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HB-5876, As Passed House, May 20, 2026
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HOUSE BILL NO. 5876
A bill to amend 1941 PA 122, entitled
"An act to establish the revenue collection duties of the
department of treasury; to prescribe its powers and duties as the
revenue collection agency of this state; to prescribe certain
powers and duties of the state treasurer; to establish the
collection duties of certain other state departments for money or
accounts owed to this state; to regulate the importation, stamping,
and disposition of certain tobacco products; to provide for the
transfer of powers and duties now vested in certain other state
boards, commissions, departments, and offices; to prescribe certain
duties of and require certain reports from the department of
treasury; to provide procedures for the payment, administration,
audit, assessment, levy of interests or penalties on, and appeals
of taxes and tax liability; to prescribe its powers and duties if
an agreement to act as agent for a city to administer, collect, and
April 22, 2026, Introduced by Reps. Kuhn, Johnsen, Smit, DeBoyer , Fox, Roth, Cavitt, Wortz,
Harris, Kelly, Meerman, Maddock, Aragona, Schuette, Bruck, Bierlein, Thompson and Frisbie
and referred to Committee on Government Operations.
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enforce the city income tax act on behalf of a city is entered into
with any city; to provide an appropriation; to abolish the state
board of tax administration; to prescribe penalties and provide
remedies; and to declare the effect of this act,"
by amending section 21 (MCL 205.21), as amended by 2017 PA 215.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
Sec. 21. (1) If a taxpayer fails or refuses to make a return 1
or payment as required, in whole or in part, or if the department 2
has reason to believe that a return made or payment does not supply 3
sufficient information for an accurate determination of the amount 4
of tax due, the department may obtain information on which to base 5
an assessment of the tax. By its duly authorized agents, the 6
department may examine the books, records, and papers and audit the 7
accounts of a person or any other records pertaining to the tax. A 8
taxpayer who has been audited by the department or its agent or a 9
taxpayer whose books, records, and papers have been examined by the 10
department shall, upon on request, be provided a complete copy in 11
printed or electronic format of the complete audit work papers and 12
the audit report of findings. Any audit performed by the department 13
or its duly authorized agents under section 3(a) shall must be 14
performed in accordance with auditing standards, which shall 15
include, including, but are not limited to, confidentiality, 16
technical training, independence, due professional care, planning, 17
supervision, understanding of the entity audited including internal 18
control and an assessment of risk, audit evidence and 19
documentation, sampling and sampling projections, and elements of 20
the audit report of findings. The department shall promulgate 21
administrative rules on audit standards within 1 year of the date 22
of enactment of the amendatory act that added this sentence.by 23
March 20, 2015. 24
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(2) In carrying out this section, the department and the 1
taxpayer shall comply with the following procedure: 2
(a) The department shall send to the taxpayer a letter of 3
inquiry stating, in a courteous and nonintimidating manner, the 4
department's opinion that the taxpayer needs to furnish further 5
information or owes taxes to the this state, and the reason for 6
that opinion. A letter of inquiry shall must also explain the 7
procedure by which the person may initiate communication with the 8
department to resolve any dispute. This subdivision does not apply 9
in any of the following circumstances: 10
(i) The taxpayer files a return showing a tax due and fails to 11
pay that tax. 12
(ii) The deficiency resulted from an audit of the taxpayer's 13
books and records by this state. 14
(iii) The taxpayer otherwise affirmatively admits that a tax is 15
due and owing. 16
(b) If the dispute is not resolved within 30 days after the 17
department sends the taxpayer a letter of inquiry or if a letter of 18
inquiry is not required pursuant to under subdivision (a), the 19
department, after determining the amount of tax due from a 20
taxpayer, shall give notice to notify the taxpayer of its intent to 21
assess the tax. The notice shall must include the amount of the tax 22
the department believes the taxpayer owes, the reason for that 23
deficiency, and a statement advising the taxpayer of a right to an 24
informal conference, the requirement of a written request by the 25
taxpayer for the informal conference that includes the taxpayer's 26
statement of the contested amounts and an explanation of the 27
dispute, and the 60-day time limit for that request. 28
(c) If the taxpayer serves written notice upon on the 29
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department within 60 days after the taxpayer receives a notice of 1
intent to assess, remits the uncontested portion of the liability, 2
and provides a statement of the contested amounts and an 3
explanation of the dispute, the taxpayer is entitled to an informal 4
conference on the question of liability for the assessment. 5
(d) Upon On receipt of a taxpayer's written notice, the 6
department shall set a mutually agreed upon on or reasonable time 7
and place for the informal conference and shall give the taxpayer 8
reasonable written notice not less than 20 days before the informal 9
conference. The notice shall must specify the intent to assess, 10
