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Contact Information:
Edward S. Kisscorni, CPA
290 Suncrest Court, SW
Grandville, MI 49418

Office: 616/233-0667
Cell: 616/443-6730
Fax: 616/233-0667

Blog: www.EdKisscorni.com/Blog1
Email: Ed@EdKisscorni.com
 



 



 

 Blog 
Monday, September 30 2013

Revenue Administrative Bulletin Addresses "Nexus" Questions

Revenue Administrative Bulletin 2013-9, Michigan Department of Treasury, June 5, 2013, discusses the meaning of "actively solicits" as it is used in one of the corporate income tax nexus standards.  

Under the substantial economic presence nexus standard, nexus exists if the taxpayer actively solicits sales in Michigan and has gross receipts of $350,000 or more sourced to Michigan.  State law defines "actively solicits" as (1) speech, conduct, or activity that is purposefully directed at or intended to reach persons within Michigan and that explicitly or implicitly invites an order for a purchase or sale; or (2) speech, conduct, or activity that is purposefully directed at or intended to reach persons within Michigan that neither explicitly nor implicitly invites an order for a purchase or sale, but is entirely ancillary to requests for an order.

Active solicitation on its own does not necessarily create nexus.  Active solicitation includes, but is not limited to, solicitation through the use of mail, telephone, and email, advertising (including print, radio, Internet, television, and other media), and maintenance of an Internet site through which sales transactions occur with persons in Michigan.  Examples include sending mail order catalogs, sending credit applications, maintaining Internet sites offering online shopping, services or subscriptions, and soliciting through media advertising.  The same standards used to determine nexus for out-of-state taxpayers are applied to decide if a taxpayer is taxable in another state for apportionment purposes.

Posted by: Ed Kisscorni AT 12:38 pm   |  Permalink   |  Email
Friday, September 27 2013

Reviewed by Deputy Treasurer for Tax Administration

In Internal Policy Directive 2013-2, Michigan Department of Treasury, May 30, 2013, any rebuttal to a recommendation drafted by an informal conference referee will be reviewed by the Deputy Treasurer for Tax Administration prior to issuance of the Decision and Order of Determination. 

The Hearings Division of the Department of Treasury conducts informal appeals (Informal Conference) pertaining to all questions of liability for any Michigan tax administered by the Department of Treasury.  The Deputy Treasurer for Tax Administration  oversees administration of taxes administered by the Department of Treasury under the Revenue Act.  It is important that the Deputy Treasurer be knowledgeable of decisions issued as a result of informal conferences and particularly rebuttals issued in explanation of reasons for rejecting a referee’s recommendation.

A taxpayer is entitled to an informal conference upon timely service of written notice upon the Department of Treasury 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.  After the informal conference is held, the Department of Treasury  renders a decision and order in writing setting forth the reasons and authority for the decision.

Posted by: Ed Kisscorni AT 12:36 pm   |  Permalink   |  Email
Thursday, September 26 2013

Assessment Not Timely Appealed

In Bonar v. Department of Treasury, Michigan Court of Appeals, No. 310707, May 30, 2013, the Michigan Court of Appeals held that a taxpayer, as a responsible corporate officer, failed to timely appeal a single business tax assessment and an income tax withholding assessment to the Tax Tribunal.

The final assessments were sent on September 24, 2009, and were appealed on December 7, 2010.  The applicable statute gave taxpayers 35 days to appeal.  The fact that the power of attorney was completed with the wrong entity name did not change the result.  The Court of Appeals ruled the power of attorney must be strictly construed and cannot be extended beyond its face.

Posted by: Ed Kisscorni AT 12:34 pm   |  Permalink   |  Email
Wednesday, September 25 2013

Tax Tribunal Failed to Make Independent Determination of True Cash Value

In Avolio v. City of Detroit, Michigan Court of Appeals, No. 308885, May 23, 2013, the Michigan Tax Tribunal’s judgment affirming the original assessed, taxable, and true cash valuations of a parcel of property for property tax assessment purposes was incorrect because the Tax Tribunal failed to make an independent determination of the true cash value of the property.

The taxpayer had a licensed real estate appraiser report on the value of the property by comparing the subject property to similar homes recently sold in the neighborhood.  Although the sales comparison approach is generally a useful method, the properties were not accepted because they were bank or government owned and the adjustments were too large.  Likewise, the determination impermissibly gave presumptive validity to the city’s assessments so that essentially the assessment was accepted as correct.

Cost Less Depreciation Method Was Determined to be the Best Method for Valuation

In Reid v. Township of Clark, Michigan Court of Appeals, No. 309268, May 23, 2013, the Michigan Court of Appeals held that the cost less depreciation method was the most reliable method to calculate a property’s true cash value for property tax purposes.  The property was an improved residential lot on Lake Huron with a peninsula.  The trial court had the duty to select the approach which provided the most accurate valuation under the circumstances of the individual case.  After examining the evidence, the trial court found that the property record card, which used the cost less depreciation method, was the most reliable indicator of the property’s value.  The rationale was supported by the record evidence.  Furthermore, the trial court did not commit an error of law by discounting the taxpayer’s appraisal evidence, which used the sales comparison approach.  There was no evidence of suitably comparable sales of property upon which to base a sales comparison approach for valuation.  

