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
Michigan State and Local Tax Update (30641 - MSLTTR)
Monday, May 19, 2014
MSU Management Education Center - Troy, MI