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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 
Wednesday, April 30 2014

Tax Based on Gross Up Method Not Allowed When Records Exist

In Liquor Basket Party Store, Inc. v. Department of Treasury, Michigan Tax Tribunal, No. 449145, March 5, 2014, the Tax tribunal upheld a sales tax because the taxpayer failed to show that its gross-up method was more accurate than the Department of Treasury’s reliance on the taxpayer’s own Z-ring tapes.

This case is the latest in a series of cases coming out of the Tax tribunal.  The decisions are inconsistent and provide limited guidance to taxpayers because of different facts and circumstances.  This case is different because in the others, the Department of Treasury will use an "indirect method" to determine the tax because the taxpayer did not have adequate records.  Here the taxpayer wanted the Tax Tribunal to use a gross-up method.   

Though the gross-up method is a valid way to determine a taxpayer’s sales tax liability, there was no need to resort to the method in the instant case because the actual sales data was available from the taxpayer’s Z-ring tapes.  The relevant statutes indicate that the Legislature intended to give the department the power to base assessments on the best information it could obtain.  Furthermore, the taxpayer had no right to choose a particular audit method when it failed to maintain adequate records.

Posted by: Ed Kisscorni AT 01:34 pm   |  Permalink   |  0 Comments  |  Email
Tuesday, April 29 2014

Transfer of Tangible Personal Property for Consideration

In Schoeneckers, Inc. v. Department of Treasury, Michigan Tax Tribunal, No. 450419, March 5, 2014 the transfer of award merchandise to program participants in exchange for award points was properly held subject to Michigan sales tax because the transactions were transfers of tangible personal property for consideration.

Under the terms of a written contract, the taxpayer provided a service to its clients by designing, managing, and administering performance improvement programs.  It also transferred award merchandise directly to program participants. Though the taxpayer asserted that the "incidental to service" test in Catalina Marketing Sales Corp. v. Dept. of Treasury, 470 Mich. 13, 678 N.W.2d 619 (2004), should apply, the test only applies when a single transaction involves a provision of services and the transfer of tangible personal property.

In this case, there were two separate transactions: (1) the provision of services from the taxpayer to its customers, and (2) the transfer of award merchandise to program participants in exchange for award points. The program participants did not need to be parties to the contract in order for there to be a retail sale from the taxpayer to the participants.

Posted by: Ed Kisscorni AT 01:31 pm   |  Permalink   |  0 Comments  |  Email
Monday, April 28 2014

Four Bill Package Retroactive to 2012 Except Unitary Group Changes Which are Not Effective Until 2014

From the MACPA:

Public Act 13 of 2014:  HB 5008

NOL Successorship

Explanation: Clarify that former SBT and MBT policy allowing loss carry-forwards to survive corporate reorganizations also applies to the CIT. (Parallels previously enacted MBT technical corrections.) (MCL 206.623) 
 

Clarify Ultimate Destination
Explanation: Clarify the phrase "ultimate destination" in the sourcing rule for tangible personal property to ensure that temporary storage of goods does not constitute coming to rest. (Parallels previously enacted MBT technical corrections.) (MCL 206.665) 

Small Business Credit Definition of Officer Limited

Explanation:  Adds to the definition of officer persons performing similar duties and responsibilities to those particular individuals that include, at a minimum, major decision making.

Public Act 14 of 2014:  HB 5009 

Expand Intercompany Eliminations for a Unitary Business Group
Explanation: Clarify that intercompany eliminations for a unitary business group filing a combined return include exemptions, deductions, subtractions and credits.  (MCL 206.691)


Public Act 15 of 2014:  HB 5010


Clarify Intercompany Elimination for Unitary Flow-Through Entity Sales
Explanation: Clarify that the sales factor elimination for intercompany sales between a corporation and a unitary flow-through entity is based on the corporation's ownership percentage in the flow-through entity. Similarly, clarify that sales between two unitary flow-through entities owned by the corporation are eliminated based on the corporation's ownership percentage of the selling flow-through entity.  (MCL 206.663)

IC-DISC Exemption
Explanation: Establish explicit exemption from CIT for Interest Charge Domestic International Sales Corporations (IC-DISC), consistent with federal income tax treatment.  (MCL 206.625)

Public Act 16 of 2014:  HB 5011 

ITC Recapture

Explanation:  Establish "to extent used" requirement in the CIT for the MBT ITC recapture provision (which exists in the SBT ITC recapture provision) to prevent double tax effect of recapturing a credit which was never utilized.  (MCL 206.673)

All of the amendments to the Corporate Income Tax will be discussed at the Michigan State and Local Tax Update in May in Traverse City and Troy.

