DEPARTMENT OF TREASURY

                               BUREAU OF REVENUE

                            TAXPAYER BILL OF RIGHTS


(By authority conferred on the state commissioner of revenue by  sections  4, 
23 and 24 of Act No. 122 of the  Public  Acts  of  1941,  as  amended,  being 
§§205.4, 205.23, and 205.24 of the Michigan Compiled Laws).


R 205.1001   Definitions.
  Rule 1. As used in these rules:
  (a) "Act" means Act No. 122 of the Public Acts of 1941, as  amended,  being 
§205.1 et seq. of the Michigan Compiled Laws.
  (b) "Commissioner" means the state commissioner of revenue as appointed  by 
the state treasurer and described in the act.
  (c) "Confidential information" means information and facts that are treated 
in a confidential manner under section 28 of the act.
  (d) "Department" means  the  department  of  treasury  and  includes  those 
employees and officers of  the  State  of  Michigan,  or  their  agents,  who 
implement or carry out the functions described in the act.
  (e) "Informal conference" means  a  meeting  involving  a  taxpayer  and  a 
department representative before a referee to review and  where  appropriate, 
to resolve a tax dispute pursuant to section 21 of the act.
  (f)"Notice of final assessment" means the notice which advises the taxpayer 
that an assessment issued under section 21 of the act is final and subject to 
appeal.
  (g) "Notice of intent to assess" means the notice that advises the taxpayer 
of the department's intent to assess the tax and provides the amount  of  the 
tax the department believes the taxpayer owes, the reason for the deficiency, 
and a statement that advises the taxpayer of all of the following:
  (i) The right to an informal conference.
  (ii) The requirement of a written request by the taxpayer for the  informal 
conference, including the taxpayer's statement of the contested  amounts  and 
an explanation of the dispute.
  (iii)The 30-day time limit for the request.
  (h) "Person" means any of the following entities:
  (i) An individual.
  (ii) A firm.
  (iii) A bank.
  (iv) A financial institution.
  (v) A limited partnership.
  (vi) A copartnership.
  (vii) A partnership.
  (viii) A limited liability company.
  (ix) A joint venture.
  (x) An association.
  (xi) A corporation.
  (xii) A receiver.
  (xiii) An estate.
  (xiv) A trust.
  (xv) Any other group or combination acting as a unit.
  (i) "Referee" means an individual who is authorized by the commissioner  to 
conduct an informal conference pursuant to section 21 of the act.
  (j) "Tax" means any tax that is administered and collected under the act.
Tax includes any tax, penalty, and interest.
  (k) "Taxpayer representative" means a  person  who  is  authorized  by  the 
taxpayer to represent the taxpayer before the department.
  (l) "Third party" means any of the following entities:
  (i) A relative, except for a husband or wife when a joint return is filed.
However, if a joint return has not been filed and a spouse has  been  claimed 
as an exemption on a return, that spouse may not receive information  without 
written permission from the taxpayer.  If a joint return has been  filed  and 
the parties are separated or  divorced,  current  information,  such  as  the 
current address, employment information, or collection information, about one 
party shall not be disclosed to the other party.
  (ii) A friend of the taxpayer.
  (iii) Any  elected  official  acting  in  his  or  her  official  capacity, 
including a member of the United States Congress or the state legislature.
  (iv) Any professional, such as an accountant or attorney, who does not  act 
as the taxpayer representative.  For  example,  a  return  preparer  who  has 
prepared and signed a return is not  entitled  to  receive  the  return  upon 
request without express written authorization from the taxpayer.
  (v) Any person, other than the taxpayer, who is not authorized by  the  act 
or these rules to obtain confidential information.

   History:  1996 AACS.


