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HB 5876

Taxation: administration; settlement process; modify to reflect repeal of the state real estate transfer tax act. Amends sec. 21 of 1941 PA 122 (MCL 205.21). TIE BAR WITH: HB 5880'26, HB 5874'26

2025-2026 Regular Session Introduced by Joe Aragona and 17 co-sponsors

Michigan HB 5876 reorganizes tax disputes by formalizing audits, clarifying informal conferences and settlements, and speeding final assessments under the state revenue act.

REFERRED TO COMMITTEE ON GOVERNMENT OPERATIONS
#taxation:administration #taxation:staterealestatetransfer
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Bill Summary · HB 5876

Summary of Michigan HB 5876 (2025-2026)

Core Purpose

HB 5876 proposes amendments to 1941 PA 122 (the state revenue collection act) to modify the administration of taxes and the settlement/appeals process in light of repealing the state real estate transfer tax act. The bill focuses on audit procedures, informal conferences, settlement processes, and related timelines for tax administration, while preserving general framework for assessments, appeals, and confidentiality.

Note: The bill is set to take effect 90 days after enactment and includes a tie-bar with HB 5880 and HB 5874, meaning its effectiveness depends on those companion bills becoming law.

Key Provisions and Changes

  • Audit and Information Access (Sec. 21(1))

    • The Department of Treasury or its agents may audit books, records, and papers to determine tax due when a taxpayer fails to file, pays insufficiently, or the department suspects information is inadequate.
    • Audited taxpayers (or those whose records were examined) must receive a complete copy of audit work papers and findings.
    • Audits must be conducted in accordance with auditing standards emphasizing confidentiality, training, independence, risk assessment, evidence, documentation, and reporting.
    • The department must promulgate audit standards within 1 year of enactment.

  • Taxpayer Contact and Dispute Resolution Process (Sec. 21(2))

    • The department issues a courteous letter of inquiry requesting additional information or indicating taxes may be owed, and explains dispute-resolution options.
    • If unresolved within 30 days (or sooner if no inquiry), the department may issue an intent-to-asses notice, detailing the tax amount, deficiency reasons, and right to an informal conference with a 60-day window to request it.

  • Informal Conference and Settlement Procedures (Sec. 21(2)(c)-(e))

    • Taxpayers may request an informal conference within 60 days; the conference is not subject to the Administrative Procedures Act but follows department rules.
    • Conferences can be recorded at the party’s expense with prior notice.
    • During or after the informal conference, taxpayers and the department may settle issues via a written settlement offer. Settlement steps include:
    • Taxpayer submits offer within 21 days after the conference, including issues, proposed amount, and supporting bases.
    • The State Treasurer (or designee) reviews and decides whether to accept, reject, or counter the offer; department notifies the taxpayer.
    • If offers are rejected or countered, the process continues; if accepted, a written settlement agreement is executed, potentially ending the dispute for those settled issues.
    • Settlement offers and related communications become part of the settlement record; final settlement documents may be confidential and exempt from Freedom of Information Act disclosure and not admissible as proof in other proceedings.

  • Post-Settlement and Final Assessments (Sec. 21(2)(f)-(g))

    • If issues are settled, the department issues a final assessment reflecting the agreed-upon settlement for settled issues. The settlement agreement may be the final notice for those issues and is not subject to further court review.
    • For unsettled issues, the department issues a written decision and order, detailing reasons and authority, and assesses the due taxes, interest, and penalties for those issues.
    • If the taxpayer does not protest the notice of intent to assess, the department may proceed with assessment, and the final assessment is subject to appeal under Section 22.
    • If a protest is deemed frivolous, penalties may apply.

  • Refunds and Audit Timeline (Sec. 21(3)-(7))

    • If an audit results in a refund, the department notifies the taxpayer and outlines appeal rights; the taxpayer has the same informal conference and appeal rights as with assessments.
    • For audits begun after Sept. 30, 2014:
    • The department must complete fieldwork and provide a written preliminary audit determination within 1 year of the period (absent extensions by written agreement).
    • Final assessments are generally due within 9 months after the preliminary determination, unless the taxpayer requests reconsideration or an informal conference.
    • Reconsideration requests may delay final assessment.

  • Reporting and Transparency (Sec. 21(8))

    • The department must publish semiannual reports on the website detailing:
    • Aggregate original liability determinations arising from settlements.
    • Aggregate settled liability amounts.
    • If 5 or more settlements occurred in the period, the actual number of settlements; otherwise “less than 5.”

  • Scope of Settlement Process (Sec. 21(9))

    • The informal settlement process in subsection (2)(e) applies primarily to taxes administered under this act.
    • The process does not apply to certain taxes and acts, including:
    • General property tax act
    • State real estate transfer tax act (relevant to the bill’s context)
    • Tobacco products tax act
    • Health insurance claims assessment act
    • City income tax act
    • This creates a narrower settlement pathway specifically for taxes under the act, while real estate transfer taxes may be excluded (relevant to repeal context).

Affected Parties

  • Taxpayers subject to Michigan taxes administered under 1941 PA 122: Those who file returns, face audits, or owe taxes under the act.
  • Department of Treasury and its agents: Responsible for audits, inquiries, notices of intent to assess, informal conferences, settlements, and final assessments.
  • State Treasurer and designees: Central decision-makers for approving, rejecting, or counter-offering tax settlements.
  • Taxpayers seeking refunds: Entitled to the same informal conference and appeal rights if refunds arise from audits.

Procedural and Timeline Highlights

  • Audit standards must be promulgated within 1 year of enactment.
  • Informal conferences and settlement processes occur after a notice of intent to assess; 60-day window to request an informal conference; settlement offers due within 21 days post-conference.
  • Final assessments for settled issues issue reflecting the settlement; unsettled issues proceed to written decision and order.
  • Final assessments are generally subject to appeal under Section 22, except when settlements finalize the matter.
  • Repeal-related real estate transfer tax act changes are addressed by adjusting the settlement framework via the tie-bar with related bills HB 5874 and HB 5880.

Effective Date

  • Takes effect 90 days after enactment.
  • Enacting section indicates it depends on the enactment of HB 5874 and HB 5880 (tie-bar).

This bill reorganizes and clarifies the tax administration and dispute resolution pathway under the state revenue law, with emphasis on audits, informal conferences, settlements, and timely final assessments, while aligning with the repeal of the state real estate transfer tax act.

Compiled from official sources — confirm details with the bill’s official record.

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