STATE OF MICHIGAN TAX AMNESTY PROGRAM
THE STATE OF MICHIGAN TAX AMNESTY PROGRAM OFFERS
BUSINESS AND INDIVIDUAL TAXPAYERS THE OPPORTUNITY
TO SETTLE DELINQUENT STATE TAX DEBT AND AVOID
COSTLY PENALTY PAYMENTS
by James F. Mauro and Brian P. Vincent
State of Michigan (the “State”) taxpayers who have failed to file a State
tax return or to pay a tax due to the State for tax return periods ending
on or before December 31, 2009, may be eligible to take advantage of
the State’s new tax amnesty program, which is scheduled to begin on
May 15, 2011, and end on June 30, 2011.
On October 5, 2010, the State Governor signed this tax amnesty
program (the “Program) into law.1 The Program allows individual
and business State taxpayer participants (collectively, “Taxpayers”)
to resolve eligible unpaid State tax debt for tax return periods (i.e.,
quarterly, annual and/or monthly) which ended on or before December
31, 2009, at a significantly discounted rate by waiving all outstanding
civil penalties currently due and owing, in exchange for full payment
of the tax and interest due for the particular tax return period, and
eliminating the potential for future criminal prosecution. In contrast
to many tax amnesty programs, there is no Taxpayer penalty for failure
to participate in the Program.
Who is Eligible for Tax Amnesty?
Under the Program, there are three categories of eligible State tax
debt: (1) tax debt caused by failure or refusal to file a tax return; (2)
tax debt caused by failure to timely pay; or (3) tax debt caused by an
excessive claim for refund.
A Taxpayer is ineligible to participate in the Program if: (1) the Taxpayer is
eligible to enter into a voluntary disclosure agreement with the Michigan
Department of the Treasury (the “DOT”)2; (2) the tax is attributable to
income derived from a criminal act; (3) the Taxpayer is under criminal
investigation or involved in a lawsuit or criminal prosecution for the tax;
or (4) the Taxpayer has been convicted of a felony under the Michigan
Revenue Act or the Internal Revenue Code of 1986.
Tax Types Covered by Amnesty
Only those State taxes which are administered by the DOT under
the Revenue Act3 qualify for amnesty under the Program. Qualifying
State tax types include, among others: (1) Individual Income Tax;
(2) Withholding Tax; (3) Inheritance Tax; (4) Michigan Business Tax;
(5) Motor Fuel Tax; (6) Sales and Use Tax; (7) Single Business Tax; (8)
Severance on Oil and Gas Tax; and (9) Tobacco Products Tax.
State Required to Notify Eligible Taxpayers
The DOT was required to notify eligible Taxpayers about the Program
no later than April 15, 2011. This notification should, among other
things, include information about the Taxpayer’s eligibility and the
terms and conditions of the Program.
How to Participate in the State Tax Amnesty Program
Taxpayers who wish to participate in the Program will be required
to submit an application, file any outstanding initial or amended tax
return(s), and full pay the tax and interest currently due and owing
with respect to the particular return period after May 15, 2011, but
before June 30, 2011 (the “Amnesty Period”).
A Taxpayer with unpaid State tax debt for more than one eligible tax
return period (quarterly and annual) will not be required to full-pay
the total amount of all tax and interest currently due and owing for all
eligible unpaid State tax debts. Rather, the Taxpayer’s application will
be considered on a return period-by-return period basis (i.e., the DOT’s
determination of amnesty eligibility will be based upon its assessment
of whether the Taxpayer full-paid the tax and interest due and owing
and filed any delinquent initial or amended return for the particular
eligible tax period).
The Benefits of Participating in the Tax Amnesty Program
(and the Costs of Non-Participation)
Under State law, additional penalty and interest charges continue to
accrue on a Taxpayer’s delinquent State tax debt(s) until the unpaid
debt(s) is/are paid in full. Moreover, State tax debts — if left unresolved
– subject a Taxpayer to DOT collection action (i.e., real and/or personal
property liens; business closure and/or personal property seizure and
sale tax warrants; wage and/or bank account levies). Failure to settle
State tax debt(s) prior to DOT collection action can result not only in
significantly greater costs to a Taxpayer; it can have a compounding
detrimental effect on a Taxpayer’s overall ability to meet ongoing
financial obligations.
__________________________________________________________
1 See P.A. 198 of 2010.
2 See MCL 205.30C; see also Voluntary Disclosure, Michigan Department
of Treasury–Tax Practitioners Quick Links (http://www.michigan.gov/
taxes/0,1607,7-238-43549-156155–,00.html).
3 See P.A. 122 of 1941.
Taxpayers who have questions regarding Program eligibility and/or
participation requirements may contact:
James F. Mauro is a member in Dickinson Wright’s Lansing office and can be reached at 517.487.4701 or jmauro@dickinsonwright.com.
Brian P. Vincent is an associate in Dickinson Wright’s Lansing office and can be reached at 517.487.4714 or bvincent@dickinsonwright.com.
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