Lansing -- The Senate this morning passed a tax amnesty bill estimated to bring in $35 million in unpaid taxesfrom the 2008-09 fiscal year, which ended Sept. 30.

The bill would order the state treasurer to designate a 30- to 60-day amnesty period during which criminal and civil penalties would be waived for failure or refusal to file a return, failure to pay a tax or making an excessive claim for a refund of a tax under the Act.

People who fail to take advantage of the amnesty would be subject to an additional 25 percent penalty on top of interest and penalties they already owe. The bill would only take effect if a proposal already approved by the Senate to eliminate the Michigan Business Tax surcharge over three years becomes law. That measure is part of package that faces opposition in the House because it would also freeze the earned income tax credit for low income citizens.

The bill would increase state tax revenue by approximately $35 million for the 2009-10 budget, according to a Senate Fiscal Agency analysis. School AidFund revenue would comprise approximately $10.5 million of the revenue increase, with the remaining $24.5 million going to the General Fund.

Senate Democrats voted against the amnesty because freezing the earned income tax credit would negatively affect low-income and unemployed residents. They believe the MBT surcharge should be eliminated as part of Democrats' tax reform package, which includes a new 3 percent tax on non-Medicaid physician services and other measures.

"Tax reform should be comprehensive in nature," said Sen. Deb Cherry, D-Burton. "(The amnesty) does not provide revenue for the current budget."

The bill would allocate $1 million of revenue from the increased collections to pay for the administrative costs. It would have to be passed by the House and signed by Gov. Jennifer Granholm to become law.