January 17, 2008, Introduced by Reps. Acciavatti, Elsenheimer, Meekhof, Hildenbrand, Meltzer, Schuitmaker, Huizenga, Proos, Calley, Agema, Pavlov, Stahl, Rocca, Booher, Knollenberg, Palmer, LaJoy, Horn, Opsommer and Emmons and referred to the Committee on Tax Policy.
A bill to amend 2007 PA 36, entitled
"Michigan business tax act,"
by amending the title and sections 201, 403, 405, 451, and 601 (MCL
208.1201, 208.1403, 208.1405, 208.1451, and 208.1601), the title
and sections 201, 403, 405, and 601 as amended and section 451 as
added by 2007 PA 145; and to repeal acts and parts of acts.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
TITLE
An
act to meet deficiencies in state funds by providing
provide for the imposition, levy, computation, collection,
assessment, reporting, payment, and enforcement of taxes on certain
commercial, business, and financial activities; to prescribe the
powers and duties of public officers and state departments; to
provide for the inspection of certain taxpayer records; to provide
for interest and penalties; to provide exemptions, credits, and
refunds; to provide for the disposition of funds; to provide for
the interrelation of this act with other acts; and to make
appropriations.
Sec. 201. (1) Except as otherwise provided in this act, there
is levied and imposed a business income tax on every taxpayer with
business activity within this state unless prohibited by 15 USC 381
to 384. The business income tax is imposed on the business income
tax base, after allocation or apportionment to this state, at the
rate of 4.95%.
(2) The business income tax base means a taxpayer's business
income subject to the following adjustments, before allocation or
apportionment, and the adjustment in subsection (5) after
allocation or apportionment:
(a) Add interest income and dividends derived from obligations
or securities of states other than this state, in the same amount
that was excluded from federal taxable income, less the related
portion of expenses not deducted in computing federal taxable
income because of sections 265 and 291 of the internal revenue
code.
(b) Add all taxes on or measured by net income and the tax
imposed under this act to the extent the taxes were deducted in
arriving at federal taxable income.
(c) Add any carryback or carryover of a net operating loss to
the extent deducted in arriving at federal taxable income.
(d) To the extent included in federal taxable income, deduct
dividends and royalties received from persons other than United
States persons and foreign operating entities, including, but not
limited to, amounts determined under section 78 of the internal
revenue code or sections 951 to 964 of the internal revenue code.
(e) To the extent included in federal taxable income, add the
loss or subtract the income from the business income tax base that
is attributable to another entity whose business activities are
taxable under this section or would be subject to the tax under
this section if the business activities were in this state.
(f) Except as otherwise provided under this subdivision, to
the extent deducted in arriving at federal taxable income, add any
royalty, interest, or other expense paid to a person related to the
taxpayer by ownership or control for the use of an intangible asset
if the person is not included in the taxpayer's unitary business
group. The addition of any royalty, interest, or other expense
described under this subdivision is not required to be added if the
taxpayer can demonstrate that the transaction has a nontax business
purpose other than avoidance of this tax, is conducted with arm's-
length pricing and rates and terms as applied in accordance with
sections 482 and 1274(d) of the internal revenue code, and
satisfies 1 of the following:
(i) Is a pass through of another transaction between a third
party and the related person with comparable rates and terms.
(ii) Results in double taxation. For purposes of this
subparagraph, double taxation exists if the transaction is subject
to tax in another jurisdiction.
(iii) Is unreasonable as determined by the treasurer, and the
taxpayer agrees that the addition would be unreasonable based on
the taxpayer's facts and circumstances.
(g) To the extent included in federal taxable income, deduct
interest income derived from United States obligations.
(h) To the extent included in federal taxable income, deduct
any earnings that are net earnings from self-employment as defined
under section 1402 of the internal revenue code of the taxpayer or
a partner or limited liability company member of the taxpayer
except to the extent that those net earnings represent a reasonable
return on capital.
(i) Subject to the limitation provided under this subdivision,
if the book-tax differences for the first fiscal period ending
after July 12, 2007 result in a deferred liability for a person
subject to tax under this act, deduct the following percentages of
the total book-tax difference for each qualifying asset, for each
of the successive 15 tax years beginning with the 2015 tax year:
(i) For the 2015 through 2019 tax years, 4%.
(ii) For the 2020 through 2024 tax years, 6%.
(iii) For the 2025 through 2029 tax years, 10%.
