Corporate Officer Liability Frequently Asked Questions

1. What is Corporate Officer Liability?
2. My business is a Limited Liability Company. Can the officers of a Limited Liability Company be pursued?
3. What documentation do I need to submit to validate that I was/am not an officer of the company?
4. I am no longer an officer of this company. Why are you billing/assessing me?
5. My divorce decree states that I am not liable. Why am I being billed/assessed?
6. My company has filed bankruptcy, why am I being billed/assessed personally?
7. Is there anything that I can do if I missed the deadline to reply to the Letter of Inquiry - Notice of Corporate Officer Liability?
8. The corporation is discontinued, why are you billing/assessing me?
9. I was an officer, but never made financial decisions, can I still be pursued?
10. Is there a timeframe after which I can no longer be billed/assessed for the unpaid taxes of a business I used to operate?

1. What is Corporate Officer Liability?
Corporate Officer Liability (COL) refers to holding an individual (an officer, member, partner etc.,) of a corporation personally liable for unpaid tax debts accrued by a corporation. When a corporation fails to file returns or pay taxes due, the Michigan Department of Treasury, Office of Collections, will attempt to collect the debt from any individual who the Department has identified as being an officer with responsibility for, or control/supervision of, making returns or payments during the periods in question. See the General Overview of the Corporate Officer Liability Process for more information.

2. My business is a Limited Liability Company. Can the officers of a Limited Liability Company be pursued?
Yes. Under MCL 205.27a(5), officers, managers, members and/or partners may be held personally liable for the debts of a corporation. MCL 205.27a(5) was amended on June 24, 2003 to include members, managers and partners of limited liability companies, limited liability partnerships, partnerships and limited partnerships.

3. What documentation do I need to submit to validate that I was/am not an officer of the company?
Some documents may be helpful in determining the status of an individual's relationship with a corporation, such as that of an officer. Items include but are not limited to:

• Corporate meeting minutes indicating who the officer(s) were during the entire billing/assessment period(s).
• A copy of your resignation along with board meeting minutes accepting your resignation. Your resignation must be dated and signed. Further, the effective date of your termination must be provided in the board meeting minutes.
• A letter from an officer of the corporation stating you are/were not a corporate officer during the tax period(s) shown on the bill/assessment.
• Memorandums, letters or other correspondence (on company letterhead) indicating all corporate officers of the corporation during the entire bill/assessment period.

Please note each corporation's account has unique circumstances and characteristics that may have an affect on the Department's decision to hold an individual personally liable and for certain tax periods. Consequently, any documentation provided to the Department is subject to review and does not necessarily mean you will not be held personally liable for all or part of the corporation's liability.

4. I am no longer an officer of this company. Why are you billing/assessing me?
Under MCL 205.27a (5), officers, managers, members and/or partners may be held personally liable for the debts of a corporation.

As required by MCL 205.27a (5) the Department has determined that you were an officer who was responsible for the payment of taxes during the taxable period in question. Current status of an individual, or of the corporation, has no bearing on the billing/assessment of officers who were responsible for the filing and/or payment of taxes, during the tax periods in question.

5. My divorce decree states that I am not liable. Why am I being billed/assessed?
Based on a review of the corporation's account, the Department will attempt to collect the debt from all officers, managers, members and/or partners of a corporation, limited liability corporation, partnership, limited partnership or limited liability partnership responsible for the filing or payment of Michigan taxes during the period(s) in question. The Department has determined that you were an officer during the billing/assessment period(s). A divorce settlement may contain an indemnification clause, which declares the rights between the parties in the divorce. However, the terms of a private contract or settlement agreement are not binding on the State of Michigan for tax purposes.

6. My company has filed bankruptcy, why am I being billed/assessed personally?
MCL 205.27a(5) imposes personal liability on officers having control, supervision of, or are charged with the responsibility for filing returns and making payments should the corporation fail for any reason to pay taxes due. Corporate officers will be billed/assessed for tax liabilities incurred by the corporation prior to the date a bankruptcy court orders that the oversight of the company will be handled by a "debtor in possession" (in instances the debtor in possession is not an officer of the corporation), or the court appoints a trustee. If the debtor in possession is an officer of the corporation, he/she will be billed/assessed for the periods while acting as a debtor in possession.

7. Is there anything that I can do if I missed the deadline to reply to the Letter of Inquiry - Notice of Corporate Officer Liability?
Yes. Immediately following the deadline to reply to the Letter of Inquiry - Notice of Corporate Officer Liability, a Bill for Taxes Due (Intent to Assess) will be issued. The reverse side of each Bill for Taxes Due (Intent to Assess) contains information on how to request an informal conference with the Michigan Department of Treasury's Hearings Division.

At the time you request an informal conference, submit the documentation that you believe will release you from that liability.

8. The corporation is discontinued, why are you billing/assessing me?
The discontinuance, sale or restructuring of a corporation does not discharge the officers, managers, members and/or partners of the corporation from the corporation's tax liability. Consequently, all officers of the corporation during the billing/assessment periods having control or supervision of or responsibility for, making returns or payments may be held personally liable for the debts under MCL 205.27a(5).

9. I was an officer, but never made financial decisions, can I still be pursued?
If the Department has determined you are an individual who was an officer of the corporation who had control or supervision of, or the responsibility for filing returns or making payments during the billing/assessment periods in question, you may be held personally liable for the corporation's liabilities under MCL 205.27a(5). Your contention that you were not responsible for financial decisions is a valid basis for an appeal, which should be contested. See the Appeals process for more information.

10. Is there a timeframe after which I can no longer be billed/assessed for the unpaid taxes of a business I used to operate?
Yes. Michigan Compiled Law MCL 205.27a(2) indicates the Department may not bill/assess tax, penalty or interest after the expiration of four years from the date set for filing the return or the date the return was filed, whichever is later. Note however, that subsections 3 and 4 provides for exceptions to the expiration date. This four year timeframe starts after the business has exhausted all appeal rights and the bill/assessment is no longer contestable.

Example 1
Business A filed its December 1999 Single Business Tax return on April 15, 2000 showing an amount due of $1,000.00 however, payment was not made. Business A does not exercise any appeal rights and the bill/assessment becomes final against the business on May 20, 2000. Under MCL 205.27a Subsection (2) the Department has until May 20, 2004 to issue a bill/assessment against the responsible officer.

Example 2
Business B did not file its December 1999 Single Business Tax return. The Department issued a Bill for Taxes Due (Intent to Assess) on September 20, 2005 indicating Business B owes $1,000.00. Business B requests an informal conference with the Hearings Division. The Hearings Division issued a Decision and Order of Determination stating Business B owes $1,000.00 and on February 20, 2006 the Department issued a Final Bill for Taxes Due (Final Assessment) against Business B. Business B is not satisfied with the results of the informal conference and appeals with the Michigan Tax Tribunal. The Michigan Tax Tribunal issued an Opinion and Judgment on June 9, 2007 and Business B did not exercise any other appeal rights. Under MCL 205.27a Subsection (2) the Department has until June 9, 2011 to issue a bill/assessment against the responsible officer(s).