R 205.1002   Standards for treatment of public by department employees.
  Rule 2. (1) The department shall treat the public in a fair  and  courteous 
manner.  A department employee that has direct contact with the public in the 
course of his or her duties shall perform his or her duties in a businesslike 
manner.
  (2)  A  department  employee  shall  not  engage  in  improper  conduct  in 
interactions with the public and shall strive  to  avoid  the  appearance  of 
impropriety.  The following are examples of improper conduct:
  (a) The use or appearance  of  use,  of  one's  position  or  knowledge  of 
department procedures or access to confidential information to  intentionally 
harass or personally benefit from  another  person  or  grant  privileges  to 
another person.
  (b) Conduct, the natural consequence  of  which  is  to  oppress  or  abuse 
another person.
  (c) The use, or threat of use, of violence or other criminal means to  harm 
a person's physical integrity, reputation, or property.
  (d) The use of profane or offensive language.
  (e) Name-calling of a derogatory nature.
  (f) Soliciting raffle tickets during work hours for a charity.
  (g) The acceptance of, or an agreement to accept, a  gift  or  anything  of 
value from a person that could reasonably be expected to influence the manner 
in which an employee performs work or makes decisions.
  (h) The making of false statements or statements with false implications in 
the course of collecting debts, such as falsely implying that the employee is 
an attorney, using a false name, or falsely implying that  the  taxpayer  has 
committed a crime.
  (i) An employee's participation in  any  business  transaction  or  private 
arrangement for direct or indirect financial gain or deferment or discount of 
payment that accrues from or is based upon the employee's  official  position 
or on confidential information gained by reason of the employee's position.
  (j) An employee's failure to report to the  employee's  supervisor  or  the 
supervisor's supervisor appearances of a possible  conflict  of  interest  in 
relation to taxpayers with whom the employee  may  have  direct  or  indirect 
involvement.
  (k) The employee's failure to report to the employee's  supervisor  or  the 
supervisor's supervisor a taxpayer's complaint about the employee or  another 
employee or the employee's failure to report to the employee's supervisor  or 
the supervisor's supervisor a possible interference in a taxpayer's  attempts 
to discuss matters with a management person.
  (l) The falsification of reports or other records of contacts  or  attempts 
to contact or personally serve taxpayers with any notice or the falsification 
of other work activities.
  (m) Other conduct that may be subject to disciplinary action.
  (3) An employee shall perform his or her duties at the following times  and 
places:
  (a) For collection purposes, the department  shall  observe  the  following 
rules with respect to taxpayers, but not third parties:
  (i) Taxpayers may be contacted only during the day after 8 a.m. and  before 
9 p.m., local time, except with prior supervisory approvals follows:
  (A) The taxpayer has noncustomary working hours and has  expressed  to  the 
department that he or she wishes to be contacted at a different time  of  the 
day.
  (B) On a case-by-case basis for activities authorized under the  act,  such 
as those related to  jeopardy  assessment  accounts,  seizures  that  require 
earlier contact to make personal service, similar activities.
  (ii) Except as provided in subparagraphs (A) to (C) of this  paragraph  and 
unless otherwise agreed to by the department and the taxpayer, in the absence 
of knowledge of circumstances to the contrary, the department  shall  presume 
that a convenient place for communicating with the taxpayer is  the  location 
of the taxpayer or, if the taxpayer is represented  and  the  department  has 
been properly notified of the representation, the location  of  the  taxpayer 
representative, for example, the address of record:
  (A) The department shall not communicate with the  taxpayer  regarding  the 
collection of a debt at any time or place known, or which should be known, to 
be inconvenient to the taxpayer.
  (B) A department employee shall not contact a taxpayer at his or her  place 
of employment if the employee knows or has reason to know that the taxpayer's 
employer prohibits the taxpayer from receiving the communication.
  (C) If a taxpayer representative does not respond to a  communication  from 
the department, then a department employee shall refer the matter to  his  or 
her immediate supervisor and  shall  refrain  from  contacting  the  taxpayer 
representative until further instructions are provided.
  (b) For audit purposes, the department shall observe  the  following  rules 
with respect to taxpayers:
  (i) Auditors shall keep the work hours  as  established  by  the  taxpayer, 
shall limit lunchtime to not more than an hour, and shall leave the  taxpayer 
at the established time.
  (ii) Auditors  shall  respect  the  taxpayer's  property,  rules,  business 
practices, and hours and  shall  obtain  permission  to  use  the  taxpayer's 
equipment, such as the telephone or copying machine.
  (c) For all other purposes, the department shall contact  taxpayers  during 
regular working hours unless otherwise agreed to by the taxpayer.
  (4) The department shall have a system for monitoring compliance  with  the 
standards of fair and courteous treatment of the public.   The  system  shall 
provide for aggrieved persons to complain to the immediate supervisor of  the 
employee who acts improperly, for the department to discipline  the  employee 
who acts improperly, and for a taxpayer advocate  to  respond  to  complaints 
from the public.

  History:  1996 AACS.


R 205.1003   Confidentiality of information.
  Rule 3. (1) Except as  otherwise  provided  by  law,  the  commissioner  of 
revenue, any employee or authorized  representative  or  former  employee  or 
former authorized representative, or anyone  connected  with  the  department 
shall not disclose to any person, except the taxpayer or his or  her  or  its 
authorized representative, any facts or information  obtained  in  connection 
with the administration of a tax or  information  or  parameters  that  would 
enable a person to ascertain the audit selection or processing criteria for a 
tax administered by the department or collection or assessment parameters  or 
collection information.
  (2) Access to confidential information shall be  restricted  to  department 
employees who have a need to access the information to perform their duties.
A department employee shall not disclose confidential information to  another 
department employee, except as needed to perform duties.  For example, if  an 
employee reviews a  taxpayer's  individual  return  and  discovers  a  letter 
concerning the taxpayer's business tax liability, the  employee  shall  refer 
the correspondence to the business tax division for further action and  shall 
identify the source of the correspondence.
  (3) Confidential  information  shall  not  be  disclosed  by  a  department 
employee to confirm information made public by another  party  or  source  or 
which is part of any public record.  For example, if  an  unauthorized  third 
party wants to know if a tax lien has been filed against a certain  business, 
a department employee shall not release that information.  A tax lien becomes 
part of the public record upon filing, but still retains its identity as  tax 
return information and may not be released to unauthorized parties.
  (4) An employee or authorized  representative  of  another  agency  of  the 
federal, state, or local  government  who  handles  confidential  information 
pursuant  to  an  agreement  or  subpoena  shall  be  subject  to  the   same 
restrictions as department employees or authorized representatives and  shall 
not disclose the confidential information.
  (5) Confidential  information  obtained  about  a  taxpayer  shall  not  be 
disclosed without proper authorization.
  (6) The commissioner of revenue or a designated representative  shall  keep 
records  of  persons  who  are  not  department   employees   or   authorized 
representatives of the commissioner and  are  granted  access  to,  or  given 
copies of, returns or return information.  The records shall contain  all  of 
the following information:
  (a) The name and address of the person who has been granted access  to,  or 
given copies of, returns.
  (b) The representative capacity of the person specified in subdivision  (a) 
of this subrule if not the taxpayer.
  (c) The date of disclosure.
  (d) The name of the taxpayer or taxpayers.
  (e) The type of returns.
  (f) The taxable periods involved.