Michigan State and Local Tax Update (30637 - MSLTTC)

Monday, May 12, 2014

Holiday Inn Traverse City - West Bay - Traverse City, MI

http://www.michcpa.org/Aptify/Meetings/Meeting.aspx?ID=30637

Michigan State and Local Tax Update (30641 - MSLTTR)

Monday, May 19, 2014

MSU Management Education Center - Troy, MI

http://www.michcpa.org/Aptify/Meetings/Meeting.aspx?ID=30641

Posted by: Ed Kisscorni AT 01:26 pm   |  Permalink   |  0 Comments  |  Email
Friday, April 25 2014

Letter Ruling No. LR 2014-1 Presents a Solution to Avoid Double Tax

In Letter Ruling No. LR 2014-1, Michigan Department of Treasury, February 25, 2014, a common problem is address and a solution presented.  The issue involves a retailer selling tangible personal property with installation where the installation is performed by an independent contractor unrelated to the retailer.  The retailer is required to pay sales tax on the total selling price of the tangible personal property sold including installation.  A contractor is responsible for tax on the purchase price of tangible personal property affixed to the realty.  The potential for double tax exists. 

Internal Policy Directive 2005-3 would allow a contractor to remit sales tax as a retailer under certain circumstances.

Letter Ruling No. LR 2014-1

When a retailer sells taxable product and installation to a customer and hires a subcontractor to perform the installation services, the retailer is required to remit Michigan sales tax on the price charged to the customer for the materials.  The contractor will be relieved of use tax liability on the tangible personal property if it can demonstrate that the retailer collected the sales tax.  An invoice from the retailer to the customer that separately states the sales tax would be sufficient evidence to exempt the contractor.

A retailer may not exempt taxable transactions without a valid exemption claim.  Therefore, a retailer must collect sales tax on taxable property even if a contractor requests that such tax not be collected to enable the contractor to pay use tax on the property.  If the contractor obtains materials for contracts with the retailer from another source, it would owe sales tax to that other vendor, and the property would not be subject to use tax upon installation.

Letter Ruling No. LR 2014-1 and Internal Policy Directive 2005-3 will be discussed at the June Michigan sales and Use Tax seminars in Livonia and Traverse City.

Michigan Sales and Use Tax (30677 - MSUTLV)

Friday, June 20, 2014

VisTaTech Center Schoolcraft College - Livonia, MI

http://www.michcpa.org/Aptify/Meetings/Meeting.aspx?ID=30677

Michigan Sales and Use Tax (30681 - MSUTTC)

Tuesday, June 24, 2014

Holiday Inn Traverse City - West Bay - Traverse City, MI - Northern

http://www.michcpa.org/Aptify/Meetings/Meeting.aspx?ID=30681

Posted by: Ed Kisscorni AT 01:24 pm   |  Permalink   |  0 Comments  |  Email
Thursday, April 24 2014

Tax Tribunal Determination of Unjust Enrichment Reversed

In MJR Group, LLC v. Department of Treasury, Michigan Court of Appeals, No. 312745, February 25, 2014 the summary judgment of the Tax Tribunal in favor of the Department of Treasury was reversed.  The Court of Appeals said the Tax Tribunal applied the wrong standards upon reviewing the parties’ motions.

The taxpayer sought a refund on sales tax erroneously remitted for bottled water and prepackaged candy sold at its theaters’ concession stands.  The taxpayer asserted that it did not pass the burden of the sales tax to its customers but absorbed the amount, and advertised that its prices included sales tax.

The Tax Tribunal ruled that the taxpayer would be unjustly enriched if it received a refund, but in doing so, rejected the taxpayer’s well-pleaded allegations that it did not add sales tax to its menu items and did not reimburse itself.  As the taxpayer created the factual issue of whether it collected sales tax from its customers, summary disposition could also not be granted in its favor.