type of tax, and tax year that is the subject of the informal 11
conference. The informal conference provided for by this 12
subdivision is not subject to the administrative procedures act of 13
1969, 1969 PA 306, MCL 24.201 to 24.328, but is subject to the 14
rules governing informal conferences as promulgated by the 15
department in accordance with the administrative procedures act of 16
1969, 1969 PA 306, MCL 24.201 to 24.328. The taxpayer may appear or 17
be represented by any person before the department at an informal 18
conference, and may present testimony and argument. At the party's 19
own expense and with advance notice to the other party, a taxpayer 20
or the department, or both, may make an audio recording of an 21
informal conference. A taxpayer who has made a timely request for 22
an informal conference may at any time withdraw that request by 23
filing written notice with the department. Upon On receipt of the 24
request for withdrawal from the informal conference process, the 25
department shall issue a decision and order of determination and, 26
where if appropriate, a final assessment, from which a taxpayer may 27
seek an appeal as provided under section 22. 28
(e) After a timely request for an informal conference has been 29
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made under subdivision (c), the taxpayer and the department may 1
seek to settle any or all issues in dispute by submitting a written 2
settlement offer to the other party in accordance with the 3
following: 4
(i) The taxpayer shall submit a written settlement offer no not 5
later than 21 days after the informal conference. The settlement 6
offer must identify the issues in dispute to be settled, the amount 7
of the settlement offer, and the factual and legal bases supporting 8
the taxpayer's settlement offer, and include any supporting 9
documents. The state treasurer or the state treasurer's designee or 10
designees shall review the settlement offer and the department's 11
recommendation regarding the offer. The state treasurer or the 12
state treasurer's designee or designees shall determine whether to 13
accept, reject, or counter the settlement offer. The department 14
shall notify the taxpayer in writing of the department's 15
acceptance, rejection, or counter-offer. If the department does not 16
accept the taxpayer's offer, the department shall include in its 17
written notification the factual and legal bases for the 18
department's rejection or counter-offer. The taxpayer may accept, 19
reject, or counter the department's counter-offer and proceed in 20
accordance with subparagraph (iii). 21
(ii) The informal conference referee or the administrator of 22
the department's hearings division or its successor unit may submit 23
a written report to the state treasurer or the state treasurer's 24
designee or designees that identifies the relevant facts and issues 25
involved in the dispute, the factual and legal bases supporting 26
settlement of any or all of the issues, and a settlement 27
recommendation. Doubt as to collectability shall is not be a reason 28
for settlement under this subdivision. If the state treasurer or 29
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the state treasurer's designee or designees determines to pursue a 1
settlement, the department shall notify the taxpayer in writing of 2
the department's settlement offer, to be determined by the state 3
treasurer or the state treasurer's designee or designees. The 4
department's written settlement offer shall must include the 5
factual and legal bases supporting the department's settlement 6
offer. The taxpayer, in writing, may accept, reject, or counter the 7
department's settlement offer and proceed in accordance with 8
subparagraph (iii). 9
(iii) If the department rejects the taxpayer's settlement offer 10
or counter-offer or the taxpayer rejects the department's 11
settlement offer or counter-offer, the informal conference process 12
shall must proceed as provided under this section unless the 13
taxpayer files a written notice to withdraw the request for an 14
informal conference as provided in subdivision (d). If the 15
department accepts the taxpayer's settlement offer or counter-offer 16
or the taxpayer accepts the department's settlement offer or 17
counter-offer, the department and the taxpayer shall execute a 18
written agreement outlining all of the terms of the settlement. If 19
the agreement settles all of the issues in dispute, then the 20
written agreement is also the taxpayer's written notice to withdraw 21
its request for an informal conference. Then the department shall, 22
where if appropriate, issue a final assessment that reflects the 23
agreement and the agreed-upon agreed-on amount of liability as to 24
the settled issues. The department's final assessment issued under 25
this subdivision is not subject to challenge or appeal under this 26
act or reviewable in any court by mandamus, appeal, or other method 27
of direct or collateral attack. With respect to any issues in 28
dispute that are not included in the settlement agreement, the 29
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informal conference process shall must proceed as provided under 1
this section unless the taxpayer files a written notice to withdraw 2
the request for an informal conference as provided in subdivision 3
(d). 4
(iv) The taxpayer's and the department's settlement offers, 5
counter-offers, and responses to those offers and counter-offers, 6
the disposition of a settlement offer or counter-offer under this 7
subdivision, and settlement agreements, may not be offered by any 8
party in any proceeding before the Michigan tax tribunal, the court 9
of claims, or any court of competent jurisdiction as proof of the 10
validity of the department's decision, order, or assessment, or of 11
