Bill Text: MI HB4091 | 2011-2012 | 96th Legislature | Introduced

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Bill Title: Michigan business tax; tax base; modified gross receipts tax base, business income tax rate, and certain credits; eliminate, increase, and repeal. Amends secs. 111, 113, 200, 201, 207, 239, 301, 411, 417, 501, 503, 505, 507, 511 & 601 of 2007 PA 36 (MCL 208.1111 et seq.) & repeals secs. 203, 403 & 405 of 2007 PA 36 (MCL 208.1203 et seq.).

Spectrum: Partisan Bill (Republican 2-0)

Status: (Introduced - Dead) 2011-01-19 - Printed Bill Filed 01/19/2011 [HB4091 Detail]

Download: Michigan-2011-HB4091-Introduced.html

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HOUSE BILL No. 4091

 

January 18, 2011, Introduced by Reps. Horn and MacMaster and referred to the Committee on Tax Policy.

 

     A bill to amend 2007 PA 36, entitled

 

"Michigan business tax act,"

 

by amending sections 111, 113, 200, 201, 207, 239, 301, 411, 417,

 

501, 503, 505, 507, 511, and 601 (MCL 208.1111, 208.1113, 208.1200,

 

208.1201, 208.1207, 208.1239, 208.1301, 208.1411, 208.1417,

 

208.1501, 208.1503, 208.1505, 208.1507, 208.1511, and 208.1601),

 

section 111 as amended by 2010 PA 133, section 113 as amended by

 

2008 PA 472, section 201 as amended by 2009 PA 135, section 207 as

 

amended by 2008 PA 435, sections 239 and 601 as amended by 2007 PA

 

145, section 501 as amended by 2009 PA 9, and section 503 as

 

amended by 2009 PA 185; and to repeal acts and parts of acts.

 

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

 

     Sec. 111. (1) "Gross receipts" means the entire amount

 

received by the taxpayer as determined by using the taxpayer's

 

method of accounting used for federal income tax purposes, less any

 

amount deducted as bad debt for federal income tax purposes that

 

corresponds to items of gross receipts included in the modified

 

gross receipts tax base for the current tax year or a past tax year

 

phased in over a 5-year period starting with 50% of that amount in

 

the 2008 tax year, 60% in the 2009 tax year, 60% in the 2010 tax

 

year, 75% in the 2011 tax year, and 100% in the 2012 tax year and

 

each tax year thereafter, from any activity whether in intrastate,

 

interstate, or foreign commerce carried on for direct or indirect

 

gain, benefit, or advantage to the taxpayer or to others except for

 

the following:

 

     (a) Proceeds from sales by a principal that the taxpayer

 

collects in an agency capacity solely on behalf of the principal

 

and delivers to the principal.

 

     (b) Amounts received by the taxpayer as an agent solely on

 

behalf of the principal that are expended by the taxpayer for any

 

of the following:

 

     (i) The performance of a service by a third party for the

 

benefit of the principal that is required by law to be performed by

 

a licensed person.

 

     (ii) The performance of a service by a third party for the

 

benefit of the principal that the taxpayer has not undertaken a

 

contractual duty to perform.

 

     (iii) Principal and interest under a mortgage loan or land

 

contract, lease or rental payments, or taxes, utilities, or

 

insurance premiums relating to real or personal property owned or

 

leased by the principal.

 

     (iv) A capital asset of a type that is, or under the internal

 

revenue code will become, eligible for depreciation, amortization,

 

or accelerated cost recovery by the principal for federal income

 

tax purposes, or for real property owned or leased by the

 

principal.

 

     (v) Property not described under subparagraph (iv) that is

 

purchased by the taxpayer on behalf of the principal and that the

 

taxpayer does not take title to or use in the course of performing

 

its contractual business activities.

 

     (vi) Fees, taxes, assessments, levies, fines, penalties, or

 

other payments established by law that are paid to a governmental

 

entity and that are the legal obligation of the principal.

 

     (c) Amounts that are excluded from gross income of a foreign

 

corporation engaged in the international operation of aircraft

 

under section 883(a) of the internal revenue code.

 

     (d) Amounts received by an advertising agency used to acquire

 

advertising media time, space, production, or talent on behalf of

 

another person.

 

     (e) Amounts received by a newspaper to acquire advertising

 

space not owned by that newspaper in another newspaper on behalf of

 

another person. This subdivision does not apply to any

 

consideration received by the taxpayer for acquiring that

 

advertising space.

 

     (f) Notwithstanding any other provision of this section,

 

amounts received by a taxpayer that manages real property owned by

 

a third party that are deposited into a separate account kept in

 

the name of that third party and that are not reimbursements to the

 

taxpayer and are not indirect payments for management services that

 

the taxpayer provides to that third party.

 

     (g) Proceeds from the taxpayer's transfer of an account

 

receivable if the sale that generated the account receivable was

 

included in gross receipts for federal income tax purposes. This

 

subdivision does not apply to a taxpayer that during the tax year

 

both buys and sells any receivables.

 

     (h) Proceeds from any of the following:

 

     (i) The original issue of stock or equity instruments or equity

 

issued by a regulated investment company as that term is defined

 

under section 851 of the internal revenue code.

 

     (ii) The original issue of debt instruments.

 

     (i) Refunds from returned merchandise.

 

     (j) Cash and in-kind discounts.

 

     (k) Trade discounts.

 

     (l) Federal, state, or local tax refunds.

 

     (m) Security deposits.

 

     (n) Payment of the principal portion of loans.

 

     (o) Value of property received in a like-kind exchange.

