February 16, 2010, Introduced by Reps. Calley, Amash, Lori, Moss, Opsommer, Green, Hildenbrand, Marleau, Walsh, DeShazor, Kurtz, Scripps, Wayne Schmidt and Pearce and referred to the Committee on Tax Policy.
A bill to amend 2007 PA 36, entitled
"Michigan business tax act,"
by amending sections 200, 411, 417, and 505 (MCL 208.1200,
208.1411, 208.1417, and 208.1505).
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
Sec. 200. (1) Except as otherwise provided in this act or
under subsection (2), a taxpayer has substantial nexus in this
state and is subject to the tax imposed under this act if the
taxpayer has a physical presence in this state for a period of more
than 1 day during the tax year or if the taxpayer actively solicits
sales
in this state and has gross receipts of $350,000.00
$1,000,000.00 or more sourced to this state.
(2)
For purposes of this section: , "actively
(a) "Actively solicits" shall be defined by the department
through written guidance that shall be applied prospectively.
(3)
As used in this section, "physical
(b) "Physical presence" means any activity conducted by the
taxpayer or on behalf of the taxpayer by the taxpayer's employee,
agent, or independent contractor acting in a representative
capacity. Physical presence does not include the activities of
professionals providing services in a professional capacity or
other service providers if the activity is not significantly
associated with the taxpayer's ability to establish and maintain a
market in this state.
Sec. 411. A taxpayer whose gross receipts allocated or
apportioned
to this state are greater than $350,000.00
$1,000,000.00
but less than $700,000.00 $1,500,000.00, may claim a
credit against the tax imposed under this act equal to the tax
liability after the credit under section 417 multiplied by a
fraction the numerator of which is the difference between the
person's
allocated or apportioned gross receipts and $700,000.00
$1,500,000.00
and the denominator of which is $350,000.00
$1,000,000.00.
Sec. 417. (1) The credit provided in this section shall be
taken after the credits under sections 403 and 405 and before any
other credit under this act and is available to any taxpayer with
gross
receipts that do not exceed $20,000,000.00. and with adjusted
business
income minus the loss adjustment that does not exceed
$1,300,000.00
as adjusted annually for inflation using the Detroit
consumer
price index and subject to the following:
(a)
An individual, a partnership, a limited liability company,
or
a subchapter S corporation is disqualified if the individual,
any
1 partner of the partnership, any 1 member of the limited
liability
company, or any 1 shareholder of the subchapter S
corporation
receives more than $180,000.00 as a distributive share
of
the adjusted business income minus the loss adjustment of the
individual,
the partnership, the limited liability company, or the
subchapter
S corporation.
(b)
A corporation other than a subchapter S corporation is
disqualified
if either of the following occur for the respective
tax
year:
(i) Compensation and directors' fees of a shareholder
or
officer
exceed $180,000.00.
(ii) The sum of the following amounts exceeds $180,000.00:
(A)
Compensation and directors' fees of a shareholder.
(B)
The product of the percentage of outstanding ownership or
of
outstanding stock owned by that shareholder multiplied by the
difference
between the sum of business income and, to the extent
deducted
in determining federal taxable income, a carryback or a
carryover
of a net operating loss or capital loss, minus the loss
adjustment.
(c)
Subject to the reduction percentage determined under
subsection
(3), the credit determined under this subsection shall
be
reduced by the following percentages in the following
circumstances:
(i) If an individual, any 1 partner of the
partnership, any 1
member
of the limited liability company, or any 1 shareholder of
the
subchapter S corporation receives as a distributive share of
adjusted
business income minus the loss adjustment of the
individual,
partnership, limited liability company, or subchapter S
corporation;
if compensation and directors' fees of a shareholder
or
officer of a corporation other than a subchapter S corporation
are;
or if the sum of the amounts in subdivision (b)(ii)(A) and (B)
is
more than $160,000.00 but less than $165,000.00, the credit is
reduced
by 20%.
(ii) If an individual, any 1 partner of the
partnership, any 1
member
of the limited liability company, or any 1 shareholder of
the
subchapter S corporation receives as a distributive share of
adjusted
business income minus the loss adjustment of the
individual,
partnership, limited liability company, or subchapter S
corporation;
if compensation and directors' fees of a shareholder
or
officer of a corporation other than a subchapter S corporation
are;
or if the sum of the amounts in subdivision (b)(ii)(A) and (B)
is
$165,000.00 or more but less than $170,000.00, the credit is
reduced
by 40%.
(iii) If an individual, any 1 partner of the
partnership, any 1
member
of the limited liability company, or any 1 shareholder of
the
subchapter S corporation receives as a distributive share of
adjusted
business income minus the loss adjustment of the
individual,
partnership, limited liability company, or subchapter S
corporation;
if compensation and directors' fees of a shareholder
or
officer of a corporation other than a subchapter S corporation
are;
or if the sum of the amounts in subdivision (b)(ii)(A) and (B)
is
$170,000.00 or more but less than $175,000.00, the credit is
reduced
by 60%.
(iv) If an individual, any 1 partner of the
partnership, any 1
member
of the limited liability company, or any 1 shareholder of
the
subchapter S corporation receives as a distributive share of
adjusted
business income minus the loss adjustment of the
individual,
partnership, limited liability company, or subchapter S
corporation;
if compensation and directors' fees of a shareholder
or
officer of a corporation other than a subchapter S corporation
are;
or if the sum of the amounts in subdivision (b)(ii)(A) and (B)
is
$175,000.00 or more but not in excess of $180,000.00, the credit
is
reduced by 80%.