the proper amount of the taxpayer's tax liability. 12
(v) Settlement offers, counter-offers, responses thereto, 13
settlement agreements, and reports of the informal conference 14
referee, the administrator, or the department related to 15
settlements under this subdivision are exempt from disclosure under 16
the freedom of information act, 1976 PA 442, MCL 15.231 to 15.246, 17
and may not be obtained through discovery in any proceeding. 18
(f) Except for those issues that were settled pursuant to 19
subdivision (e), after the informal conference, the department 20
shall render a decision and order in writing, setting forth the 21
reasons and authority, and shall assess the tax, interest, and 22
penalty found to be due and payable. The decision and order are 23
limited to the subject of the informal conference as included in 24
the notice under subdivision (d). 25
(g) If the taxpayer does not protest the notice of intent to 26
assess within the time provided in subdivision (c), the department 27
may assess the tax and the interest and penalty on the tax that the 28
department believes are due and payable. An assessment under this 29
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subdivision or subdivision (f) is final and subject to appeal as 1
provided in section 22. The final notice of assessment shall must 2
include a statement advising the person of a right to appeal. 3
(3) If as a result of an audit it is determined that a 4
taxpayer is owed a refund, the department shall send a notice to 5
the taxpayer stating the amount of the refund the department 6
believes is owed to the taxpayer as a result of the audit. The 7
notice shall must inform the taxpayer of his or her the taxpayer's 8
appeal rights. If the taxpayer disputes the findings of the audit, 9
the taxpayer may serve written notice upon on the department in the 10
same manner as provided for in subsection (2)(c) and the taxpayer 11
is entitled to the same informal conference and subsequent appeals 12
as provided for in this section. 13
(4) If the department determines that a protest to the notice 14
of intent to assess the tax is determined by the department to be a 15
frivolous protest or a desire attempt by the taxpayer to delay or 16
impede the administration of taxes administered under this act, a 17
penalty of $25.00 or 25% of the amount of tax under protest, 18
whichever is greater, shall must be added to the tax. 19
(5) During the course of the informal conference under 20
subsection (2)(d), the taxpayer by written notice may convert his 21
or her the taxpayer's contest of the assessment to a claim for a 22
refund. The written notice shall must be accompanied by payment of 23
the contested amount. The informal conference shall must continue 24
and the department shall render a decision and issue an order 25
regarding the claim for refund. 26
(6) For audits commenced after September 30, 2014, the 27
department must complete fieldwork and provide a written 28
preliminary audit determination for any tax period no later than 1 29
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year after the period provided for in section 27a(2) without regard 1
to the extension provided for in section 27a(3). The limitation 2
described in this subsection does not apply to any tax period in 3
which the department and the taxpayer agreed in writing to extend 4
the statute of limitations described in section 27a(2). 5
(7) For audits commenced after September 30, 2014, unless 6
otherwise agreed to by the department and the taxpayer, the final 7
assessment issued under subsection (2)(g) must be issued within 9 8
months of after the date that the department provided the taxpayer 9
with a written preliminary audit determination unless the taxpayer, 10
for any reason, requests reconsideration of the preliminary audit 11
determination or the taxpayer requests an informal conference under 12
subsection (2)(c). A request for reconsideration by a taxpayer 13
permits, but does not require, the department to delay the issuance 14
of a final assessment under subsection (2)(g). 15
(8) The department shall publish semiannually on the 16
department's website a report containing the following information: 17
(a) The aggregate amount of the department's original 18
determinations of liability attributed to settlements entered into 19
during the reporting period. 20
(b) The aggregate settled amount of liability attributed to 21
the settlements entered into during the reporting period. 22
(c) If the total number of settlements between taxpayers and 23
the department entered into during the reporting period is 5 or 24
more, include the actual number of settlements. If the number of 25
settlements is less than 5, the department shall state "less than 26
5". 27
(9) Except as otherwise provided under in this subsection, the 28
settlement process established under subsection (2)(e) only applies 29
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only to taxes subject to administration under this act. The 1
settlement process established under subsection (2)(e) does not 2
apply to matters arising under the general property tax act, 1893 3
PA 206, MCL 211.1 to 211.155, the state real estate transfer tax 4
act, former 1993 PA 330, MCL 207.521 to 207.537, the tobacco 5
products tax act, 1993 PA 327, MCL 205.421 to 205.436, the health 6
insurance claims assessment act, former 2011 PA 142, MCL 550.1731 7
to 550.1741, and the city income tax act, 1964 PA 284, MCL 141.501 8
to 141.787. 9
Enacting section 1. This amendatory act takes effect 90 days 10
after the date it is enacted into law. 11
Enacting section 2. This amendatory act does not take effect 12
unless all of the following bills of the 103rd Legislature are 13
enacted into law: 14
(a) House Bill No. 5874 (request no. H01857'25). 15
(b) House Bill No. 5880 (request no. H05876'25). 16