  History:  1996 AACS.


R 205.1004   Confidentiality  of  information;   exceptions   to   disclosure 
prohibition.
  Rule 4. (1) Subject to the same restrictions as department employees on the 
treatment of confidential information, a private contractor or its  employees 
are strictly prohibited from  disclosing  taxpayer  information  to  a  third 
party.  The prohibition against disclosure does not  bar  an  employee  of  a 
private contractor that processes tax returns or payments pursuant to the act 
from having access to confidential information that  is  reasonably  required 
for the processing or collection of amounts due this state.
  (2) The department may use a taxpayer's name, address and  social  security 
number  or  employer  identification  number  to  the  extent  necessary   in 
connection with the processing and mailing of forms for any report or  return 
required in the administration of any tax administered under the act.
  (3) The department may disclose confidential information in  the  following 
circumstances:
  (a) If the disclosure is required for the proper administration  of  a  tax 
law administered under the act.
  (b) If the disclosure is required by judicial order  sought  by  an  agency 
charged with the duty  of  enforcing  or  investigating  support  obligations 
pursuant to an order of a court in a domestic relations matter as  that  term 
is defined in section 31 of Act No. 294  of  the  Public  Acts  of  1982,  as 
amended, being §552.531 of the Michigan Compiled Laws.
  (c) If the disclosure is required pursuant to a judicial order, including a 
subpoena, search warrant, or other court order, sought by an  agency  of  the 
federal, state, or local government charged with the responsibility  for  the 
administration or enforcement of criminal law for purposes  of  investigating 
or  prosecuting  criminal  matters  or  for  federal  or  state  grand   jury 
proceedings.
  (d) If the disclosure is required by judicial order  where  the  taxpayer's 
liability for a tax administered under the act is to be  adjudicated  by  the 
court that issued the judicial order.
  (e) If the disclosure is required by a  reciprocal  agreement  between  the 
department and other departments  of  state  government,  the  United  States 
department of treasury, local governmental units within this state, or taxing 
officials of other states.
  (f) If the disclosure  is  upon  the  written  request  of  a  head  of  an 
institution, agency, or department of state government when  it  is  required 
for the effective administration or enforcement of the laws of this state, is 
upon the written request of a proper officer of the United States  department 
of treasury, or is upon the written request of a proper  officer  of  another 
state reciprocating in this privilege.
For all of the types of disclosure specified in this subrule, the request for 
information, subpoena, or other judicial  order  shall  be  directed  to  the 
Disclosure Officer,  Michigan  Department  of  Treasury,  Treasury  Building, 
Lansing, Michigan 48922.
  (4) The department may  disclose  records  and  information  that  are  not 
confidential, for example, that the department is not barred from  disclosing 
under the act, pursuant to a request filed under Act No. 442  of  the  Public 
Acts of 1976, as amended, being §15.231 et  seq.  of  the  Michigan  Compiled 
Laws.  Requests  shall  be  addressed  to  the  Director  of  the  Bureau  of 
Management Services, Michigan  Department  of  Treasury,  Treasury  Building, 
Lansing, Michigan 48922.

  History:  1996 AACS.


R 205.1005   Representation before department.
  Rule 5. (1) Any person may represent a taxpayer before the department as  a 
taxpayer representative.  A taxpayer may  appear  for  himself,  herself,  or 
itself or may be represented by  an  accountant,  attorney,  bookkeeper,  tax 
preparer, or any other third party that the taxpayer may choose.
  (2) The person shall file, with the department, either an appearance in the 
dispute or written authorization as described in  R  205.1006.  The  person's 
name, address, and telephone number shall be included in  the  appearance  or 
the written authorization.  The  person's  appearance  applies  only  to  the 
extent authorized by the taxpayer.
  (3) A person who has entered an appearance in a dispute may  withdraw  from 
the representation after giving the department notice of the withdrawal.
  (4) The appearance of a business firm or an organization shall include  the 
name of an individual who serves as a contact  person  and  the  address  and 
phone number of the individual if different from the  business  firm  or  the 
organization.

  History:  1996 AACS.


