September 22, 2020

Volume X, Number 266

September 22, 2020

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September 21, 2020

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Michigan Expands Settlement Authority for Tax Disputes

Governor Snyder signed PA 215 of 2017 on December 20, 2017. This new law creates for the first time the potential to settle tax disputes during the administrative appeal process prior to litigation. However, taxpayers and their representatives should be aware of the details and requirements of this legislation. The Department of Treasury has published guidance with respect to the program.

Request for Informal Conference Must Be Timely

To qualify for the new settlement program, a taxpayer must make a timely, proper request for informal conference and must pay uncontested taxes prior to making the request.

Offers Must Be Made Timely and in the Proper Form

An offer to settle cannot be made more than 21 days after the date the informal conference was held. Therefore, taxpayers must be prepared to submit offers, in writing, in a timely fashion following an informal conference. In addition, the offer must be in writing, signed by the taxpayer, and must identify the issues to be settled, the amount of the settlement offer, and the factual and legal bases for settlement.

Doubt as to Collectability Not a Basis for Settlement

Taxpayers must advance a viable legal position to support settlement. The inability to pay is not a basis for settlement under PA 215.

Once a settlement offer is made, the Treasurer or his/her designee may accept, reject, or make a counteroffer. The taxpayer will be notified in writing of the Treasurer's decision. The Treasurer also can make a settlement proposal under the new law, and such an offer also will be made in writing. If no settlement is reached, the informal conference process will continue in its normal manner, and post-informal conference procedures remain unchanged.

If a settlement is reached, a settlement agreement will be executed by both parties and this settlement is final, not appealable under the Revenue Act, and is not subject to review or direct or collateral attack.

PA 215 Settlement Is Separate and Distinct from Offer-In-Compromise

This new settlement program is different from the offer-in-compromise program created in 2014. Offer-in-compromise remains a vital tool for cases in which appeal rights have expired and in which the taxpayers lack an ability to pay the assessed liability.

© 2020 Varnum LLPNational Law Review, Volume VIII, Number 2


About this Author

Wayne D. Roberts, Corporate tax attorney, Varnum

Wayne is a member of Varnum’s Tax Team. His practice includes all aspects of federal and state tax planning and tax litigation. He represents both closely-held and Fortune 100 companies in tax disputes with the IRS, the Michigan Department of Treasury, and revenue departments in Pennsylvania, Indiana, Tennessee, New York, California and numerous other state and local taxing jurisdictions. 

Eric M. Nemeth, Tax Planning Attorney, Varnum, Financial Controversy Lawyer

Eric is a partner and leads the tax team. He concentrates on tax and financial controversy (IRS and various States) from examinations appellate conferences, criminal investigations, witness representation and civil and criminal tax litigation. He works with government regulatory and general tax matters. He has served as Senior Trial Attorney for the District Counsel of the Internal Revenue Service and as Special Assistant U.S. Attorney for the Department of Justice. He is a frequent speaker on tax enforcement and has served as an expert witness and binding arbitrator.

Erin Haney, Tax attorney, Varnum

Erin is a member of Varnum's Tax Practice Team. As a former senior auditor for the Michigan Department of Treasury, she is experienced in Michigan tax compliance and controversy matters. Erin is also a certified public accountant, and she worked as a tax consultant for a major accounting firm prior to pursuing a career in law. During law school she served as a research assistant reviewing updates for the Guidebook to Michigan Taxes and completed an internship with the United States District Court for the Western District of Michigan.