Thursday, May 30 2013
Officer Shareholder Was Determined to be a Responsible Officer
In Griffin v. Department of Treasury, Michigan Court of Appeals, No. 311118, May 23, 2013, an assessment for Michigan sales and withholding taxes issued against a taxpayer’s president and co-owner was upheld because evidence supported the conclusion that he was a responsible corporate officer.
In order to hold a petitioner personally liable for unremitted taxes, the Department of Treasury must show that (1) the petitioner had control over the making of the taxpayer’s returns and payments; (2) the petitioner supervised the making of the taxpayer’s returns and payments; or (3) the petitioner was charged with the responsibility for making returns and payments. In the present case, the petitioner testified that he was the only person with responsibility for making and signing returns. Furthermore, upon receiving completed returns from the accountant, the petitioner personally reviewed and signed them.
Wednesday, May 29 2013
Scheduled for Monday, June 3rd In Grand Rapids at the WMU Downtown Conference Center
The Michigan State & Local Tax Update course with Ed Kisscorni and Ron Kaley is an opportunity to get current and up to date information on the State of Michigan’s tax issues. The numerous amendments added to the income tax act during 2012 will be discussed. The post tax season follow-up will evaluate how flow through withholding is working. Guidance on new withholding requirements has been slow, but Ed and Ron will point out the effects on corporations, flow-through entities, and non-resident individuals.
Mop up on the Single Business Tax (SBT) and Michigan Business Tax (MBT) continues with a review of SBT court cases and new amendments to the MBT. Audits of MBT returns are in progress creating many issues for practitioners. The process to start the phase out of the personal property tax has begun. Special provisions for small businesses will be addressed. A complete update of the sales and use tax will include a review of new law, court cases, new administrative rules and proposed legislation.
Register on line at the MACPA:
Michigan State & Local Tax Update with Ed Kisscorni & Ron Kaley (MSLTGR)
Monday, June 03, 2013
WMU Downtown Conference Center - Grand Rapids, MI - Western
Wednesday, May 29 2013
Lessor of Aircraft Never Took Possession of Aircraft Prior to Lease
The Michigan Supreme Court has granted leave to appeal the October 16, 2012 judgment of the Court of Appeals in NACG Leasing v. Department of Treasury, No. 306773. The parties must address the applicability of the use tax to a transaction where tangible personal property is purchased by one party and leased to another party when the purchaser does not obtain actual possession of the property. The Court of Appeals held that the owner/lessor was not liable for use tax because it ceded total control over the aircraft to its lessee. The lessor had executed the lease contemporaneously with its purchase of the aircraft. The lessee was already in possession of the aircraft prior to the taxpayer’s purchase, and this possession was uninterrupted. The lessee was responsible for all repairs, insurance, and taxes and bore the risk of loss of the aircraft.
NACG Leasing v. Department of Treasury, Michigan Supreme Court, No. 146234, May 22, 2013, granting application for leave to appeal NACG Leasing v. Department of Treasury, Michigan Court of Appeals, No. 306773, October 16, 2012
Tuesday, May 28 2013
Applicable Statutes that Created the Entities Exempted Them from All State and Local Taxes
In County of Oakland v. Federal Housing Finance Agency, U.S. Court of Appeals for the Sixth Circuit, Nos. 12-2135 and 12-2136, May 20, 2013, the U.S. Court of Appeals ruled the Federal National Mortgage Association (Fannie Mae), the Federal Home Loan Mortgage Corporation (Freddie Mac), and the Federal Housing and Finance Agency were exempt from Michigan state and county real estate transfer taxes, the U.S. Court of Appeals for the Sixth Circuit held, because the plain language of the applicable statutes that created these entities expressly exempted them from all taxation imposed by the state or local taxing authority. Accordingly, the common sense, nontechnical interpretation of "all taxation" had to include the state and county real estate transfer taxes, which imposed a tax on the seller or grantor when a deed or other instrument of conveyance was recorded during the transfer of real property.
