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A Better Partnership


Feb 2014
February 21, 2014

New State Law Provides More Protection for Taxpayers

The Michigan Legislature and Governor Rick Snyder recently passed a law that provides some relief to taxpayers facing audit and other scrutiny from the state Department of Treasury. Here is a summary of the changes:

Audit Changes: Public Act 3 of 2014 requires the Michigan Department of Treasury to complete an audit within 12 months after the expiration of the statute of limitations for the return under audit. Treasury also must issue a final assessment within nine months of the issuance of a preliminary audit report. This provision applies to audits commenced after September 30, 2014.

Successor Liability: Treasury will be required, upon request, to issue purchasers of businesses the known or estimated tax liability of a seller target for the purpose of establishing an escrow account within 60 days of the request. The changes allow Treasury to estimate taxes that could be due based on prior tax returns or other available information.  The application of this estimation rule is unknown and hopefully administrative guidance will be issued.  Purchasers who request the disclosure of tax liability without Treasury’s timely compliance will not have successor liability.  The purchaser will be held liable only for the tax obligation disclosed if the purchaser holds back an adequate escrow.  Finally, a purchaser that does not maintain an adequate escrow may be liable for taxes up to the value of the target business, less amounts paid to superior secured interests.  The purchase of a business includes buying a company’s stock of goods, so the rules apply to less than a complete purchase of a business.

Personal Liability: Treasury will have four years after assessing a business to assess personal liability for unpaid taxes.  Treasury has the burden of proof to show prima facie evidence or make a prima facie case that a person is responsible for filing returns and paying taxes. If Treasury meets its burden, the responsible person will have all business defenses for the assessment.  The new law allows for a claim of contribution from other responsible parties on a proportionate liability theory.  Treasury will first have to pursue a purchaser or succeeding purchaser that has successor liability before collecting tax from a responsible person.  The alleged responsible party will have access to audit documentation.  Finally, for assessments issued to a responsible party after Dec. 31, 2013, the liability is limited to sales, use, withholding, tobacco products, motor fuel, motor carrier fuel and another other tax withheld from a third party.  These new protections afforded responsible parties are a significant change from the prior strict liability statute and narrows the type of taxes covered by this rule.

Refund Claim Changes: The new law allows taxpayers to presume that a claim for refund has been denied if the claim has not been approved, denied or adjusted within one year of the date the claim was received by Treasury – which permits taxpayers to pursue legally afforded appeals.

The WNJ Tax Group is available to consult with clients regarding their state tax obligations and addressing issues involved in an audit. Contact Sean Cook at 248.784.5058, or via email at

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