Bill Text: MI HB4003 | 2009-2010 | 95th Legislature | Introduced
Bill Title: Michigan business tax; other; small business tax credit; modify. Amends secs. 200, 411, 417 & 505 of 2007 PA 36 (MCL 208.1200 et seq.).
Spectrum: Partisan Bill (Republican 1-0)
Status: (Introduced - Dead) 2009-01-27 - Printed Bill Filed 01/23/2009 [HB4003 Detail]
Download: Michigan-2009-HB4003-Introduced.html
HOUSE BILL No. 4003
January 22, 2009, Introduced by Rep. Calley 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 as
adjusted annually for inflation using the Detroit consumer price
index or 5%, whichever is greater, or more sourced to this state.
(2) For purposes of this section, "actively solicits" shall be
defined by the department through written guidance that shall be
applied prospectively.
(3) As used in this section, "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 as adjusted
annually for inflation using the Detroit consumer price index or
5%, whichever is greater, but less than $700,000.00 as adjusted
annually for inflation using the Detroit consumer price index or
5%, whichever is greater, 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 as adjusted annually for inflation
using the Detroit consumer price index or 5%, whichever is greater,
and the denominator of which is $350,000.00 as adjusted annually
for inflation using the Detroit consumer price index or 5%,
whichever is greater.
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 as adjusted
annually for inflation using the Detroit consumer price index or
5%, whichever is greater, 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 or
5%, whichever is greater, 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 adjusted annually for
inflation using the Detroit consumer price index or 5%, whichever
is greater, 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 as adjusted annually for inflation using
the Detroit consumer price index or 5%, whichever is greater.
(ii) The sum of the following amounts exceeds $180,000.00 as
adjusted annually for inflation using the Detroit consumer price
index or 5%, whichever is greater:
(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 as adjusted annually for inflation using
the Detroit consumer price index or 5%, whichever is greater, but
less than $165,000.00 as adjusted annually for inflation using the
Detroit consumer price index or 5%, whichever is greater, 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 as adjusted annually for inflation using the Detroit
consumer price index or 5%, whichever is greater, or more but less
than $170,000.00 as adjusted annually for inflation using the
Detroit consumer price index or 5%, whichever is greater, 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 as adjusted annually for inflation using the Detroit
consumer price index or 5%, whichever is greater, or more but less
than $175,000.00 as adjusted annually for inflation using the
Detroit consumer price index or 5%, whichever is greater, 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 as adjusted annually for inflation using the Detroit
consumer price index or 5%, whichever is greater, or more but not
in excess of $180,000.00 as adjusted annually for inflation using
the Detroit consumer price index or 5%, whichever is greater, 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).
(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.
(5) If gross receipts exceed $19,000,000.00 as adjusted
annually for inflation using the Detroit consumer price index or
5%, whichever is greater, the credit shall be reduced by a
fraction, the numerator of which is the amount of gross receipts
over $19,000,000.00 as adjusted annually for inflation using the
Detroit consumer price index or 5%, whichever is greater, and the
denominator of which is $1,000,000.00 as adjusted annually for
inflation using the Detroit consumer price index or 5%, whichever
is greater. The credit shall not exceed 100% of the tax liability
imposed under this act.
(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.
(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), and that is not required to reduce the credit
pursuant to subsection (1) or (5), to file and pay the tax imposed
by this act without computing the tax imposed under sections 201
and 203.
(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.
(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 as adjusted annually for inflation using the
Detroit consumer price index or 5%, whichever is greater, 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.