 

     (p) Proceeds from a sale, transaction, exchange, involuntary

 

conversion, maturity, redemption, repurchase, recapitalization, or

 

other disposition or reorganization of tangible, intangible, or

 

real property, less any gain from the disposition or reorganization

 

to the extent that the gain is included in the taxpayer's federal

 

taxable income, if the property satisfies 1 or more of the

 

following:

 

     (i) The property is a capital asset as defined in section

 

1221(a) of the internal revenue code.

 

     (ii) The property is land that qualifies as property used in

 

the trade or business as defined in section 1231(b) of the internal

 

revenue code.

 

     (iii) The property is used in a hedging transaction entered into

 

by the taxpayer in the normal course of the taxpayer's trade or

 

business primarily to manage the risk of exposure to foreign

 

currency fluctuations that affect assets, liabilities, profits,

 

losses, equity, or investments in foreign operations; interest rate

 

fluctuations; or commodity price fluctuations. For purposes of this

 

subparagraph, the actual transfer of title of real or tangible

 

personal property to another person is not a hedging transaction.

 

Only the overall net gain from the hedging transactions entered

 

into during the tax year is included in gross receipts. As used in

 

this subparagraph, "hedging transaction" means that term as defined

 

under section 1221 of the internal revenue code regardless of

 

whether the transaction was identified by the taxpayer as a hedge

 

for federal income tax purposes, provided, however, that

 

transactions excluded under this subparagraph and not identified as

 

a hedge for federal income tax purposes shall be identifiable to

 

the department by the taxpayer as a hedge in its books and records.

 

     (iv) The property is investment and trading assets managed as

 

part of the person's treasury function. For purposes of this

 

subparagraph, a person principally engaged in the trade or business

 

of purchasing and selling investment and trading assets is not

 

performing a treasury function. Only the overall net gain from the

 

treasury function incurred during the tax year is included in gross

 

receipts. As used in this subparagraph, "treasury function" means

 

the pooling and management of investment and trading assets for the

 

purpose of satisfying the cash flow or liquidity needs of the

 

taxpayer's trade or business.

 

     (q) The proceeds from a policy of insurance, a settlement of a

 

claim, or a judgment in a civil action less any proceeds under this

 

subdivision that are included in federal taxable income.

 

     (r) For a sales finance company, as defined in section 2 of

 

the motor vehicle sales finance act, 1950 (Ex Sess) PA 27, MCL

 

492.102, and directly or indirectly owned in whole or in part by a

 

motor vehicle manufacturer as of January 1, 2008, and for a person

 

that is a broker or dealer as defined under section 78c(a)(4) or

 

(5) of the securities exchange act of 1934, 15 USC 78c, or a person

 

included in the unitary business group of that broker or dealer

 

that buys and sells for its own account, contracts that are subject

 

to the commodity exchange act, 7 USC 1 to 27f, amounts realized

 

from the repayment, maturity, sale, or redemption of the principal

 

of a loan, bond, or mutual fund, certificate of deposit, or similar

 

marketable instrument provided such instruments are not held as

 

inventory.

 

     (s) For a sales finance company, as defined in section 2 of

 

the motor vehicle sales finance act, 1950 (Ex Sess) PA 27, MCL

 

492.102, and directly or indirectly owned in whole or in part by a

 

motor vehicle manufacturer as of January 1, 2008, and for a person

 

that is a broker or dealer as defined under section 78c(a)(4) or

 

(5) of the securities exchange act of 1934, 15 USC 78c, or a person

 

included in the unitary business group of that broker or dealer

 

that buys and sells for its own account, contracts that are subject

 

to the commodity exchange act, 7 USC 1 to 27f, the principal amount

 

received under a repurchase agreement or other transaction properly

 

characterized as a loan.

 

     (t) For a mortgage company, proceeds representing the

 

principal balance of loans transferred or sold in the tax year. For

 

purposes of this subdivision, "mortgage company" means a person

 

that is licensed under the mortgage brokers, lenders, and servicers

 

licensing act, 1987 PA 173, MCL 445.1651 to 445.1684, or the

 

secondary mortgage loan act, 1981 PA 125, MCL 493.51 to 493.81, and

 

has greater than 90% of its revenues, in the ordinary course of

 

business, from the origination, sale, or servicing of residential

 

mortgage loans.

 

     (u) For a professional employer organization, any amount

 

charged by a professional employer organization that represents the

 

actual cost of wages and salaries, benefits, worker's compensation,

 

payroll taxes, withholding, or other assessments paid to or on

 

behalf of a covered employee by the professional employer

 

organization under a professional employer arrangement.

 

     (v) Any invoiced items used to provide more favorable floor

 

plan assistance to a person subject to the tax imposed under this

 

act than to a person not subject to this tax and paid by a

 

manufacturer, distributor, or supplier.

 

     (w) For an individual, estate, or other person organized for

 

estate or gift planning purposes, amounts received other than those

 

from transactions, activities, and sources in the regular course of

 

the taxpayer's trade or business. For purposes of this subdivision,

 

all of the following apply:

 

     (i) Amounts received from transactions, activities, and sources

 

in the regular course of the taxpayer's business include, but are

 

not limited to, the following:

 

     (A) Receipts from tangible and intangible property if the

 

acquisition, rental, lease, management, or disposition of the

 

property constitutes integral parts of the taxpayer's regular trade

 

or business operations.

 

     (B) Receipts received in the course of the taxpayer's trade or

 

business from stock and securities of any foreign or domestic

 

corporation and dividend and interest income.

 

     (C) Receipts derived from isolated sales, leases, assignments,

 

licenses, divisions, or other infrequently occurring dispositions,

 

transfers, or transactions involving tangible, intangible, or real

 

property if the property is or was used in the taxpayer's trade or

 

business operation.

 

     (D) Receipts derived from the sale of an interest in a

 

business that constitutes an integral part of the taxpayer's

 

regular trade or business.

 

     (E) Receipts derived from the lease or rental of real

 

property.