The Court of Appeals also noted that the text of the statutes was revealing in another way. In granting to each of the three entities an exemption, Congress explicitly created a carve-out from the "all taxation" language by permitting taxes on real property. Congress, however, did not provide a similar carve-out for the type of transfer taxes at issue in this case. When Congress provided exceptions in a statute, it did not follow that courts had authority to create others. The proper inference was that Congress considered the issue of exceptions and, in the end, it limited the statute to the ones set forth. Therefore, because the statutes were clear, the court was not in a position to second guess Congress and create a new exception in the statute for state and county real estate transfer taxes.
The conclusion that the plain language of the statutes should control was reinforced by the U.S. Supreme Court’s decision in Federal Land Bank of St. Paul v. Bismarck Lumber Co., 314 U.S. 95 (1941), and the decision of the U.S. Court of Appeals for the Sixth Circuit in United States v. State of Michigan, 851 F. 2nd 803 (1988). These cases involved entity exemptions in statutes similar to the exemption statutes in this case. In both cases, the courts concluded that the exemption precluded a sales tax on the entities’ purchases, even though sales taxes were not a specifically enumerated exemption in the statute.
In other words, Bismarck and Michigan supported the straightforward, nontechnical reading of the exemptions in this case. They stood for the proposition that when Congress broadly exempted an entity from taxation or all taxation, it meant all taxation.
Thursday, May 23 2013
Three Rules Rescinded - Nine Rules Amended
The Michigan Department of Treasury has amended and repealed several sales and use tax rules in order to conform to current law. The rescinded rules include: R205.5 Tangible Personal Property, R205.9 Sales for Purposes of Resale and R205.23 Records
Sales tax licenses: R205.1 is amended to reflect that a sales tax license expires on September 30 of each year. Also, the amended rule advises that a person licensed to sell at retail is not automatically exempt from sales tax on its own purchases.
Consumer: R205.8 is amended to clarify that a "consumer" includes a person acquiring, for consideration, tangible personal property through the mail or catalog or over the Internet. The term also includes (1) a person acquiring tangible personal property if engaged in the business of constructing, altering, repairing, or improving the real estate of others, and (2) a person who converts tangible personal property or services that were exempt to a use that is not exempt. A seller is deemed a consumer when one of the following occurs: (1) the seller removes goods from inventory for personal use or consumption or in the conduct of the seller’s business; or (2) the seller converts tangible personal property acquired for an exempt use to a nonexempt use.
Trade-in deduction: R205.15 is amended to reflect that sellers of automotive parts must remit tax on the total sales price, including the value placed on the used part traded in and the part sold. No refund or reduction in tax is allowed based on any payment or credit given to a customer for a part traded in.
Returned goods: R205.16 has been revised to state that if a seller provides a full refund or credit of the purchase price and tax on returned goods, the seller may claim a refund or credit of the tax paid to the department within four years of the date for the filing of the original return for the period in which the tax was due. In regards to a seller providing a partial refund or credit on returned goods, the seller’s claim for refund of the tax paid on that portion of the purchase price refunded must also be made within four years of the date for the filing of the original return for the period in which the tax was due. A refund or credit of tax will not be given on returned goods without proof that Michigan tax was paid on the original sale.
General application: R205.20 is amended to provide that the administrative rules must be read and interpreted in their entirety, taking into account the effect of all pertinent legislation, rules, and court decisions.
Use tax registration: R205.26 is amended to reflect that the following activities are among those that require a use tax registration:
· a business within the state buying tangible personal property from nonregistered sellers;
· a provider of interstate telecommunications services having nexus with the state; and
· a provider of laundering or textile cleaning services under a sale, rental, or service agreement with a term of five days or more that has nexus with the state.
Use tax included in gross proceeds: R205.28 is amended to read that the use tax act requires a seller to collect use tax as a separate line item and prohibits the inclusion of such charge as part of the sales price or purchase price.
