The following opinion is presented on-line for informational use only and does not replace the official version. (Mich Dept of Attorney General Web Site - www.ag.state.mi.us)



STATE OF MICHIGAN

FRANK J. KELLEY, ATTORNEY GENERAL


Opinion No. 6626

March 27, 1990

LABOR & EMPLOYMENT:

Authority of MESC to establish tax amnesty program

MICHIGAN EMPLOYMENT SECURITY COMMISSION:

Authority of MESC to establish tax amnesty program

MCL 421.15; MSA 17.515, authorizes the MESC to cancel interest and penalties only on a case-by-case basis; therefore, the action of the MESC on December 6, 1989, which sought to establish an interest and penalty amnesty plan in connection with the collection of outstanding employment security taxes through the mechanism of a new Commission policy, was of no legal effect.

Kenneth Morris

Chairman

Michigan Employment Security Commission

7310 Woodward Avenue

Detroit, MI 48202

This will acknowledge receipt of a request you referred to me through a member of my staff at the end of the February 13, 1990, Michigan Employment Security Commission meeting, regarding the implementation of the so-called "CAROT" amnesty program adopted by the Commission.

Your question arises out of the Commission's action at its December 6, 1989, meeting to adopt an amnesty plan proposed by the Director of Labor, who is an ex-officio member of the Commission, but without a vote. The Director's amnesty proposal (the "CAROT" program) was adopted as a Commission policy to cancel interest and penalties outstanding provided that the principal taxes owing to the Commission were paid in full by July 31, 1990.

A one-page document explaining the plan was distributed to the Commissioners during the meeting. The document stated, in its entirety, as follows:

MESC COLLECTIONS

Problem

Since 1985, the MESC has not routinely issued assessments to employers for overdue taxes. Consequently, a backlog of 114,000 delinquent employers developed. Of these, about 12,000 owe more than $1000 each. All of these are reporting employers. That is, they filed their quarterly tax returns but either underpaid or did not pay their taxes at all. The aggregate total of overdue taxes is estimated by MESC to be about $267 million.

This problem results from several factors, including MESC's failure to issue timely notifications to employers of overdue taxes. Whatever the cause, the agency desires to collect as much of the overdue taxes as possible. To aid in that effort, it would be helpful if the Commissioners would make a very specifically defined and limited offer to cancel penalties and interest.

The MES Act permits the cancellation of any interest and any penalty so long as the failure to pay was not the result of negligence, intentional disregard of the Rules of the Commission, or fraud.

Action Needed

The Commissioners would need to take two actions, by motion, at an open meeting of the Commission:

1. Amend the Statement of Policy on Cancellation of Interest and/or penalty to add a new Section 15, delegating the authority for cancellation under certain circumstances to the Chief of the Section.

2. Adopt a motion for cancellation of penalty and interest establishing a limited application period. The form to be used should include a certification by the employer that the overdue tax balance does not result from negligence, intentional disregard of the rules of the commission or fraud. The agreement should call for payment in full by July 31, 1990, in order to qualify for the cancellation of penalty and interest.

Copies of proposed motions are attached. The two proposed motions were attached to the foregoing statement. The first of these proposed motions was as follows:

Motion for the Cancellation of Penalty and Interest

The Commission hereby establishes an application period of January 2, 1990, through January 25, 1990, for requesting cancellation of interest and penalties owed on overdue taxes. All applications must be on a form approved by the Commission.

The Commission will notify each applicant of acceptance into the program by April 30, 1990. The notice will include the tax amount overdue which the employer must pay in order to have interest and penalty cancelled. All such payments must be received by the Commission no later than July 31, 1990, or the agreement to cancel penalty and interest will become null and void.

The second proposed motion, also attached, provided:

Statement of Policy

Cancellation of Interest and/or Penalty

15. The Commission delegates the authority for cancellation of interest and/or penalty to the Chief of the Contributions Section in cases involving employers who apply for relief within the application period defined by the Commission and which meet the criteria established by the Commission for the timely payment of taxes due and owing.

