Guidelines for Alternative Dispute Resolution Process

Pursuant to Public Act 215 of 2017 (PA 215), amending sections 21 and 28 of the Revenue Act, PA 122 of 1941 (the “Revenue Act”), a taxpayer and the Michigan Department of Treasury (Treasury) may settle disputed matters by compromising taxes administered under the Revenue Act after a valid request for an informal conference has been made regarding the contested matters.

The following guidelines provide an overview of the newly-granted authority to Treasury to settle matters through the Alternative Dispute Resolution process. The guidelines also describe: (1) when and how a taxpayer seeking to resolve a tax dispute can tender an offer; (2) how Treasury will process and evaluate a tendered offer; (3) how Treasury may respond to that offer; and (4) the protections against public disclosure of documents generated from the Alternative Dispute Resolution process.

A. Taxes Covered

  1. Only disputed matters involving the following taxes may be settled through the Alternative Dispute Resolution process:
    • Single Business Tax
    • Michigan Business Tax
    • Corporate Income Tax
    • Individual Income Tax
    • Sales Tax
    • Use Tax
    • Motor Fuel Tax
    • Motor Carrier Fuel Tax (IFTA)
    • Severance Tax
    • Equalization Tax
  2. No other tax matters are eligible for settlement through the Alternative Dispute Resolution process.

B. Timing and Effect of Settlement Offer

  1. After a taxpayer has made a valid request for an informal conference under MCL 205.21(2)(c), the taxpayer or Treasury may tender a settlement offer.
  2. A taxpayer’s settlement offer may be tendered at any time after a valid informal conference request, but no later than 21 days after the informal conference was held. An informal conference is considered to be held on the date the parties appeared either in person or telephonically pursuant to the Notice of Scheduled Hearing.
  3. The date of the taxpayer’s settlement offer is either: (1) the date the submission is postmarked by the United States Postal Service, or (2) the date the submission is given to an accepted private delivery service for delivery, as indicated by the date recorded electronically in the service’s database or marked on the cover of the package in which the item is delivered. The only accepted delivery services are the United Parcel Service, Federal Express, and DHL Express.
  4. Treasury may tender a settlement offer at any point after a taxpayer’s valid request for informal conference.
  5. If a valid settlement offer is tendered, Treasury’s Hearings Division will place the informal conference process in abeyance, and any informal conference scheduled or informal conference recommendation will be deferred pending a resolution of the settlement offer.

C. Settlement Offer Form and Procedure

  1. A settlement offer may seek to resolve any or all of the issues in dispute. A settlement offer tendered by a taxpayer must be made by mailing a completed Treasury Form 5573 – Michigan Alternative Dispute Resolution Settlement Offer to: Michigan Department of Treasury-Executive Office, Alternative Dispute Resolution Office, P.O. Box 30716, Lansing, Michigan 48909. A settlement offer made under this process may not be hand-delivered.
  2. Treasury may also tender a settlement offer to the taxpayer in writing by mail using any of the delivery methods specified in Section B(3).
  3. A taxpayer settlement offer must:
    1. Identify the issue(s) and amount(s) in dispute, and identify the issue(s) to be settled, if the offer seeks to settle fewer than all of the disputed issues;
    2. Include the factual and legal bases supporting the offer;
    3. Identify the amount of the proposed settlement;
    4. Include any supporting documentation; and
    5. Be signed by the taxpayer and not by any third-party representative.
  4. A Treasury settlement offer must:
    1. Identify the issue(s) and amount(s) in dispute, and identify the issue(s) to be settled, if the offer seeks to settle fewer than all of the disputed issues;
    2. Include the factual and legal bases supporting the offer; and
    3. Identify the amount of the proposed settlement.
  5. It is expected that a settlement offer tendered will be the offering party’s best offer, one that is made in good faith and where the proposed liability calculation is supported by and commensurate with the facts and law at issue in the matter.
  6. Upon receipt, Treasury will review a taxpayer’s settlement offer to determine whether it contains the required elements.
  7. A taxpayer’s settlement offer that fails to meet the required criteria will be rejected as a matter of procedure. Treasury will notify the taxpayer in writing of this procedural response and notify the taxpayer of the reason(s) the taxpayer’s offer failed to meet the required criteria.
  8. Even if a taxpayer’s settlement offer satisfies the required elements, Treasury may still request additional information from the taxpayer if it believes further information is needed to evaluate the offer.

