Except as otherwise provided in sections 21(2)(e), 23a,

and 30c, the state treasurer or an employee of the department shall

not compromise or reduce in any manner the taxes due to or claimed

by this state or unpaid accounts or amounts due to any department,

institution, or agency of state government. This subdivision does

not prevent a compromise of interest or penalties, or both.

(f) Except as otherwise provided in this subdivision, in

subsection (6) or (7), or in section 23a, an employee, authorized

representative, former employee or authorized representative of the

department, or anyone connected with the department shall not

divulge any facts or information obtained in connection with the

administration of a tax or information or parameters that would

enable a person to ascertain the audit selection or processing

criteria of the department for a tax administered by the

department. An employee or authorized representative shall not

willfully inspect any return or information contained in a return

unless it is appropriate for the proper administration of a tax law

administered under this act. A person may disclose information

described in this subdivision if the disclosure is required for the

proper administration of a tax law administered under this act or

the general property tax act, 1893 PA 206, MCL 211.1 to 211.155,

pursuant to a judicial order sought by an agency charged with the

duty of enforcing or investigating support obligations pursuant to

an order of a court in a domestic relations matter as that term is

defined in section 2 of the friend of the court act, 1982 PA 294,

MCL 552.502, pursuant to a judicial order sought by an agency of

the federal, state, or local government charged with the

responsibility for the administration or enforcement of criminal

law for purposes of investigating or prosecuting criminal matters

or for federal or state grand jury proceedings, or pursuant to a

judicial order if the taxpayer's liability for a tax administered

under this act is to be adjudicated by the court that issued the

judicial order. A person required to disclose information under

section 10(1)(j) of the Michigan economic growth authority act,

1995 PA 24, MCL 207.810, may disclose the information only to the

individuals described in that section. A person may disclose the

information required for the report described in section 9 of the

Michigan strategic fund act, 1984 PA 270, MCL 125.2009, for

programs with new written agreements entered into after the

effective date of the amendatory act that added this sentence for

programs operated under the Michigan strategic fund act, 1984 PA

270, MCL 125.2001 to 125.2094. A person may disclose the adjusted

gross receipts and the wagering tax paid by a casino licensee

licensed under the Michigan gaming control and revenue act, 1996 IL

1, MCL 432.201 to 432.226, pursuant to section 18, sections 341,

342, and 386 of the management and budget act, 1984 PA 431, MCL

18.1341, 18.1342, and 18.1386, or as authorized by the executive

director of the gaming control board. However, the state treasurer

or a person designated by the state treasurer may divulge

information set forth or disclosed in a return or report or by an

investigation or audit to any department, institution, or agency of

state government upon receipt of a written request from a head of

the department, institution, or agency of state government if it is

required for the effective administration or enforcement of the

laws of this state, to a proper officer of the United States

department of treasury, Department of Treasury, and to a proper

officer of another state reciprocating in this privilege. The state

treasurer may enter into reciprocal agreements with other

departments of state government, the United States department of

treasury, Department of Treasury, local governmental units within

this state, or taxing officials of other states for the

enforcement, collection, and exchange of data after ascertaining

that any information provided will be subject to confidentiality

restrictions substantially the same as the provisions of this act.

The state treasurer or a person designated by the state treasurer

may disclose the address of each housing unit that is part of a

housing project exempt from ad valorem taxes under section 15a of

the state housing development authority act of 1966, 1966 PA 346,

MCL 125.1415a, or under section 11a of 1933 (Ex Sess) PA 18, MCL

125.661a, and whether the unit is subject to a service charge in

lieu of ad valorem taxes. The state treasurer or a person

designated by the state treasurer may also disclose the millage

rates of property taxes as defined in section 512a of the income

tax act of 1967, 1967 PA 281, MCL 206.512a.

(2) A person who violates subsection (1)(e), (1)(f), or (4) is

guilty of a felony, punishable by a fine of not more than

$5,000.00, or imprisonment for not more than 5 years, or both,

together with the costs of prosecution. In addition, if the offense

is committed by an employee of this state, the person shall be

dismissed from office or discharged from employment upon

conviction.

(3) A person liable for any tax administered under this act

shall keep accurate and complete records necessary for the proper

determination of tax liability as required by law or rule of the

department.

(4) A person who receives information under subsection (1)(f)

for the proper administration of the general property tax act, 1893

PA 206, MCL 211.1 to 211.155, shall not willfully disclose that

information for any purpose other than the administration of the

general property tax act, 1893 PA 206, MCL 211.1 to 211.155. A

person who violates this subsection is subject to the penalties

provided in subsection (2).

(5) A person identified in section 10(1) of the Michigan

economic growth authority act, 1995 PA 24, MCL 207.810, who

receives information under section 10(1)(j) of the Michigan

economic growth authority act, 1995 PA 24, MCL 207.810, as

permitted in subsection (1)(f), shall not willfully disclose that

information for any purpose other than the proper administration of

his or her legislative duties nor disclose that information to

anyone other than an employee of the legislature, who is also bound

by the same restrictions. A person who violates this subsection is

responsible for and subject to a civil fine of not more than

$5,000.00 per violation.

(6) The department shall annually prepare a report containing

statistics described in this subsection concerning the Michigan

business tax act, 2007 PA 36, MCL 208.1101 to 208.1601, for the

most recent tax year for which reliable return data have been

processed and cleared in the ordinary course of return processing

by the department. A copy of the report must be provided to the

chairpersons of the senate and house of representatives standing

committees that have jurisdiction over matters relating to taxation

and finance, the director of the senate fiscal agency, and the

director of the house fiscal agency. The department shall report

the following information broken down by business sector and,

provided that no grouping consists of fewer than 10 taxpayers, by

firm size in compliance with subsection (1)(f) and in a manner that

does not result in the disclosure of information regarding any

specific taxpayer:

(a) Apportioned business income tax base.

(b) Apportioned modified gross receipts tax base.

(d) Use of credits.

(e) Modified gross receipts tax liability.

(f) Total final liability.

(g) Total liability before credits.

(7) A person may disclose the following information described

in this subsection:

(a) Information required to be reported under section 455 of

the Michigan business tax act, 2007 PA 36, MCL 208.1455.

(b) An application to enter into an agreement, a communication

denying an application to enter into an agreement, an agreement, a

postproduction certificate, a communication denying a

postproduction certificate, or the total amount of credits claimed

in a tax year under section 455 of the Michigan business tax act,

2007 PA 36, MCL 208.1455, notwithstanding section 455(6) of the

Michigan business tax act, 2007 PA 36, MCL 208.1455.

denying an application to enter into an agreement, an agreement, an

investment expenditure certificate, a communication denying an

investment expenditure certificate, or the total amount of credits

claimed in a tax year under section 457 of the Michigan business

tax act, 2007 PA 36, MCL 208.1457, notwithstanding section 457(6)

of the Michigan business tax act, 2007 PA 36, MCL 208.1457.

(d) An application to enter into an agreement, a communication

denying an application to enter into an agreement, an agreement, a

qualified job training expenditures certificate, a communication

denying a qualified job training expenditures certificate, or the

total amount of credits claimed in a tax year under section 459 of

the Michigan business tax act, 2007 PA 36, MCL 208.1459,

notwithstanding section 459(6) of the Michigan business tax act,

2007 PA 36, MCL 208.1459.

(8) As used in subsection (1), "adjusted gross receipts" and

"wagering tax" mean those terms as described in the Michigan gaming

control and revenue act, 1996 IL 1, MCL 432.201 to 432.226.