(2)
For the purposes of determining disqualification under
subsection
(1), an active shareholder's share of business income
shall
not be attributed to another active shareholder.
(3)
To determine the reduction percentage under subsection
(1)(c),
the following apply:
(a)
The reduction percentage for a partnership, limited
liability
company, or subchapter S corporation is based on the
distributive
share of adjusted business income minus loss
adjustment
of the partner, member, or shareholder with the greatest
distributive
share of adjusted business income minus loss
adjustment.
(b)
The reduction percentage for a corporation other than a
subchapter
S corporation is the greater of the following:
(i) The reduction percentage based on the compensation
and
directors'
fees of the shareholder or officer with the greatest
amount
of compensation and directors' fees.
(ii) The reduction percentage based on the sum of the
amounts
in
subsection (1)(b)(ii)(A)
and (B) for the shareholder or officer
with
the greatest sum of the amounts in subsection (1)(b)(ii)(A) and
(B).
(2) (4)
A taxpayer that qualifies under
subsection (1) is
allowed a credit against the tax imposed under this act. The credit
under this subsection is the amount by which the tax imposed under
this act exceeds 1.8% of adjusted business income.
(3) (5)
If gross receipts exceed
$19,000,000.00, the credit
shall be reduced by a fraction, the numerator of which is the
amount of gross receipts over $19,000,000.00 and the denominator of
which is $1,000,000.00. The credit shall not exceed 100% of the tax
liability imposed under this act.
(4) (6)
For a taxpayer that reports for a
tax year less than
12 months, the amounts specified in this section for gross
receipts, adjusted business income, and share of business income
shall be multiplied by a fraction, the numerator of which is the
number of months in the tax year and the denominator of which is
12.
(5) (7)
The department shall permit a
taxpayer that elects to
claim the credit allowed under this section based on the amount by
which the tax imposed under this act exceeds the percentage of
adjusted business income for the tax year as determined under
subsection
(4) (2), and that is not required to reduce the credit
pursuant
to subsection (1) or (5) (3), to file and pay the tax
imposed by this act without computing the tax imposed under
sections 201 and 203.
(6) (8)
Compensation paid by the
professional employer
organization to the officers of the client and to employees of the
professional employer organization who are assigned or leased to
and perform services for the client shall be included in
determining eligibility of the client under this section.
(7) (9)
As used in this section:
(a) "Active shareholder" means a shareholder who receives at
least $10,000.00 in compensation, directors' fees, or dividends
from the business, and who owns at least 5% of the outstanding
stock or other ownership interest.
(b) "Adjusted business income" means business income as
defined in section 105 with all of the following adjustments:
(i) Add compensation and directors' fees of active shareholders
of a corporation.
(ii) Add, to the extent deducted in determining federal taxable
income, a carryback or a carryover of a net operating loss.
(iii) Add, to the extent deducted in determining federal taxable
income, a capital loss.
(iv) Add compensation and directors' fees of officers of a
corporation.
(c)
"Detroit consumer price index" means the most
comprehensive
index of consumer prices available for the Detroit
area
from the United States department of labor, bureau of labor
statistics.
(d)
"Loss adjustment" means the amount by which adjusted
business
income was less than zero in any of the 5 tax years
immediately
preceding the tax year for which eligibility for the
credit
under this section is being determined. In determining the
loss
adjustment for a tax year, a taxpayer is not required to use
more
of the taxpayer's total negative adjusted business income than
the
amount needed to qualify the taxpayer for the credit under this
section.
A taxpayer shall not be considered to have used any
portion
of the taxpayer's negative adjusted business income amount
unless
the portion used is necessary to qualify for the credit
under
this section. A taxpayer shall not reuse a negative adjusted
business
income amount used as a loss adjustment in a previous tax
year
or use a negative adjusted business income amount from a year
in
which the taxpayer did not receive the credit under this
section.
Sec. 505. (1) An annual or final return shall be filed with
the department in the form and content prescribed by the department
by the last day of the fourth month after the end of the taxpayer's
tax year. Any final liability shall be remitted with this return. A
taxpayer, other than a taxpayer subject to the tax imposed under
chapter 2A or 2B, whose apportioned or allocated gross receipts are
less
than $350,000.00 $1,000,000.00
does not need to file a return
or pay the tax imposed under this act.
(2) If a taxpayer has apportioned or allocated gross receipts
for a tax year of less than 12 months, the amount in subsection (1)
shall be multiplied by a fraction, the numerator of which is the
number of months in the tax year and the denominator of which is
12.
(3) The department, upon application of the taxpayer and for
good cause shown, may extend the date for filing the annual return.
Interest at the rate under section 23(2) of 1941 PA 122, MCL
205.23, shall be added to the amount of the tax unpaid for the
period of the extension. The treasurer shall require with the
application payment of the estimated tax liability unpaid for the
tax period covered by the extension.
(4) If a taxpayer is granted an extension of time within which
to file the federal income tax return for any tax year, the filing
of a copy of the request for extension together with a tentative
return and payment of an estimated tax with the department by the
due date provided in subsection (1) shall automatically extend the
due date for the filing of an annual or final return under this act
until the last day of the eighth month following the original due
date of the return. Interest at the rate under section 23(2) of
1941 PA 122, MCL 205.23, shall be added to the amount of the tax
unpaid for the period of the extension.