 

     (ii) Receipts excluded from gross receipts include, but are not

 

limited to, the following:

 

     (A) Receipts derived from investment activity, including

 

interest, dividends, royalties, and gains from an investment

 

portfolio or retirement account, if the investment activity is not

 

part of the taxpayer's trade or business.

 

     (B) Receipts derived from the disposition of tangible,

 

intangible, or real property held for personal use and enjoyment,

 

such as a personal residence or personal assets.

 

     (x) Receipts derived from investment activity by a person that

 

is organized exclusively to conduct investment activity and that

 

does not conduct investment activity for any person other than an

 

individual or a person related to that individual or by a common

 

trust fund established under the collective investment funds act,

 

1941 PA 174, MCL 555.101 to 555.113. For purposes of this

 

subdivision, a person is related to an individual if that person is

 

a spouse, brother or sister, whether of the whole or half blood or

 

by adoption, ancestor, lineal descendent of that individual or

 

related person, or a trust benefiting that individual or 1 or more

 

persons related to that individual.

 

     (y) Interest income and dividends derived from obligations or

 

securities of the United States government, this state, or any

 

governmental unit of this state. As used in this subdivision,

 

"governmental unit" means that term as defined in section 3 of the

 

shared credit rating act, 1985 PA 227, MCL 141.1053.

 

     (z) Dividends and royalties received or deemed received from a

 

foreign operating entity or a person other than a United States

 

person, including, but not limited to, the amounts determined under

 

section 78 of the internal revenue code and sections 951 to 964 of

 

the internal revenue code, phased in over a 5-year period starting

 

with 50% of that amount in the 2008 tax year, 60% in the 2009 tax

 

year, 60% in the 2010 tax year, 75% in the 2011 tax year, and 100%

 

in the 2012 tax year and each tax year thereafter.

 

     (aa) To the extent not deducted as purchases from other firms

 

under section 203, each of the following:

 

     (i) Sales or use taxes collected from or reimbursed by a

 

consumer or other taxes the taxpayer collected directly from or was

 

reimbursed by a purchaser and remitted to a local, state, or

 

federal tax authority, phased in over a 5-year period starting with

 

50% of that amount in the 2008 tax year, 60% in the 2009 tax year,

 

60% in the 2010 tax year, 75% in the 2011 tax year, and 100% in the

 

2012 tax year and each tax year thereafter.

 

     (ii) In the case of receipts from the sale of cigarettes or

 

tobacco products by a wholesale dealer, retail dealer, distributor,

 

manufacturer, or seller, an amount equal to the federal and state

 

excise taxes paid by any person on or for such cigarettes or

 

tobacco products under subtitle E of the internal revenue code or

 

other applicable state law, phased in over a 3-year period starting

 

with 60% of that amount in the 2008 tax year, 75% in the 2009 tax

 

year, and 100% in the 2010 tax year and each tax year thereafter.

 

     (iii) In the case of receipts from the sale of motor fuel by a

 

person with a motor fuel tax license or a retail dealer, an amount

 

equal to federal and state excise taxes paid by any person on such

 

motor fuel under section 4081 of the internal revenue code or under

 

other applicable state law, phased in over a 5-year period starting

 

with 50% of that amount in the 2008 tax year, 60% in the 2009 tax

 

year, 60% in the 2010 tax year, 75% in the 2011 tax year, and 100%

 

in the 2012 tax year and each tax year thereafter.

 

     (iv) In the case of receipts from the sale of beer, wine, or

 

intoxicating liquor by a person holding a license to sell,

 

distribute, or produce those products, an amount equal to federal

 

and state excise taxes paid by any person on or for such beer,

 

wine, or intoxicating liquor under subtitle E of the internal

 

revenue code or other applicable state law, phased in over a 5-year

 

period starting with 50% of that amount in the 2008 tax year, 60%

 

in the 2009 tax year, 60% in the 2010 tax year, 75% in the 2011 tax

 

year, and 100% in the 2012 tax year and each tax year thereafter.

 

     (v) In the case of receipts from the sale of communication,

 

video, internet access and related services and equipment, any

 

government imposed tax, fee, or other imposition in the nature of a

 

tax or fee required by law, ordinance, regulation, ruling, or other

 

legal authority and authorized to be charged on a customer's bill

 

or invoice, phased in over a 5-year period starting with 50% of

 

that amount in the 2008 tax year, 60% in the 2009 tax year, 60% in

 

the 2010 tax year, 75% in the 2011 tax year, and 100% in the 2012

 

tax year and each tax year thereafter. This subparagraph does not

 

include the recovery of net income taxes, net worth taxes, property

 

taxes, or the tax imposed under this act.

 

     (vi) In the case of receipts from the sale of electricity,

 

natural gas, or other energy source, any government imposed tax,

 

fee, or other imposition in the nature of a tax or fee required by

 

law, ordinance, regulation, ruling, or other legal authority and

 

authorized to be charged on a customer's bill or invoice, phased in

 

over a 5-year period starting with 50% of that amount in the 2008

 

tax year, 60% in the 2009 tax year, 60% in the 2010 tax year, 75%

 

in the 2011 tax year, and 100% in the 2012 tax year and each tax

 

year thereafter. This subparagraph does not include the recovery of

 

net income taxes, net worth taxes, property taxes, or the tax

 

imposed under this act.

 

     (vii) Any deposit required under any of the following, phased

 

in over a 5-year period starting with 50% of that amount in the

 

2008 tax year, 60% in the 2009 tax year, 60% in the 2010 tax year,

 

75% in the 2011 tax year, and 100% in the 2012 tax year and each

 

tax year thereafter:

 

     (A) 1976 IL 1, MCL 445.571 to 445.576.

 

     (B) R 436.1629 of the Michigan administrative code.