R 205.1006    Written  authorization  for  disclosure   of    confidential    
information to third parties or taxpayer representatives;  use  of  facsimile 
equipment.
  Rule  6.  (1)  Before  a  department  officer  or  employee  may   disclose 
confidential information to a third party, the third party shall furnish  the 
appropriate authorization from the taxpayer.
  (2) For telephone or in-person requests, the department shall determine the 
identity of the requesting party before giving out confidential information.
  (3) When determining the identity of the third party, whether  the  request 
is by telephone or in person,  the  department  shall  obtain  the  following 
information about the taxpayer and the subject  matter  from  the  requesting 
party:
  (a) The taxpayer's  name,  address  of  record,  taxpayer's  identification 
number, and any other information necessary to identify the requesting party.
  (b) For a refund inquiry, the approximate amount of expected refund, unless 
that amount is computed by the department, and the manner in which the return 
was filed, for example, an individual separate or a joint return.
  (4) A telephone conference call which is  initiated  by  the  taxpayer  and 
which includes the taxpayer, the taxpayer representative, and the  department 
may be utilized to discuss confidential information concerning  the  taxpayer 
without written authorization, unless it is preferable to mail the  requested 
return information to the taxpayer's address of record.
  (5) The written authorization of the taxpayer shall include  the  following 
information:
  (a) The taxpayer's name, address, and account number.
  (b) The time period for which the authorization is effective.
  (c) The name, address, and telephone number of the taxpayer representative.
  (d) The type of return, tax type, and period to be disclosed.
  (e) The taxpayer's signature and the date of signature.
  (f) A designation as to  whether  the  taxpayer  respresentative  is  given 
general authorization or limited  authorization  to  act  on  the  taxpayer's 
behalf. General authorization  to  act  on  the  taxpayer's  behalf  includes 
authorization to do any of the following:
  (i) Inspect or receive confidential tax information for all tax  years  and 
all tax matters.
  (ii) Represent the taxpayer and make oral or written presentations of  fact 
and argument for all tax matters and years.
  (iii) Sign returns and enter into agreements for all tax matters and years.
Limited authorization for specific tax matters includes authorization as to a 
specific type of tax, return, or year or period.
  (6) A taxpayer's written authorization may be provided by filing any of the 
following completed documents:
  (a)  The  original  Michigan  form  C-1029  entitled  "Power  of  Attorney/ 
Authorization." The form may be  obtained  without  cost  from  the  Michigan 
Department of Treasury, Treasury Building, Lansing,  Michigan  48922,  or  by 
calling 1-800-FORM-2-ME (1-800-367-6263).
  (b) A copy of federal form 2848 entitled "Power of Attorney and Declaration 
of Representative." The form may be obtained at the nearest internal  revenue 
service office.
  (c) An original or a copy of any other appropriate  power  of  attorney  or 
other taxpayer authorization.
  (7) If the written authorization does not identify the effective  date  and 
expiration date, the department shall presume that the effective date is  the 
same  date  as  the  date  of  the  written  authorization.  If  the  written 
authorization is not dated, the department shall presume that  the  effective 
date is the date the  department  receives  the  written  authorization.  The 
department shall presume that there is no expiration  date  for  the  matters 
specified. If a written authorization is otherwise incomplete, the department 
may request the taxpayer to supply missing or clarifying information.
  (8) The taxpayer may name only 1 taxpayer representative for a  single  tax 
dispute or matter. The department will contact  the  taxpayer  representative 
when a valid authorization or power of attorney has been properly filed  with 
the department and the taxpayer  makes  a  written  request  that  copies  of 
letters and notices be sent to the taxpayer  representative.  If  a  taxpayer 
representative is an organization and not an individual, the  taxpayer  shall 
designate a contact person within the organization.
  (9) A taxpayer shall have only 1 authorization or  power  of  attorney  for 
each taxpayer representative on file with the  department  for  a  particular 
matter. An autorization, once filed with the department and associated with a 
return or tax matter, shall be presumed to be  valid  unless  the  department 
receives notice that the authorization is no longer valid. By  executing  and 
filing a new written authorization, a  taxpayer  shall  revoke  a  previously 
filed authorization that relates to the same tax dispute that is  covered  by 
the newly filed authorization. An authorization ordinarily will be  requested 
regarding  a  specific  matter  only  upon  the  first  appearance   of   the 
representative before the department.
  (10) The department may accept tax information that is voluntarily  offered 
by third parties, but, in the absence of appropriate authorization,  may  not 
disclose information to the third party.  For  example,  a  third  party  may 
provide canceled check information to initiate a payment tracer  on  a  bill, 
but the department may not disclose the balance due  or  the  nature  of  the 
assessment to the third party in the  absence  of  appropriate  authorization 
from the taxpayer.  The  department  may  discuss  only  general  information 
relative to the meaning of a bill or a notice or information that is provided 
by the third party.
  (11)  A  taxpayer's  conduct  may  constitute  either  express  or  implied 
authorization to the department to  disclose  confidential  information.  For 
example, if a taxpayer brings a friend to an  informal  conference  or  other 
face-to-face meeting with department personnel and invites the friend to  sit 
in, the taxpayer's conduct will be considered to have given  implied  consent 
to the disclosure of confidential tax information about the  taxpayer.  If  a 
taxpayer does not authorize  the  department  to  disclose  confidential  tax 
information  to  the  friend,  then  the  friend  shall  leave  the  informal 
conference.  For  example,  the  conduct  of  a  deaf  individual  who  seeks 
translation from  the  department  may  constitute  implied  consent  to  the 
translator to relay or receive confidential information on  the  individual's 
behalf if the deaf individual  is  a  party  to  the  conversation  with  the 
department.
  (12) The department will accept either the original  written  authorization 
or, with indicia of reliability and trustworthiness, a copy  of  a  power  of 
attorney received by facsimile transmission (FAX).

