The Voluntary Disclosure Act (Public Act 221 of 1998) authorizes the State Treasurer, or a representative, to enter into a voluntary disclosure agreement with nonfilers who have not been previously contacted by the Department and who meet certain other criteria.  (Reference MCL 205.30c).

Under a voluntary disclosure agreement, eligible persons may file returns and pay taxes and interest for a limited lookback period of four years without imposition of penalties, in exchange for future tax compliance. 

 

Qualification Requirements

To qualify for voluntary disclosure a person must meet the following criteria:

1. not have previously filed a tax return for the particular tax being disclosed for periods beginning after December 31, 1988.  Nonfiler also includes a person whose only filing was a single business tax (SBT) estimated tax return filed before January 1, 1999. 
   
   
2. have a filing responsibility under the nexus standards issued by the Department of Treasury  after December 31, 1997  -or-  have a reasonable basis to contest a liability as determined by the Commissioner for a tax or fee administered under the Revenue Act.

Two nexus standards have been issued by the Department subsequent to December 31, 1997. Revenue Administrative Bulletin (RAB) 1998-1 and RAB 1999-1 describe the jurisdictional standards for Michigan Single Business Tax and Use Tax, respectively. Both standards are applied retroactively.

A person qualifying under the above criteria may be eligible for a voluntary disclosure agreement if all of the following requirements are met: 

1. Has had no previous contact by the Department or its agents regarding a tax covered by the agreement. Previous contact means any notification of an impending audit pursuant to section 205.21(1), review, notice of intent to assess, assessment or subpoena from the Department. A letter of inquiry is not considered a previous contact. However, a person will not qualify for voluntary disclosure after receiving a final letter of inquiry.
    
2. Is not currently under audit by the Department of Treasury or under investigation by the Department of State Police, Department of Attorney General, or any local law enforcement agency regarding a tax covered by the agreement.
    
3. Is not currently the subject of a civil action or a criminal prosecution involving any taxes covered by the agreement.
    
4. Has agreed to register, file returns, and pay all taxes due for all taxes administered under the Revenue Act for periods after the lookback period. 
    
5. Has agreed to file returns and worksheets specified in the agreement and pay all the taxes and statutory interest for the entire lookback period within the time period and manner specified in the agreement. 

 

Potential Agreement Terms

If a person satisfies all the requirements, the Department shall enter into a voluntary disclosure agreement with that person. The agreement will specify the lookback period, and will become effective only when signed by the person subject to the agreement, or its lawful representative, and returned to the Department within the time period specified in the agreement. The Department will not assess tax, penalty or interest for any period before the lookback period identified for that tax as specified in the agreement. Nor will the Department apply penalties for the lookback period. For Single Business Tax, the lookback period is determined by the date of the initial request to enter into an agreement. The lookback period for Use Tax is determined by the registration date designated in the agreement. Lookback period means one or more of the following: 

Example A request to enter into a voluntary disclosure agreement for the Single Business Tax was initiated on October 12, 2004. The person qualifies under the four most recent completed calendar year scenario. The Department signs the agreement on April 20, 2005. The lookback period, based on the initial request date, includes January 1, 2000 through December 31, 2003. In addition, the person is responsible for making estimated payments for 2004 and the first quarter of 2005.

 

Filing Requirements

1. If the company has nexus for Single Business Tax under RAB 1998-1, complete Form 4132, Voluntary Disclosure-Multi-Year Apportionment Schedule for Single Business Tax to determine whether you should request voluntary disclosure for SBT.
   
2. A seller is subject to use tax collection responsibility under the Use Tax Act if it has nexus with Michigan.

1. If the disclosure is for single business tax or individual income tax, completed tax returns must be submitted for all years.
    
2. If the disclosure is for sales, use or withholding tax, a worksheet must be submitted. Example: If you are reporting sales tax, the worksheet must include the taxable sales, the tax amount and the interest amount. Go to Revenue Administrative Bulletins (RAB's) to locate the most current RAB for Interest Rates. 

1. If the tax being remitted was not previously collected, complete the worksheet on a quarterly basis. Compute interest from the 15th day of the month following the quarter, to the present date. 
    
2. If sales or use tax was collected from the purchaser, or withholding taxes withheld from employee wages, the amounts must be reported on a monthly basis. Compute interest from the 15th day of the following month to the present date. 

3. Remit the full amount of tax and interest due along with a check payable to the State of Michigan. Forward the letter, returns/worksheets and payment to the Discovery and Tax Enforcement Division, at the address identified below. (Interest is calculated by multiplying the current interest rate. View the current interest rate.)