 

     (C) R 436.1723a of the Michigan administrative code.

 

     (D) Any substantially similar beverage container deposit law

 

of another state.

 

     (viii) An excise tax collected pursuant to the airport parking

 

tax act, 1987 PA 248, MCL 207.371 to 207.383, collected from or

 

reimbursed by a consumer and remitted as provided in the airport

 

parking tax act, 1987 PA 248, MCL 207.371 to 207.383, phased in

 

over a 5-year period starting with 50% of that amount in the 2008

 

tax year, 60% in the 2009 tax year, 60% in the 2010 tax year, 75%

 

in the 2011 tax year, and 100% in the 2012 tax year and each tax

 

year thereafter.

 

     (bb) Amounts attributable to an ownership interest in a pass-

 

through entity, regulated investment company, real estate

 

investment trust, or cooperative corporation whose business

 

activities are taxable under section 203 or would be subject to the

 

tax under section 203 if the business activities were in this

 

state. For purposes of this subdivision:

 

     (i) "Cooperative corporation" means those organizations

 

described under subchapter T of the internal revenue code.

 

     (ii) "Pass-through" entity means a partnership, subchapter S

 

corporation, or other person, other than an individual, that is not

 

classified for federal income tax purposes as an association taxed

 

as a corporation.

 

     (iii) "Real estate investment trust" means that term as defined

 

under section 856 of the internal revenue code.

 

     (iv) "Regulated investment company" means that term as defined

 

under section 851 of the internal revenue code.

 

     (cc) For a regulated investment company as that term is

 

defined under section 851 of the internal revenue code, receipts

 

derived from investment activity by that regulated investment

 

company.

 

     (dd) For fiscal years that begin after September 30, 2009,

 

unless the state budget director certifies to the state treasurer

 

by January 1 of that fiscal year that the federally certified rates

 

for actuarial soundness required under 42 CFR 438.6 and that are

 

specifically developed for Michigan's health maintenance

 

organizations that hold a contract with this state for medicaid

 

services provide explicit adjustment for their obligations required

 

for payment of the tax under this act, amounts received by the

 

taxpayer during that fiscal year for medicaid premium or

 

reimbursement of costs associated with service provided to a

 

medicaid recipient or beneficiary.

 

     (ee) For a taxpayer that provides health care management

 

consulting services, amounts received by the taxpayer as fees from

 

its clients that are expended by the taxpayer to reimburse those

 

clients for labor and nonlabor services that are paid by the client

 

and reimbursed to the client pursuant to a services agreement.

 

     (1) (2) "Insurance company" means an authorized insurer as

 

defined in section sections 106 and 108 of the insurance code of

 

1956, 1956 PA 218, MCL 500.106 and 500.108.

 

     (2) (3) "Internal revenue code" means the United States

 

internal revenue code of 1986 in effect on January 1, 2008 or, at

 

the option of the taxpayer, in effect for the tax year.

 

     (4) "Inventory" means, except as provided in subdivision (e),

 

all of the following:

 

     (a) The stock of goods held for resale in the regular course

 

of trade of a retail or wholesale business, including electricity

 

or natural gas purchased for resale.

 

     (b) Finished goods, goods in process, and raw materials of a

 

manufacturing business purchased from another person.

 

     (c) For a person that is a new motor vehicle dealer licensed

 

under the Michigan vehicle code, 1949 PA 300, MCL 257.1 to 257.923,

 

floor plan interest expenses for new motor vehicles. For purposes

 

of this subdivision, "floor plan interest" means interest paid that

 

finances any part of the person's purchase of new motor vehicle

 

inventory from a manufacturer, distributor, or supplier. However,

 

amounts attributable to any invoiced items used to provide more

 

favorable floor plan assistance to a person subject to the tax

 

imposed under this act than to a person not subject to this tax is

 

considered interest paid by a manufacturer, distributor, or

 

supplier.

 

     (d) For a person that is a securities trader, broker, or

 

dealer or a person included in the unitary business group of that

 

securities trader, broker, or dealer that buys and sells for its

 

own account, contracts that are subject to the commodity exchange

 

act, 7 USC 1 to 27f, the cost of securities as defined under

 

section 475(c)(2) of the internal revenue code and for a securities

 

trader the cost of commodities as defined under section 475(e)(2)

 

and for a broker or dealer the cost of commodities as defined under

 

section 475(e)(2)(b), (c), and (d) of the internal revenue code,

 

excluding interest expense other than interest expense related to

 

repurchase agreements. As used in this subdivision:

 

     (i) "Broker" means that term as defined under section 78c(a)(4)

 

of the securities exchange act of 1934, 15 USC 78c.

 

     (ii) "Dealer" means that term as defined under section

 

78c(a)(5) of the securities exchange act of 1934, 15 USC 78c.

 

     (iii) "Securities trader" means a person that engages in the

 

trade or business of purchasing and selling investments and trading

 

assets.

 

     (e) Inventory does not include either of the following:

 

     (i) Personal property under lease or principally intended for

 

lease rather than sale.

 

     (ii) Property allowed a deduction or allowance for depreciation

 

or depletion under the internal revenue code.

 

     (3) (5) "Officer" means an officer of a corporation other than

 

a subchapter S corporation, including all of the following:

 

     (a) The chairperson of the board.

 

     (b) The president, vice president, secretary, or treasurer of

 

the corporation or board.

 

     (c) Persons performing similar duties to persons described in

 

subdivisions (a) and (b).

 

     Sec. 113. (1) "Partner" means a partner or member of a

 

partnership.

 

     (2) "Partnership" means a taxpayer that is required to or has

 

elected to file as a partnership for federal income tax purposes.

