Death & Taxes

As the old saying goes, nothing can be said to be certain, except death and taxes.  In this episode we unpack how estates, probate, and taxes intersect with liquor licensing and what steps keep a business compliant when an owner dies or owes back taxes. MLCC Licensing Deputy Director Jackie Anthony joins us to explain documents, approvals, levies, seizures, and the practical paths forward.

• Difference between active operation and escrow authority
• Documents MLCC needs after a death
• Approvals, denials, escrow-only decisions and appeals
• Trusts, transfer-on-death and ownership transfers
• Letters of authority timing and follow ups
• License holds, renewals and enforcement checks
• How a personal representative transfers interest to self
• Spouse ownership structures and survivorship
• What a Treasury levy triggers and how to resolve it
• Seizures, tax warrants, auctions and license value

For more information on the Michigan Liquor Control Commission, please visit our website at www.michigan.gov/lcc

The MLCC On The Road podcast is brought to you by the Michigan Liquor Control Commission (MLCC).  For more information on the MLCC, please visit our website at www.michigan.gov/lcc.  To submit a question or idea for a podcast topic, please email mlccinfo2@michigan.gov.

The mission of the Michigan Liquor Control Commission is to make alcoholic beverages available for consumption while protecting the consumer and the general public through regulation of those involved in the sale and distribution of these alcohol beverage products.

Transcript

Welcome, Disclaimer, Guest Intro

David Marvin 0:00

You're listening to the MLCC On the Road Podcast, brought to you by the Michigan Liquor Control Commission with hosts Sarah Weber and David Marvin. Welcome back to the MLCC on the road podcast. I'm David Marvin, and with me today is Sarah Weber. And today's episode, we are going to talk a little bit about a more serious and somber couple topics death and taxes. And we're going to talk a little bit about what happens if you have a deceased stockholder or member or licensee, and also what happens if your business encounters some tax difficulties and ends up with a treasury levy from the Department of Treasury here in Michigan. But before we get going, I want to hand it over to Sarah. She wants to give us a little bit of a disclaimer and then also introduce our special guest that we have here today. So Sarah, take it away.

Sara Weber 0:49

I just want to remind everybody listening that we are not licensed attorneys. And so anything that you hear on this podcast is coming strictly from the MLCC standpoint on what we would require for documentation to keep a business going and operational and/or allowing your licenses to renew or communicate with the Department of Treasury. So if you have any questions related to the estate matter or taxes, you would want to talk to or consult with an attorney in this matter to make sure that you're doing what you need to do on your end while maintaining compliance with the commission. So I'll leave that for now. And in the meantime, I want to introduce Jackie Anthony. Jackie is one of the deputy directors in our licensing division, and she oversees and reviews a lot of the estate matters that come into our office. Hi, Jackie. Hi. Um, I want to have you introduce yourself and kind of give everyone a background on how you've grown up in the commission because she's been here quite a while too. Good morning. Thanks for having me.

Jackie’s Role And Scope

Jackie Anthony 1:52

I started here at the commission back in 2003 in our licensing department, and I've worked in multiple different areas throughout our licensing department. In about 2013, so for the last 10 years or so, I have worked in handling some of our deceased stockholders' licensee files or the Department of Treasury levies, as you mentioned. Along with handling those matters, I am also the deputy director in the licensing division, overseeing the unit staff that process the license applications from basically from the time they come into our office and are set up until the licenses are issued, as well as overseeing the renewal department that handles the yearly license renewals.

Sara Weber 2:33

Okay, so Jackie, you've been doing this for a little while now. Can you kind of explain a little bit about the process that we take here in the office when we receive some type of notification or documentation comes into our office notifying us that a person has passed away?