(3) The deduction under subsection (2)(i) shall not exceed the
amount necessary to offset the net deferred tax liability of the
taxpayer as computed in accordance with generally accepted
accounting principles which would otherwise result from the
imposition of the business income tax under this section and the
modified gross receipts tax under section 203 if the deduction
provided
under this subdivision were not allowed. The deduction
under
subsection (2)(i) is intended to flow through and reduce the
surcharge
imposed and levied under section 281. For
purposes of the
calculation of the deduction under subsection (2)(i), a book-tax
difference shall only be used once in the calculation of the
deduction arising from the taxpayer's business income tax base
under this section and once in the calculation of the deduction
arising from the taxpayer's modified gross receipts tax base under
section 203. The adjustment under subsection (2)(i) shall be
calculated without regard to the federal effect of the deduction.
If the adjustment under subsection (2)(i) is greater than the
taxpayer's business income tax base, any adjustment that is unused
may be carried forward and applied as an adjustment to the
taxpayer's business income tax base before apportionment in future
years. In order to claim this deduction, the department may require
the taxpayer to report the amount of this deduction on a form as
prescribed by the department that is to be filed on or after the
date that the first quarterly return and estimated payment are due
under this act. As used in subsection (2)(i) and this subsection:
(a) "Book-tax difference" means the difference, if any,
between the person's qualifying asset's net book value shown on the
person's books and records for the first fiscal period ending after
July 12, 2007 and the qualifying asset's tax basis on that same
date.
(b) "Qualifying asset" means any asset shown on the person's
books and records for the first fiscal period ending after July 12,
2007, in accordance with generally accepted accounting principles.
(4) For purposes of subsections (2) and (3), the business
income of a unitary business group is the sum of the business
income of each person, other than a foreign operating entity or a
person subject to the tax imposed under chapter 2A or 2B, included
in the unitary business group less any items of income and related
deductions arising from transactions including dividends between
persons included in the unitary business group.
(5) Deduct any available business loss incurred after December
31, 2007. As used in this subsection, "business loss" means a
negative business income taxable amount after allocation or
apportionment. The business loss shall be carried forward to the
year immediately succeeding the loss year as an offset to the
allocated or apportioned business income tax base, then
successively to the next 9 taxable years following the loss year or
until the loss is used up, whichever occurs first, but for not more
than 10 taxable years after the loss year.
Sec. 403. (1) Notwithstanding any other provision in this act,
the credits provided in this section shall be taken before any
other
credit under this act. For the 2008 tax year, the The total
combined
credit allowed under this section shall not exceed 50% of
the
tax liability imposed under this act before the imposition and
levy
of the surcharge under section 281. For the 2009 tax year and
each
tax year after 2009, the total combined credit allowed under
this
section shall not exceed 52% of the 65% of the total tax
liability
imposed under this act. before the imposition and levy of
the
surcharge under section 281.
(2)
Subject to the limitation in subsection (1), for the 2008
tax
year a taxpayer may claim a credit against the tax imposed by
this
act equal to 0.296% of the taxpayer's compensation in this
state.
For the 2009 tax year and each tax year after 2009, subject
to
the limitation in subsection (1), a
taxpayer may claim a credit
against the tax imposed by this act equal to 0.370% of the
taxpayer's compensation in this state. For purposes of this
subsection, a taxpayer includes a person subject to the tax imposed
under chapter 2A and a person subject to the tax imposed under
chapter 2B. A professional employer organization shall not include
payments by the professional employer organization to the officers
and employees of a client of the professional employer organization
whose employment operations are managed by the professional
employer organization. A client may include payments by the
professional employer organization to the officers and employees of
the client whose employment operations are managed by the
professional employer organization.
(3)
Subject to the limitation in subsection (1), for the 2008
tax
year a taxpayer may claim a credit against the tax imposed by
this
act equal to 2.32% multiplied by the result of subtracting the
sum
of the amounts calculated under subdivisions (d), (e), and (f)
from
the sum of the amounts calculated under subdivisions (a), (b),
and
(c). Subject to the limitation in
subsection (1), for the 2009
tax
year and each tax year after 2009, a
taxpayer may claim a
credit against the tax imposed by this act equal to 2.9% multiplied
by the result of subtracting the sum of the amounts calculated
under subdivisions (d), (e), and (f) from the sum of the amounts
calculated under subdivisions (a), (b), and (c):
(a) Calculate the cost, including fabrication and
installation, paid or accrued in the taxable year of tangible
assets of a type that are, or under the internal revenue code will
become, eligible for depreciation, amortization, or accelerated
capital cost recovery for federal income tax purposes, provided
that the assets are physically located in this state for use in a
business activity in this state and are not mobile tangible assets.
(b) Calculate the cost, including fabrication and
installation, paid or accrued in the taxable year of mobile
tangible assets of a type that are, or under the internal revenue
code will become, eligible for depreciation, amortization, or
accelerated capital cost recovery for federal income tax purposes.
This amount shall be multiplied by the apportionment factor for the
tax year as prescribed in chapter 3.
