SENATE BILL No. 1040

February 17, 2000, Introduced by Senators HOFFMAN, STEIL, BENNETT, EMMONS, HAMMERSTROM, ROGERS, BULLARD and SHUGARS and referred to the

Committee on Finance.

A bill to amend 1975 PA 228, entitled

"Single business tax act,"

by amending section 35a (MCL 208.35a), as added by 1999 PA 115.

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

1 Sec. 35a. (1) For a tax year beginning after December 31,

2 1999, a taxpayer may claim a credit against the tax imposed by

3 this act of equal to the percentage determined under subsection

4 (2) multiplied by the result of subtracting the sum of the

5 amounts calculated under subdivisions (d), (e), and (f) from the

6 sum of the amounts calculated under subdivisions (a), (b), and

7 (c):

8 (a) Calculate the cost, including fabrication and installa-

9 tion, paid or accrued in the taxable year of tangible assets of a

10 type that are, or under the internal revenue code will become,

11 eligible for depreciation, amortization, or accelerated capital

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1 cost recovery for federal income tax purposes, provided that the

2 assets are physically located in this state for use in a business

3 activity in this state and are not mobile tangible assets.

4 (b) Calculate the cost, including fabrication and installa-

5 tion, paid or accrued in the taxable year of mobile tangible

6 assets of a type that are, or under the internal revenue code

7 will become, eligible for depreciation, amortization, or acceler-

8 ated capital cost recovery for federal income tax purposes. This

9 amount shall be multiplied by the apportionment factor for the

10 tax year as prescribed in chapter 3.

11 (c) For tangible assets, other than mobile tangible assets,

12 purchased or acquired for use outside of this state in a tax year

13 beginning after December 31, 1996 and physically located in this

14 state in a tax year beginning after December 31, 1999 and after

15 the assets are purchased or acquired for use in a business activ-

16 ity, calculate the federal basis used for determining gain or

17 loss as of the date the tangible assets were physically located

18 in this state for use in a business activity plus the cost of

19 fabrication and installation of the tangible assets in this

20 state.

21 (d) If the cost of tangible assets described in subdivision

22 (a) was paid or accrued in a tax year beginning after December

23 31, 1999, calculate the gross proceeds or benefit derived from

24 the sale or other disposition of the tangible assets minus the

25 gain, multiplied by the apportionment factor for the taxable year

26 as prescribed in chapter 3, and plus the loss, multiplied by the

27 apportionment factor for the taxable year as prescribed in

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1 chapter 3 from the sale or other disposition reflected in federal

2 taxable income and minus the gain from the sale or other disposi-

3 tion added to the tax base in section 9(6).

4 (e) If the cost of tangible assets described in subdivision

5 (b) was paid or accrued in a tax year beginning after December

6 31, 1999, calculate the gross proceeds or benefit derived from

7 the sale or other disposition of the tangible assets minus the

8 gain and plus the loss from the sale or other disposition

9 reflected in federal taxable income and minus the gain from the

10 sale or other disposition added to the tax base in section 9(6).

11 This amount shall be multiplied by the apportionment factor for

12 the tax year as prescribed in chapter 3.

13 (f) For assets purchased or acquired in a tax year beginning

14 after December 31, 1996 that were eligible for a deduction under

15 subdivision (a) or (c) and that were transferred out of this

16 state, calculate the federal basis used for determining gain or

17 loss as of the date of the transfer.

18 (2) The amount calculated under subsection (1) shall be

19 multiplied by a percentage determined by dividing the tax rate

20 for the tax year in which the credit is claimed by 2.3% and

21 multiplying that result by 0.85%. THE FOLLOWING PERCENTAGE AS

22 APPLICABLE:

23 (A) FOR TAXPAYERS WITH ADJUSTED GROSS RECEIPTS FOR THE TAX

24 YEAR OF $1,000,000.00 OR LESS, 2.3%.

25 (B) FOR TAXPAYERS WITH ADJUSTED GROSS RECEIPTS FOR THE TAX

26 YEAR OF MORE THAN $1,000,000.00 BUT $2,500,000.00 OR LESS, 1.5%.

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1 (C) FOR TAXPAYERS WITH ADJUSTED GROSS RECEIPTS FOR THE TAX

2 YEAR OF MORE THAN $2,500,000.00 BUT $5,000,000.00 OR LESS, 1.5%.

3 (D) FOR TAXPAYERS WITH ADJUSTED GROSS RECEIPTS FOR THE TAX

4 YEAR OF MORE THAN $5,000,000.00, 0.85%.

5 (3) For a tax year in which the amount calculated under sub-

6 section (1) and multiplied by the percentage determined under

7 subsection (2) is negative, the absolute value of that amount is

8 added to the taxpayer's tax liability for the tax year.

9 (4) If the credit allowed under this section for the tax

10 year and any unused carryforward of the credit allowed under this

11 section exceed the tax liability of the taxpayer for the tax

12 year, the excess shall not be refunded, but may be carried for-

13 ward as an offset to the tax liability in subsequent tax years

14 for 9 taxable years or until the excess credit is used up, which-

15 ever occurs first.

16 (5) Notwithstanding any other provision of this act, the

17 credit provided in this section shall be taken before any other

18 credit under this act and the credits under other sections of

19 this act shall be calculated using the tax liability after the

20 calculation of the credit under this section and, to the extent

21 provided by law, after the calculation of credits under other

22 sections of this act.

23 (6) A taxpayer that reduces the adjusted tax base under sec-

24 tion 31(2) shall not claim a credit under this section.

25 (7) A taxpayer that reduces the adjusted tax base under sec-

26 tion 31(4) shall reduce the credit under this section by a

27 percentage not to exceed 100% determined by dividing the

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1 applicable tax rate under section 31(1) by the percentage

2 determined under subsection (2) and multiplying the result by the

3 percentage reduction to the adjusted tax base claimed by the tax-

4 payer for the tax year under section 31(4).

5 (8) A MEMBER OF AN AFFILIATED GROUP AS DEFINED IN THIS ACT,

6 A CONTROLLED GROUP OF CORPORATIONS AS DEFINED IN SECTION 1563 OF

7 THE INTERNAL REVENUE CODE AND FURTHER DESCRIBED IN 26

8 C.F.R. 1.414(b)-1 AND 1.414(c)-1 TO 1.414(c)-5, OR AN ENTITY

9 UNDER COMMON CONTROL AS DEFINED BY THE INTERNAL REVENUE CODE

10 SHALL DETERMINE ADJUSTED GROSS RECEIPTS FOR PURPOSES OF SUBSEC-

11 TION (2) ON A CONSOLIDATED BASIS.

12 (9) AS USED IN SUBSECTION (2), "ADJUSTED GROSS RECEIPTS"

13 MEANS THE SUM OF THE FOLLOWING:

14 (A) GROSS RECEIPTS APPORTIONED OR ALLOCATED TO MICHIGAN WITH

15 THE APPORTIONMENT FRACTION CALCULATED PURSUANT TO CHAPTER 3.

16 (B) ADJUSTMENTS PROVIDED IN SECTION 23B(A) TO (G).

17 (C) ADJUSTMENTS PROVIDED IN SUBSECTION (1)(D) TO (F).

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