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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
 



 



 

 Michigan Tax Audits and Appeals 

The Revenue Act guarantees the taxpayer the right to appeal any billing or a reduced refund.  Such protections are provided in the Revenue Act.  Furthermore, the Revenue Act provides certain procedures which must be followed before any unpaid tax may be assessed.

 

(a) The department shall send to the taxpayer a letter of inquiry stating, in a courteous and nonintimidating manner, the department's opinion that the taxpayer needs to furnish further information or owes taxes to the state, and the reason for that opinion. A letter of inquiry shall also explain the procedure by which the person may initiate communication with the department to resolve any dispute. This subdivision does not apply in any of the following circumstances:  [MCL 205.21(2)(a)]

(i) The taxpayer files a return showing a tax due and fails to pay that tax.

(ii) The deficiency resulted from an audit of the taxpayer's books and records by this state.

(iii) The taxpayer otherwise affirmatively admits that a tax is due and owing.

(b) If the dispute is not resolved within 30 days after the department sends the taxpayer a letter of inquiry or if a letter of inquiry is not required pursuant to subdivision (a), the department, after determining the amount of tax due from a taxpayer, shall give notice to the taxpayer of its intent to assess the tax. The notice shall include the amount of the tax the department believes the taxpayer owes, the reason for that deficiency, and a statement advising the taxpayer of a right to an informal conference, the requirement of a written request by the taxpayer for the informal conference that includes the taxpayer's statement of the contested amounts and an explanation of the dispute, and the 60-day time limit for that request.  [MCL 205.21(2)(b)]

 

Bill for Taxes Due (Intent to Assess) 

 

A Bill for Taxes Due (Intent to Assess) is a notice sent from the Department of Treasury to a taxpayer informing the taxpayer of the Department's plan to impose a tax liability.   As the term implies, it is merely a proposed assessment.  It is not a final assessment.  After a taxpayer receives a Bill for Taxes Due (Intent to Assess) from the Department of Treasury, the taxpayer has the statutory right to request an informal conference.

 

Adjustment or Denial of a Refund

 

An adjustment or denial of a refund occurs when the Department of Treasury determines the taxpayer is not entitled to all or part of a requested refund.  An adjustment or denial of a refund can arise from a sales or use tax audit where the taxpayer believes the audit determined overpayment is understated.  If the refund amount that the taxpayer claimed or believes was entitled to, was either adjusted or denied, the taxpayer has the right to request an informal conference with the hearings division.

 

(3) If as a result of an audit it is determined that a taxpayer is owed a refund, the department shall send a notice to the taxpayer stating the amount of the refund the department believes is owed to the taxpayer as a result of the audit. The notice shall inform the taxpayer of his or her appeal rights. If the taxpayer disputes the findings of the audit, the taxpayer may serve written notice upon the department in the same manner as provided for in subsection (2)(c) and the taxpayer is entitled to the same informal conference and subsequent appeals as provided for in this section.  [MCL 205.21(3)]

(c) If the taxpayer serves written notice upon the department within 60 days 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, the taxpayer is entitled to an informal conference on the question of liability for the assessment.  [MCL 205.21(2)(c)]

 

Hearings Division

The Hearings Division is an administrative forum within the Michigan Department of Treasury (Department) where a taxpayer may contest certain actions taken by the Department.  A taxpayer must request an informal conference, hearing or appeal in writing within the timeframe provided by the statute governing their matter.  Hearing Referees designated by the Department consider each matter and prepare written recommendations for resolution to the Department.

The Hearings Division handles matters involving many different taxes, tax adjustments and tax refunds. The laws governing each type of tax matter can be different. As a result of the varying laws applicable to each type of matter, please click on the appropriate link below that applies to your situation for more information.