Posted by: Ed Kisscorni AT 01:22 pm   |  Permalink   |  0 Comments  |  Email
Wednesday, April 23 2014

Revenue Administrative Bulletin 2014-5 Discusses Three Nexus Standards

The Michigan Department of Treasury has issued a Revenue Administrative Bulletin discussing the corporate income tax nexus standards.

There are three alternative ways to establish nexus:

  • The taxpayer has physical presence in the state for more than one day during the tax year.  Physical presence is determined on a facts and circumstances basis, although corporations incorporated within the state have physical presence in Michigan.  Also, physical presence exists for one day when physical presence is established for any portion of a day.
  • The taxpayer actively solicits sales in Michigan and has Michigan gross receipts of $350,000 or more.  Active solicitation includes, but is not limited to, solicitation through (a) the use of mail, telephone, and email, (b) advertising, and (c) maintenance of an Internet site through which sales transactions occur.
  • The taxpayer has an ownership interest or beneficial interest in a flow-through entity, directly or indirectly, through one or more flow-through entities that has nexus in Michigan.  There is no minimum ownership percentage or degree of control threshold that a taxpayer-owner of a flow-through entity must have in order for nexus with Michigan to exist.

Effective January 1, 2012, the nexus standards apply to corporations for the corporate income tax and financial institutions for the franchise tax, but they do not apply to insurance companies.

A corporation whose activities are limited to those protected by P.L. 86-272 is not subject to the corporate income tax.  So long as one member of a unitary business group has nexus with Michigan and exceeds the protections of P.L. 86-272, all members of the unitary business group (including those protected by P.L. 86-272) must be included when calculating the unitary business group’s tax base and apportionment.

RAB 2014-5 discusses P.L. 86-272 extensively.  Protection under P.L. 86-272 is determined on a tax-year by tax-year basis.  Types of de minimis activities are provided in the RAB.

The same nexus standard used to determine nexus for out-of-state taxpayers, will be applied to determine whether a taxpayer is taxable in another state for purposes of apportionment.

The Michigan Corporate Income Tax Nexus Standard will be discussed at the Michigan State and Local Tax Update seminars in Traverse City and Troy in May.

Michigan State and Local Tax Update (30637 - MSLTTC)

Monday, May 12, 2014

Holiday Inn Traverse City - West Bay - Traverse City, MI

http://www.michcpa.org/Aptify/Meetings/Meeting.aspx?ID=30637

Michigan State and Local Tax Update (30641 - MSLTTR)

Monday, May 19, 2014

MSU Management Education Center - Troy, MI

http://www.michcpa.org/Aptify/Meetings/Meeting.aspx?ID=30641

Posted by: Ed Kisscorni AT 01:20 pm   |  Permalink   |  0 Comments  |  Email
Tuesday, April 22 2014

Check-Signing by the Officers was Ministerial in Nature

In Beermann v. Department of Treasury, Michigan Tax Tribunal, No. 410958, January 16, 2014,

Michigan sales and use tax and single business tax (SBT) assessments issued against two corporate officers were dismissed because the evidence did not show that the officers had control over or supervised the making of the corporation’s tax returns and payments or were charged with the responsibility for making the returns and payments.

It has been a long standing practice that the Department of Treasury would deem the person signing checks as an officer ignoring other requirement of the law.  However, the Tax Tribunal ruled that though the corporate officers had check-writing authority and one of their signatures appeared on relevant tax returns, they rebutted the presumption that they were responsible officers.  The check-signing by the officers was ministerial in nature.

Posted by: Ed Kisscorni AT 01:18 pm   |  Permalink   |  0 Comments  |  Email
Monday, April 21 2014

Aircraft Owner Was Taxable on Lease Transaction Despite Lack of Actual Possession

In NACG Leasing v. Department of Treasury, Michigan Supreme Court, No. 146234, February 6, 2014, the taxpayer purchased an aircraft and immediately executed a lease to another company.  The leasee had possession of the aircraft.  The Supreme Court held the taxpayer (lessor) subject to Michigan use tax because the they exercised a right or power incident to ownership in Michigan when it executed the lease.

The act of ceding control over the aircraft constituted an exercise of a right incident to ownership.  The taxpayer used the aircraft for purposes of the Use Tax Act regardless of whether it ever had actual possession of the aircraft.  

