Revenue Administrative Bulletin 2026-9

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 2026-9. This RAB explains the law governing assessments of officers, members, managers of a manager-managed limited liability company, or partners (referred to in this RAB, collectively, as “officers” unless otherwise provided) for certain tax liabilities of corporations, limited liability companies, limited liability partnerships, partnerships or limited partnerships, each referred to in this RAB, as a “business,” unless otherwise provided, under the Revenue Act, 1941 PA 122, MCL 205.27a(15)(a).

This RAB replaces RAB 2015-23 based on new developments in the law governing officer liability due to Mertz v Dep’t of Treasury, unpublished per curiam opinion of the Court of Appeals, issued June 13, 2024 (Docket No. 365480) and Daoud v Dep’t of Treasury, unpublished per curiam opinion of the Court of Appeals, issued December 3, 2020 (Docket No. 351087).

Introduction

When a business fails to fully pay certain tax liabilities, its officers may be held personally liable for the debt. This is known as derivative liability or more commonly as “corporate officer liability.” The Revenue Act, MCL 205.27a, sets forth procedures Treasury must follow when issuing an assessment for corporate officer liability.

Prior to assessing an officer, Treasury must first determine if there is a succeeding purchaser (successor) of the assessed business that is liable under MCL 205.27a(1). If Treasury has information that clearly identifies a successor, and it determines that assessing the successor would allow Treasury to collect the entire assessment against the assessed business, it must assess the successor prior to assessing an officer. However, if the successor fails to pay a final assessment within the later of two years after the date Treasury issues the assessment against the business or 90 days after the issuance of the assessment against the successor, Treasury may then assess officers it determines to be “responsible persons.” Successor liability is the subject of RAB 2025-5.

A “responsible person” is a person that meets all the following criteria:

1. Was an officer, member, manager (of a manager-managed limited liability company), or partner of the business during the “time period of default”;

2. Controlled, supervised, or was responsible for the filing of returns or payment of any of the taxes described in MCL 205.27a(14)(b) during the “time period of default”;

3. For any of the taxes described in MCL 205.27a(14)(b), “willfully” failed to file a return or pay the tax due during the “time period of default.” MCL 205.27a(15)(b).

The “time period of default” means the tax period for which the business failed to file the return or pay the tax due under MCL 205.27a(5), through the later of the date set for filing the return or for making the required tax payment. MCL 205.27a(15)(c).

A person’s actions are “willful” (and a person acts “willfully”) if the person knew, or had reason to know, of the obligation to file a return or pay the tax, but intentionally or recklessly failed to file the return or pay the tax. MCL 205.27a(15)(d). Determining whether a person’s actions are willful is a fact-intensive inquiry and will be made on a case-by-case basis.

Prior to assessing someone as a responsible person, Treasury must first produce prima facie evidence as described in MCL 205.27a(15)(b) or establish a prima facie case that the person is a responsible person as defined in MCL 205.27a(15)(b). MCL 205.27a(5). If Treasury produces prima facie evidence, it is presumed that the person was a responsible person, and that person may rebut the presumption by demonstrating that one or more of the three elements required to be a responsible person as described above has not been met.

There are two types of prima facie evidence: (1) a tax return or negotiable instrument submitted in payment of a tax owed by the business during the time period of default signed by the officer, or (2) a tax return or negotiable instrument submitted in payment of a tax before the time period of default signed by the officer along with other evidence demonstrating that the person was an officer during the time period of default. Such other evidence may include a return or negotiable instrument submitted in payment of taxes after the time period of default signed by the officer. MCL 205.27a(15)(b).

When Treasury is unable to produce prima facie evidence, it must establish a prima facie case that the person is a responsible person. Establishing a prima facie case requires Treasury to establish every element required to be a responsible person.

If Treasury produces prima facie evidence or establishes a prima facie case, the officer may rebut by providing evidence that any of the elements required to be a responsible person, as set forth above, are not met.

Treasury must assess a responsible person within four years of the date the assessment against the business was issued. MCL 205.27a(5). “Assessment” for purposes of determining this four-year period means a final assessment and not merely an intent to assess. A responsible person may challenge the validity of the assessment issued to the business to the same extent the business could have challenged it. Id.

A person found liable for taxes as a responsible person may bring a cause of action in the appropriate circuit court to recover damages from other responsible persons in an amount equal to the assessment or for the portion of the assessment for which another responsible person was liable. Id.