Notifying MLCC Of A Death

Jackie Anthony 2:51

Sure. Upon finding out an individual has passed, the commission reaches out to the licensee in an attempt to get some estate documents to see who has the legal authority to act on behalf of our deceased, whether it's licensee, stockholder, member, who has the authority to act on their behalf. In doing that, typically we are just sending out an what we would call an estate letter. We're looking for them to be able to provide a copy of a death certificate. We're looking for the probate court letters of authority as to who's been appointed as that personal representative for the individual's estate. We're also looking for information about the individual who's been appointed or the last will of the deceased party, which will demonstrate who's been appointed personal representative of the estate after their passing. And finally, we would collect the LCC 303, which would be an MLCC form that provides personal information regarding the personal representative who's been appointed.

David Marvin 3:50

Jackie, there could be a situation where the stockholder or the member was the only person on the license and it's still an actively operating business. Is there a difference if my business, if if I'm the deceased stockholder or the member and my business is still active and my personal representative intends to continue operating the business versus maybe my license is an escrow and I was trying to sell it? Is there something in how we handle that differently for those types of scenarios?

Active Operation Versus Escrow

Jackie Anthony 4:17

Yes, David, there is uh a difference in the two. The commission itself doesn't actually appoint or approve, say, a personal representative who can rep who's representing or in control of a deceased party's estate. The commission is able to approve someone to actively operate a license. So when the license is an escrow, the personal representative wouldn't be actively operating the license. They would just need to have the legal authority to say sign a purchase agreement or sell the license on behalf of that deceased party. So the commission would actually, upon receiving the estate documents I previously referenced, the commission would have just acknowledged that appointment of the personal representative. We'd update our records to show that individual as the authorized party in order to act on that behalf, renew the license, sell the license in those in those cases. Now, if the license is active, the commission would look to make a decision if that personal representative qualified to actively operate the license. In looking at that, we're looking to see is their their history, do they have conviction history, do they have operating history that the commission may need to consider to see would they qualify to operate the license? So in doing that, once the application is completed, the file will go before the commission for a decision to see if uh the commission will allow them to actively operate. And an actually an order will be issued as well.

Sara Weber 5:47

And if they chose or if the commission looking at this history or if there was any, for instance, any cross-tier issues where maybe the personal representative that they intended to have be responsible for this license maybe may not be able to do so. What type of action would the commission take if they did not want to elect to allow them to operate or could not allow them to operate?

Jackie Anthony 6:08

The commission at that point would still acknowledge the appointment of the personal representative. The commission could approve the personal representative for escrow purposes only in order that the license be placed in escrow, basically denying that active operation to that personal representative. If that happens, the personal representative does still have the right to appeal that decision within 20 days of that order being released, and they can be afforded a hearing to come in to explain to the commission or demonstrate why they should be able to be allowed to operate.

Sara Weber 6:41

Are there any other instances where you may receive documents that are a little bit different from a probate court letters of authority or a will? What if my estate had a trust attached to it? How would we handle that instead?

Denials, Appeals, And Escrow Only

Jackie Anthony 6:56

In those instances, we do have to sometimes reach back out and confirm with the individual who's attempting to settle the estate for the deceased party. We need to try and figure out was that the stock that the deceased party held, was that interest transferred prior to their death to their trust and just not reported to the commission? Or in some instances, there are transfer on death documents that are in place or agreements that are in place that indicate that upon an individual's death, the stock is automatically transferred to, say, the trust. So depending on how, you know, when things have occurred, we ultimately, if the trust is going to end up being that stockholder or member, we do need to do a stock transfer or a membership interest transfer in order to get the interest from the deceased person's estate into the trust so that the trust can then be the stockholder and whoever's the trustee or successor trustee of that trust is would be the one acting on behalf of the trust at that point in time. The only caveat to all of that is if the license is held by a sole proprietor or in an individual's name, a trust cannot be a license holder based on the verbiage and the statute at this point.

Trusts, TOD, And Transfers

David Marvin 8:11

Jackie, it's my understanding that letters of authority for a personal representative are not perpetual. There are time limits on them. What is the process that a licensee would have to do if they have a personal representative set up to make sure that we still have all the accurate information when it comes to those letters of authority?

