HOUSE BILL No. 6480 November 7, 2002, Introduced by Rep. LaSata and referred to the Committee on Tax Policy. A bill to amend 1941 PA 122, entitled "An act to establish a revenue division of the department of treasury; to prescribe its powers and duties as the revenue col- lection agency of the state; to prescribe certain powers and duties of the state treasurer; to regulate the importation, stamping, and disposition of certain tobacco products; to create the position and to define the powers and duties of the state commissioner of revenue; to provide for the transfer of powers and duties now vested in certain other state boards, commissions, departments and offices; to prescribe certain duties of and require certain reports from the department of treasury; to pro- vide procedures for the payment, administration, audit, assess- ment, levy of interests or penalties on, and appeals of taxes and tax liability; to prescribe its powers and duties if an agreement to act as agent for a city to administer, collect, and enforce the city income tax act on behalf of a city is entered into with any city; to provide an appropriation; to abolish the state board of tax administration; to prescribe penalties and provide reme- dies; and to declare the effect of this act," by amending section 30c (MCL 205.30c), as amended by 2001 PA 168. THE PEOPLE OF THE STATE OF MICHIGAN ENACT: 07426'02 JLB 2 1 Sec. 30c. (1) The commissioner, or an authorized 2 representative of the commissioner, on behalf of the department, 3 may enter into a voluntary disclosure agreement PURSUANT TO SUB- 4 SECTIONS (2) TO (11) OR AN AGREEMENT WITH A FEDERALLY RECOGNIZED 5 INDIAN TRIBE WITHIN THE STATE OF MICHIGAN PURSUANT TO SUBSECTIONS 6 (12) AND (13). 7 (2) A VOLUNTARY DISCLOSURE AGREEMENT MAY BE ENTERED INTO 8 with a person who makes application, who is a nonfiler, and who 9 meets 1 or more of the following criteria: 10 (a) Has a filing responsibility under nexus standards issued 11 by the department after December 31, 1997. 12 (b) Has a reasonable basis to contest liability, as deter- 13 mined by the commissioner, for a tax or fee administered under 14 this act. 15 (3)(2)All taxes and fees administered under this act are 16 eligible for inclusion in a voluntary disclosure agreement. 17 (4)(3)To be eligible for a voluntary disclosure agree- 18 ment, subject to subsection (1), a person must meet all of the 19 following requirements: 20 (a) Except as otherwise provided in this subdivision, has 21 had no previous contact by the department or its agents regarding 22 a tax covered by the agreement. For purposes of this subdivi- 23 sion, a letter of inquiry, whether a final letter or otherwise, 24 requesting information under section 21(2)(a) that was sent to a 25 nonfiler shall not be considered a previous contact under this 26 subdivision if the nonfiler sends a written request to the 07426'02 3 1 department to enter into a voluntary disclosure agreement not 2 later than June 30, 1999. 3 (b) Has had no notification of an impending audit by the 4 department or its agents. 5 (c) Is not currently under audit by the department of trea- 6 sury or under investigation by the department of state police, 7 department of attorney general, or any local law enforcement 8 agency regarding a tax covered by the agreement. 9 (d) Is not currently the subject of a civil action or a 10 criminal prosecution involving any tax covered by the agreement. 11 (e) Has agreed to register, file returns, and pay all taxes 12 due in accordance with all applicable laws of this state for all 13 taxes administered under this act for all periods after the look- 14 back period. 15 (f) Has agreed to pay all taxes due for each tax covered 16 under the agreement for the lookback period, plus statutory 17 interest as stated in section 23, within the period of time and 18 in the manner specified in the agreement. 19 (g) Has agreed to file returns and worksheets for the look- 20 back period as specified in the agreement. 21 (h) Has agreed not to file a protest or seek a refund of 22 taxes paid to this state for the lookback period based on the 23 issues disclosed in the agreement or based on the person's lack 24 of nexus or contacts with this state. 25 (5)(4)If a person satisfies all requirements stated in 26 subsections (1), (2), and(3)(4), the department shall enter 07426'02 4 1 into a voluntary disclosure agreement with that person providing 2 the following relief: 3 (a) Notwithstanding section 28(1)(e) of this act, the 4 department shall not assess any tax, delinquency for a tax, pen- 5 alty, or interest covered under the agreement for any period 6 before the lookback period identified in the agreement. 