Issues

1. What are the prerequisites to Treasury assessing a responsible person?

2. For what taxes may a responsible person be derivatively liable?

3. What is a “responsible person?”

4. What is prima facie evidence? What is a prima facie case?

5. How does a responsible person contest the underlying assessment?

6. What information must Treasury disclose to a responsible person?

7. What effect does a business’s bankruptcy petition or an order appointing a receiver have on officer liability?

Conclusions

1. Prerequisites to Assessing a Responsible Person

Treasury may assess a responsible person if a business that is liable for an applicable tax identified in MCL 205.27a(14) fails to file a required return or pay a tax due for any reason after assessment. MCL 205.27a(5). If an officer is determined to be a responsible person, Treasury may assess the responsible person any time after a final assessment has been issued to the business if it fails to pay the tax due and does not appeal the assessment to the Tax Tribunal or the Court of Claims. Treasury may assess any individual it determines to be a responsible person; and it may do so any time up to four years after the date of the underlying assessment. If the business appeals the assessment, Treasury will not assess a responsible person until the conclusion of the litigation. Additionally, if the business enters into an installment agreement with Treasury covering the period at issue, no assessments will be issued against any responsible persons so long as the business does not default on the agreement. A default occurs if a required payment is not timely remitted according to the terms of the agreement.

Example 1:

Treasury assessed ABC Inc. for unpaid sales tax. ABC admits liability but is unable to immediately pay the entire assessment. ABC enters into an installment agreement with Treasury to begin to pay its liability. ABC timely makes the payments agreed upon in the installment agreement. Treasury will not assess any officers it determines to be responsible persons so long as ABC complies with the installment agreement.

Example 2:

Treasury assessed ABC Inc. for unpaid sales tax. ABC admits liability but is unable to immediately pay the entire assessment. ABC enters into an installment agreement with Treasury to pay its liability. After several months of making the agreed upon payments, ABC fails to make a payment and defaults on the agreement. Treasury may assess responsible persons anytime after ABC defaults on the agreement.

Example 3:

Treasury assessed ABC Inc. for unpaid sales tax. ABC admits liability but is unable to pay the entire assessment immediately. ABC enters into an installment agreement with Treasury to pay its liability. After several months of making the agreed upon payments, ABC fails to make timely payment on a new tax liability for a subsequent period. Treasury notifies ABC of the new liability, and ABC does not immediately satisfy it. Treasury initiates collection activity after ABC’s appeal rights expire, and the debt remains outstanding. Treasury may assess responsible persons for the new tax liability on or after the date that ABC fails to satisfy the new tax debt.

However, if, prior to assessing any responsible person(s), Treasury obtains information that clearly identifies a successor liable under MCL 205.27a(1) and determines that assessing the successor would allow Treasury to collect the entire amount of the liability (total tax, interest and penalty for all periods assessed) of the defaulting business, Treasury must assess that successor prior to assessing any responsible person(s). MCL 205.27a(5). Both conditions must be met before Treasury will delay assessing a responsible person. Treasury will look to all relevant information available to it in determining if the successor is able to pay the entire amount of the assessment. For example, if the fair market value of the business purchased is less than the amount of the outstanding taxes assessed against the original business, then the successor cannot be held liable for the entire amount of the assessment, and Treasury may therefore proceed to assess any responsible persons. See MCL 205.27a(1).

If the successor fails to pay the assessment within the later of two years after the date Treasury issues the assessment against the business or 90 days after the issuance of the assessment against the successor, and Treasury has determined that the successor is not capable of paying the entire assessment, Treasury may assess an officer if it can produce prima facie evidence or establish a prima facie case that the officer is a “responsible person.” However, if the successor appeals its assessment and the appeal lasts beyond the periods noted above, to preserve the statute of limitations, Treasury and any officer Treasury believes is a responsible person may stipulate to extend the time in which Treasury may assess the responsible person (rather than immediately issuing an assessment to the responsible person.) Note that Treasury must assess responsible persons within four years of the date of the final assessment issued to the business. MCL 205.27a(5). This period may be extended by written waiver. If Treasury assesses a responsible person after assessing a successor, Treasury will provide notice to the responsible person that a successor was previously assessed. Treasury is prohibited from disclosing the identity of the successor. MCL 205.28(1)(f).

