LANSING – The Michigan Department of Treasury Business Tax Division was not ensuring that businesses were filing all the necessary tax forms and was not following up when forms were tagged for errors, a report from Auditor General Doug Ringler said.
The performance audit of the Corporate Income Tax and Michigan Business Tax in the Department of Treasury for the period January 1, 2012, through April 10, 2015, found the division was not ensuring those receiving accelerated Historic Preservation and Brownfield Redevelopment credits were filing the related tax forms.
Under the MBT, some companies qualifying for the credits can receive a portion of them in advance, but are then required to file tax returns for the appropriate year. Auditors found that of the 79 businesses that had received those advance payments as of March 13, 2015, 60 had not filed the appropriate tax forms. The credits were worth $54 million.
The department agreed and said it had contacted those taxpayers, sending delinquency notices to those who did not respond.
Auditors also found that, of the 94,000 CIT returns and 176,000 MBT returns filed between January 1, 2012, and April 10, 2015, which were identified as having errors, 33,887 CIT returns and 67,423 MBT returns had not received the required independent review.
Because of the revenues involved, the returns do not enter the normal queue for approvals, but officials said they are working on ways to process those returns, as well as a system for supervisors to check the work of those checking the returns.
Auditors also found the department was not following up on CIT filers where another entity was paying their withholding. From the sample of 25 returns pulled from the 746 filed between March 14, 2013, and April 10, 2015, auditors found six with exceptions.
Treasury officials acknowledged they had not been following up on those returns, but said it was more cost effective to catch the problems during audits. And they noted that the language allowing the flow-through withholding was repealed in June (PA 158 of 2016).
Auditors cited the department for not consistently notifying taxpayers when a return was deactivated for errors or because it was a duplicate or not needed. Auditors said failing to send the notifications could mean delays in proper taxes being paid.
Treasury officials agreed the notifications could reduce delays where additional filings are needed, but noted that 98 percent of the audit sample (of 45 CIT and 45 MBT sample returns, 13 total had not been notified) involved businesses that were not required to file a return, so there would be no delay of future filings.
Officials also noted, in response to an audit finding, that they are working with the Michigan Economic Development Corporation to obtain lists of all companies with approved credits to speed processing of those returns.
OTHER AUDITS: Use of Transportation-Related Funding, performance audit for the period October 1, 2013, through September 30, 2015.
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