  History:  1996 AACS; 1998 AACS; 1998 - 2000 AACS.


R 205.1007   Disclosure officer; delegation of authority.
  Rule 7. (1) The authority to disclose state tax information is delegated to 
the disclosure officer and to certain other positions within the  department.
The disclosure officer serves as a contact person for  all  governmental  and 
nongovernmental agencies that seek confidential information.  The  disclosure 
officer shall determine that a request for confidential information meets the 
requirements of the act and these rules.
  (2) Specific responsibilities are  delegated  to  the  following  positions 
within the department to ensure the confidentiality of tax information and to 
coordinate requests for authorized disclosure of tax information  within  the 
department:
  (a) The disclosure officer is responsible for the development  of  security 
directives  and  the  periodic  review  of  security  procedures  within  the 
department. For those agencies that the department discloses information  to, 
a report of all findings is furnished to  the  commissioner  of  revenue  for 
action as deemed appropriate.  The disclosure officer is responsible for  the 
development of information sharing agreements with  appropriate  federal  and 
state agencies.  The disclosure officer serves as the  liaison  with  federal 
and state  agencies  and  their  appropriate  administrators  concerning  the 
exchange of information.  The disclosure officer reviews  all  requests  from 
local jurisdictions seeking confidential information.
  (b) Division administrators who have primary custody or control of  returns 
or tax return information will determine that the necessary safeguards are in 
place to prevent the unauthorized use or disclosure of state or  federal  tax 
information.  The department shall issue appropriate written instructions  to 
employees and shall adopt measures to ensure that employees remain thoroughly 
familiar with, and strictly adhere to, the  rules  and  procedures  governing 
confidentiality and the disclosure of tax information.
  (3) All new department employees shall be required to review the  policies, 
procedures,  and  bulletins  governing  confidentiality  and  the  authorized 
disclosure of confidential information and to certify that they are  familiar 
with the documents as they documents relate to the employees specific duties.
 Periodically, department employees shall be required to review the policies, 
procedures, and bulletins associated with  confidential  information  in  the 
performance of their duties.  The disclosure officer  shall  annually  remind 
department employees of the confidentiality requirements.

  History:  1996 AACS.


R 205.1008   Right  to  informal  conference;  request   requirements   for   
informal conference; acknowledgment.
  Rule 8. (1) If a notice of intent to assess is  sent  to  a  taxpayer,  the 
notice shall include a statement of  the  taxpayer's  right  to  an  informal 
conference, the need for a written request by a  taxpayer  for  the  informal 
conference, which includes the taxpayer's statement of the contested  amounts 
and an explanation of the dispute, and the 30-day time limit for the request.
  (2) The taxpayer shall be entitled to an informal conference if a  taxpayer 
or taxpayer representative does all of the following:
  (a) Serves written notice upon the department, to the address specified  in 
the notice of intent to assess, within 30 days after the taxpayer receives  a 
notice of intent to assess.  The department  will  acccept  a  United  States 
postmarked certified or registered mail receipt as proof of  service  if  the 
certified mail receipt number is listed on the written notice of appeal.
  (b) Remits the uncontested portion of  the  liability  in  cash,  by  check 
payable to the "State of Michigan," or as otherwise indicated in  the  notice 
of intent to assess.
  (c) Provides a statement of the contested amounts and an explanation of the 
dispute.
  (3) If a taxpayer pays on the intent to assess in full before the scheduled 
informal conference is held in order to stop the  accrual  of  interest,  the 
taxpayer may preserve the right to dispute the assessment and raise  whatever 
issues would have been raised had the assessment remained unpaid.
  (4) If the taxpayer complies with the provisions of  subrule  (2)  of  this 
rule, the department shall respond, in writing, by acknowledging the request.
If a taxpayer does not satisfy the conditions specified  in  subrule  (2)  of 
this rule, the department shall inform the taxpayer, in writing, of that fact 
and shall advise the taxpayer  that  the  taxpayer  is  not  entitled  to  an 
informal conference.

  History:  1996 AACS.


