FRONT-LOAD AUTO SUPPLIER MEGA CREDITS

House Bill 4126 (Substitute H-1)

Sponsor:  Rep. Richard LeBlanc

Committee:  Tax Policy

Complete to 3-26-09

A SUMMARY OF HOUSE BILL 4126 AS REPORTED FROM COMMITTEE

House Bill 4126 (H-1) would amend the Michigan Business Tax Act, generally speaking, to allow certain automotive suppliers to take all of their previously granted MEGA credits for future years up front, in a single tax year that ends before January 1, 2011.

Specifically, this applies to suppliers and manufacturers of motor vehicle components, tools and equipment, automotive chemicals, and related products that previously had entered into an agreement for tax credits with the Michigan Economic Growth Authority (MEGA) under Section 8(9) of the Michigan Economic Growth Authority Act and Section 431(1)(e) of the MBT Act.  Section 431(1)(e) applies to credits for the retention of jobs.

The bill specifies that the total amount of credits claimed for all years could not exceed $250 million.

To receive the credit, a firm would have to be "likely to retain the jobs" specified in the original agreement and have to be "likely to retain long term viability in this state as measured by its continuing relation with original equipment manufacturers or, where applicable, tier one automotive suppliers."  A firm could not claim the credit unless MEGA had issue it a certificate, which the business would then attach to MBT annual return.

Under the bill, a taxpayer that claims the credit but subsequently fails to meet statutory requirements or other conditions in the agreement could have its credit reduced or terminated or could have a percentage of a credit previously claimed added back to its tax liability.

Section 8(9) of the Michigan Economic Growth Authority Act authorizes MEGA to enter into a written agreement with a taxpayer to provide the taxpayer with a credit against the MBT, as provided in Section 431(1)(e) of the MBT Act, if the taxpayer agrees to the following conditions:

(1)               Retains at least 50 jobs.

(2)               Invests at a facility - through construction, acquisition, transfer, purchase, contract, or another method as determined by MEGA - equal to at least $50,000 per retained job maintained at the facility.

(3)               Certifies that, without the credits and without new capital investment, the facility is at risk of closing and the work and jobs would be relocated outside of Michigan.

(4)               Certifies that the firm intends to improve its competitiveness through improved management, implementation of "best practices," including lean manufacturing principles, and market diversification.

(5)               Certifies that the firm will work to keep jobs in Michigan when making plant location and closing decisions.

(6)               Certifies that employees of the facility will strive to improve productivity and profitability. 

Section 431(1)(d) of the MBT Act provides a credit equal to the tax rate multiplied by the result of the following expression:

FISCAL IMPACT:

As written, this bill would reduce MBT revenue by not more than $250 million.  All of this reduction would affect General Fund/General Purpose revenue.  This bill would have no direct affect on local units of government. 

POSITIONS:

Detroit Renaissance and the Detroit Regional Chamber of Commerce indicated support for the bill to the House Tax Policy Committee.  (3-25-09

                                                                                           Legislative Analyst:   Mark Wolf

                                                                                                  Fiscal Analyst:   Rebecca Ross

■ This analysis was prepared by nonpartisan House staff for use by House members in their deliberations, and does not constitute an official statement of legislative intent.