Posted by: Ed Kisscorni AT 01:17 pm   |  Permalink   |  0 Comments  |  Email
Friday, April 18 2014

Not Subject to Michigan Individual Income Tax Because the Property Was Not in Michigan

In Aikens v. Department of Treasury, Michigan Court of Appeals, No. 310528, January 28, 2014, the income from the sale of a limited partnership interest was business income.  However, it was not attributable to Michigan and was not subject to the Michigan individual income tax.

The taxpayers owned an interest in a partnership, which, in turn, owned a limited partnership interest in an entity that owned and operated properties throughout the United States, but not Michigan, during the relevant time period.  The limited partnership interest was liquidated in 2004.  

Department of Treasury asserted that the income received from the sale of the partnership interest was capital gain on the sale of an investment and not business income. The Michigan Income Tax Act provided that business income includes income from the sale of a business or business property.  

In an earlier decision, the Michigan taxpayers were not permitted to claim a loss from a limited partnership on the Michigan return when the loss arose from an out-of-state apartment building. Thus, the court concluded that the income at issue was business income. However, the income was not attributable to Michigan under the circumstances.

Posted by: Ed Kisscorni AT 01:15 pm   |  Permalink   |  0 Comments  |  Email
Thursday, April 17 2014

Court of Appeals Affirms Tax Tribunal Determination But Reverses the Award of Costs

In Schoeneckers, Inc. v. Department of Treasury, Michigan Court of Appeals, No. 313311, January 28, 2014 the Court of Appeals affirmed the Tax Tribunal determination that a taxpayer’s sales other than sales of tangible personal property were properly apportioned under the costs-of-performance method for the Michigan sales factor numerator under the single business tax (SBT.  

The taxpayer earned revenue from business theater and travel.  The taxpayer originally used a bill-to method to apportion its sales as opposed to the costs-of-performance method, but later filed amended returns. The SBT statute provided that such sales were in Michigan if the business activity was performed both inside and outside Michigan, and, based on the costs of performance, the greater proportion of the business activity was performed in Michigan.

The taxpayer presented competent, material, and substantial evidence regarding the amended returns filed to use the costs-of-performance method.  As the appellant, the Department of Treasury did not meet its burden of proof in the appeal.  As such, the use of the costs-of-performance method to apportion income was proper.  

The Department of Treasury also appealed the Tax Tribunal’s award of attorney fees.  The Court of Appeals recognized the Tax Tribunal had authority to award attorney fees as a sanction, but ruled the award was not justified.

Posted by: Ed Kisscorni AT 01:13 pm   |  Permalink   |  0 Comments  |  Email
Wednesday, April 16 2014

The Tax Tribunal Did Not Err in Assessing Properties Based on True Cash Value

In Allemon v. Rose Township, Michigan Court of Appeals, Nos. 313119 and 315306, January 21, 2014, the Court of Appeals supported assessing the true cash value (TCV) for one of the taxpayers’ properties because the tribunal’s finding as to TCV for property tax year 2011 was clearly supported by competent, substantial, and material evidence on the whole record, and the tribunal’s highly logical approach of relying on the property’s assessment history to determine the TCV for property tax year 2012 was also clearly supported by competent, substantial, and material evidence on the whole record.

For tax year 2011, the taxpayers offered a number of comparables as evidence of TCV, but the Tax Tribunal determined that the comparables were not the best evidence of value because the properties were not adequately adjusted to the subject property.

For tax year 2012, the Tax Tribunal rejected the valuation evidence submitted by both parties and found that the township’s late-submitted evidence could not be considered and that the taxpayers’ comparables were not sufficiently similar to the subject property to be relevant for valuation.

The Tax Tribunal also did not err in assessing another of the taxpayers’ properties because the referee properly concluded that the township’s sales comparables supported the current assessed and taxable values of the property.  Moreover, the taxpayers’ comparables were not reliable indicators of value because they were all distressed properties and the taxpayers’ adjustments did not appear to be market based.

