Revenue Administrative Bulletin 2023-14

Impact of COVID-19 Extensions and Penalty and Interest Waivers on the Statute of Limitations

Approved: August 23, 2023

Note: A taxpayer may rely on this Revenue Administrative Bulletin (RAB) until it is revoked by Treasury or until a law on which this RAB is based is altered by legislation or by binding judicial precedent. See MCL 205.6a and RAB 2016-20.

RAB 2023-14. This Revenue Administrative Bulletin (RAB) describes the impact of the Covid-19 extensions and waivers on the statute of limitations for individual income tax, corporate income tax, and sales, use, and withholding (SUW) taxes.  More specifically, Treasury issued multiple notices due to the Covid-19 Pandemic impact on individuals and businesses that extended filing deadlines and/or waived penalty and interest for late filing and/or remittance of tax. The notices varied depending on the type of tax return being filed. For example, the income tax extensions modified the original return filing and tax payment deadlines, impacting the statute of limitations for individual income tax and corporate income tax returns. Conversely, only penalty and interest for some SUW periods were waived while the original return filing and tax payment deadlines remained the same. Consequently, there was no effect on the statute of limitations for SUW due to the notices.

ISSUES

I.     Return Deadlines and the Statute of Limitations

II.     Covid-19 Pandemic Extensions and Penalty and Interest Waivers

III.     Impact of Extensions and Penalty and Interest Waivers on the Statute of Limitations

IV.     Extension Dates for Tax Years 2019 and 2020 and Examples

ANALYSIS AND DISCUSSION

I.          Return Deadlines and the Statute of Limitations

Generally, the deadline for filing annual income tax returns and remitting tax payments each tax year is April 15 for individuals and April 30 for corporations.  MCL 206.315 and 206.685.  The deadline for filing SUW returns and remitting tax payments depends on the filing frequency of the taxpayer: for annual filers, returns and remittance of tax are due on February 28; for quarterly filers, returns and remittance of tax are due on the 20th of the month following the end of the calendar quarter; and for monthly filers, returns and remittance of tax are due on the 20th of the following month. MCL 205.56 and 205.96.

The Revenue Act provides that Treasury may not assess tax, penalty, or interest “after the expiration of four years after the date set for the filing of the required return or after the date the return was filed, whichever is later.” MCL 205.27a(2).  Likewise, a taxpayer cannot claim a refund after the expiration of four years from the date set for the filing of the original return. MCL 205.27a(2). These limits on assessments and refunds are referred to as the “statute of limitations.”  Notably, the statute of limitations for refunds differs from the assessment limitations period in that it does not relate to the date the return was actually filed, but rather, it is only tied to the original due date of the return. Properly filed extensions change the “date set for the filing of the” original or required returns. 

II.         Covid-19 Pandemic Extensions and Penalty and Interest Waivers

A.     Individual and Corporate Income Taxes

Early in the Covid-19 Pandemic, the Internal Revenue Service (IRS) extended to July 15, 2020, the filing and payment deadlines for individuals and corporations whose 2019 federal tax returns and payments were due between April 1, 2020 and July 15, 2020. IRS Notice 2020-23, Update to Notice 2020-18, Additional Relief for Taxpayers Affected by Ongoing Coronavirus Disease 2019 Pandemic, available at Part III - Administrative, Procedural, and Miscellaneous (irs.gov).  Likewise, on March 27, 2020, Governor Whitmer issued Executive Order 2020-26 (EO 2020-26), which extended the due dates for Michigan income tax returns for individuals to July 15, 2020, and for corporations to July 31, 2020.  Notice: Automatic Extension for Individual and Composite State Income Tax Returns Due on April 15, 2021 (michigan.gov). That notice also provided that a taxpayer may request an extension to file based on the new required filing date; however, the non-Covid extended due dates were not altered. Thus, those extension due dates remained October 15, 2020, for individuals and either December 31, 2020, or February 28, 2021, for corporate filers. Treasury’s notice did not extend the SUW annual return date.

On March 17, 2021, the IRS issued IR-2021-59 to announce the federal individual income tax filing due date for the 2020 tax year was extended from April 15, 2021, to May 17, 2021. Treasury issued Notice Automatic Extension of State and Income Tax Filing Deadlines comporting with the IRS extension, available at Notice Automatic Extension of State and Income Tax Filing Deadlines (michigan.gov).

2021 PA 8. On April 22, 2021, a new Michigan law was enacted codifying Treasury’s Notice Automatic Extension of State and Income Tax Filing Deadlines and extending the 2020 annual filing due date for individual and composite filers from April 15 to May 17, 2021. MCL 206.301a. The non-Covid extension due date for returns when taxpayers requested additional time to file a 2020 annual state individual income tax return remained October 15, 2021.

Summary of the Individual and Corporate due dates:

Individuals.

2019

2019 Individual Income Tax Return Deadlines. The calendar and fiscal filing and payment deadline was extended to July 15, 2020, for individuals, fiduciaries, and composite filers whose federal tax returns or payments were due on or after April 1, 2020, and before July 15, 2020.

2020

2020 Individual Income Tax Return Deadline. The annual filing and payment deadline was extended to May 17, 2021, for individuals and composite filers whose returns or payments were due on April 15, 2021.

Corporations.

2019

2019 Corporate Income Tax Return Deadline. The filing deadline was extended to July 31, 2020, for returns due between April 30, 2020, and before July 31, 2020.