Jackie Anthony 8:29

Yeah, when the letters of authority are initially received at the commission, some of the probate courts will have a specific expiration date or the letters of authority will have a specific expiration date that the court has put on them. In those instances, the commission will note that and we will make sure to follow up at that expiration date. There's a good handful of probate courts that don't put an expiration date on them. It is my understanding that each of the probate courts, though, still require the estate or that personal representative to file yearly a what the courts call a notice of continued administration. It's basically a check-in that the personal representative has to do with the probate court to let that probate estate continue to remain open. In the instances if we receive letters of authority that don't have a specific expiration date, commission's policy has been to follow up after two years. A lot of the estates within a year will get closed. Some though take a little bit longer. So we've in looking at that policy, we've extended that to the two-year mark. If we don't receive something within the two years, we will follow up with the licensee requesting the continued letters just to demonstrate that that probate estate is still open.

Letters Of Authority And Follow Ups

Sara Weber 9:43

And what happens if we don't get a response back? So you'll send that notice out letting them know that they either expired on a certain date or we're following up because it's been two years since we received a notice of continued administration, or we haven't yet received that notice. What potential ramifications are there to the license holder at that point?

Holds, Renewals, And Enforcement

Jackie Anthony 10:03

Each situation's a little bit different. Some of the situations, especially when the individual that's deceased was the sole stockholder or the sole member, they were the only ones authorized or approved to act. In those situations, we do try to mail those letters, we email them, we will make a phone call out. But if we're not able to still reach the personal representative or get a response back, we will place holds on their licenses. So their license will not be able to be renewed. At that point, we don't have anybody authorized or we don't know that we continue to have somebody authorized to be acting on behalf of the estate. So we will put some license holds on. The renewal will be held until we do receive that information. In other instances where there may be multiple stockholders or multiple members who do have the authority to still act, but we still have this estate out there that we're not sure kind of what's going on with it. We do follow the same process as far as sending out those letters, attempting to make contact with them. If we are unable to, we will also attempt to have our enforcement division make a visit to the establishment to try to get that information from them so that we can make sure the estate is still open and they are still in compliance.

David Marvin 11:11

And assuming that I have the power as a personal representative to transfer interest to myself, if I wanted to get the stock interest or the membership interest in a license as a part of the closing out of the estate as a personal representative, what do I need to do in that situation?

PR Transferring Interest To Self

Jackie Anthony 11:29

It would be one of our routine, say stock transfers or membership interest transfer applications is what we would need. The LCC 101 form. Depending on what was involved in the estate or how the estate was being handled, there may be an assignment agreement, a purchase agreement if it's actually being purchased. There'll be some sort of an agreement, or our LCC 101 form does have a kind of spots that will include the information that may have been included in one of those transfer agreements. If you were that personal representative, you would actually be signing the agreement on behalf of both parties. As the seller, you would be signing in your capacity as the personal representative. Your legal authority is the personal representative for the deceased estate. And then you would also be signing as the applicant. You're individually signing that. So your legal capacity is different from the individual to your personal representative.

Sara Weber 12:18

So it would follow more of a normal application route in that regard if they were not already currently licensed somewhere else. Correct. Or depending on what they were getting for stock issuance. They may have to go through investigation or submit fingerprints, even though they're a personal representative, moving into a licensed stockholder or subordinate in a company would require a commission approval.

Jackie Anthony 12:38

Correct. As a personal representative, you're just stepping into the shoes of the stockholder or the member. You were not actually fully investigated and approved by the commission as that licensee stockholder or member, where when you want to actually have the stock transferred to yourself, you're then stepping into a different role as well, which would require that full application, the full investigation if we hadn't investigated you under another license, as you indicated.

Sensitivity, Violations, Emergencies

Sara Weber 13:07

This is all really great information and I think it's really helpful for anybody who's listening right now or looking at future planning as it comes down to their business. I want to be sensitive here because I know that when things like this happen within your family, you may not be thinking about what you need to do right away for keeping your business or preserving the license. If we find out somebody passed away more than a decade ago, I could see where in instances violations may occur, but can you kind of explain how we as staff kind of look at these when we're finding out about them?