Court of Appeals Found No Sufficient and Reliable Evidence to Support Reductions in Land Value and Depreciation

In Froling v. City of Bloomfield Hills, Michigan Court of Appeals, No. 309091, January 23, 2014,

the Court of Appeals rejected the taxpayers’ argument that their property had been overvalued for property tax purposes. The taxpayers failed to satisfy their burden of proving where their percentages of reduction in land value and depreciation for obsolescence derived.  Even if the tribunal were to have determined, which it did not, that a reduction was warranted, it would have been incumbent on the taxpayers to prove with specificity what those reductions should have been.

The taxpayers contended that the Tax Tribunal did not address the unique nature of their property because it failed to consider their flooding problem, but the evidence revealed that the Tax Tribunal determined that the referee properly found that a flooding problem did exist. By adopting the referee’s findings into its final decision, the Tax Tribunal effectively acknowledged that there was evidence showing flooding on the property, indicating the presence of allergic mold, and affirming that real estate brokers would not list the property with its current flooding issues.

The Tax Tribunal agreed with the referee’s conclusion that the evidence failed to persuasively establish that a significant reduction in value for the water issue should be applied for the tax years at issue. Furthermore, the Tax Tribunal determined that the referee properly found that the sales comparisons offered by the city accurately reflected the value of the taxpayers’ property.

Posted by: Ed Kisscorni AT 01:10 pm   |  Permalink   |  0 Comments  |  Email
Tuesday, April 15 2014

Unanimous  Vote  Sends  House  Bill  4003  to the  Senate

FROM:  The Michigan State Chamber of Commerce Capitol Report

The State House continued its pursuit of legislation to improve Michigan’s tax climate with important administrative reform.  House Bill 4003 (Walsh, R-Livonia) provides a codified and transparent “Offer In Compromise” process for taxpayers who cannot pay their full taxes but who want to voluntarily come forward with some type of payment and become compliant.  This Chamber-initiated legislation is part of our aggressive agenda to seek operational improvement with how taxes are administered in Michigan.

Michigan is one of only a few states that do not have an Offer in Compromise (OIC) program. Not to be confused with “tax amnesty” programs (which simply allow taxpayers - who are otherwise able to pay - to get out of penalties and interest), an Offer in Compromise is for those who truly cannot pay due to circumstances like bankruptcy, medical expenses or loss of job. The taxpayer must apply, be accepted, and agree to be fully compliant with future liabilities or face penalties.

HB 4003 makes good policy sense because it would help bring in otherwise uncollectable money to the state, allow Treasury to expend its resources in endeavors more productive than chasing uncollectable money, and provide a codified process for taxpayers that would be consistent and transparent for everyone.

Posted by: Ed kisscorni AT 01:08 pm   |  Permalink   |  0 Comments  |  Email
Monday, April 14 2014

Public Act 3 Implements Reforms to Protect Taxpayers and Improve the Efficiency of Tax Auditing and Refund Approvals

FROM:  The  Michigan  State  Chamber  of  Commerce  Capitol  Report

LANSING, Mich. – The Michigan Chamber of Commerce commended Governor Snyder for signing important reforms to Michigan’s officer liability tax laws.  Senate Bill 337 (Brandenburg, R-11), now Public Act 3 of 2014, implements meaningful reforms that will protect taxpayers and improve the efficiency of tax auditing and refund approvals.

“Senate Bill 337 is a comprehensive bill that puts in place concrete deadlines for the Michigan Department of Treasury to finish audits and respond to refund claims,” said Tricia Kinley, Senior Director of Tax & Regulatory Reform for the Michigan Chamber. “In addition, the new law will dramatically improve Michigan’s officer tax liability statute, long viewed as extreme among states, by giving those who have been unfairly assessed a fair opportunity to absolve themselves.” 

“We applaud Governor Snyder for standing up for individuals who have been unfairly assessed taxes by the State and for recognizing that the administration of tax audits and tax refunds was in desperate need of reform,” Kinley continued. “This new Act will set an expectation that the Michigan Department of Treasury should be thorough and efficient in its day-to-day administration of tax laws and that it should treat taxpayers in Michigan fairly.” 

“We also applaud the sponsor of the bill, Senator Jack Brandenburg, who, along with House and Senate leadership, worked across the aisle with his Democratic counterparts and made efficiency and fair treatment of taxpayers a priority,” said Jim Holcomb, Senior Vice President for Business Advocacy & General Counsel for the Michigan Chamber. “Senator Brandenburg refused to give up on these individuals or the greater pursuit of better administration of tax laws.