D. Substantive Responses to Settlement Offer.

  1. All responses to settlement offers – whether by a taxpayer or Treasury – must be in writing. Any taxpayer response to a Treasury offer, including a taxpayer’s counter-offer, may be signed by either the taxpayer or the taxpayer’s authorized representative (a representative properly designated in Form 151 Authorized Representative Declaration (Power of Attorney) (POA)). If Treasury has a proper Section 8 (Revenue Act, MCL 205.8) request on file, Treasury will provide all responses to the taxpayer and the taxpayer’s POA. (A proper Section 8 request is one where the taxpayer has checked the box in Part 5 of the Form 151 POA, indicating a request that copies of letters and notices regarding a tax dispute be sent to the representative identified on the form.)
  2. The receiving party may accept, reject, or counter the settlement offer.
  3. Treasury’s rejection of a taxpayer’s settlement offer, or any counter-offer extended to the taxpayer, will include the factual and legal bases for the rejection or counter-offer.
  4. Rejection without a counter-offer by either party will result in removal of the matter from abeyance status and reinstatement of the informal conference process, unless a taxpayer files a written notice to withdraw its request for an informal conference as provided in Section 21(2)(d) of the Revenue Act.
  5. Counter-offers may be made by either party as to any or all disputed issues.
  6. If either party accepts the other’s settlement offer, the parties must execute a settlement agreement, which will be drafted by Treasury. The settlement agreement may be signed by either the taxpayer or the taxpayer’s POA. If all issues are settled by the agreement, the executed settlement agreement serves as the taxpayer’s request to withdraw from the informal conference process under Section 21(2)(d) of the Revenue Act.
  7. If the settlement results in an agreement that a taxpayer’s tax deficiency exceeds zero, Treasury will issue a final assessment reflecting the agreed-upon amount and will adjust the taxpayer’s account accordingly. Collection of the agreed-upon liability will proceed in accordance with Treasury’s collection policies.
  8. If the settlement results in an agreement that a taxpayer’s tax deficiency is zero or that the taxpayer is entitled to a refund, Treasury will adjust the taxpayer’s account accordingly. In the case of a refund, the settlement agreement will direct whether the refund is to be carried forward or issued. Treasury will process the refund according to the terms set forth in the settlement agreement.
  9. Treasury’s final assessment reflecting the settled amount is not subject to challenge or appeal or reviewable in any court or tribunal by mandamus, appeal, or other method of direct or collateral attack.
  10. If the settlement does not resolve all of the disputed issues, the matter will be removed from abeyance and proceed through the informal conference process as to the remaining issues. Any decision and order and final assessment issued with respect to the remaining disputed issues may be appealed only as to those issues.
     

E. Disclosure of Settlements

  1. PA 215 proscribes the use and disclosure of documents and communications produced or provided during the Alternative Dispute Resolution process. MCL 205.21(e)(iv) and (v).
  2. Settlement offers and responses, settlement agreements, and reports of informal conference referees or the Hearings Division administrator may not be used as evidence of liability or of the validity of any Treasury decision, order, or assessment in any legal forum or proceeding.
  3. Settlement offers and responses, settlement agreements, and reports of informal conference referees or the Hearings Division administrator are exempt from disclosure under the Freedom of Information Act and from discovery proceedings.


Related Documents
5573, ALTERNATIVE DISPUTE RESOLUTION SETTLEMENT OFFER PDF icon
Notice to Taxpayers Regarding Alternative Dispute Resolution PDF icon