Following a very brief discussion, the Michigan Employment Security Commission approved both of the proposed motions by a vote of two of the three Commissioners who were present.

Before responding to your inquiry concerning the implementation of the CAROT program, it is necessary to determine whether the Commission's action adopting this program at the December 6, 1989, meeting was within the authority conferred upon the Commission by law.

The Michigan Employment Security Act, Sec. 15(a), MCL 421.15(a); MSA 17.515(a), provides, in pertinent part, that:

The [Michigan Employment Security] commission may cancel any interest and any penalty when it is shown that the failure to pay on or before the last day on which the tax could have been paid without interest and penalty was not the result of negligence, intentional disregard of the rules of the commission, or fraud.

Consistent with the practice of the Employment Security Commissioners since the inception of the cancellation of interest and penalties provision in the Act, the present Commissioners have exercised their discretionary authority to cancel interest and penalties only on a case-by-case basis. They have done so collegially at their regularly scheduled monthly meetings.

The Commissioner of Revenue of the Department of Treasury has similar statutory authority to compromise interest and penalties pursuant to the provisions of MCL 205.28(1)(e); MSA 7.657(28)(1)(e). Commissioners of Revenue have likewise always exercised this discretionary authority on a case-by-case basis. Thus, each agency has had a long history of interpreting its statute as requiring that the exercise of discretion to compromise or cancel interest and penalties be done on a case-by-case basis. In this connection, it is to be noted that the Court, in Magreta v. Ambassador Steel Co, 380 Mich 513, 519; 157 NW2d 298 (1968), quoting from Boyer-Campbell Co v. Fry, 271 Mich 282, 296; 260 NW 165 (1935) and United States v. Moore, 95 US 760, 763; 24 LE 588 (1877), stated:

The construction given to a statute by those charged with the duty of executing it is always entitled to the most respectful consideration and ought not to be overruled without cogent reasons.

In 1986, the Commissioner of Revenue of the Department of Treasury carried out a broad-scale tax amnesty program which included the cancellation of penalties for the purpose of accelerating the payment of taxes. Before doing so, however, statutory authority for the amnesty program was sought from the Legislature. The result was 1986 PA 58, MCL 205.31; MSA 7.657(31), which authorized the Commissioner of Revenue to waive criminal and civil penalties on a broad-scale, rather than on a case-by-case basis, and established specific conditions therefor. This plan, known as the 1986 Michigan Tax Amnesty Program, was implemented by the adoption of emergency rules under the provisions of the Administrative Procedures Act of 1969, 1969 PA 306, MCL 24.201, et seq; MSA 3.560(101), et seq.

If the Legislature had given broad-scale amnesty-granting authority to the Commissioner of Revenue when it enacted MCL 205.28(1)(e); MSA 7.657(28)(1)(e), the enactment of MCL 205.31; MSA 7.657(31), was an idle, unneeded act. However, it is a well-settled principle of statutory construction that it will not be presumed or concluded that the Legislature, in enacting a statute, involved itself in an unnecessary statutory enactment. See, Klopfenstein v. Rohlfing, 356 Mich 197, 202; 96 NW2d 782 (1959). The Legislature is also presumed to have acted with knowledge of and regard to existing laws on the same subject. People v. Buckley, 302 Mich 12, 21; 4 NW2d 448 (1942). It is clear, therefore, that, when the Legislature enacted MCL 205.31; MSA 7.657(31), it gave to the Commissioner of Revenue new authority to set in motion an amnesty plan and, in so doing, granted to the Commissioner of Revenue authority not previously possessed.

It inexorably follows that MCL 421.15; MSA 17.515, authorizes the Commission to cancel interest and penalties only on a case-by-case basis and does not authorize the establishment by the Employment Security Commissioners of an amnesty program. In order for the Commissioners to adopt such a program, specific legislative authority is necessary.

It is my opinion, therefore, that the action of the Employment Security Commissioners on December 6, 1989, by which they sought to establish an interest and penalty amnesty plan in connection with the collection of outstanding employment security taxes through the mechanism of a new Commission policy, was of no legal effect.

Frank J. Kelley

Attorney General