“The unanimous bi-partisan support shown for this bill is truly appreciated by our members,” Holcomb concluded.

What Public Act 3 Does

Public Act 3 of 2014 (PA 3-14) provides additional time periods for extending the four-year statute of limitations during which the Department of Treasury may assess a Michigan corporate income tax, personal income tax, sales and use tax, and miscellaneous tax deficiencies, interest, or penalties.

For audits which start after September 30, 2014, Treasury must complete the audit within one year and must assess the audit deficiency within nine month after the completion of the audit.  The one year requirement to complete an audit can be extended by mutual agreement between the taxpayer and the state.  The nine month time period to assess a tax deficiency is extended if the taxpayer asks for a reconsideration of the preliminary audit determination or an informal conference.

The statute of limitations will be extended by the following:

  • the period pending a final determination of tax;
  • a period of 90 days after the issuance of a decision and order from an informal conference;
  • a period of 90 days after the issuance of a court order resolving an appeal of a decision of the department in a case in which a final assessment was not issued prior to appeal; and
  • for the period of an audit that started after September 30, 2014, and was conducted within a specified time frame established by law.
  • for the period in which the taxpayer and the state have consented to extend the statute of limitations.

The legislation strikes references in the law to suspending the statute of limitations and instead provides that the statute of limitations is extended for the periods currently stipulated in the law as well as the additional time periods. The four-year statute of limitations also applies to taxpayers claiming refunds.

Public Act 3 of 2014 (PA 3-14) makes significant changes to the officer liability provisions of the Revenue Act.  The act defines "responsible person" to mean an officer, member, manager of a manager-managed limited liability company, or partner for the business who controlled, supervised, or was responsible for the filing of returns or payment of any of the taxes during the time period of default and who, during the time period of default, willfully failed to file a return or pay the tax due.  The act requires the department to provide a responsible person of a business with notice of any amount collected by the department from any other responsible person.

The department may not assess a responsible person more than four years after the date of the assessment issued to a business. Before assessing a responsible person as liable for a tax assessed to a business, the department must first assess a purchaser or succeeding purchaser of the business who is personally liable. However, the department may assess a responsible person notwithstanding the liability of a purchaser or succeeding purchaser if the purchaser or succeeding purchaser fails to pay the assessment for sales and use taxes, tobacco products tax, motor fuel tax, motor carrier fuel tax, income tax withholding, and any other tax that a person is required to collect on behalf of a third person.

Public Act 3 will be discussed in depth, what it means to taxpayers, what it means to tax practitioners; at the May Michigan State and Local Tax Update seminars in Traverse City and Troy.

Michigan State and Local Tax Update (30637 - MSLTTC)

Monday, May 12, 2014

Holiday Inn Traverse City - West Bay - Traverse City, MI

http://www.michcpa.org/Aptify/Meetings/Meeting.aspx?ID=30637

Michigan State and Local Tax Update (30641 - MSLTTR)

Monday, May 19, 2014

MSU Management Education Center - Troy, MI

http://www.michcpa.org/Aptify/Meetings/Meeting.aspx?ID=30641

Posted by: Ed Kisscorni AT 01:05 pm   |  Permalink   |  Email
Friday, April 11 2014

Asset Disposition Was Casual Transaction

In South Lyon Apartment, LLC v. Department of Treasury, Michigan Court of Appeals, No. 313943, March 13, 2014, a Michigan taxpayer’s asset disposition was properly determined to be a casual transaction under the Single Business Tax (SBT).  The Court of Appeals ruled that it was properly excluded from the tax base.  

The taxpayer’s sole asset was a 50% interest in a limited partnership that operated an apartment complex.  The SBT law defined "casual transaction" to be a transaction made in other than the ordinary course of repeated and successive transactions of a like character, except that a transaction made or engaged in by a person that is incidental to that person’s regular business activity is a business activity.  "Incidental" means something minor and of little importance.

In this case, the Court of Appeals determined the sale of the taxpayer’s sole asset as a major event, a significant act in the financial sense that ended the taxpayer’s business interest in the partnership.  A one-time transaction, the asset disposition was not incidental.  Thus, the taxpayer’s sale of its only asset qualified as a casual transaction and was not subject to the SBT.