R 205.1009   Time and place of informal conference;  requests   to   change   
time and place.
  Rule 9. (1) The department shall set the informal conference at a  mutually 
convenient or reasonable time  and  place.   This  rule  establishes  general 
principles for the department to apply in determining  whether  a  particular 
time and  place  for  an  informal  conference  are  mutually  convenient  or 
reasonable.  The department shall exercise sound  judgment  in  applying  the 
principles.
  (2) It is reasonable for the time of  an  informal  conference  to  be  set 
during the regular business  hours  of  the  department  and  during  regular 
working days of the department.  The regular business hours of the department 
are 8 a.m. to 5 p.m., Monday through Friday, except legal holidays  or  other 
days that the department is closed.
  (3) It is reasonable for the department to  schedule  informal  conferences 
throughout the year without regard to seasonal fluctuations in the businesses 
of particular taxpayers or taxpayer representatives.  However, the department 
will work with taxpayers or taxpayer representatives to try to  minimize  any 
adverse effects that may arise in scheduling an informal conference.
  (4) It is reasonable for  the  department  to  schedule  the  place  of  an 
informal conference at a location that is available  to  the  department  and 
that has adequate resources for the safe, proper, and efficient  handling  of 
an informal conference.  The department shall make an  initial  determination 
of the place for an informal conference  based  upon  all  of  the  following 
considerations:
  (a) The location of the taxpayer or taxpayer representative.
  (b) The location of department employees.
  (c) The distance that either a taxpayer or department employee  would  have 
to travel to attend.
  (d) The requirements of fair and efficient tax administration.
  (5) A request by a taxpayer or taxpayer representative to change the  place 
or date of an informal conference will be resolved on  a  case-by-case  basis 
taking into consideration all of the following factors:
  (a) The location of the taxpayer.
  (b) The location of the taxpayer representative, if applicable.
  (c)  The  location  at  which  the  department  can  conduct  the  informal 
conference most efficiently.
  (d) The department's resources available  at  the  location  to  which  the 
taxpayer has requested a transfer.
  (e)  The  availability   of   conducting   the   informal   conference   by 
telecommunications.
  (f) Whether this is the first request to change the time and  place  of  an 
informal conference.
  (g) The reasonableness of the reasons offered.
  (h) Factors which indicate that holding the informal conference could  pose 
an undue inconvenience to the taxpayer.
  (i) factors that  indicate  that  holding  the  informal  conference  would 
fulfill the requirements of fair and efficient tax administration.
  (6) Nothing in this rule shall be interpreted as precluding the  department 
from initiating the transfer of an informal conference  if the transfer would 
promote the effective and efficient conduct of the informal conference.  If a 
taxpayer requests that a transfer not  be  made,  then  the  department  will 
consider the request according to the provisions of subrule (5) of this rule.
  (7) If a request to change the time  and  place  of  a  scheduled  informal 
conference is denied, then the informal conference shall be at the  time  and 
place as established by the department.

  History:  1996 AACS.


R 205.1010   Informal conference generally.
  Rule 10. (1) The purpose  of  the  informal  conference  is  to  informally 
discuss the positions of the parties, more thoroughly narrow the issues  that 
may not be capable of resolution at this level, and present arguments to  the 
referee in support of the parties' positions, to permit the referee to make a 
recommendation to the commissioner.
  (2) The informal conference is not a contested case proceeding and  is  not 
subject to the provisions of Act No. 306 of  the  Public  Acts  of  1969,  as 
amended, being §24.201 et seq. of the Michigan Compiled Laws. The  provisions 
of Act No. 267 of the Public Acts of 1976,  being  §15.261  et  seq.  of  the 
Michigan Compiled Laws do not apply.
  (3) The department will provide the taxpayer or taxpayer  representative  a 
written notice of the assignment of the informal conference to a referee.
  (4) The department shall provide written notice of the time  and  place  of 
the informal conference by certified mail.  The notice shall be provided  not 
less than 20 days before the informal conference.  The notice  shall  specify 
the intent to assess, the type of tax, and the tax year that is  the  subject 
of the informal conference. The department shall explain the  nature  of  the 
informal conference and advise that the final determination will be  made  by 
the commissioner.
  (5) At  the  beginning  of  the  informal  conference,  the  referee  shall 
ascertain whether any portion of the tax dispute has been resolved.   If  the 
parties resolve any portion of the tax dispute at  any  time  after  the  tax 
dispute has been assigned to a  referee,  but  before  the  commissioner  has 
issued a decision and order, the parties shall notify the commissioner or  an 
authorized representative of the commissioner.
  (6) The referee shall conduct the informal conference in an informal manner 
that facilitates the exchange of information  needed  to  review  and,  where 
applicable, to resolve the tax dispute. The referee shall  hear  and  receive 
testimony.  Generally, testimony is not taken under  oath,  although  matters 
alleged as fact may be submitted in the form of affidavits or may be declared 
to be true under penalties of perjury.   The  department  shall  provide  the 
reasons and authority for the proposed assessment.  The parties shall discuss 
their respective positions with a view to  narrowing  the  issues  and  shall 
present arguments based upon the law in support of their respective positions.
  (7) Instead of attending the informal  conference,  the  parties  have  the 
option to have the  dispute  reviewed  and  resolved  based  upon  a  written 
statement  that contains the facts, a discussion of the law,  and  the  legal 
arguments that the  parties  would  have  presented  had  they  attended  the 
informal conference.  A party that chooses to have a dispute reviewed in this 
manner shall so advise the referee as early as possible  in  advance  of  the 
scheduled informal conference.
  (8) A taxpayer may request that an  informal  conference  be  conducted  by 
telecommunications. The commissioner may require an  informal  conference  by 
telecommunication, if required for fair and efficient tax administration.
  (9) If an informal  conference  is  conducted  by  telecommunications,  the 
referee shall identify all persons, by name and title, and shall ask  whether 
any  participant  is  recording  the  informal  conference  and  whether  any 
participant objects to the recording of the informal conference.
  (10) If a  taxpayer  or  taxpayer  representative  fails  to  appear  at  a 
scheduled informal conference without  permission  to  change  the  time  and 
place, then the referee shall proceed in the absence of that  party  and  the 
referee shall prepare a recommendation based upon the information available.
  (11) A formal record of the informal conference is not made.  A taxpayer at 
whose request the informal conference is being held  or  the  department  may 
make a sound recording of the informal conference at  the  recording  party's 
expense.  The taxpayer or department employee who makes the  sound  recording 
shall give advance written notice of not less than 7  days  to  the  opposing 
party and to the referee.   The authorization to make a  sound  recording  of 
the informal conference does  not  include  authorization  to  make  a  video 
recording.