7 (b) The department shall not assess any applicable discre- 8 tionary or nondiscretionary penalties for the lookback period. 9 (c) The department shall provide complete confidentiality of 10 the agreement and shall also enter into an agreement not to dis- 11 close, in accordance with section 28(1)(f), any of the terms or 12 conditions of the agreement to any tax authorities of any state 13 or governmental authority or to any person except as required by 14 exchange of information agreements authorized under section 15 28(1)(f), including the international fuel tax agreement under 16 chapter 317 of title 49 of the United States Code, 49 17 U.S.C. 31701 to 31708. The department shall not exchange infor- 18 mation obtained under this section with other states regarding 19 the person unless information regarding the person is specifi- 20 cally requested by another state. 21 (6)(5)The department shall not bring a criminal action 22 against a person for failure to report or to remit any tax cov- 23 ered by the agreement before or during the lookback period if the 24 facts established by the department are not materially different 25 from the facts disclosed by the person to the department. 26 (7)(6)A voluntary disclosure agreement is effective when 27 signed by the person subject to the agreement, or his, her, or 07426'02 5 1 its lawful representative, and returned to the department within 2 the time period specified in the agreement. The department shall 3 only provide the relief specified in the executed agreement. Any 4 verbal or written communication by the department before the 5 effective date of the agreement shall not afford any penalty 6 waiver, limited lookback period, or other benefit otherwise 7 available under this section. 8 (8)(7)A material misrepresentation of the fact by an 9 applicant relating to the applicant's current activity in this 10 state renders an agreement null and void and of no effect. A 11 change in the activities or operations of a person after the 12 effective date of the agreement is not a material misrepresenta- 13 tion of fact and shall not affect the agreement's validity. 14 (9)(8)The department may audit any of the taxes covered 15 by the agreement within the lookback period or in any prior 16 period if, in the department's opinion, an audit of a prior 17 period is necessary to determine the person's tax liability for 18 the tax periods within the lookback period or to determine 19 another person's tax liability. 20 (10)(9)Nothing inthis sectionSUBSECTIONS (2) TO (9) 21 shall be interpreted to allow or permit unjust enrichment as that 22 term is defined in subsection(11)(15). Any tax collected or 23 withheld from another person by an applicant shall be remitted to 24 the department without respect to whether it was collected during 25 or before the lookback period. 07426'02 6 1 (11)(10)The department shall not require a person who 2 enters into a voluntary disclosure agreement to make any filings 3 that are additional to those otherwise required by law. 4 (12) THE DEPARTMENT MAY ENTER INTO A TRIBAL AGREEMENT WITH A 5 FEDERALLY RECOGNIZED INDIAN TRIBE SPECIFYING THE APPLICABILITY OF 6 A TAX ADMINISTERED UNDER THIS ACT TO THAT TRIBE, ITS MEMBERS, AND 7 ANY PERSON CONDUCTING BUSINESS WITH THEM. THE TRIBE, ITS MEM- 8 BERS, AND ANY PERSON CONDUCTING BUSINESS WITH THEM SHALL REMAIN 9 FULLY SUBJECT TO THIS STATE'S TAX ACTS EXCEPT AS OTHERWISE SPE- 10 CIFICALLY PROVIDED BY AN AGREEMENT IN EFFECT FOR THE PERIOD AT 11 ISSUE. A TRIBAL AGREEMENT SHALL INCLUDE ALL OF THE FOLLOWING: 12 (A) A STATEMENT OF ITS PURPOSE. 13 (B) PROVISIONS GOVERNING DURATION AND TERMINATION THAT MAKE 14 THE AGREEMENT TERMINABLE BY EITHER PARTY IF THERE IS NONCOMPLI- 15 ANCE AND TERMINABLE AT-WILL AFTER A PERIOD OF NOT MORE THAN 16 2 YEARS. 17 (C) PROVISIONS GOVERNING ADMINISTRATION, COLLECTION, AND 18 ENFORCEMENT. THOSE PROVISIONS SHALL INCLUDE ALL OF THE 19 FOLLOWING: 20 (i) COLLECTION OF TAXES LEVIED UNDER THE GENERAL SALES TAX 21 ACT, 1933 PA 167, MCL 205.51 TO 205.78, OR THE USE TAX ACT, 1937 22 PA 94, MCL 205.91 TO 205.111, ON THE SALE OF TANGIBLE PERSONAL 23 PROPERTY OR THE STORAGE, USE, OR CONSUMPTION OF TANGIBLE PERSONAL 24 PROPERTY NOT EXEMPT UNDER THE AGREEMENT. 