 

Informal Conference

(a)   Upon receipt of a taxpayer's written notice, the department shall set a mutually agreed upon or reasonable time and place for the informal conference and shall give the taxpayer reasonable written notice not less than 20 days before the informal conference. The notice shall specify the intent to assess, type of tax, and tax year that is the subject of the informal conference. The informal conference provided for by this subdivision is not subject to the administrative procedures act of 1969, 1969 PA 306, MCL 24.201 to 24.328, but is subject to the rules governing informal conferences as promulgated by the department in accordance with the administrative procedures act of 1969, 1969 PA 306, MCL 24.201 to 24.328. The taxpayer may appear or be represented by any person before the department at an informal conference, and may present testimony and argument. At the party's own expense and with advance notice to the other party, a taxpayer or the department, or both, may make an audio recording of an informal conference. A taxpayer who has made a timely request for an informal conference may at any time withdraw that request by filing written notice with the department. Upon receipt of the request for withdrawal from the informal conference process, the department shall issue a decision and order of determination and, where appropriate, a final assessment, from which a taxpayer may seek an appeal as provided under section 22.  [MCL 205.21(2)(d)]

 

The taxpayer must request an informal conference in writing within 60 days after receiving a Bill for Taxes Due (Intent to Assess) or a Final Audit Determination letter in the case of a reduced refund. 

 

The taxpayer must include the following in the written request:

? The amount of tax in dispute

? An explanation of the complaint

? Payment of any portion of the tax bill that is not in dispute.

 

The Hearings Division will set a hearing date and place that is convenient for all parties.  The taxpayer can request a postponement if the scheduled date is not convenient.  Only one postponement is allowed.

 

(5) During the course of the informal conference under subsection (2)(d), the taxpayer by written notice may convert his or her contest of the assessment to a claim for a refund. The written notice shall be accompanied by payment of the contested amount. The informal conference shall continue and the department shall render a decision and issue an order regarding the claim for refund.  [MCL 205.21(5)]

 

The taxpayer can represent himself or herself at the informal conference.  Or, the taxpayer may be represented an attorney or other representative.  Normally, there is no record made of the hearing.  However, the taxpayer may record the hearing with prior notification.

 

The hearing referee will conduct the informal conference, ask questions, make notes and may request additional information from either the taxpayer or the Department of Treasury.  The hearing referee will prepare a written recommendation to the State Treasurer. 

 

The State Treasurer, or an authorized representative, will review the taxpayer's file and the hearing referee's recommendation.  If the Department agrees with the hearing referee's recommendation, a Decision and Order will be issued.   If the Department disagrees with the recommendation from the hearing referee, then an explanation of the final decision will accompany the final Decision and Order.  The taxpayer will be notified by US Mail.

 

(e) After the informal conference, the department shall render a decision and order in writing, setting forth the reasons and authority, and shall assess the tax, interest, and penalty found to be due and payable. The decision and order are limited to the subject of the informal conference as included in the notice under subdivision (d).  [MCL 205.21(2)(e)]

(f) If the taxpayer does not protest the notice of intent to assess within the time provided in subdivision (c), the department may assess the tax and the interest and penalty on the tax that the department believes are due and payable. An assessment under this subdivision or subdivision (e) is final and subject to appeal as provided in section 22. The final notice of assessment shall include a statement advising the person of a right to appeal.  [MCL 205.21(2)(f)]

 

Bill for Taxes Due (Final Assessment)

 

A final Decision and Order will be sent to the Collections Division where a Bill for Taxes Due (Final Assessment) will be prepared and sent by US Mail to the taxpayer.  The amount of interest is updated.  The taxpayer can pay the final tax, penalty and interest computed to be due.  Or, the taxpayer can further appeal the Bill for Taxes Due (Final Assessment) to either the Michigan Tax Tribunal or the Michigan Court of Claims.

 

(1)    A taxpayer aggrieved by an assessment, decision, or order of the department may appeal the contested portion of the assessment, decision, or order to the tax tribunal within 35 days, or to the court of claims within 90 days after the assessment, decision, or order. The uncontested portion of an assessment, order, or decision shall be paid as a prerequisite to appeal. However, an action shall be commenced in the court of claims within 6 months after payment of the tax or an adverse determination of the taxpayer's claim for refund, whichever is later, if the payment of the tax or adverse determination of the claim for refund occurred under the former single business tax act, 1975 PA 228, and before May 1, 1986.  [MCL 205.22(1)]

 

Michigan Tax Tribunal

 

The Michigan Tax Tribunal is an administrative tax court.  As the State's tax court, the Tribunal has authority over assessment disputes relating to both property and non-property tax matters.  To resolve those disputes, the Tribunal conducts hearings and renders written decisions based on the evidence submitted by all the parties.

 

State non-property tax appeals filed with the Tribunal involve all taxes levied by the Michigan Department of Treasury including individual income taxes; sales, use and withholding taxes; single business taxes; corporate officer liability issues; motor fuel refund issues, etc.  The Tribunal shares its authority over non-property tax matters with the Court of Claims.