  History:  1996 AACS.


R 205.1011   Informal conference; referee recommendation; decision and  order 
of commissioner following informal conference.
  Rule 11. (1) After reviewing the testimony,  evidence,  comments,  and,  if 
applicable, written submissions at an informal conference, the  referee  will 
prepare a written recommendation to the commissioner.
  (2) The commissioner or an authorized representative  of  the  commissioner 
shall review the recommendation and shall issue a written decision and order.
In the written decision and order, the commissioner shall do  either  of  the 
following:
  (a) Accept the recommendation of the referee.
  (b) Reject the recommendation of the referee, in  whole  or  part,  with  a 
written rebuttal explanation of the reasons for rejecting the  recommendation 
of the referee.
  (3) The decision and order shall contain a statement  of  the  reasons  and 
authority for the decision and shall assess the tax,  interest,  and  penalty 
found to be due and payable.  The decision and order shall be limited to  the 
subject of the informal conference.  Neither the taxpayer nor the  department 
representative shall be provided an opportunity to review the  recommendation 
of the referee and to file objections to the recommendation in advance of the 
issuance of the decision and order by the commissioner. There shall not be  a 
rehearing of a decision and order.
  (4) The department shall send, to the taxpayer, by certified  mail  if  the 
taxpayer is not represented, or by  first  class  mail  if  the  taxpayer  is 
represented in the dispute, a copy of the recommendation,  the  decision  and 
order, and, if applicable,  the  rebuttal  explanation.   If  a  taxpayer  is 
represented in  the  informal  conference,  the  department  shall  send,  by 
certified mail, to the taxpayer representative, a copy of the recommendation, 
the decision and order, and, if applicable, the rebuttal explanation.
  (5) After the decision and order  have  been  issued,  a  notice  of  final 
assessment shall be sent to the taxpayer.  The  notice  of  final  assessment 
shall include a statement advising the taxpayer of the right to appeal.

  History:  1996 AACS.


R 205.1012   Taxpayer negligence determination; burden of  proof;  examples   
of negligence; examples of reasonable cause for waiving negligence penalty.
  Rule 12. (1) Negligence is the lack of due care in failing  to  do  what  a 
reasonable and ordinarily prudent person would have done under the particular 
circumstances.  The  standard  for  determining  negligence  is  whether  the 
taxpayer exercised ordinary care and  prudence  in  preparing  and  filing  a 
return and paying the applicable tax in accordance  with  the  statute.   The 
facts and circumstances of each case will be considered.
  (2) When the department imposes a negligence penalty, the department  bears 
the burden of establishing facts to support a finding of negligence  and  the 
taxpayer bears the burden of establishing facts that will negate a finding of 
negligence.  The taxpayer shall file a written statement  that  explains,  in 
detail, the facts which are relied upon  to  defeat  the  penalty  and  which 
constitute reasonable cause.
  (3) The following illustrative  examples,  when  clearly  established,  are 
generally considered to constitute negligence:
  Example no. 1: The income tax and single business tax instructions  clearly 
require the prepayment of the annual tax, but the taxpayer  remits  estimated 
tax payments of less than the required amount.
  Example no. 2: A taxpayer fails to file an income tax  or  single  business 
tax amended return within 120  days,  as  required  by  law,  after  a  final 
alteration, modification, recomputation, or  determination  of  a  deficiency 
under the provisions of the internal revenue code.
  Example no. 3: The taxpayer has been assessed a tax deficiency.  There is a 
subsequent audit of the taxpayer that results in a similar deficiency  for  a 
subsequent tax period  resulting  from  the  taxpayer's  failure  to  correct 
internal controls and reporting procedures that contributed to  the  original 
assessment.
  Example no. 4: The income tax and single business tax instructions  clearly 
require payment of the  estimated  annual  tax  at  the  time  of  filing  an 
extension  request.   The  taxpayer  understates  and  underpays  the  annual 
liability with the extension request.
  Example no. 5: The estate tax act requires an amended return  to  be  filed 
within 60 days of the  date  of  the  federal  determination.   The  personal 
representative fails to file the amended return within the 60 days allowed.
  (4) The following illustrative  examples,  when  clearly  established,  are 
generally considered to constitute reasonable cause for purposes  of  waiving 
the negligence penalty:
  Example no. 1: The taxpayer was assessed a  deficiency  of  sales  and  use 
taxes and  negligence  penalty  on  the  taxpayer's  first  audit.  Reporting 
procedures  were  not  adequate  during  the  audit  period.   The   taxpayer 
overstated and understated  food  deductions  in  each  year.   The  taxpayer 
claimed a resale exemption on  fixed  asset  purchases,  expense  items,  and 
out-of-state purchases. The taxpayer hired an accountant after the deficiency 
was issued. The taxpayer has subsequently invested in a new system for record 
keeping purposes.  Reasonable cause has been established  because  corrective 
steps were taken to prevent the recurrence of this situation.
  Example no. 2: The taxpayer was  assessed  an  income  tax  deficiency  and 
negligence penalty.   The taxpayer is a Michigan resident who is employed  in 
a neighboring state. The taxpayer's employer  withheld  income  tax  for  the 
wrong state. The taxpayer's employer provided the taxpayer and the department 
with a letter acknowledging the error as  an  error  of  the  employer.   The 
taxpayer requests a waiver of the negligence penalty.
Reasonable cause has been established because the taxpayer's employer created 
the error and acknowledged the error. The taxpayer  exercised  ordinary  care 
and prudence.