25 (ii) COLLECTION OF TAXES LEVIED ON TOBACCO PRODUCTS UNDER 26 THE TOBACCO PRODUCTS TAX ACT, 1993 PA 327, MCL 205.421 TO 27 205.436, AND TAXES LEVIED UNDER THE MOTOR FUEL TAX ACT, 2000 07426'02 7 1 PA 403, MCL 207.1001 TO 207.1170, AND THE MOTOR CARRIER FUEL TAX 2 ACT, 1980 PA 119, MCL 207.211 TO 207.234, ON SALES OF TOBACCO 3 PRODUCTS OR MOTOR FUELS NOT EXEMPT UNDER THE AGREEMENT. 4 (iii) WITHHOLDING AND REMITTANCE OF INCOME TAXES LEVIED 5 UNDER THE INCOME TAX ACT OF 1967, 1967 PA 281, MCL 206.1 TO 6 206.532, FROM EMPLOYEES NOT EXEMPT UNDER THE AGREEMENT. 7 (iv) REPORTING OF GAMBLING WINNINGS TO THE SAME EXTENT AND 8 IN THE SAME MANNER AS REPORTED TO THE FEDERAL GOVERNMENT. 9 (v) A WAIVER OF TRIBAL SOVEREIGN IMMUNITY SUFFICIENT TO MAKE 10 THE AGREEMENT ENFORCEABLE AGAINST BOTH PARTIES. 11 (D) PROVISIONS GOVERNING DISCLOSURE OF INFORMATION BETWEEN 12 THE DEPARTMENT AND THE TRIBE AS NECESSARY FOR THE PROPER ADMINIS- 13 TRATION OF THE TRIBAL AGREEMENT. 14 (E) A PROVISION ENSURING THAT THE MEMBERS OF THE TRIBE WILL 15 BE BOUND BY THE TERMS OF THE AGREEMENT. 16 (13) A TRIBAL AGREEMENT AUTHORIZED UNDER SUBSECTION (12) MAY 17 INCLUDE 1 OR MORE OF THE FOLLOWING: 18 (A) A PROVISION FOR DISPUTE RESOLUTION BETWEEN THIS STATE 19 AND THE TRIBE, WHICH MAY INCLUDE A NONJUDICIAL FORUM. 20 (B) A PROVISION FOR THE SHARING BETWEEN THE PARTIES OF CER- 21 TAIN TAXES COLLECTED BY THE TRIBE AND ITS MEMBERS. 22 (C) ANY OTHER PROVISIONS BENEFICIAL TO THE ADMINISTRATION OR 23 ENFORCEMENT OF THE TRIBAL AGREEMENT. 24 (14) A TRIBAL AGREEMENT AUTHORIZED UNDER SUBSECTION (12) 25 SHALL NOT AUTHORIZE THE APPROVAL OF A CLASS III GAMING COMPACT 26 NEGOTIATED UNDER THE INDIAN GAMING REGULATORY ACT, PUBLIC 27 LAW 100-497, 102 STAT. 2467. 07426'02 8 1 (15)(11)As used in this section: 2 (a) "Lookback period" means 1 or more of the following: 3 (i) The most recent 48-month period as determined by the 4 department or the first date the person subject to an agreement 5 under this section began doing business intheTHIS state if 6 less than 48 months. 7 (ii) For single business taxes levied under the single busi- 8 ness tax act, 1975 PA 228, MCL 208.1 to 208.145, the lookback 9 period shall be the 4 most recent completed fiscal or calendar 10 years over a 48-month period or the first date the person subject 11 to an agreement under this section began doing business in this 12 state if less than 48 months. 13 (iii) Notwithstanding subparagraphs (i), (ii), and (iv), the 14 most recent 36-month period as determined by the department or 15 the first date the person subject to an agreement under this sec- 16 tion began doing business in this state if less than 36 months, 17 if tax returns filed in another state for a tax based on net 18 income that included sales in the numerator of the apportionment 19 formula that now must be included in the numerator of the appor- 20 tionment formula under the single business tax act, 1975 PA 228, 21 MCL 208.1 to 208.145, and those sales increased the net tax 22 liability payable to that state. 23 (iv) If there is doubt as to liability for the tax during 24 the lookback period, another period as determined by the commis- 25 sioner to be in the best interest of this state and to preserve 26 equitable and fair administration of taxes. 07426'02 9 1 (b) "Nonfiler" for a particular tax means, beginning July 1, 2 1998, a person that has not filed a return for the particular tax 3 being disclosed for periods beginning after December 31, 1988. 4 Nonfiler also includes a person whose only filing was a single 5 business tax estimated tax return filed before January 1, 1999. 6 (c) "Person" means an individual, firm, bank, financial 7 institution, limited partnership, copartnership, partnership, 8 joint venture, association, corporation, limited liability com- 9 pany, limited liability partnership, receiver, estate, trust, or 10 any other group or combination acting as a unit. 11 (d) "Previous contact" means any notification of an impend- 12 ing audit pursuant to section 21(1), review, notice of intent to 13 assess, or assessment. Previous contact also includes final let- 14 ters of inquiry pursuant to section 21(2)(a) or a subpoena from 15 the department. 16 (e) "Unjust enrichment" includes the withholding of income 17 tax under the income tax act of 1967, 1967 PA 281, MCL 206.1 to 18 206.532, and the collection of any other tax administered by this 19 act that has not been remitted to the department. 20 (f) "Voluntary disclosure agreement" or "agreement" means a 21 written agreement that complies with this act. 07426'02 Final page. JLB