 

     (3) "Person" means an individual, firm, bank, financial

 

institution, insurance company, limited partnership, limited

 

liability partnership, copartnership, partnership, joint venture,

 

association, corporation, subchapter S corporation, limited

 

liability company, receiver, estate, trust, or any other group or

 

combination of groups acting as a unit.

 

     (4) "Professional employer organization" means an organization

 

that provides the management and administration of the human

 

resources of another entity by contractually assuming substantial

 

employer rights and responsibilities through a professional

 

employer agreement that establishes an employer relationship with

 

the leased officers or employees assigned to the other entity by

 

doing all of the following:

 

     (a) Maintaining a right of direction and control of employees'

 

work, although this responsibility may be shared with the other

 

entity.

 

     (b) Paying wages and employment taxes of the employees out of

 

its own accounts.

 

     (c) Reporting, collecting, and depositing state and federal

 

employment taxes for the employees.

 

     (d) Retaining a right to hire and fire employees.

 

     (5) Professional employer organization is not a staffing

 

company as that term is defined in subsection (6).

 

     (6) "Purchases from other firms" means all of the following:

 

     (a) Inventory acquired during the tax year, including freight,

 

shipping, delivery, or engineering charges included in the original

 

contract price for that inventory.

 

     (b) Assets, including the costs of fabrication and

 

installation, acquired during the tax year 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.

 

     (c) To the extent not included in inventory or depreciable

 

property, materials and supplies, including repair parts and fuel.

 

     (d) For a staffing company, compensation of personnel supplied

 

to customers of staffing companies. As used in this subdivision:

 

     (i) "Compensation" means that term as defined under section 107

 

plus all payroll tax and worker's compensation costs.

 

     (ii) "Staffing company" means a taxpayer whose business

 

activities are included in industry group 736 under the standard

 

industrial classification code as compiled by the United States

 

department of labor.

 

     (e) For a person included in major group 15, 16, or 17 under

 

the standard industrial classification code as compiled by the

 

United States department of labor that does not qualify for a

 

credit under section 417, both of the following:

 

     (i) Payments to subcontractors for a construction project under

 

a contract specific to that project.

 

     (ii) To the extent not deducted under subdivisions (a) and (c),

 

payments for materials deducted as purchases in determining the

 

cost of goods sold for the purpose of calculating total income on

 

the taxpayer's federal income tax return.

 

     (f) For the 2008 tax year and each tax year after 2008, all

 

film rental or royalty payments paid by a theater owner to a film

 

distributor, a film producer, or a film distributor and producer.

 

     (g) For a taxpayer licensed under article 25 or 26 of the

 

occupational code, 1980 PA 299, MCL 339.2501 to 339.2518 and

 

339.2601 to 339.2637, payments to an independent contractor

 

licensed under article 25 or 26 of the occupational code, 1980 PA

 

299, MCL 339.2501 to 339.2518 and 339.2601 to 339.2637.

 

     (5) (7) "Revenue mile" means the transportation for a

 

consideration of 1 net ton in weight or 1 passenger the distance of

 

1 mile.

 

     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 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. 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%.following rates:

 

     (a) For tax years ending after December 31, 2007 and before

 

January 1, 2012, 4.95%.

 

     (b) For tax years ending after December 31, 2011, 6.0%.

 

     (2) The business income tax base means a taxpayer's business

 

income subject to the following adjustments, before allocation or

 

apportionment, and the adjustments in subsections (5), (6), and (7)

 

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.

 

     (iv) The related person recipient of the transaction is

 

organized under the laws of a foreign nation which has in force a

 

comprehensive income tax treaty with the United States.

 

     (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%.

 

     (j) For tax years that begin after December 31, 2009, to the

 

extent included in federal taxable income, deduct the amount of a

 

charitable contribution made to the advance tuition payment fund

 

created under section 9 of the Michigan education trust act, 1986

 

PA 316, MCL 390.1429.

 

     (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.

 

     (6) Deduct any gain from the sale of any residential rental

 

units in this state to a qualified affordable housing project that

 

enters an agreement to operate the residential rental units as rent

 

restricted units for a minimum of 15 years. If the qualified

 

affordable housing project does not agree to operate all of the

 

residential rental units as rent restricted units, the deduction

 

under this subsection is limited to an amount equal to the gain

 

from the sale multiplied by a fraction, the numerator of which is

 

the number of those residential rental units purchased that are to

 

be operated as a rent restricted unit and the denominator is the

 

number of all residential rental units purchased. In order to claim

 

this deduction, the department may require the taxpayer and the

 

qualified affordable housing project to report the amount of this

 

deduction on a form as prescribed by the department that is to be

 

signed by both the taxpayer and the qualified affordable housing

 

project and filed with the taxpayer's annual return. The department

 

shall record a lien against the property subject to the operation

 

agreement for the total amount of the deduction allowed under this

 

subsection. The department shall notify the qualified affordable

 

housing project of the maximum amount of the lien that the

 

qualified affordable housing project may be liable for if the

 

qualified affordable housing project fails to qualify and operate

 

as provided in the operation agreement within 15 years after the

 

purchase. The lien shall become payable in an amount as provided

 

under this subsection to the state by the qualified affordable

 

housing project if the qualified affordable housing project fails

 

to qualify as a qualified affordable housing project and fails to

 

operate all or some of the residential rental units as rent

 

restricted units in accordance with the operation agreement entered

 

upon the purchase of those units within 15 years after the

 

deduction is claimed by a taxpayer under this subsection. An amount

 

equal to the product of 100% of the amount of the deduction allowed

 

under this subsection multiplied by a fraction, the numerator of

 

which is the difference between 15 and the number of years the

 

affordable housing project qualified and operated rent restricted

 

units in accordance with the agreement and the denominator is 15,

 

shall be added back to the tax liability of the qualified

 

affordable housing project for the tax year that the qualified

 

affordable housing project fails to comply with the agreement.

