MI HB5989

Prohibits the Michigan Department of Treasury from basing tax deficiency assessments on indirect audit procedures without the taxpayer's written approval when the taxpayer has filed all required returns and maintained adequate records.

Requires that any indirect audit of a compliant taxpayer include a review of books and records, credibility evaluation of evidence, investigation of taxpayer-presented refuting evidence, and must not be conducted arbitrarily.

Defines "indirect audit procedure" as an audit method using circumstantial evidence to determine tax liability based on omitted income, overstated deductions, or both.

Establishes that tax deficiency projections from samples require written taxpayer approval and allows the department to use any reasonable method to reconstruct income, deductions, or expenses using third-party records.

Clarifies that blanket exemption claims for qualifying purchasers do not require renewal or updates if a recurring business relationship exists (sales transactions within 12-month periods).