(c) For tangible assets, other than mobile tangible assets,
purchased or acquired for use outside of this state in a tax year
beginning after December 31, 2007 and subsequently transferred into
this state and purchased or acquired for use in a business
activity, calculate the federal basis used for determining gain or
loss as of the date the tangible assets were physically located in
this state for use in a business activity plus the cost of
fabrication and installation of the tangible assets in this state.
(d) If the cost of tangible assets described in subdivision
(a) was paid or accrued in a tax year beginning after December 31,
2007, or before December 31, 2007 to the extent the credit is used
and at the rate at which the credit was used under former 1975 PA
228 or this act, calculate the gross proceeds or benefit derived
from the sale or other disposition of the tangible assets minus the
gain, multiplied by the apportionment factor for the taxable year
as prescribed in chapter 3, and plus the loss, multiplied by the
apportionment factor for the taxable year as prescribed in chapter
3 from the sale or other disposition reflected in federal taxable
income and minus the gain from the sale or other disposition added
to the business income tax base in section 201.
(e) If the cost of tangible assets described in subdivision
(b) was paid or accrued in a tax year beginning after December 31,
2007, or before December 31, 2007 to the extent the credit is used
and at the rate at which the credit was used under former 1975 PA
228 or this act, calculate the gross proceeds or benefit derived
from the sale or other disposition of the tangible assets minus the
gain and plus the loss from the sale or other disposition reflected
in federal taxable income and minus the gain from the sale or other
disposition added to the business income tax base in section 201.
This amount shall be multiplied by the apportionment factor for the
tax year as prescribed in chapter 3.
(f) For assets purchased or acquired in a tax year beginning
after December 31, 2007, or before December 31, 2007 to the extent
the credit is used and at the rate at which the credit was used
under former 1975 PA 228 or this act, that were eligible for a
credit under subdivision (a) or (c) and that were transferred out
of this state, calculate the federal basis used for determining
gain or loss as of the date of the transfer.
(4) For a tax year in which the amount of the credit
calculated under subsection (3) is negative, the absolute value of
that amount is added to the taxpayer's tax liability for the tax
year.
(5) A taxpayer that claims a credit under this section is not
prohibited from claiming a credit under section 405. However, the
taxpayer shall not claim a credit under this section and section
405 based on the same costs and expenses.
Sec.
405. For the 2008 tax year, a taxpayer may claim a credit
against
the tax imposed by this act equal to 1.52% of the
taxpayer's
research and development expenses in this state in the
tax
year. For the 2009 tax year and each tax year after 2009, a A
taxpayer may claim a credit against the tax imposed by this act
equal to 1.90% of the taxpayer's research and development expenses
in this state in the tax year. The credit under this section
combined with the total combined credit allowed under section 403
shall
not exceed 65% 75% of the total
tax liability imposed under
this
act. before the imposition and levy of the surcharge
under
section
281. As used in this section,
"research and development
expenses" means that term as defined in section 41(b) of the
internal revenue code.
Sec. 451. (1) An eligible taxpayer may claim a credit against
the
tax imposed by this act equal to the following:
(a)
If a surcharge is imposed and levied under section 281 for
the
same tax year for which the credit is claimed under this
section,
30.5% of the taxpayer's expenses incurred during the tax
year
to comply with 1976 IL 1, MCL 445.571 to 445.576.
(b)
If a surcharge is not imposed and levied under section 281
for
the same tax year for which the credit is claimed under this
section,
25% of the taxpayer's expenses
incurred during the tax
year to comply with 1976 IL 1, MCL 445.571 to 445.576.
(2) If the amount of the credit allowed under this section
exceeds the tax liability of the taxpayer for the tax year, that
excess shall not be refunded and shall not be carried forward as an
offset to the tax liability in subsequent tax years.
(3) As used in this section:
(a) "Beverage container" and "distributor" mean those terms as
defined under 1976 IL 1, MCL 445.571 to 445.576.
(b) "Eligible taxpayer" means a distributor or manufacturer
who originates a deposit on a beverage container in accordance with
1976 IL 1, MCL 445.571 to 445.576.
Sec. 601. (1) For the 2008 fiscal year, except as otherwise
provided under subsection (4), if total net cash payments from the
tax imposed under this act plus any net cash payments from former
1975 PA 228 less any net cash payments made by insurance companies
under
either act exceed the fiscal year 2008 base
$2,398,000,000.00, 60% of that excess shall be refunded in the
immediately succeeding fiscal year as provided in subsection (5)
and the remaining 40% shall be deposited into the countercyclical
budget and economic stabilization fund created in section 351 of
the
management and budget act, 1984 PA 431, MCL 18.1351. To
calculate
the fiscal year 2008 base, multiply $2,619,100,000.00 by
1.0075
and then multiply this product by the United States consumer
price
index for fiscal year 2008 and then divide this product by
the
United States consumer price index for fiscal year 2007.