If the successor enters into an installment agreement with Treasury, Treasury will not pursue any responsible persons so long as the successor does not default on the agreement. If Treasury lacks information identifying a successor at the time it properly assesses a responsible person, but subsequently identifies a successor, it will assess the successor; however, the assessment against the responsible person remains valid and Treasury will continue to pursue that assessment. Mertz, supra.

Example 4:

Treasury assesses CEO as a responsible person for his role as a former officer of ABC, Inc. At the time CEO is assessed Treasury has no information indicating that there was a succeeding purchaser of ABC. However, after assessing CEO, Treasury obtains information that indicates XYZ Inc. may be the successor of ABC. Treasury’s assessment against CEO is valid because at the time it assessed CEO it did not have information that clearly identified a succeeding purchaser. Once a succeeding purchaser is identified, however, Treasury may assess it, in addition to CEO.

Example 5:

ABC Inc. owes unremitted wage withholding tax to Treasury. XYZ Inc. approaches ABC to purchase its business assets. ABC requests tax clearance from Treasury, but the tax clearance request identifies only the seller, and an impending sale, not the purchaser. Treasury issues a notice of intent to assess to CEO as a responsible person for his role as an officer of ABC Inc. At the time it issues the notice of intent to assess, Treasury has no information identifying XYZ as successor of ABC. CEO requests an informal conference and notifies Treasury of ABC’s successor. Treasury may continue to pursue responsible person liability against CEO without first assessing the successor because Treasury did not know the identity of the succeeding purchaser at the time it issued the notice of intent to assess against CEO. See Mertz, supra. Treasury may have been on notice of an impending sale at the time of the clearance request, but the statute requires clear identification of the successor. A failure to identify a successor prevents a responsible person from arguing later that Treasury must assess the successor before issuing an assessment against a responsible person.

Example 6:

ABC Inc. is assessed for unpaid sales tax and does not appeal. XYZ Inc. purchases ABC without obtaining tax clearance or escrowing sufficient funds as required by law. As a result, XYZ is liable for the lesser of ABC’s tax liability or the fair market value of the business. Treasury assesses XYZ, and it has insufficient assets to pay the entire tax liability. Because assessing XYZ did not permit Treasury to collect the entire amount of the business’s tax assessment, in addition to assessing XYZ, Treasury may also assess a responsible person.

Example 7:

Successor XYZ Inc. purchases ABC Inc. without obtaining tax clearance or escrowing sufficient funds as required by law; XYZ is subject to successor liability as a result. ABC is issued a final assessment for the unpaid sales tax and does not appeal or pay it. XYZ is incapable of immediately paying the entire assessment. XYZ enters into an installment agreement with Treasury to pay its liability. XYZ consistently makes the payments agreed upon in the installment agreement. Treasury will not assess any officers it determines to be responsible persons so long as XYZ complies with the installment agreement.

Example 8:

Successor XYZ Inc. purchases ABC Inc. without obtaining tax clearance or escrowing sufficient funds as required by law; XYZ is subject to successor liability as a result. XYZ is incapable of immediately paying the entire assessment. XYZ enters into an installment agreement with Treasury to pay its liability. After several months of making the agreed upon payments, XYZ defaults on the agreement by failing to make a payment and fails to cure the default. Treasury may assess responsible persons any time after the date XYZ fails to make the payment.

Example 9:

ABC Inc. is assessed for unpaid sales tax on January 1, 2024. ABC fails to pay its liability. Treasury identifies XYZ Inc. as a successor to ABC and assesses XYZ on June 1, 2024. Treasury will not assess any responsible persons before January 1, 2026.

Example 10:

ABC Inc. is assessed for unpaid sales tax on January 1, 2024. ABC fails to pay its liability. Treasury identifies XYZ Inc. as a successor to ABC and sends a final assessment notice to XYZ on December 1, 2025. Treasury will not assess any responsible persons before March 1, 2026.

2. Applicable Taxes

Officer liability applies only for the failure to file a return for or pay the following taxes:

• Sales tax, 1933 PA 167, MCL 205.51 to MCL 205.78
• Use tax, 1937 PA 94, MCL 205.91 to 205.111, but only in instances where the business is required to (or actually did) collect tax from a third party for remittance to the State;
• Tobacco products tax, 1993 PA 327, MCL 205.421 to 205.436;
• Motor fuel tax and motor carrier fuel tax, MCL 207.1001 to 207.1170 and MCL 207.211 to 207.236;
• Income tax withholding, MCL 206.701 to 206.713;
• Any other tax administered under the Revenue Act for which a business is required to collect tax from or on behalf of a third party for remittance to the State. MCL 205.27a(14).