 

July 1, 2004 was the 30th anniversary of the creation of the Michigan Tax Tribunal, the State's tax court. As the State's tax court, the Tribunal has original and exclusive  jurisdiction over property tax matters. The Tribunal also has concurrent (i.e., shared) jurisdiction over State non-property tax matters.  Prior to the creation of the Tax Tribunal, the State Board of Tax Appeals and other boards and agencies, as well as Michigan's courts, provided review of local property tax and non-property tax matters.

In 1969, an advisory board consisting of members of the State Bar of Michigan and representatives of the Michigan Department of Treasury, the Michigan State Tax Commission, and the Michigan Department of Attorney General reviewed administrative and judicial procedures utilized in resolving state tax questions and issued a report ("the 1969 Report") recommending both changes in those procedures and the creation of a "specialized" administrative tribunal with jurisdiction "over all tax disputes."

As a result of that report, the Tax Tribunal Act (MCL 205.701 et seq) was enacted in July, 1974 to both create the Tribunal and abolish the boards and agencies that had been responsible for review of various tax matters. The Act specifically provided that, as of January 1, 1976, any person or legal entity which was entitled to proceed before any "quasi-judicial body, court of claims, probate court.or circuit court for determination of a matter relating to [various taxes].shall proceed only before the tribunal."

In 1991, a committee was appointed by Governor Engler to review the operations of the Tribunal and make recommendations to improve those operations ("the 1991 Report"). Based on the committee's recommendations, Governor Engler issued on August 28, 1991, Executive Reorganization Order No. 1991-15, compiled at MCL 205.800. The ERO transferred the Tribunal to the Department of Commerce to avoid "the appearance of conflicting objectives with respect to the current location of the.Tribunal in the Department of Treasury."  The ERO also transferred to the Governor the power to designate the   Tribunal chairperson.

 

The Tribunal initially consisted of five members, with two additional members appointed in 1976 and 1977.  Since that time, 35 people have served as members of the Tribunal. These members are appointed by the Governor, with the advice and consent of the Senate, to serve terms of four years, with one member appointed to serve as chairperson. Pursuant to the Tax Tribunal Act, the Tribunal's members are required to be citizens of the United States and residents of Michigan.  They are also required to be from various walks of life with at least two members being attorneys, one being a certified level IV assessor, one being a professional real estate appraiser, and one being a certified public accountant.  The Act further states that not more than three members shall be members of the same professional discipline, and that the members who are not attorneys, assessors, appraisers, or CPAs must have at least five years' experience in state or local tax matters.  These requirements ensure that the decisions issued by the Tax Tribunal are made by people having extensive knowledge and expertise in their respective fields.

 

Practice before the Tribunal is governed by the Tribunal's Rules of Practice and Procedure (TTR), which are similar to the Michigan Court Rules (MCR) that govern practice before the courts in Michigan.  The Tribunal's Rules were revised in 1981 and again in 1996.  The Tribunal Rules are constantly updated to better reflect its current practices and amendments made to the Michigan Court Rules.

 

Entire Tribunal

 

The Entire Tribunal utilizes a formal hearing process to resolve the more complicated appeals. Parties are typically represented by attorneys, certified public accountants, and others.

 

An appeal to the Tax tribunal must be filed within 35 days of the Bill for Taxes Due (Final Assessment) or a determination of the Department of Treasury.  The taxpayer initiates the appeal by filing a Petition along with the required filing fee.  The taxpayer must pay all taxes not in dispute.

 

Following are the steps to initiate an appeal before the entire Tribunal:

1. Initiating Appeal

An appeal can be initiated by timely filing an Entire Tribunal Petition, as provided by TTR 240, with a proof of service .   [MCL 205.735, MCL 205.735a, TTR 208, and TTR 210]

2. Response to Petition

The respondent must timely file an answer to the petition or a responsive pleading, as provided by TTR 210 or TTR 245, with a proof of service.   [MCL 205.735, TTR 208, and TTR 210]

3. Discovery

Discovery is permitted in the Entire Tribunal.  The conducting of discovery is governed by TTR 255, TTR 257, TTR 260, and the Michigan Court Rules under TTR 111.  There is no further discovery after the prehearing conference unless otherwise ordered by the Tribunal, as provided by TTR 270(10).

