MACPA Member Issues Relating to Practice with the Department of Treasury
I represent the MACPA on the Department of Treasury Business Tax Advisory Group. Following is a brief summary on my report to the MACPA State and Local Tax Task Force delivered last week Thursday, August 9, 2012.
1. Treasury says Public Act 211, which relates to the 10-year use tax audit, will not be applied retroactive. Revenue Act Section 22 precludes any further appeal after a final assessment has been issued. However, any use tax audits in progress, use tax audits in informal conference or at the Tax Tribunal/Court of Claims will be limited to four years if the return filing requirement is satisfied.
2. The Court of Appeals decision in Andrie was appealed to the Supreme Court on July 26, 2012. In Tulgestka, the Tax Tribunal applied the Andrie presumption on a very limited basis.
3. Several judicial decisions have established "unitary" for Individual Income Tax. There is a need for legislation to codify "unitary" for IIT and limit it to a waters edge approach identical to the CIT provisions. Also, the sourcing rules should be amended to mimic the CIT provisions. The MACPA may partner with Treasury to obtain such legislation into law.
4. Treasury is not providing the "Report of Audit Findings" to taxpayers. However, they are available through the disclosure officer or as part of discovery.
5. Treasury is not providing copies of the Final Assessment to the taxpayer's agent as identified on the Power of Attorney. Two cases are pending in the Court of Appeals: Fradco, Inc. and SMK, LLC.
6. On MBT audits, auditors are assuming "Unitary" to be automatic when the control test is satisfied in a small closely held group of businesses. To be unitary, a group of affiliated entities must independently satisfy both the "control test" and the "relationship test". A documented "unitary business group study" is advisable to support a tax return position.
7. HB 5146, which addresses out of state construction contracts, is moving through the legislature, but it is limited to only manufacturer contractors. The bill, if enacted into law would stop the Treasury from taxing material withdrawn from a Michigan inventory to be affixed to realty out of Michigan.
8. Several bills are in the Legislative Service Bureau (LSB) to address auditing procedures, sampling and sample projections.