 

     (7) Subject to the limitations provided in this subsection,

 

for a person that is a qualified affordable housing project, deduct

 

an amount equal to the product of that person's taxable income that

 

is attributable to residential rental units in this state owned by

 

the qualified affordable housing project multiplied by a fraction,

 

the numerator of which is the number of rent restricted units in

 

this state owned by that qualified affordable housing project and

 

the denominator of which is the number of all residential rental

 

units in this state owned by the qualified affordable housing

 

project. The amount of the deduction calculated under this

 

subsection shall be reduced by the amount of limited dividends or

 

other distributions made to the partners, members, or shareholders

 

of the qualified affordable housing project. Taxable income that is

 

attributable to residential rental units does not include income

 

received by the management, construction, or development company

 

for completion and operation of the project and those rental units.

 

     (8) If a qualified affordable housing project no longer meets

 

the requirements of subsection (9)(b) or fails to operate those

 

residential rental units as rent restricted units in accordance

 

with the operation agreement and the requirements of subsection

 

(9)(c), the taxpayer is entitled to the deductions under

 

subsections (6) and (7) as long as the qualified affordable housing

 

project continues to offer some of the residential rental units

 

purchased as rent restricted units in accordance with the operation

 

agreement.

 

     (9) For purposes of subsections (6), (7), and (8) and this

 

subsection:

 

     (a) "Limited dividend housing association" means a limited

 

dividend housing association, corporation, or cooperative organized

 

and qualified pursuant to chapter 7 of the state housing

 

development authority act of 1966, 1966 PA 346, MCL 125.1491 to

 

125.1496.

 

     (b) "Qualified affordable housing project" means a person that

 

is organized, qualified, and operated as a limited dividend housing

 

association that has a limitation on the amount of dividends or

 

other distributions that may be distributed to its owners in any

 

given year and has received funding, subsidies, grants, operating

 

support, or construction or permanent funding through 1 or more of

 

the following sources and programs:

 

     (i) Mortgage or other financing provided by the Michigan state

 

housing development authority created in section 21 of the state

 

housing development authority act of 1966, 1966 PA 346, MCL

 

125.1421, the United States department of housing and urban

 

development, the United States department of agriculture for rural

 

housing service, the Michigan interfaith housing trust fund,

 

Michigan housing and community development fund, federal home loan

 

bank, housing commission loan, community development financial

 

institution, or mortgage or other funding or guaranteed by Fannie,

 

Ginnie, federal housing association, United States department of

 

agriculture, or federal home loan mortgage corporation.

 

     (ii) A tax-exempt bond issued by a nonprofit organization,

 

local governmental unit, or other authority.

 

     (iii) A payment in lieu of tax agreement or other tax abatement.

 

     (iv) Funding from the state or a local governmental unit

 

through a HOME investments partnership program authorized under 42

 

USC 12741 to 12756.

 

     (v) A grant or other funding from a federal home loan bank's

 

affordable housing program.

 

     (vi) Financing or funding under the new markets tax credit

 

program under section 45D of the internal revenue code.

 

     (vii) Financed in whole or in part under the United States

 

department of housing and urban development's hope VI program as

 

authorized by section 803 of the national affordable housing act,

 

42 USC 8012.

 

     (viii) Financed in whole or in part under the United States

 

department of housing and urban development's section 202 program

 

authorized by section 202 of the national housing act, 12 USC

 

1701q.

 

     (ix) Financing or funding under the low-income housing tax

 

credit program under section 42 of the internal revenue code.

 

     (x) Financing or other subsidies from any new programs similar

 

to any of the above.

 

     (c) "Rent restricted unit" means any residential rental unit's

 

rental income is restricted in accordance with section 42(g)(1) of

 

the internal revenue code as if it was a qualified low-income

 

housing project, or receives rental assistance in the form of HUD

 

section 8 subsidies or HUD housing assistance program subsidies, or

 

rental assistance from the United States department of agriculture

 

rural housing programs, or from any of the other programs described

 

under subdivision (b).

 

     Sec. 207. (1) Except as otherwise provided in this section,

 

the following are exempt from the tax imposed by this act:

 

     (a) The United States, this state, other states, and the

 

agencies, political subdivisions, and enterprises of the United

 

States, this state, and other states, including any grantor trust

 

established by a municipality with the municipality as the grantor

 

and exempt from federal income tax under the internal revenue code.

 

     (b) A person who is exempt from federal income tax under the

 

internal revenue code, and a partnership, limited liability

 

company, joint venture, general partnership, limited partnership,

 

unincorporated association, or other group or combination of

 

entities acting as a unit if the activities of the entity are

 

exclusively related to the charitable, educational, or other

 

purpose or function that is the basis for the exemption under the

 

internal revenue code from federal income taxation of the partners

 

or members and if all of the partners or members of the entity are

 

exempt from federal income tax under the internal revenue code,

 

except the following:

 

     (i) An organization included under section 501(c)(12) or

 

501(c)(16) of the internal revenue code.

 

     (ii) An organization exempt under section 501(c)(4) of the

 

internal revenue code that would be exempt under section 501(c)(12)

 

of the internal revenue code except that it failed to meet the

 

requirements in section 501(c)(12) that 85% or more of its income

 

consist of amounts collected from members.

 

     (iii) The tax base attributable to the activities giving rise to

 

the unrelated taxable business income of an exempt person.

 

     (c) A nonprofit cooperative housing corporation. As used in

 

this subdivision, "nonprofit cooperative housing corporation" means

 

a cooperative housing corporation that is engaged in providing

 

housing services to its stockholders and members and that does not

 

pay dividends or interest on stock or membership investment but

 

that does distribute all earnings to its stockholders or members.