  History:  1996 AACS.


R 205.1013    Failure  to  file  or  pay  penalty;   waiver   of   penalty;   
reasonable cause for failure to file or pay.
  Rule 13. (1) Except as otherwise provided in the act, if a  taxpayer  fails 
or refuses to file a return, or fails or refuses to pay  a  tax  administered 
under the act within the time specified by law, a penalty of $10.00 or 5%  of 
the tax, whichever is greater, shall be added to the tax owed if the  failure 
is for a period of not more than 1 calendar month.    An  additional  penalty 
shall be added to the tax owed at the rate of 5% for each additional month or 
fraction of a month during which the failure continues  or  the  tax  is  not 
paid.  The maximum penalty shall be 50% of the tax owed.
  (2) If a return is filed or a remittance is paid after the time  specified, 
the taxpayer may request that the  commissioner  of  revenue  waive  and  the 
commissioner shall waive the penalty authorized by section 24(4) of  the  act 
if the taxpayer establishes that the failure to file the return or to pay the 
tax was due to reasonable cause and not to willful neglect.
  (3) A waiver of penalty request shall be in writing  and  shall  state  the 
reasons alleged to constitute reasonable cause and  the  absence  of  willful 
neglect.
  (4) The taxpayer bears the burden of affirmatively establishing,  by  clear 
and convincing evidence, that the failure to file or failure to pay  was  due 
to reasonable cause.
  (5) A taxpayer is required to exercise ordinary business care and  prudence 
in complying with filing and payment requirements.
  (6) When determining whether a taxpayer was unable to file a return or  pay 
a tax in spite of the exercise of ordinary business care  and  prudence,  the 
timeliness, facts and circumstances of each case will be considered.
  (7) The examples set forth in this subrule, if clearly established  and  if 
other  contributing  circumstances  do  not   exist,   generally   constitute 
reasonable cause for failure to file or pay.  The following examples are  not 
intended  to  be  the  only  instances  in  which  reasonable  cause  may  be 
established and each case shall be judged individually upon its own facts and 
circumstances:
  (a) The delay in filing or payment is caused by the  prolonged  unavoidable 
absence of the taxpayer responsible  for  filing  and  the  taxpayer  who  is 
precluded, due to circumstances beyond the taxpayer's  control,  from  making 
alternate arrangements for filing and paying.
  (b) The delay in filing or payment is caused by the destruction, by fire or 
other casualty, of the taxpayer's records or the taxpayer's business  if  the 
destroyed records directly related to and prevented timely compliance.
  (c) The delay arose from the taxpayer's inability to obtain  the  necessary 
records or information due to reasons beyond  the  taxpayer's  control.   The 
taxpayer shall explain why the records are needed to comply, why the  records 
are unavailable, other avenues explored to secure the  information,  and  why 
the information is not estimated.
  (d) The taxpayer receives erroneous written information from  a  department 
employee who responds to the taxpayer's request and the taxpayer provided all 
complete  and  relevant  information.   The  erroneous  written   information 
directly relates to and prevents the taxpayer from complying with  state  tax 
obligations.
  (e) The filing of a return or payment of tax is delayed in delivery by  the 
United States post office or is filed or paid in  the  wrong  office  of  the 
department.
  (f) A bank error that is the sole cause of the failure to pay.
  (8) The following factors alone do  not  constitute  reasonable  cause  for 
failure to file or pay.  However, these factors may be considered with  other 
facts and circumstances and may constitute reasonable cause.   The  following 
factors are for illustration only and are not an exclusive listing of factors:
  (a) The compliance history of the taxpayer.
  (b) The nature of the tax.
  (c) The taxpayer's financial circumstances, including the amount and nature 
of the taxpayer's expenditures in light of the income the  taxpayer,  at  the 
time of the expenditures, could reasonably expect to receive before  the  due 
date prescribed for paying the tax.
  (d) The taxpayer was incorrectly advised by a tax advisor who is  competent 
in Michigan state tax matters after furnishing the advisor with all necessary 
and relevant information and the taxpayer acted reasonably  in  not  securing 
further advice.
  (e) The taxpayer's accounting and financial  system  that  is  designed  to 
ensure timely filing breaks down due to unavoidable circumstances  and,  upon 
discovery, the taxpayer promptly complies.
  (f) The death or serious incapacitating illness  of  the  taxpayer  or  the 
person responsible for filing the return or making the payment or a member of 
his or her immediate family.
  (g) Lack of funds to make timely payment.
  (h) A taxpayer's reliance on an employee or agent to  file  the  return  or 
make the payment.

  History:  1996 AACS.