In order to fly while working on my EAB project, I belong to a small flying club organized as a non-profit corp in Ohio, for which I recently started serving as treasurer. Our 1972 citabria 7ECA was purchased by the club 38 years ago in 1980 and as far as we know, has always been based in Michigan at KDUH, just outside Toledo Ohio. It has also been registered in Michigan for all or most of that 38 years. I just got a letter from the Michigan Department of Taxation saying they discovered the airplane is stored in Michigan and asking me to prove that we paid Michigan use tax. We have absolutely no records and the club founders that purchased the airplane are long ago buried....
I have not yet replied to the inquiry, and I am no CPA, but what I think I have learned so far is that Michigan law includes a statute of limitations of 4 years, but the Michigan taxation department (somehow) claims the limitation does not apply unless you file form 518 to register that the transaction took place (an act that is not legally required) and of course you wouldn't file this extra form if you didn't know you needed to pay the tax. So, as I understand it, if you fraudulently underpay, AND know to register the transaction, the limit is 4 years. If you don't know you owe the tax, or pay it and don't keep proof (and don't file the form 518 that nothing tells you to file), the time bomb ticks forever. Plus interest and penalties.
I am also guessing that if an owner of an airplane in Ohio purchased his airplane in Ohio as a "casual sale" (thus not paying any ohio tax) and then later moves his airplane to Michigan, he would owe the Michigan tax. If he doesn't know any better, it could be a big surprize later on.
To make matters worse, we had a prop strike this Fall. I am wondering if this is the end of the club.
I have not yet replied to the inquiry, and I am no CPA, but what I think I have learned so far is that Michigan law includes a statute of limitations of 4 years, but the Michigan taxation department (somehow) claims the limitation does not apply unless you file form 518 to register that the transaction took place (an act that is not legally required) and of course you wouldn't file this extra form if you didn't know you needed to pay the tax. So, as I understand it, if you fraudulently underpay, AND know to register the transaction, the limit is 4 years. If you don't know you owe the tax, or pay it and don't keep proof (and don't file the form 518 that nothing tells you to file), the time bomb ticks forever. Plus interest and penalties.
I am also guessing that if an owner of an airplane in Ohio purchased his airplane in Ohio as a "casual sale" (thus not paying any ohio tax) and then later moves his airplane to Michigan, he would owe the Michigan tax. If he doesn't know any better, it could be a big surprize later on.
To make matters worse, we had a prop strike this Fall. I am wondering if this is the end of the club.