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Michigan legislature ends prepayment issue on tax appeals

When most people think of going to court, they may believe that whatever the action that may result, that result will only be imposed after a court has made a final determination. If they had been involved in a disputed contract, they would not expect to have to pay the damages for the alleged breach before they could go to court.

For Michigan taxpayers who wanted to have their case involving a tax dispute heard by the Michigan Court of Claims, that is exactly what they had to do. They had to pay all of the tax, interest and penalties before they could even make their argument to court.

The effect of such a law was to stop some individuals with genuine and valid tax disputes involving their Michigan taxes from being able to have their day in court.

The governor has now signed legislation that will remove this impediment, and will allow taxpayers to proceed to the Court of Claims without prepaying all of their disputed taxes.

This will equalize the ability to appeal with the Michigan Tax Tribunal, which is an administrative agency that hears appeals on tax issues involving Michigan property taxes and other tax disputes.

The Tribunal was seen by some as not providing the same remedy a hearing in the Court of Claims. In addition, proponents of the change argued that prepayment provided an incentive for Michigan to make tax assessments that allow the state to hold the money for the period of time that the appeal is being heard.

The new law will eliminate that incentive and make this process more fair for taxpayers who want to have their day in court in a genuine court.

Source:, "Gov. Rick Snyder signs bill eliminating prepayment of tax liability for Treasury disputes," June 16, 2015

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