Discounts: R205.22 is amended to conform to the definition of "sales price" contained in the Streamlined Sales and Use Tax (SST) Agreement. A discount or rebate offered by the seller, with no reimbursement by a third party, reduces the sales price. However, a discount or rebate does not reduce the sales price when the following conditions are found:
· the seller receives consideration from a party other than the purchaser and the consideration is directly related to the price reduction;
· the seller is obligated to pass the price reduction to the purchaser;
· the amount of consideration attributable to the sale is fixed and determinable by the seller at the time of sale; and
· the purchaser presents documentation to the seller claiming a price reduction granted by a third party with the understanding that the third party will reimburse the seller, or the purchaser identifies him/herself as a member of a group entitled to a reduction or discount, or the price reduction is identified as a third-party discount on the invoice received by the purchaser.
Food for human consumption: R205.136 is amended to include the definition of "prepared food" as found in the SST Agreement. Prepared food means (1) food sold in a heated state or that is heated by the seller; (2) two or more food ingredients mixed by the seller for sale as a single item; or (3) food sold with eating utensils provided by the seller.
Wednesday, May 22 2013
In Elm Investment Co. v. City of Detroit, Michigan Court of Appeals, No. 309738, May 14, 2013, a local Michigan tax lien for 2005 property taxes survived a judgment of foreclosure because the property taxes for 2005 were assessed to the property on December 31, 2004, and became a debt due to the local unit of government at that time. The taxes were due prior to the time the county treasurer took absolute title to the property on March 31, 2005.
The judgment of foreclosure did not extinguish the tax debt. The lien that secured the 2005 taxes arose by operation of law on July 1, 2005, and that lien was security for the 2005 property taxes, which were already a debt due to the city. Therefore, when the taxpayer acquired the property at an auction on September 9, 2005, the property was subject to the lien that arose on July 1, 2005, that secured the 2005 property taxes that were imposed before the treasurer took title. The tax lien that arose on July 1, 2005, was not extinguished because it was not in existence at the time the fee simple title vested in the treasurer on March 31, 2005, pursuant to the judgment of foreclosure.
Friday, May 17 2013
Taxpayer Could Not Prove Petition Was Filed
In Jameson v. City of Northville, Michigan Court of Appeals, No. 308961, April 23, 2013, the Michigan Tax Tribunal properly dismissed a taxpayer’s local property tax assessment appeal for lack of jurisdiction because the taxpayer did not timely file his petition. The tribunal had no record that the petition was ever received, and the taxpayer was, therefore, unable to establish that the petition was postmarked by the U.S. postal service on or before the expiration of the applicable time period. Without evidence of a postmark, the taxpayer was unable to establish timely filing. The applicable law did not provide any means of recourse when a taxpayer maintained that a package was timely mailed with the U.S. postal service but was unable to present evidence that it was postmarked before the expiration of the applicable time period. The Michigan Court of Appeals was not permitted to read something into an unambiguous statute that was not within the manifest intention of the law as derived from the words of the statute itself.
Thursday, May 16 2013
Old Tax Tribunal Rules Recinded
The Michigan Department of Licensing and Regulatory Affairs has rescinded existing rules and adopted new rules that govern practice and procedure in all proceedings before the tax tribunal. The new rules must be construed so as to secure a fair, efficient, and impartial determination of the issues presented in all proceedings before the tribunal. To the extent that there is a conflict between these tax tribunal rules and other administrative hearing rules that are promulgated by the Michigan administrative hearing system, the tax tribunal rules must govern. The rules are divided into three subparts: (1) general provisions; (2) matters before the entire tribunal; and (3) matters before the small claims division. The tax tribunal rules may be cited as TTR.
Rules R 792.10201 through R 792.10289, as adopted by the Michigan Department of Licensing and Regulatory Affairs, and Rules R 205.1101 through R 205.1348, rescinded by the Michigan Department of Licensing and Regulatory Affairs, effective March 27, 2013
Wednesday, May 15 2013
Exemption From Withholding Provisions Available
Public Act 15 of 2013, retroactive to January 1, 2013 makes several changes to the Michigan flow-through entity withholding provisions for the corporate income tax. If a flow-through entity receives an exemption certificate from a member other than a nonresident individual, then the flow-through entity shall not withhold tax on the distributive share of business income of that member if the following conditions are met:
-the exemption certificate is completed by a member (previously, corporation);
-the Department of Treasury may require the member to (previously, the corporation was required) to file the exemption certificate with the department and provide a copy to the flow-through entity;
the department may require a flow-through entity that receives an exemption certificate to attach a copy to the annual reconciliation return (previously, the flow-through entity was required to attach a copy); and
a copy of the exemption certificate shall be retained by the member (previously, corporation) and flow-through entity and made available to the department on request.