 

The exemption under this subdivision does not apply to a business

 

activity of a nonprofit cooperative housing corporation other than

 

providing housing services to its stockholders and members.

 

     (d) That portion of the tax base attributable to the

 

production of agricultural goods by a person whose primary activity

 

is the production of agricultural goods. "Production of

 

agricultural goods" means commercial farming, including, but not

 

limited to, cultivation of the soil; growing and harvesting of an

 

agricultural, horticultural, or floricultural commodity; dairying;

 

raising of livestock, bees, fish, fur-bearing animals, or poultry;

 

or turf or tree farming, but does not include the marketing at

 

retail of agricultural goods except for sales of nursery stock

 

grown by the seller and sold to a nursery dealer licensed under

 

section 9 of the insect pest and plant disease act, 1931 PA 189,

 

MCL 286.209.

 

     (e) Except as provided in subsection (2), a farmers'

 

cooperative corporation organized within the limitations of section

 

98 of 1931 PA 327, MCL 450.98, that was at any time exempt under

 

subdivision (b) because the corporation was exempt from federal

 

income taxes under section 521 of the internal revenue code and

 

that would continue to be exempt under section 521 of the internal

 

revenue code except for either of the following activities:

 

     (i) The corporation's repurchase from nonproducer customers of

 

portions or components of commodities the corporation markets to

 

those nonproducer customers and the corporation's subsequent

 

manufacturing or marketing of the repurchased portions or

 

components of the commodities.

 

     (ii) The corporation's incidental or emergency purchases of

 

commodities from nonproducers to facilitate the manufacturing or

 

marketing of commodities purchased from producers.

 

     (f) That portion of the tax base attributable to the direct

 

and indirect marketing activities of a farmers' cooperative

 

corporation organized within the limitations of section 98 of 1931

 

PA 327, MCL 450.98, if those marketing activities are provided on

 

behalf of the members of that corporation and are related to the

 

members' direct sales of their products to third parties or, for

 

livestock, are related to the members' direct or indirect sales of

 

that product to third parties. Marketing activities for a product

 

that is not livestock are not exempt under this subdivision if the

 

farmers' cooperative corporation takes physical possession of the

 

product. As used in this subdivision, "marketing activities" means

 

activities that include, but are not limited to, all of the

 

following:

 

     (i) Activities under the agricultural commodities marketing

 

act, 1965 PA 232, MCL 290.651 to 290.674, and the agricultural

 

marketing and bargaining act, 1972 PA 344, MCL 290.701 to 290.726.

 

     (ii) Dissemination of market information.

 

     (iii) Establishment of price and other terms of trade.

 

     (iv) Promotion.

 

     (v) Research relating to members' products.

 

     (g) That portion of the tax base attributable to the services

 

provided by an attorney-in-fact to a reciprocal insurer pursuant to

 

chapter 72 of the insurance code of 1956, 1956 PA 218, MCL 500.7200

 

to 500.7234.

 

     (h) That portion of the tax base attributable to a multiple

 

employer welfare arrangement that provides dental benefits only and

 

that has a certificate of authority under chapter 70 of the

 

insurance code of 1956, 1956 PA 218, MCL 500.7001 to 500.7090.

 

     (i) A foreign person is not subject to taxation under this act

 

if the foreign person is domiciled in a subnational jurisdiction

 

that does not impose an income tax on a similarly situated person

 

domiciled in this state whose presence in the foreign country is

 

the same as the foreign person's presence in the United States. If

 

a foreign person is domiciled in a subnational jurisdiction that

 

does not impose an income tax on businesses, but instead imposes

 

some other type of subnational business tax, that foreign person is

 

not subject to taxation under this act if that subnational business

 

tax is not imposed on a similarly situated person domiciled in this

 

state whose presence in the foreign country is the same as the

 

foreign person's presence in the United States.

 

     (2) Subsection (1)(e) does not exempt a farmers' cooperative

 

corporation if the total dollar value of the farmers' cooperative

 

corporation's incidental and emergency purchases described in

 

subsection (1)(e)(ii) are equal to or greater than 5% of the

 

corporation's total purchases.

 

     (3) Except as otherwise provided in this section, a farmers'

 

cooperative corporation that is structured to allocate net earnings

 

in the form of patronage dividends as defined in section 1388 of

 

the internal revenue code to its farmer or farmer cooperative

 

corporation patrons shall exclude from its adjusted tax base the

 

revenue and expenses attributable to business transacted with its

 

farmer or farmer cooperative corporation patrons.

 

     (4) Notwithstanding any other provision of this act to the

 

contrary, a foreign person subject to tax under this act shall

 

calculate its business income tax base and modified gross receipts

 

tax base under this section. Except as otherwise provided in this

 

section, the business income tax base and modified gross receipts

 

tax base of a foreign person is subject to all adjustments and

 

other provisions of this act. However, neither the business income

 

tax base nor the modified gross receipts tax base shall not include

 

proceeds from sales where title passes outside the United States.

 

     (5) Except as otherwise provided in this section, the modified

 

gross receipts tax base of a foreign person includes the sum of

 

gross receipts and the adjustments under section 203 that are

 

related to United States business activity.

 

     (5) (6) Except as otherwise provided in this section, the

 

business income tax base of a foreign person includes the sum of

 

business income and the adjustments under section 201 that are

 

related to United States business activity.

 

     (6) (7) The sales factor for a foreign person is a fraction,

 

the numerator of which is the taxpayer's total sales in this state

 

where title passes inside the United States during the tax year and

 

the denominator of which is the taxpayer's total sales in the

 

United States where title passes inside the United States during

 

the tax year.

