Public Act 211 of 2012 Defines Tax Return - Applicable to All Open Periods
On Wednesday, June 27th, Governor Snyder signed House Bill 5543 sponsored by Representative Pscholka of Stevensville. The legislation clarifies what constitutes the filing of a tax return for purposes of the four year statute of limitations. It will dramatically reduce overly-aggressive auditing by the Department of Treasury. The bill, which was signed into law as Public Act 211 of 2012 is effective for all open periods.
PA 211 eliminates the current Department of Treasury's practice to conduct a ten year use tax audit on taxpayers registered with the Department of Treasury and filing current returns by clarifying when Michigan's four year statute of limitations begins. The bill amends Section 27a of the Revenue Act to provide that the filing of a return includes the filing of a combined, consolidated, or composite return whether or not any tax was paid and whether or not the taxpayer reported any amount in the Use Tax line, including zero.
The bill expresses legislative intent that the amendment be retroactive and effective for all tax years that are open under the statute of limitations provided in Section 27a of the Revenue Act and for all matters regarding the filing of a return under Section 27a. The bill also expresses legislative intent that the amendment not affects a refund required by a final court order for which all rights of appeal were exhausted or had expired before May 1, 2012.
I had the opportunity to write the amendatory language which was reviewed and edited by Curtis Ruppel, CPA and the Tax Policy Committee of the Michigan State Chamber of Commerce. I was asked to testify at the House Tax Policy Committee. But I was third in line. The first witness told a long heartbreaking story about his struggles to keep his construction company afloat. Then the use tax audit came. He could not afford to hire a CPA or attorney. He fought it on his own. The preliminary audit adjustment was about $150,000. He had worked it down to about $30,000 with the auditor, a manageable amount. Then, he said, the auditor came back after a meeting with the supervisor and said the audit period was extended to ten years and $150,000 with interest; an amount that would put the company out of business.
The second witness was Stacy Berndt, CPA from Stevensville, Michigan. She told a long and disgusting story of her experiences with a use tax audit on her client that also covered ten years. I had to follow these two witnesses. I felt like walking out the door. I did testify about the need to make the amendment retroactive. After my testimony, the Department of Treasury representative testified that the Department of Treasury supports the legislation and has changed their policy accordingly.
Any Michigan taxpayer currently undergoing a ten year use tax audit, appealing at informal conference, the Tax Tribunal or the courts should be aware of the new law and their cases should be settled accordingly.