Sale Under Asset Purchase Agreement Was Casual Transaction

In Sovereign Sales, LLC, v. Department of Treasury, Michigan Court of Appeals, No. 313982, March 18, 2014, a Michigan taxpayer’s sale under an asset purchase agreement was determined to be a casual transaction under the Single Business Tax (SBT).  Therefore it was properly excluded from the tax base.

Under the APA, the taxpayer agreed to sell to a competitor all of its business assets including the accounts, purchase orders, licenses, permits, copyrights, trademarks, good will, equipment, and inventory, and entered into a covenant not to compete. The SBT law defined "casual transaction" to be a transaction made in other than the ordinary course of repeated and successive transactions of a like character, except that a transaction made or engaged in by a person that is incidental to that person’s regular business activity is a business activity. "Incidental" means something minor and of little importance.

The Court of Appeals rejected the department’s argument that the sale of the taxpayer’s entire inventory to the competitor was of like character with its ongoing business of selling its inventory to retailers.  In this case, the asset purchase was not of like character with the taxpayer’s previous repeated and successive transactions.  The sale of substantially all of its assets was not incidental.  Thus, the taxpayer’s sale of essentially the entire business qualified as a casual transaction and was not subject to the Single Business Tax.

Posted by: Ed Kisscorni AT 01:37 pm   |  Permalink   |  0 Comments  |  Email
Friday, April 11 2014

Taxpayer's  Right  to  Representation  is  Recognized  by  the  High  Court

On Tuesday, April 1st I was returning from a two week beach and golf vacation in Florida.  While checking my emails I noted an email from Attorney James Novis.  The message was simple:   "We Won"   

In Fradco, Inc v Department of Treasury and SMK, LLC v Department of Treasury (combined cases), Jim handled the appeals and presented oral argument before the Supreme Court.  I handled both cases successfully at the Tax Tribunal.  However, successive appeals by the Department of Treasury at the Court of Appeals and the Supreme Court brought us to the April 1st decision. 

The Supreme Court upheld the Court of Appeals and the Tax Tribunal on the key question of taxpayer representation.  The issue dealt with the right of a taxpayer to be represented by someone else and the right of an attorney, a CPA or another person to represent a taxpayer before the Department of Treasury.  The taxpayers in these cases won.  It should be noted that the taxpayers are the smallest of small businesses who decided at great cost to take on the Department of Treasury.

Following are two reports on the Supreme Court decision, the first from the Michigan Chamber of Commerce representing thousands of Michigan businesses and the second from the Michigan Association of Certified Public Accountants representing 16,000 CPAs.

Unanimous Michigan Supreme Court Sides With Taxpayers Over Basic Procedural Rights

In a decision that speaks to the fundamental rights of taxpayers to be properly notified by the Michigan Department of Treasury during their audits, assessments, and appeals, the Michigan Supreme Court has handed down a resounding defeat to Treasury and a big win to taxpayers!

In Fradco, Inc v Department of Treasury and SMK, LLC v Department of Treasury (combined cases), the Court found that, "If a taxpayer has appointed a representative, the Department of Treasury must issue notice to both the taxpayer and the taxpayer’s official representative before the taxpayer’s 35-day appeal period under MCL 205.22 (1) begins to run."

While this language appears to be straightforward, Treasury concluded that this provision was a mere “courtesy” and that it was, therefore, not obligated to follow the law as written. The Michigan Supreme Court disagreed with Treasury's twisted reading of the law and found in favor of the taxpayers.

It is unfortunate that taxpayers had to waste precious resources in this case just to have basic taxpayer rights.  Improving the day-to-day operations and culture at the Michigan Department of Treasury is a top priority for the Michigan Chamber.

From:  MACPA Advocacy Alert

In a major victory for CPAs and taxpayers in Michigan, on April 1, 2014, the Michigan Supreme Court decided in favor of the taxpaying public, stating that: "If a taxpayer has appointed a representative, the Department of Treasury must issue notice to both the taxpayer and the taxpayer's official representative before the taxpayer's 35-day appeal period under MCL 205.22(1) begins to run."