4. Motion Practice

Parties are required to file motions when requesting the Tribunal to take action.  The filing of motions and responses to the motions are governed by TTR 230 and the Michigan Court Rules under TTR 111.

5. Counsel Conference

The parties in a property tax appeal are required to conduct a counsel conference and file a counsel conference summary, as provided by TTR 250.   Parties to a non property tax dispute are encouraged, but not required, to conduct a counsel conference.

6. Non-Property Tax Matter Scheduling Order

The parties in a non-property tax appeal are required to complete and submit a scheduling order.  The order will provide dates for the filing and exchange of the non-property prehearing statement and the conducting of a prehearing conference.

7. Prehearing General Call

Property tax matter appeals are placed on a prehearing general call.  The prehearing general call provides dates for the filing and exchange of valuation disclosures and property prehearing statements. Once the valuation disclosures and prehearing statements have been filed, the appeal is scheduled for a prehearing conference.

Parties may request extensions of time for the filing and exchange of valuation disclosures and prehearing statements, as provided by Tribunal Notice 2005-9.

8. Prehearing Conference

Prehearing conferences are generally 45 minutes in length.

The presiding judge at a prehearing conference will generally be a Tribunal member.

The presiding judge will issue a Summary of Prehearing Conference and Scheduling Order establishing dates for the filing and exchange of witness and exhibits lists, a stipulation of facts, and dispositive motions.  The Order will also schedule the appeal for hearing.

9. Hearing

Entire Tribunal hearings can range in length from day to two months or more.  The majority of such hearings, however, are conducted over a five-day period.  Entire Tribunal hearings are held in the Tribunal's Lansing office.   The presiding judge is generally the same Tribunal member that presided over the prehearing conference.   A party may request that a hearing be adjourned.

10. Opinion and Judgment

"If the presiding judge is a Tribunal member, the Opinion and Judgment will be a Final Opinion and Judgment.  The parties may appeal the Final Opinion and Judgment to the Michigan Court of Appeals, as provided by MCL 205.753 and the Michigan Rules of Court. "

If the presiding judge is a hearing officer, the Opinion and Judgment will be a Proposed Opinion and Judgment.  The parties may file exceptions to a Proposed Opinion and Judgment within 20 days of the entry of the Proposed Opinion and Judgment.

 

Small Claims Division

 

The Tribunal's Small Claims Division utilizes an informal hearing process to resolve the majority of all appeals filed with the Tribunal.  Parties typically represent themselves in such appeals.   Non property tax appeals must be $25,000 or less in tax.

Following are the steps to initiate an appeal before the Michigan Tax Tribunal Small Claims Division:

1. Initiating Appeal

An appeal can be initiated by the timely filing of a letter or the printing and mailing of a completed petition form.

2. Petition Form

If an appeal is initiated by the filing of a letter, the Tribunal will send the petitioner a petition form that must be completed and returned by the date on the form, as required by TTR 320.

The failure to complete and timely return the petition form may result in the dismissal of the appeal.

3. Answer Form

If the completed petition form has been timely returned, the Tribunal will send an answer form to the respondent.

The answer form must be completed and returned by the date on the form, as required by TTR 332.

The failure to complete and timely return the answer form OR properly submit a copy of the completed answer form to the petitioner may result in the conducting of a default hearing.

4. Discovery

There is no discovery in the Small Claims Division except by leave of Tribunal only, as provided by TTR 111(3).

5. Notice of Hearing

Notice of the scheduling of a hearing is sent to both parties approximately 30 days in advance of the hearing.

The notice will provide the date, time, and location of the hearing.

6. Hearing

Small Claims hearings are generally 30 minutes in length.

The presiding judge will be a Tribunal member or hearing officer.

Parties are required to submit their documentary evidence to the Tribunal and the opposing party at least 14 days in advance of the scheduled hearing date, as provided by TTR 342.

A party may request that a hearing be conducted "on the file," as provided by TTR 317.

A party may request that a hearing be adjourned.

7. Opinion and Judgment

If the presiding judge is a Tribunal member, the Opinion and Judgment will be a Final Opinion and Judgment.  The parties may appeal the Final Opinion and Judgment to the Michigan Court of Appeals, as provided by MCL 205.753 and the Michigan Rules of Court.