The Michigan Business Tax, Corporate Income Tax, and any other tax administered under the Revenue Act that is not required to be collected from a third-party for remittance to the State are not subject to officer liability.

3. Responsible Person

A “responsible person” is a person that meets all the following criteria:

1. Was an officer, member, manager of a manager-managed limited liability company or partner of the business during the “time period of default”;

2. Controlled, supervised, or was responsible for the filing of returns or payment of any of the taxes described in MCL 205.27a(14)(b) during the “time period of default”; and

3. For any of the taxes described in MCL 205.27a(14)(b), “willfully” failed to file a return or pay the tax due during the “time period of default.” MCL 205.27a(15)(b).

Before assessment, Treasury must first produce prima facie evidence or establish a prima facie case that the officer is a responsible person, which may be rebutted by the officer by proving that any element required to be a responsible person is not met. MCL 205.27a(5). Before assessing a responsible person, the business must first be assessed and fail, for any reason, to file the required return or pay the taxes due. After this failure, Treasury may assess a responsible person. Id.

A. Officer, Member, Manager of a Manger-Managed Limited Liability Company or Partner

For a person to be held liable as a responsible person, that person must have been either an officer, a member, a manager of a manager-managed limited liability company or a partner, depending on the organizational form. In the corporate context, an individual may be a de jure (i.e., legally authorized) or de facto officer of the business during the time period of default.

A “de facto” officer is an “officer who exercises the duties of an office under color of an appointment or election, but who has failed to qualify for office for any one of various reasons ….”  Black’s Law Dictionary (8th ed). The Michigan Supreme Court has long recognized the de facto officer doctrine and indicated that the liability and authority of a de facto officer is no greater (or less than) the liability and authority of a de jure officer. See e.g., Martin et al v Miller, 336 Mich 265, 277-278 (1953). See also Greyhound Corp v MI Pub Serv Comm, 360 Mich 578 (1960). A person may be a de facto officer under any of the following three circumstances:

(1) He or she was made an officer, however, the appropriate corporate procedure for appointing an officer was not followed;

(2) He or she held himself or herself out as an officer; or,

(3) He or she induced others to believe he or she was an officer. Circurel v Dep’t of Treasury, unpublished opinion per curium of the Court of Appeals, issued March 10, 1998 (Docket Nos. 198812, 198848).

Determining if a person is a de facto officer is a fact-intensive inquiry. In general, Treasury will only pursue a person as a de facto officer in exceptional circumstances. For example, if a business fails to name de jure officers as required by law, but an owner or other person with clear authority holds himself or herself out as an officer and signs returns and/or negotiable instruments in payment of taxes, he or she may be a de facto officer and assessed as a responsible person if a return is not filed and/or payment is not remitted.

Example 11:

CEO is the sole officer and owner of XYZ, Inc. CEO dies and his will appoints Administrator as administrator of his estate, which includes a controlling interest in XYZ. Administrator signs tax returns and payments of taxes as “president” while he is winding down the business. Administrator is not a de facto officer because the actions of an administrator of an estate are taken on behalf of the estate in its capacity as shareholder of the company, not on behalf of the company as an officer unless the administrator is appointed or elected as an officer.

Example 12:

Employee is an employee of XYZ Inc. and has never been appointed as a de jure officer of XYZ. The CEO of XYZ has delegated his authority to file tax returns and make payments of taxes to Accountant. Accountant is out of the office when a return becomes due. Employee takes it upon himself to file the return and signs it as CFO. This is the only time Employee has ever represented himself as an officer of XYZ. Employee is not a de facto officer.

Example 13:

CEO is the sole officer of XYZ, Inc. CEO resigns from XYZ and no officer is appointed to replace her. Employee assumes the responsibilities and exercises the authority of CEO. This includes entering into contracts on behalf of XYZ, filing tax returns, and remitting payments of tax. Employee signs documents as “CEO.” Employee is a de facto officer.