(2) For the 2009 fiscal year, except as otherwise provided
under subsection (4), if total net cash payments from the tax
imposed under this act, excluding any revenue collected pursuant to
chapter 2A, exceed the fiscal year 2009 base, 60% of that excess
shall be refunded in the immediately succeeding fiscal year as
provided in subsection (5) and the remaining 40% shall be deposited
into the countercyclical budget and economic stabilization fund
created in section 351 of the management and budget act, 1984 PA
431, MCL 18.1351. To calculate the fiscal year 2009 base, multiply
$3,051,500,000.00
by 1.015 and then multiply this product by the
United
States consumer price index
for fiscal year 2009 and then
divide
this product by the United
States consumer price index
for
fiscal
year 2007 $2,398,000,000.00
by 1.01 and then multiply this
product by 2009 fiscal year Michigan personal income divided by
2008 fiscal year Michigan personal income.
(3) For the 2010 fiscal year and each fiscal year after 2010,
except as otherwise provided under subsection (4), if total net
cash payments from the tax imposed under this act, excluding any
revenue collected pursuant to chapter 2A, exceed the fiscal year
base, 60% of that excess shall be refunded in the immediately
succeeding fiscal year as provided in subsection (5) and the
remaining 40% shall be deposited into the countercyclical budget
and economic stabilization fund created in section 351 of the
management and budget act, 1984 PA 431, MCL 18.1351. To calculate
the
2010 fiscal year base, multiply the fiscal year base
for the
immediately
preceding fiscal year by 1.0075 and then multiply this
product
by the United States consumer price index for the fiscal
year
and divide this product by the United States consumer price
index
for the immediately preceding fiscal year $2,398,000,000.00
by 1.0201 and then multiply this product by 2010 fiscal year
personal income divided by 2008 fiscal year Michigan personal
income. To calculate the fiscal year base for each fiscal year
after 2010, multiply the fiscal year base for the immediately
preceding fiscal year by 1.01 and then by a fraction the numerator
of which is fiscal year personal income for the fiscal year for
which the calculation is being performed and the denominator of
which is fiscal year personal income for the fiscal year preceding
the fiscal year for which the calculation is being performed.
(4) If the amount of the total net cash payments collected
from the tax imposed under this act, excluding any revenue
collected pursuant to chapter 2A, exceeds the amount described in
the applicable subsection by less than $5,000,000.00, then all of
that excess shall be deposited into the countercyclical budget and
economic stabilization fund created in section 351 of the
management and budget act, 1984 PA 431, MCL 18.1351.
(5)
For the 2008 fiscal year, the The
refund available under
subsection
(1) subsections (1), (2), and
(3) shall be applied pro
rata to the taxpayers that made positive net cash payments during
the fiscal year. The taxpayer's pro rata share shall be the total
amount to be refunded under subsection (1), (2), or (3) multiplied
by a fraction the numerator of which is the positive net payments
made by the taxpayer during the fiscal year and the denominator of
which is the sum of the positive net cash payments made by all
taxpayers
during the fiscal year. For each fiscal year after the
2008
fiscal year, the refund available under subsection (2) or (3)
shall
be applied pro rata to the taxpayers that claimed 1 or more
credits
under section 403 or 405 during the immediately preceding
fiscal
year. The taxpayer's pro rata share shall be the total
amount
to be refunded under subsection (2) or (3) multiplied by a
fraction
the numerator of which is the credits claimed under
sections
403 and 405 by the taxpayer during the immediately
preceding
fiscal year and the denominator of which is the sum of
the
credits claimed under sections 403 and 405 by all taxpayers
during
the immediately preceding fiscal year.
(6) As used in this section:
(a) "Fiscal year" means the state fiscal year that commences
October 1 and continues through September 30.
(b) "Fiscal year Michigan personal income" means the average
of the 4 quarterly values for the fiscal year, as published by the
United States department of commerce bureau of economic analysis.
Fiscal year personal income is calculated using the personal income
totals published in the December immediately following the end of
the fiscal year.
(c) (b)
"Net cash payments" for
the fiscal year are equal to
cash annual and estimated payments made during the fiscal year less
refunds paid during the fiscal year. Refunds paid under this
section are not used to reduce net cash payments for purposes of
calculating refunds paid out under this section.
(c)
"United States consumer price index" means the United
States
consumer price index for all urban consumers as defined and
reported
by the United States department of labor, bureau of labor
statistics.
Enacting section 1. Section 281 of Michigan business tax act,
2007 PA 36, MCL 208.1281, is repealed effective January 1, 2008.
Enacting section 2. This amendatory act is retroactive and
effective January 1, 2008.