2020

2020 Corporate Income Tax Return Deadline. Unchanged.

B.     Sales, Use, and Withholding Taxes

Treasury issued notices that provided for the waiver of any penalty and interest for the late reporting or late payment of SUW taxes for 2020 monthly or quarterly payments or returns originally due on March 20, April 20, and May 20, if filed by June 22, 2020. See Notice: Penalty and Interest Waived for 31 Days for Certain Sales, Use, and Withholding Taxpayers with Returns Due December 20, 2020 (michigan.gov) and Notice: SUW Penalty and Interest Waiver Until June 22 (michigan.gov). The payments due with those returns could be further deferred for taxpayers choosing an installment payment option. The Notice about SUW Installment Payment Options is available at Notice: SUW Installment Payment Options Available (michigan.gov). Notably, the Notices did not extend the filing deadlines for purposes of the statute of limitations; only penalty and interest waivers were provided.

On December 7, 2020, the Michigan Department of Health and Human Services (MDHHS) issued an Epidemic Order temporarily extending capacity and facemask restrictions on gatherings for certain types of businesses. The Epidemic Order is available at Gatherings and Face Mask Order (michigan.gov). To alleviate some of the challenges faced by businesses affected by the MDHHS Order, Treasury waived penalty and interest for the late reporting or late payment of SUW tax for any return or payment due on December 20, 2020.  For affected businesses, the penalty and interest waiver was extended to include returns or payments due on January 20, 2021. Returns and payments due on December 20, 2020, or January 20, 2021, could be submitted to Treasury by February 22, 2021, without incurring penalty or interest. See Notice: Penalty and Interest Waived for 33 Days for Certain Sales, Use, and Withholding Taxpayers with Returns Due January 20, 2021 (michigan.gov). The 2020 SUW annual return filings and payments remained due on February 28, 2021. Because there was only a waiver of penalty and interest for SUW taxpayers, no statutory filing deadlines were altered; thus, there was no impact on the statute of limitations.

III.        Impact of Extensions and Penalty and Interest Waivers on the Statute of Limitations

The filing and payment deadlines were modified for original 2019 and 2020 individual income tax returns and 2019 corporate income tax returns. Therefore, for purposes of the Revenue Act, the modified 2019 and 2020 tax filing deadlines discussed above became the due dates from which the statute of limitations is calculated for 2019 and 2020 individual income tax returns and for 2019 for corporate income tax returns. In other words, the four-year statute of limitations period is applied to the modified 2019 and 2020 due dates for purposes of determining the deadlines for requesting refunds and issuing assessments.   

Conversely, for purposes of SUW, there was only a waiver of penalty and interest; the filing due dates remained unchanged. Thus, the due dates for purposes of determining the statutory deadlines for requesting refunds or issuing assessments for SUW was not altered. 

IV.        Extension Dates for Tax Years 2019 and 2020 and Examples

A.     Statute of Limitations Dates for 2019 Returns

State of Michigan 2019 Annual Individual, Fiduciary, and Composite Returns:

Filing and payment original annual return date: July 15, 2020.

Refund request deadline date: July 15, 2024.

Assessment deadline date: July 15, 2024, or 4 years after the return was filed, whichever is later.

State of Michigan 2019 Annual Corporate Returns:

Filing and payment original annual return date: July 31, 2020.

Refund request deadline date: July 31, 2024.

Assessment deadline date: July 31, 2024, or 4 years after the return was filed, whichever is later.

SUW 2019 Returns:  Due dates unchanged.

B.     Statute of Limitations Dates for 2020 Returns

State of Michigan 2020 Annual Individual and Composite Returns:

Filing and payment original return date: May 17, 2021.

Refund request deadline date: May 17, 2025.

Assessment deadline date: May 17, 2025, or 4 years after the return was filed, whichever is later.

State of Michigan 2020 Annual Corporate Returns and SUW Returns:

Filing and payment deadline dates for original annual corporate returns and original annual, quarterly, and monthly SUW returns were unchanged.

C.     Examples

Example 1. Taxpayer filed a 2019 annual individual income tax return and remitted payment of the tax liability on July 15, 2020, the filing date as extended by EO 2020-26. Later, Taxpayer discovered an error on the return and filed an amended return on July 1, 2024, requesting a refund. A refund cannot be requested more than four years after the date set for filing the original return. The 2019 extended filing date of July 15, 2020, was the due date for purposes of commencing the four-year statute of limitations period. The amended return requesting a refund was timely filed.

Example 2. On June 1, 2020, Taxpayer filed an SUW monthly return that was due on May 20, 2020. Penalty and interest were waived pursuant to Treasury’s notice for a return due on May 20, 2020, if filed by June 22, 2020. On June 1, 2024, Taxpayer requests a refund of tax related to the return that was due on May 20, 2020.  Taxpayer’s request is beyond the statute of limitations because a refund must be requested within four years of the due date of the original return, which remained May 20, 2020.

Example 3.  Assume the same facts as Example 2, however, rather than Taxpayer seeking a refund, Treasury assesses Taxpayer relating to its May return on June 1, 2024.  Treasury’s assessment is within the statute of limitations because the date to assess is four years from the due date of the original return, or when the return was filed, whichever is later.  The date the return was filed (June 1, 2024) was the later date.