B. Time Period of Default

The “time period of default” is the tax period for which the business failed to file the return or pay the tax due under MCL 205.27a(5) and lasts through the later of the date the return or payment was due. MCL 205.27a(15)(c). A responsible person is not required to be an officer during the entire time period of default, only some portion of it. The dissolution, discontinuance, sale, or restructuring of a business does not discharge a responsible person’s liability for failure to file a return or pay a tax due. However, where a sale is involved, Treasury may be required to pursue the purchaser of the business prior to pursuing the responsible person.

Example 14:

ABC Inc. is a retailer and is required to file monthly sales tax returns with Treasury. ABC fails to file and pay its June 2024 sales tax. The time period of default is the date the tax period began, June 1, 2024, through the date the return or payment is due, July 20, 2024. CEO is hired as an officer of ABC on July 6, 2024, and remains an officer through July 20, 2024. CEO was an officer during the time period of default.

Example 15:

ABC Inc. is a retailer that is an annual filer for sales tax purposes. ABC fails to file and pay its tax liability for 2024. The time period of default is the date the tax period began, January 1, 2024, through the date the return or payment is due, February 28, 2025. CEO is hired as an officer of ABC on October 1, 2024, and remains an officer through February 28, 2025. CEO was an officer during the time period of default.

Example 16:

ABC Inc. is a retailer that is a monthly filer for sales tax purposes. ABC fails to file and pay its tax liability for June 2024. The time period of default is the date the tax period began, June 1, 2024, through the date the return or payment is due, July 20, 2024. CEO is hired as an officer of ABC on June 1, 2024; however, CEO is terminated by ABC on June 20, 2024. CEO was an officer during the time period of default. However, see Example 19.

C. Willfulness

For an officer’s actions to be considered “willful,” or for the officer to have acted “willfully,” the officer must have known, or had reason to know, that the business was obligated to file a return or pay the tax, but intentionally or recklessly failed to file the return or pay the tax. MCL 205.27a(15)(d). Willfulness for purposes of officer liability does not require a bad purpose, intent, or motive as may be required in a criminal prosecution. The officer must only intentionally or recklessly fail to file a return or pay a tax the officer knew, or should have known, was due.

“Intentionally” means that the officer knowingly disregarded the laws, rules, or instructions published and/or administered by Treasury. RAB 2025-15 “Penalty Provisions.” “Recklessly,” on the other hand, means the creation of a substantial and unjustifiable risk that a return would not be filed, or the tax would not be paid, or by a conscious disregard for or indifference to that risk by the officer See, Black's Law Dictionary (12th ed. 2024) definition of “recklessly”.

Payment of any other debt, including employee payroll, when the officer knew, or should have known, there was an outstanding tax liability constitutes willfulness. A mistaken belief that payments to other creditors were required to be made in preference to applicable taxes does not make the failure to pay non-willful. Demonstrating that the task of filing a return or paying taxes was delegated to another does not establish a lack of willfulness. See, e.g., Mertz, supra (non-owner controller asserted he believed that his father, an 80% owner of an LLC, was filing returns and paying taxes during the time period of default, despite knowledge that taxes were in arrears); Daoud, supra (LLC owner delegated authority to brother to report and pay taxes and did not monitor whether brother actually performed these duties).

Example 17:

CEO is an officer of ABC Inc. CEO delegates his authority to file sales tax returns and make payments of sales tax to Employee. CEO takes no steps to ensure that Employee is properly filing sales tax returns or remitting sales tax payments. Employee fails to properly remit sales tax payments. CEO’s actions are reckless and, therefore, willful.

Example 18:

CEO is an officer of ABC Inc. CEO directs Employee to pay a vendor instead of paying ABC’s sales tax liability. CEO’s direction is intentional and, therefore, willful.

Example 19:

Assume the facts in Example 16. CEO’s failure to file and pay June 2024’s tax liability was not willful.

4. Prima Facie Evidence

When Treasury has produced prima facie evidence that a person is a responsible person, all the requirements of MCL 205.27a(15)(b), including willfulness, are presumed to be met, and the officer may rebut this presumption by providing evidence that any of the elements required to be a responsible person have not been met. The evidence – signatures on returns and negotiable instruments – has a different level of sufficiency dependent on timing:

A. Signature During the Time Period of Default

The signature, including an electronic signature, of an officer on a return or negotiable instrument submitted in payment of taxes during the time period of default is prima facie evidence that the officer is a responsible person. MCL 205.27a(15)(b). The return or negotiable instrument that is signed does not need to be for the type of tax or tax period being assessed or be a Michigan return or negotiable instrument for payment of Michigan tax to constitute prima facie evidence.