If the presiding judge is a hearing officer, the Opinion and Judgment will be a Proposed Opinion and Judgment.  The parties may file exceptions to a Proposed Opinion and Judgment within 20 days of the entry of the Proposed Opinion and Judgment.

 

Michigan Court of Claims

 

As provided under Section 22 of the Revenue Act, the taxpayer may choose to appeal directly to the Court of Claims (Ingham County Circuit Court) within 90 days of receiving a notice of reduced or denied refund, a notice of reduced or denied credit forward, or a Bill for Taxes Due (Final Assessment).  Appeals to the Court of Claims require payment in full of the entire amount due including tax, penalty and interest. 

 

Appeals from a Decision of the Tax Tribunal or Court of Claims

(3) A taxpayer or the department may take an appeal by right from a decision of the tax tribunal or the court of claims to the court of appeals.  The appeal shall be taken on the record made before the tax tribunal or the court of claims.  The taxpayer or department may take further appeal to the supreme court in accordance with the court rules provided for appeals to the supreme court.  [MCL 205.22(3)]

(4) The assessment, decision, or order of the department, if not appealed in accordance with this section, is final and is not reviewable in any court by mandamus, appeal, or other method of direct or collateral attack.  [MCL 205.22(4)]

(5) An assessment is final, conclusive, and not subject to further challenge after 90 days after the issuance of the assessment, decision, or order of the department, and a person is not entitled to a refund of any tax, interest, or penalty paid pursuant to an assessment unless the aggrieved person has appealed the assessment in the manner provided by this section. 

[MCL 205.22(5)]

 

 

Michigan Court of Appeals

 

Decisions of the Tax Tribunal or the Court of Claims may be appealed timely to the Court of Appeals and ultimately to the Michigan Supreme Court.  Petitions to the Michigan Court of Appeals must be filed within 21 days of a final decision or order from either the Michigan Tax Tribunal or the Michigan Court of Claims.

The Michigan Court of Appeals was created by the Constitution of 1963, Article VI, Section 1, under which the State of Michigan has "one court of justice."

The judicial power of the state is vested exclusively in one court of justice which shall be divided into one supreme court, one court of appeals, one trial court of general jurisdiction known as the circuit court, one probate court, and courts of limited jurisdiction that the legislature may establish by a two-thirds vote of the members elected to and serving in each house.

When it first began operation in 1965, the bench of the Court of Appeals was comprised of nine judges.  In 1969, the Legislature increased the size of the bench to 12 judges, and further increases occurred in 1974 (18 judges), in 1988 (24 judges), and in 1993 (28 judges).  During this same period, annual filings ranged from a low of 1,235 in 1965 to a high of 13,352 in 1992. 

 

Michigan Supreme Court

 

Decisions of the Michigan Court of Appeals can be appealed to the Michigan Supreme Court.  However, unlike the other courts, the Supreme Court must grant a Request for Appeal.

The Supreme Court is Michigan's court of last resort, consisting of seven justices.  Supreme Court justices are elected for eight-year terms.  Candidates are nominated by political parties and are elected on a nonpartisan ballot.  Two justices are elected every two years (one in the eighth year) in the November election.  Supreme Court candidates must be qualified electors, licensed to practice law in Michigan for at least five years, and at the time of election must be under 70 years of age.  The justices' salary is fixed by the State Officers Compensation Commission and paid by the state.  Vacancies are filled by appointment of the Governor until the next general election.  Every two years, the justices of the Court elect a member of the Court as chief justice.

Cases come before the Court during a term that starts August 1 and runs through July 31 of the following year.  The Court hears oral arguments in Lansing beginning in October of each term.  Decisions are released throughout the term, following oral arguments.

Each year, the Supreme Court receives over 2,000 applications for leave to appeal from litigants primarily seeking review of decisions by the Michigan Court of Appeals.  Each justice is responsible for reviewing each case to determine whether leave should be granted.  The Court issues a decision in all cases filed with the Clerk's Office.  Cases that are accepted for oral argument may be decided by an order, with or without an opinion.  These orders may affirm or reverse the Michigan Court of Appeals, may remand a case to the trial court, or may adopt a correct Court of Appeals opinion.

The Supreme Court's authority to hear cases is discretionary.  The Court grants leave to those cases of greatest complexity and public import, where additional briefing and oral argument are essential to reaching a just outcome.

 

 

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