Spouses, Stock Structure, Survivorship

Jackie Anthony 13:42

We do try to be very conscious of the situations that these bring. And we understand that a lot of times thinking of the liquor license is not the forefront when somebody passes. We try to extend some grace to these people, but also making sure that we don't have unapproved operators in there operating or people who may not be approved in their operating that would jeopardize the safety of the public at that point. But we do make every attempt to reach out to whoever is in there and operating or acting to try to get the proper appointments put into place. Again, looking down the road when it's 10 or 15 years, we still try to get that done as soon as possible. But there are those instances where we are not able to do that. And unfortunately, the commission may issue a violation in those instances. They may also, depending on what's happening at the establishment or what would what's going on, they may deem that an emergency suspension of the license would be justified until they get somebody appointed who is able to operate that license. So it really depends. Each is one is kind of a case by case. We really do try to work with them. Our my staff does try to work with them as much as possible in getting what we need from them because we understand the times that these people are in. And sometimes when somebody passes, there are more problems that arise. So we really try to work with them as much as we can.

Sara Weber 15:01

One thing that you and I had talked about a little bit before we started recording here was how people view their companies and the structures. Can you kind of explain when you're a licensee who is a corporation, but it's a husband and wife who own it, sometimes there's some confusion on how the ownership or the what the structure looks like, and that's why they don't necessarily report things to us.

Jackie Anthony 15:21

I think it depends how the corporation was initially set up and how that stock was initially issued out. A lot of time people individually think they're the owner. Well, legally, the corporation is that owner, they're just the stockholders or the members within that licensed entity or that owning entity. A lot of times the spouse, the husband, and the wife will each, maybe, let's say, for instance, in a corporation, each hold a hundred shares of stock. So each one is considered a separate stockholder, meaning if one of them passes, the commission is wanting to make sure that that estate is protected and is being properly distributed or somebody within the proper legal capacity is acting properly, which is why we will follow the same process. In most instances, that spouse that that remains is more than likely going to be that personal representative or be acting on their behalf, but they are different. And I agree. We encounter a lot of situations where they believe that husband and wife that was just theirs together, one of them passes, the other one is still just left as the owner. There are instances where when the corporation was formed, the stock was issued to the husband and wife jointly, meaning they jointly held that with rights of survivorship. So if one of them passes, the other one still holds that same stock interest. And in those cases, it still needs to be reported. We would still get that death certificate. But in those cases, we would have them complete an LCC 101 form to drop that deceased joint stockholder, leaving the spouse that is remaining as the stockholder.

What A Treasury Levy Triggers

David Marvin 16:54

So let's shift gears a little bit now and talk about the tax portion of this podcast. We receive treasury levies from the Michigan Department of Treasury for unpaid taxes. A lot of times it's for withholding taxes or sales and use tax. So, Jackie, can you explain to us what takes place when we get a treasury levy and how that might affect the licensee?

Jackie Anthony 17:15

There's not a lot actually that goes into a levy when we receive one. The staff does verify that the levy received is for a liquor licensee. If it is determined that in fact the levy is for a liquor licensee, we do set up a request in the system, noting that pending levy, and a license hold is placed on any license that does have a Department of Treasury levy in place. The levy, though, doesn't typically affect anybody as far as their everyday course of business. The only time a levy comes into play is if somebody's attempting to transfer their license or sell it, we then would prohibit somebody from continuing on with a transfer, selling that license out from under Treasury, trying to escape or get out of their debt.

Sara Weber 17:55

So, Jackie, is there a process or is is the licensee stuck at that at that point, or do they have the ability to work with us or Treasury if they are really intent on trying to rid themselves of the license?

