Revenue Administrative Bulletin 1993-15

Approved: December 22, 1993

STATUTE OF LIMITATIONS TO COLLECT AN ASSESSMENT

(Replaces Revenue Administrative Bulletin 1989-37)

RAB-93-15. This bulletin explains the time period during which the Department of Treasury may collect a non-jeopardy assessment of a tax liability. The amendments to MCL 205.21; MSA 7.657(21); and MCL 205.28; MSA 7.657(21) made by Public Act 13 of 1993 have been incorporated to update this bulletin.

Mailing of Letter of Inquiry Required

According to the revenue act, "If a person fails or refuses to make a return or payment as required, or if the department has reason to believe that a return or payment does not supply sufficient information for an accurate determination of the amount of tax due, the department may obtain information on which to base an assessment of the tax. By its duly authorized agents, the department may examine the books, records, and papers and audit the accounts of a person or any other records pertaining to the tax." [MCL 205.21(1); MSA 7.657(21)(1)].

Prior to assessment, "the department shall send to the taxpayer a letter of inquiry stating, in a courteous and unintimidating manner, the department's opinion that the taxpayer needs to furnish further information or owes taxes to the state, and the reason for that opinion. A letter of inquiry shall also explain the procedure by which the person may initiate communication with the department to resolve any dispute." [MCL 205.21(2)(a); MSA 7.657(21)(2)(a)].

Mailing of Notice of Assessment Required

If the dispute is not resolved within 30 days after the Department sends the letter of inquiry, the Department shall give notice to the taxpayer of its intent to assess the tax. The notice shall include the amount of the tax the Department believes the taxpayer owes, the reason for that deficiency, a statement advising the taxpayer of a right to an informal conference, the requirement of a written request by the taxpayer for the informal conference that includes the taxpayer's statement of the contested amounts and an explanation of the dispute, and the 30-day time limit for that request." [MCL 205.21(b); MSA 7.657(21)(b)]. The notice of intent to assess must be delivered to the taxpayer's last known address via certified mail or personal service [MCL 205.28; MSA 7.657(28)].

Commencement of Collection Action

If, after 30 days, the Department has not received any correcting information, the Department will issue a "Bill for Taxes Due" (final assessment). If at any time during the tax billing process the taxpayer cannot pay all the taxes due, the taxpayer may contact the Office of Collections to request monthly payments. The phone number for the Office of Collections appears on the notice of intent to assess.

If the taxpayer does not make payment or payment arrangements within 35 days of the final assessment, the Department will issue a demand letter. When the taxpayer has received proper notification of a final assessment, the Department may begin collection action after 10 days of the notice of intent to assess [MCL 205. 25(1); MSA 7.657(25)(b)].

General Statute of Limitations

The statute of limitations that governs the collection of taxes administered by the Department is found under the Revised Judicature Act, MCL 600.5813; MSA A.5813. Legal proceedings may be commenced by the Department for a period of six years after a final assessment of a tax deficiency. Section 5813 provides that: "All other personal actions shall be commenced within the period of six years after the claims accrue and not afterwards unless a different period is stated in the statutes."

Neither the Revenue Act nor the specific taxing statutes contain a specific statute of limitations. Therefore, the general provision applies to collection efforts by the Department. The time period to collect an assessed liability of tax is not extended where the Department makes an adjustment to a finalized assessment that is not in litigation.

Statute of Limitations Suspended During Litigation of Assessment

The time period to effect collection of a final assessment is extended for the periods that the assessment is under litigation, conference or audit. Litigation involves an appeal to the Michigan Tax Tribunal, Michigan Court of Claims, Michigan Court of Appeals, Supreme Court, or other court of competent jurisdiction. The statute of limitations on collection may also be extended by reaffirmation of the tax debt. Reaffirmation of a tax debt will occur if the taxpayer:

1. Makes voluntary payments,

2. Signifies to the debt on a letter of acknowledgment, or

3. Mutually agrees to extend by signing an agreement with the Commissioner of Revenue.

The statute may be tolled if the Department is unable to locate the taxpayer.