Example 20:

ABC Inc. is a retailer and is required to file sales tax returns on a monthly basis. ABC failed to file its return and remit tax for June. Treasury assessed ABC for its unpaid sales tax liability, and ABC failed to pay the assessment. An officer of ABC, CEO, signed a corporate income tax return on July 8. That return is prima facie evidence that CEO is a responsible person because it was signed during the time period of default (June 1 through July 20).

B. Signature Before the Time Period of Default

The signature, including an electronic signature, of an officer on a return or negotiable instrument submitted in payment of tax before the time period of default, along with evidence other than that document that sufficiently demonstrates the person was an officer during the time period of default, is prima facie evidence that the officer is a responsible person. MCL 205.27a(15)(b). See also, Mertz, supra (signature on monthly SUW returns as president of LLC prior to period of default plus evidence of tax-specific control during the period of default was prima facie evidence of default).

Example 21:

ABC Inc. is a retailer and is required to file sales tax returns on a monthly basis. ABC failed to file its return and remit tax for June. Treasury assessed ABC for its unpaid sales tax liability, and ABC failed to pay the assessment. CEO, an officer of ABC, signed a sales tax return for the period of April on May 8. Additionally, on June 15, CEO, as an officer on behalf of ABC, signed contracts with wholesale vendors. There is prima facie evidence that CEO is a responsible person because he signed a return before the time period of default and there is other evidence demonstrating he was an officer during the time period of default (June 1 through July 20).

Example 22:

ABC Inc. is a retailer and is required to file sales tax returns on a monthly basis. ABC failed to file its return and remit tax for June. Treasury assessed ABC for its unpaid sales tax liability, and ABC failed to pay the assessment. CEO, an officer of ABC, signed a sales tax return for the period of April on May 8. There is no other evidence that CEO was an officer during the time period of default (June 1 through July 20). Treasury has not produced prima facie evidence that CEO is a responsible person.

C. No Signature on a Return or Negotiable Instrument Before or During the Time Period of Default

When Treasury fails to produce prima facie evidence, it must establish a prima facie case that the person was a responsible person. MCL 205.27a(15)(b). Establishing a prima facie case requires Treasury to produce evidence of each element required for an officer to be a responsible person:

1. Was an officer of the business during the “time period of default”;

2. The officer controlled, supervised, or was responsible for the filing of returns or payment of any of the taxes described in MCL 205.27a(14)(b) during the “time period of default”;

3. The officer was an officer during the “time period of default”; and,

4. For any of the taxes described in MCL 205.27a(14)(b), the officer “willfully” failed to file a return or pay the tax due during the “time period of default.” MCL 205.27a(15)(b).

For establishment of the first element, see section 3a, above. Treasury may establish the second element, i.e., that the officer had control, supervision, or responsibility for the filing of returns or paying of taxes, described in MCL 205.27a(14), by establishing any of the following:

(a) the officer had control over the preparing of the business’s returns or payment of tax;

(b) the officer supervised the preparing of the business’s returns or payment of tax, or;

(c) the officer was charged with the responsibility of preparing the business’s returns or payment of tax.   Peterson v Dep’t of Treasury, 145 Mich App 445, 450 (1985); Keith v Dep’t of Treasury, 165 Mich App 105, 108 (1987).

Any evidence that documents the officer’s control, supervision, or responsibility, or a lack thereof, will be considered. This includes, but is not limited to, the signature of a person on a return or negotiable instrument submitted in payment of tax after the time period of default, registration for tax, audit or collection reports that identify a person as an officer with tax responsibilities, payment plan agreements signed by the officer, contracts signed by the officer, filings with any local, state, or federal agency, or any other information that indicates the person was an officer with control, supervision, or responsibility for filing returns or paying tax.

Example 23:

Treasury assessed ABC Inc. for failing to remit sales tax; ABC fails to pay the assessment. Officer is listed as an officer on ABC’s registration for Michigan taxes. Officer has never signed a tax return or negotiable instrument in payment of tax on behalf of ABC. During the time period of default an employee of ABC, Accountant, signed returns and negotiable instruments in payment of tax on behalf of ABC, but only upon review and approval of Officer. Officer was an officer during the time period of default and directed Accountant to pay the company’s payroll instead of sales tax causing the failure to remit. A prima facie case that Officer is a responsible person has been established.