Paying, Continuations, And Closings

Jackie Anthony 18:11

They do have um some action that they can take. We advise them of the pending levy that's in place and we provide them with the Michigan Department of Treasury's contact information and we ask them to reach out to the Department of Treasury. There are instances where maybe the levy can be paid immediately. The licensee is that does have the money and is able to make good on that levy. If the levy's paid, Department of Treasury will release that levy. They'll send us a release of levy, we remove that, and then we would continue on with the transfer process as normal. In the instances where maybe that levy can't be paid up front, they can still work with Department of Treasury. Sometimes they'll come to an agreement that maybe through the sale of the license, Treasury will be paid with some of the proceeds from the sale. And in those instances, Treasury will then send us what we call a continuation letter. It's basically the Department of Treasury letting us know that while their levy's in place, we understand the licensee wants to sell. We will allow that transfer application to go forward or be processed with the caveat of them receiving payment for their levy at the end of the process. So what happens is that holds still stay on those licenses. We just allow the applicant's transfer application to move through the process. Then, should the applicant actually receive commission approval after commission approval, but before we're actually able to issue the license, treasurer will be paid for their levy. They will still send us their normal release of levy. We will complete the levy at that point, and then we can allow the transfer to be completed.

Seizures, Warrants, And Auctions

Sara Weber 19:35

And what happens in instances where a licensee isn't trying to sell the license and we have levies, do they just stay out there forever, or does Treasury eventually contact us about these outstanding levies?

Jackie Anthony 19:48

It's my understanding that as long as the taxpayer, our licensee in these instances, is making payment, they've maybe entered into a payment plan or they're trying to make good on their debt to Treasury, that Department of Treasury doesn't take any action on those. They're getting the money through the payment plan or getting at least getting some of the funds paid back. Now, in the instances where maybe the payments stop or there's no payments being made at all by that taxpayer, there are instances where the Department of Treasury will take action to seize a license. And what does that look like? From our perspective, once a seizure is is taking place, there is a warrant that's issued, a warrant as in it's a tax warrant instead of the levy, it's the tax warrant. And the Department of Treasury does have a lot of steps they go through on their end to do that. But in the instances where the liquor control commission receives that warrant, that's typically accompanied by a transfer application where the Department of Treasury has is telling us they have seized the license through their warrant and they are now taking possession of the license. And in those instances, we would start the transfer process of transferring it from the current licensee to the Department of Treasury.

Value, Non-Seizure, And Renewals

Sara Weber 20:58

And once we transfer those licenses to Treasury, Treasury is then responsible for the renewal of those licenses on an annual basis. And then for anybody who gets public notices from the Department of Treasury, you will see auctions for liquor licenses. And those licenses that are being auctioned are a result of the licenses that were seized by the department. So they can attempt to recoup some of the outstanding monies that were owed in the back taxes for those licenses. I know in some instances, Treasury doesn't always elect to take licenses either, do they?

Jackie Anthony 21:33

It depends on the value of those licenses. I'm not sure how they determine that, but I do know that depending on license availability or the demand for licenses in certain areas, there may not be a value to the particular license that this licensee has. So Treasury may, in some instances, not seize or may not take it. Now that doesn't mean they wouldn't leave a levy in place in order to try to recoup that money because at the end of the day, Treasury. Is not out to get liquor licenses or to operate any liquor establishment. They're out just to get the tax money that they are owed.

Wrap Up And Resources

Sara Weber 22:07

And in instances where we talked about before that a levy doesn't impact the licensees' ability to renew their liquor license. But if they, for whatever reason, let that license lapse for non-renewal, there are steps that Treasury may take to then seize the license so they can try to obtain it to recoup their monies as well. Well, Jackie, this was a really interesting discussion today. And I am so grateful that you finally agreed to come on and do a podcast. You did fantastic. I think you provided a lot of really good information and education for people who come across these unfortunate issues. This was not a very fun topic to discuss, but I think it was very fact-filled. Thanks for having me. Yes, thanks for being on, and we'll see you next time on MLCC on the road.

David Marvin 22:58

The MLCC on the Road podcast is brought to you by the Michigan Liquor Control Commission. For more information on the Michigan Liquor Control Commission, please visit our website at www.michigan.gov slash lcc. Thank you for listening.