Principal Residence Exemption Denied

In William A. Power III v. Michigan Department of Treasury, Michigan Court of Appeals, No. 309773, May 28, 2013, a claim for a principal residence exemption from Michigan property tax was properly denied because the petitioner failed to submit any evidence of an ownership interest in the subject property or the building in which he resided.  The lease agreement entered into by the petitioner did not convey the land or any buildings to the petitioner, and the licensing agreement that superseded the lease explicitly stated that no legal or equitable ownership interest or title in or to the lot was granted.  Furthermore, there was no evidence that petitioner owned or was purchasing his dwelling on the leased land.  All taxes were billed to the corporation that was the owner of record, and then apportioned to individual shareholders.

True Cash Value of Residential Property Not Supported by Evidence

In Town Commons, L.L.C. v. City of Howell, Michigan Court of Appeals, No. 311365, May 23, 2013, the true cash value of residential real property as determined by the Michigan Tax Tribunal for the 2010 and 2011 local property tax years was not supported by the evidence because the Tax Tribunal’s determination was wholly independent from the property’s assessed value or any value proposed by the parties.  The hearing referee concluded that the most reliable indicator of the property’s true cash value was the sales-comparison approach and found that the taxpayer’s analysis supported a decrease in true cash value of the property at issue for the tax years in question, but not to the values the taxpayer contended.  The hearing referee also rejected the city’s supporting evidence that consisted of property listings rather than actual sales.  Although the Tax Tribunal disagreed with the hearing referee’s holding that it did not have jurisdiction over an amount in dispute exceeding $100,000, because the property at issue was residential, the Tax Tribunal adopted the hearing referee’s opinion and judgment.

If neither party’s valuation figure was accurate, the Tax Tribunal was free to reject both. However, the Tax Tribunal was not permitted to substitute some other figure that was equally lacking in evidentiary support.  Absent any evidence or explanation on the record supporting the Tax Tribunal’s value determination, and given that the hearing referee’s $100,000 reduction coincided with the hearing referee’s erroneous understanding of the Tax Tribunal’s jurisdictional limits, the Michigan Court of Appeals concluded that it was necessary to remand this case to ensure that the Tax Tribunal’s determination of true cash value was not influenced by the hearing referee’s erroneous legal conclusion regarding the Tax Tribunal’s jurisdiction.

Posted by: Ed Kisscorni AT 12:30 pm   |  Permalink   |  Email
Tuesday, September 24 2013

Income Tax Act and the Michigan Constitution Reference Husband and Wife and Marriage as Between One Man One Woman

Same-sex married couples who file a joint federal income tax return must continue to file Michigan personal income tax returns using the single filing status.  State law limits a joint return to a married couple who are a husband and wife.

[MCL 206.311(3)]  Taxpayers who are husband and wife and who file a joint federal income tax return pursuant to the internal revenue code shall file a joint return.

In addition, the state constitution defines marriage as the union of one man and one woman. Under state law, the phrase "husband and wife" means a man and woman who are married to each other.

Each individual who has income attributable to Michigan and who filed a joint return for federal income tax purposes as a same-sex couple must separately report adjusted gross income for Michigan as a single filer.  Each individual must recalculate the federal adjusted gross income as if that person had filed a single tax return for federal income tax purposes.  The Department of Treasury will provide a worksheet for the calculation.

Notice to Taxpayers: Same-Sex Couples Filing Joint Federal Income Tax Returns Must File Michigan Income Tax Returns As Single Filers, Michigan Department of Treasury, September 2013.

Posted by: Ed Kisscorni AT 12:26 pm   |  Permalink   |  Email
Monday, September 23 2013

This past summer I made a couple of structural changes in the manner that I plan to deliver high quality Michigan State and Local Tax services to the Michigan business community.

First, I have affiliated myself with Ron Kaley.  I have known and worked with Ron since 1997 when we both worked in the tax department of Crowe Chizek & Co. in Grand Rapids.  More recently, we both worked in the tax department of Echelbarger Himebaugh Tamm & Co.  But you may remember Ron and I traveling the state presenting Michigan Business Tax seminars.  Ron and I also co-authored a book on the Michigan Business Tax.

Ron, a former IRS agent, has a very deep background in the federal income tax as well as state and local tax.  He supplements me in that area of tax practice. 

While we work closely together, we both have our own separate businesses, websites and blogs.  Ron's practice area includes federal, state and local tax consulting including tax planning as well as audits and appeals.  My practice will be limited to Single Business Tax and Michigan Business Tax mop up work as well as Michigan Sales and Use Tax consulting, planning, audits and appeals.