Example 24:

Treasury assessed ABC Inc. for failing to remit sales tax; ABC fails to pay the assessment. Officer is listed as an officer on ABC’s registration for Michigan taxes. Officer has never signed a tax return or negotiable instrument in payment of tax on behalf of ABC. However, in interviewing employees of ABC, Treasury learns that during the time period of default, Officer directed an employee of ABC, Accountant, to sign returns and negotiable instruments in payment of tax on behalf of ABC. Furthermore, Treasury establishes that Officer did not take any measures to ensure that Accountant properly filed returns or remitted tax. A prima facie case that Officer is a responsible person has been established.

Example 25:

Treasury assessed ABC Inc. for failing to remit sales tax; ABC fails to pay the assessment. Officer is listed as an officer on ABC’s registration for Michigan taxes. Officer signed a tax return after the time period of default, but not before or during. There is no other evidence that suggests Officer had any tax specific authority or responsibilities. A prima facie case that Officer is a responsible person has not been established.

5. Contesting the Underlying Assessment

Responsible persons may challenge the validity of the underlying assessment to the same extent that the business could have challenged it under Sections 21 and 22 of the Revenue Act, MCL 205.21 and MCL 205.22, when originally issued. MCL 205.27a(5). Generally speaking, then, the responsible officer can raise any issue that the business could have raised about the original assessment, even though the business’s appeal period has expired. However, if the business previously litigated the assessment, the officer may be precluded from challenging the underlying assessment based on the doctrines of collateral estoppel or res judicata.

Thus, upon issuance of an intent to assess against the officer, the officer may request an informal conference as provided by Section 21 of the Revenue Act challenging the officer’s status as a responsible person and/or the validity of the assessment that was originally issued against the business. Similarly, the officer may appeal a final assessment issued by Treasury to the Michigan Tax Tribunal or Court of Claims as provided by Section 22 of the Revenue Act, challenging the officer’s status as a responsible person and/or the validity of the original assessment.

6. Disclosures

MCL 205.27a(5) requires Treasury to provide an assessed responsible person notice of any amounts collected from other responsible persons or successors attributable to the same assessment. Treasury will notify responsible persons if a successor has been assessed. However, Treasury is prohibited from disclosing the identity of the successor. MCL 205.28(1)(f). Treasury will also provide an assessed responsible person notice of any amounts collected from the business attributable to the same assessment. However, Treasury is only authorized to disclose the amount collected; it is not authorized to disclose the party from whom it was collected. Id.

Additionally, upon written request of an officer that has been assessed as a responsible person, Treasury will disclose any documents it considered in its audit or investigation in determining that the officer is a responsible person liable for the tax. MCL 205.27a(6). When a written request is made, Treasury will provide any documents that it considered as the basis for its assessment within a reasonable time, in redacted form where necessary.

7. Bankruptcy Petitions and Receiverships

A responsible person may be assessed for tax liability incurred by the business prior to the date the business filed its petition under the United States Bankruptcy Code. Taxes incurred subsequent to filing under the Bankruptcy Code are the responsibility of the debtor-in-possession or trustee in bankruptcy.

However, if the business is the debtor-in-possession and no bankruptcy trustee is appointed, then the responsible person retains control of the filing of tax returns and/or payment of taxes. Therefore, a responsible person may be liable for any unpaid taxes of the business while the business is the debtor-in-possession and no bankruptcy trustee has been appointed after the business has been assessed.

In cases where a business files a petition in bankruptcy, Treasury will issue an assessment against a responsible person at approximately the same time it prepares a bankruptcy claim to be filed through the Attorney General’s office if the business has already been assessed. This would place a responsible person on notice that there is potential officer liability.

Receiverships are authorized by state law. There are generally two types of receiverships, general and limited. A general receiver is analogous to a bankruptcy trustee and takes charge of the business entity entirely, either for purposes of winding down the business or to continue operating it as a going concern.  A limited receiver, on the other hand, has control over only limited assets of the business. In Re Newport Offshore Ltd., 219 B.R. 341 (R.I. 1998). An officer is not liable for the failure to file returns or remit taxes as a responsible person if a general or limited receiver, validly appointed under state law, has the specific duty, pursuant to applicable receivership documents, to file returns and remit tax. Conversely, if the receiver is not required to file returns and/or remit tax, an officer may be liable for the failure to file a required return or remit tax even though the receiver controls some or all of the business’s assets.