Michigan Treasury’s tax overkill

EmptyPocketsPerception is a powerful tool when it comes to a state’s business climate. Making Michigan attractive for new investment – and encouraging businesses already located here to stay put – is a deliberative and dynamic process. Michigan’s recent, positive steps to improve its business climate are creating a positive international impression after a decade of bad press and negative perceptions.

However, a positive business climate is a fragile commodity that can quickly be diminished by the actions of a few people in pursuit of their own narrow agenda. Like a rude waitress in an otherwise outstanding restaurant, a great deal of damage is done when everyone is not working toward the greater good.

Case in point: the Michigan Department of Treasury’s heavy-handed approach to enforcing corporate officer liability statutes.

In Michigan, as in most states, a corporate officer is personally liable when business taxes go unpaid. Traditionally, other states and the IRS have limited personal liability to only unpaid trust taxes. Trust taxes are those taxes that a business collects from other persons and holds in trust for the government. Consumer sales taxes and employee withholding taxes are two common examples. Holding a corporate officer personally liable for unpaid trust taxes is perfectly acceptable.

In the majority of states, personal liability statutes have required that the responsible person be employed in a tax-supervisory position with the company during the time that the person’s company failed to pay the government. However, Michigan’s Treasury is departing from this body of law. Treasury now extends its assessments to persons not employed by the tax liable entity or were not employed during the time period in which the tax was not paid. That is, the state Treasury is now assessing persons for tax debts that arose before the person was employed by the company. It is assessing persons that were members of other holding companies that invested in the tax liable company – and had no hand in day-to-day operations. Treasury is assessing persons for debts which arose after they left the company. No other government jurisdiction practices such an expansive assessment.

This change was noted by Forbes Magazine - warning that Michigan imposes personal liability on all business taxes and has an aggressive collection policy relative to other states. A little bad publicity like this can undo all of the hard work undertaken to change Michigan’s bad boy business reputation.

Legislation to clarify who is the “responsible person” in these situations – and require Treasury to play by the rules common in most other states – is in front of the Senate Finance Committee. Senate Bill 64, sponsored bySenator Jack Brandenburg, is a balanced and fair approach to collecting taxes due without entangling innocent people that had nothing to do with the problem.

Lansing lawmakers would do well to get Treasury back on the reservation – and pass these important changes to keep Michigan moving in the right direction.

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About Charles Owens

Charles Owens has been advocating the interests of small business in the Michigan Legislature for over 25 years, beginning with his tenure at the Michigan Institute of Laundering and Dry-cleaning and currently with the National Federation of Independent Business / Michigan. As the State Director of one of Michigan's most respected small business organizations, Owens is responsible for directing the NFIB in its mission to maintain the viability of small business in the face of expanded legislative and regulatory challenges. Owens has been an active participant in the legislative debate over numerous landmark Michigan issues including: the Michigan Environmental Protection Act, inheritance tax, tort liability reform, Unemployment Insurance reform, Workers’ Compensation, and Michigan Occupational Safety & Health Act (MIOSHA) issues. Owens and the NFIB spearheaded the efforts of other small business groups in the fight for fairness and equity for small business in the debate over the repeal and replacement for the Michigan Business Tax. Owens is a 25 year member of the Capitol Club, a dedicated group of association executives committed to the advancement of legislative advocacy for their respective organizations. In 2005 he was elected by his peers to be President of the organization. In 2006, Owens was ranked as number five of the top ten single interest individual lobbyists in Michigan by Inside Michigan Politics. Under his leadership, NFIB was also ranked in the top twenty lobbyist organizations and top ten single interest lobbying organizations by the same publication. Originally a native of Rockford, Illinois, Owens graduated from Northern Illinois University with a Bachelors Degree in Finance and Business Administration. follow on twitter: @OwensNFIB
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