Second, both Ron and I have moved into a new suite in the Federal Square Building in downtown Grand Rapids.  Below is our new address:   

Federal Square Building

29 Pearl Street, Suite 106

Grand Rapids, MI 49503

Posted by: Ed Kisscorni AT 01:00 pm   |  Permalink   |  Email
Friday, September 20 2013

MACPA Sales and Use Tax Seminars Visit Two Cities in September and October

Take this opportunity to become up-to-date on the sales and use tax law, rules, bulletins and court cases.  The Department of Treasury is promulgating several new rules for the administration of the sales tax and the use tax.  Most of the changes update the old rules or rescinded rules that no longer were applicable.  The legislature is currently working on amendments to both the sales and use tax laws to address issues with the administration and compliance of the complicated laws.  The courts issued 25 opinions on sales and use tax cases in 2012 and 2013.  Over the last several years the number of sales and use tax audits as well as the intensity of such audits have increased. Auditors are raising new issues and employing different auditing techniques.

Register on line at the MACPA website:

Wednesday, September 25, 2013 - VisTaTech Center Schoolcraft College, Livonia Michigan

http://www.michcpa.org/Aptify/Meetings/Meeting.aspx?ID=24657

Tuesday, October 29, 2013 - Hilton Grand Rapids Airport - Grand Rapids, Michigan

http://www.michcpa.org/Aptify/Meetings/Meeting.aspx?ID=24687

Amendments to the General Sales Tax Act and the Use Tax Act

Public Act 126 of 2012 - Amends the sales tax act to eliminate the sales tax exemption for sales to inmates.

Public Act 211 of 2012 - Clarifies what constitutes the filing of a return for purposes of the statute of limitations.

Public Act 299 of 2012 - Limits the imposition of the use tax on a manufacturer contractor to affixations to real estate in Michigan; effectively eliminating the use tax on out of Michigan contracts.  PA 299 is retroactive and effective January 1, 2006.

Public Act 474 of 2012 - Amends the use tax act to provide an exemption for property purchased or manufactured by a contractor to the extent that the property was affixed to and made a structural part of real estate located outside of Michigan.

Public Act 412 of 2012 and Public Act 413 of 2012 expands the sales tax and use tax exemptions for tangible personal property used at a producing mine or a facility where beneficiation of minerals occurred.

Public Act 429 of 2012 and Public Act 467 of 2012 expands the sales and use tax exemptions for parts or other tangible personal property affixed to or to be affixed to and directly used in the operation of either a qualified truck or a trailer designed to be drawn behind a qualified truck.  Both Public Act 467 and Public Act 429 are curative and intended to clarify the original intent of the law.

Administrative Rules

Effective May 6, 2013, the Department of Treasury has promulgated a set of revised General Sales and Use Tax Rules and Specific Sales and Use Tax Rules.  Three rules were rescinded.  Notably missing was a proposed rule on single mixed transactions.

Judicial Decisions

Michigan courts issued 25 opinions on sales and use tax cases in 2012 and 2013.  Two major cases will be decided by the Michigan Supreme Court in the Fall of 2013.

Tax Administration and Compliance

Audit Standards - House Bill 4291 - Amends the Revenue Act

Transparency and Guidance - House Bill 4290 - Amends the Revenue Act

Audit Procedures - House Bill 4288 - Amends the Sales Tax Act and House Bill 4292 - Amends the Use Tax Act.  Limits the use of indirect audit procedures by the Department of Treasury.

Collection Goals, Budgets or Quotas - Senate Bill 327 - Amends the Revenue Act

Officer Liability/Successor Liability - Senate Bill 64 - Amends the Revenue Act

Offer in Compromise - House Bill 4003 - Amends the Revenue Act

Delayed Refunds to Taxpayers - House Bill 4002 - Amends the Revenue Act

Limitation on Time to Audit/Refund Claims - Senate Bill 337 - Amends the Revenue Act

Confidentiality - Senate Bill 316 - Amends the Revenue Act

Who Should Attend:
Individuals who desire a working knowledge of how the Michigan Sales and Use Tax works.

 

The Basics of Sales and Use Tax

            Sales Tax

            Use Tax 

            Exemptions

            Sourcing of Sales

            Records

            Direct Pay Authorization

            Compliance Agreements

            Exemption Documentation Requirements

Sales and Use Tax Audits and Appeals

            Sales and Use Tax Audits

            Audit Sampling Procedures

            Sales and Use Tax Appeals

            Penalty and Interests

Special Industry Application of the Sales and Use Tax

            Contractors

            Contractors vs Retailed

            Service vs Sale of Tangible Personal Property

            Industrial Processing

            Extractive Operations

            Containers, Cartons and Materials

            Healthcare

            Computer Software

            Rentals

            Interstate Motor Carrier Property

            Discounts, Rebates and Coupons

            Drop Shipments

            Delivery Services

            Food for Human Consumption

            Interstate Commerce

            Isolated Sales 

           

Posted by: Ed Kisscorni AT 11:00 am   |  Permalink   |  Email

 

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