The department may revoke the election if it determines that the member (previously, corporation) or flow-through entity is not abiding by the terms of the exemption certificate.
Tuesday, May 14 2013
Published Opinion Remanded to the Tax Tribunal
In Orthopaedic Associates of Grand Rapids, PC v. Department of Treasury, Michigan Court of Appeals, No. 308319, unpublished February 19, 2013, approved for publication April 11, 2013, the Michigan Court of Appeals held that a Michigan taxpayer’s payments of continuing medical education expenses and medical malpractice insurance premiums on behalf of its employee physicians were considered compensation and, thus, were added back to the taxpayer’s tax base under the single business tax (SBT). The case was issued earlier as an unpublished decision and has been remanded back to the Tax Tribunal for resolution.
Monday, May 13 2013
Combined Individual Income Tax Return Issue to be Resolved
The Michigan Supreme Court has held in abeyance an application for leave to appeal pending decisions in similar personal income tax cases. The cases of Malpass v. Department of Treasury and Estate of Wheeler, et. al. v. Department of Treasury are pending on appeal and decisions may resolve an issue in the present case. The Winget appellate court held that taxpayers were not permitted to combine business income from separate entities for Michigan personal income tax purposes.
Friday, May 10 2013
Internal Policy Directive 2013-1 Explains the Exemption and Documentation Required
The Michigan Department of Treasury in Internal Policy Directive 2013-1, Michigan Department of Treasury, April 2, 2013, discusses the personal investment income exemption under the single business tax (SBT). The law clarifying the treatment of personal investment income was previously reported.
The exemption covers individuals, estates, persons organized for estate or gift planning purposes, persons organized exclusively to conduct investment activity for individuals or persons related to that individual, and common trusts established under the Collective Investment Funds Act for amounts received, income or gain from those transactions, activities, or sources other than in the regular course of a person’s trade or business.
Taxpayers are not required to attach anything in particular to the return to prove that they are entitled to the exemption, but documentation should be kept. Original documents, minutes, and memoranda created contemporaneously with the entity’s formation that describe the entity’s gift or estate planning purpose are helpful, while documents created after formation or in response to the department’s request are less helpful. Also, federal income tax returns as well as federal gift or estate tax returns may be reviewed. Finally, the department discusses how the law will be applied to taxpayers for informal conferences, refund requests, final assessments that have not been paid, and litigation.
Thursday, May 09 2013
Livonia on May 15th and Grand Rapids on June 3rd
The Michigan State & Local Tax Update course with Ed Kisscorni and Ron Kaley is an opportunity to get current and up to date information on the State of Michigan’s tax issues.
The numerous amendments added to the income tax act during 2012 will be discussed. The post tax season follow-up will evaluate how flow through withholding is working. Guidance on new withholding requirements has been slow, but Ed and Ron will point out the effects on corporations, flow-through entities, and non-resident individuals.
Mop up on the Single Business Tax (SBT) and Michigan Business Tax (MBT) continues with a review of SBT court cases and new amendments to the MBT. Audits of MBT returns are in progress creating many issues for practitioners.
The process to start the phase out of the personal property tax has begun. Special provisions for small businesses will be addressed.
A complete update of the sales and use tax will include a review of new law, court cases, new administrative rules and proposed legislation.
Register for one of the two spring seminars on line at the MACPA:
Michigan State & Local Tax Update with Ed Kisscorni and Ron Kaley (MSLTLV)
Wednesday, May 15, 2013
Laurel Manor - Livonia, MI - Metro Detroit
Michigan State & Local Tax Update with Ed Kisscorni & Ron Kaley (MSLTGR)
Monday, June 03, 2013
WMU Downtown Conference Center - Grand Rapids, MI - Western