In December, the Michigan Supreme Court heard arguments in the case FRADCO INC/SMK, LLC v. The Michigan Department of Treasury, which contained the question of whether The Department of Treasury ("Treasury") was legally required to provide tax notifications to both the taxpayer and the taxpayer's designated representative/power of attorney (POA).  In recent history, Treasury adopted a practice of notifying only the taxpayer when it issued notices, including a final assessment of tax.  This practice was problematic because the issuance of the final assessment notice triggered both appeal rights and the running of the applicable period of limitations to appeal the assessment.  Moreover, taxpayers in many cases are not nearly as equipped to handle and respond to these notices as their designated representative (often a CPA).   In practice, taxpayers have often ignored these types of tax notices because they believe their designated representative is taking care of tax matters and protecting appeal rights. Taxpayers designate their CPA as the POA in many instances precisely because of the level of knowledge and experience her or she has in dealing with complex tax matters, such as an unexpected notice from the Department of Treasury.

 

Posted by: Ed Kisscorni AT 01:00 pm   |  Permalink   |  0 Comments  |  Email
Thursday, April 10 2014

Travels  Took  Me  to  Northern  Michigan,  Utah,  Italy  and  Florida

Spring  Seminars  Scheduled  In  May  and  June

Many years ago I realized that it was best for me to get out of town during tax season.  My consulting business slows down as CPAs and their clients concentrate on year end accounting, financial statements and tax returns.  This past winter, because of an unusual abundance of snow, I took advantage of it in a great way.

In January I spent four out of five weekends in the Petoskey area skiing.  The snow and weather was fantastic.  Early February sent me skiing in Park City, Utah.  Late February, I was off to northeast Italy for skiing in the Dolomites with a long weekend in Venice.   In March I visited my mother and sister in Florida. 

Obviously I did not have time to Blog, but there was a lot going on as the Legislature and the Courts were very busy.  Ron Kaley, who covered for me while I was gone, will join me in four MACPA sponsored seminars this spring.  We will cover significant developments from last year and this past winter in Michigan State and Local Tax as well as the Sales and Use tax.

Michigan State and Local Tax Update With Ed Kisscorni and RonKaley

This update includes a discussion with examples on the Individual Income Tax “Unitary” and the potential impact going forward including the filing of amended returns as a result of the recent Michigan Supreme Court decisions in Malpass and Wheeler.  Also discussed will be the significant changes to the Personal Property Tax that will impact the 2014 filing season and audit issues surrounding the “Principal Residency Exemption”.

Single Business Tax (SBT) may be a dead tax, but the courts are making decisions that could result in refund opportunities or may affect other taxes.  Like the SBT, the Michigan Business Tax (MBT) is a dead tax, but that doesn't keep the Treasury auditors from auditing the MBT.

The Corporate Income is now in its second filing season with Treasury issuing authoritative advice and the legislative amendments.

The sales and use tax remains complicated with several court cases at all levels including the Supreme Court.  Changes are in the wind on the tax administration front and the legislature changed the court structure.

Michigan State and Local Tax Update (30637 - MSLTTC)

Monday, May 12, 2014

Holiday Inn Traverse City - West Bay - Traverse City, MI

http://www.michcpa.org/Aptify/Meetings/Meeting.aspx?ID=30637

Michigan State and Local Tax Update (30641 - MSLTTR)

Monday, May 19, 2014

MSU Management Education Center - Troy, MI

http://www.michcpa.org/Aptify/Meetings/Meeting.aspx?ID=30641

Michigan Sales and Use Tax With Ed Kisscorni and Ron Kaley 

Take this opportunity to become up-to-date on the sales and use tax law, rules, bulletins and court cases. The Department of Treasury promulgated 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 has amended both the sales and use tax laws to address issues with the administration and compliance of the complicated laws.  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.  Changes are being suggested for the appeal process.

Michigan Sales and Use Tax (30677 - MSUTLV)

Friday, June 20, 2014

VisTaTech Center Schoolcraft College - Livonia, MI

http://www.michcpa.org/Aptify/Meetings/Meeting.aspx?ID=30677

Michigan Sales and Use Tax (30681 - MSUTTC)

Tuesday, June 24, 2014

Holiday Inn Traverse City - West Bay - Traverse City, MI - Northern

http://www.michcpa.org/Aptify/Meetings/Meeting.aspx?ID=30681

Posted by: Ed Kisscorni AT 04:00 pm   |  Permalink   |  0 Comments  |  Email

 

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