 

     (7) (8) As used in this section:

 

     (a) "Business income" means, for a foreign person, gross

 

income attributable to the taxpayer's United States business

 

activity and gross income derived from sources within the United

 

States minus the deductions allowed under the internal revenue code

 

that are related to that gross income. Gross income includes the

 

proceeds from sales shipped or delivered to any purchaser within

 

the United States and for which title transfers within the United

 

States; proceeds from services performed within the United States;

 

and a pro rata proportion of the proceeds from services performed

 

both within and outside the United States to the extent the

 

recipient receives benefit of the services within the United

 

States.

 

     (b) "Domiciled" means the location of the headquarters of the

 

trade or business from which the trade or business of the foreign

 

person is principally managed and directed.

 

     (c) For subsection (1)(b), "exclusively" means that term as

 

applied for purposes of section 501(c)(3) of the internal revenue

 

code.

 

     (d) "Foreign person" means either of the following:

 

     (i) An individual who is not a United States resident, whether

 

or not the individual is subject to taxation under the internal

 

revenue code.

 

     (ii) A person formed under the laws of a foreign country or a

 

political subdivision of a foreign country, whether or not the

 

person is subject to taxation under the internal revenue code.

 

     (e) "Gross receipts" means, for a foreign person, gross

 

receipts as defined in section 111(1) from United States business

 

activity or from sources within the United States. Gross receipts

 

include all sales for which title transfers within the United

 

States; proceeds from all services performed within the United

 

States; and a pro rata portion of proceeds from services performed

 

both within and outside of the United States to the extent the

 

recipient receives benefit of the services within the United

 

States.

 

     Sec. 239. (1) An insurance company shall be allowed a credit

 

against the tax imposed under this chapter in an amount equal to

 

50% of the examination fees paid by the insurance company during

 

the tax year pursuant to section 224 of the insurance code of 1956,

 

1956 PA 218, MCL 500.224.

 

     (2) An insurance company may claim a credit against the tax

 

imposed under this act as provided under section 403(2), not to

 

exceed 65% of the insurance company's tax liability for the tax

 

year after claiming the other credits allowed by this chapter.

 

     Sec. 301. (1) Except as otherwise provided in this act, each

 

the tax base established under this act shall be apportioned in

 

accordance with this chapter.

 

     (2) Each The tax base of a taxpayer whose business activities

 

are confined solely to this state shall be allocated to this state.

 

Each The tax base of a taxpayer whose business activities are

 

subject to tax both within and outside of this state shall be

 

apportioned to this state by multiplying each the tax base by the

 

sales factor calculated under section 303.

 

     (3) A taxpayer whose business activities are subject to tax

 

both within and outside of this state is subject to tax in another

 

state in either of the following circumstances:

 

     (a) The taxpayer is subject to a business privilege tax, a net

 

income tax, a franchise tax measured by net income, a franchise tax

 

for the privilege of doing business, or a corporate stock tax or a

 

tax of the type imposed under this act in that state.

 

     (b) That state has jurisdiction to subject the taxpayer to 1

 

or more of the taxes listed in subdivision (a) regardless of

 

whether that state does or does not subject the taxpayer to that

 

tax.

 

     Sec. 411. A taxpayer whose gross receipts sales allocated or

 

apportioned to this state are greater than $350,000.00 but less

 

than $700,000.00, 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 sales and $700,000.00 and the denominator of which is

 

$350,000.00.

 

     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 sales 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).

 

     (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 sales exceed $19,000,000.00, the credit

 

shall be reduced by a fraction, the numerator of which is the

 

amount of gross receipts sales 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.

 

     (6) For a taxpayer that reports for a tax year less than 12

 

months, the amounts specified in this section for gross receipts

 

sales, 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. 501. (1) A taxpayer that reasonably expects liability for

 

the tax year to exceed $800.00 shall file an estimated return and

 

pay an estimated tax for each quarter of the taxpayer's tax year.

 

     (2) For taxpayers on a calendar year basis, the quarterly

 

returns and estimated payments shall be made by April 15, July 15,

 

October 15, and January 15. Taxpayers not on a calendar year basis

 

shall file quarterly returns and make estimated payments on the

 

appropriate due date which in the taxpayer's fiscal year

 

corresponds to the calendar year.

 

     (3) Except as otherwise provided under this subsection, the

 

estimated payment made with each quarterly return of each tax year

 

shall be for the estimated business income tax base and modified

 

gross receipts tax base for the quarter or 25% of the estimated

 

annual liability. The second, third, and fourth estimated payments

 

in each tax year shall include adjustments, if necessary, to

 

correct underpayments or overpayments from previous quarterly

 

payments in the tax year to a revised estimate of the annual tax

 

liability. For a taxpayer that calculates and pays estimated

 

payments for federal income tax purposes pursuant to section

 

6655(e) of the internal revenue code, that taxpayer may use the

 

same methodology as used to calculate the annualized income

 

installment or the adjusted seasonal installment, whichever is used

 

as the basis for the federal estimated payment, to calculate the

 

estimated payments required each quarter under this section. A

 

penalty for underpayment of an estimated tax under this act shall

 

not be assessed for a tax year that ends before December 1, 2009 if

 

the taxpayer paid 75% of the tax due under this act for the tax

 

year.

 

     (4) The interest provided by this act shall not be assessed if

 

any of the following occur:

 

     (a) If the sum of the estimated payments equals at least 85%

 

of the liability and the amount of each estimated payment

 

reasonably approximates the tax liability incurred during the

 

quarter for which the estimated payment was made.

 

     (b) For the 2009 tax year and each subsequent tax year, if the

 

preceding year's tax liability under this act was $20,000.00 or

 

less and if the taxpayer submitted 4 equal installments the sum of

 

which equals the immediately preceding tax year's tax liability.

 

     (5) Each estimated return shall be made on a form prescribed

 

by the department and shall include an estimate of the annual tax

 

liability and other information required by the state treasurer.

 

The form prescribed under this subsection may be combined with any

 

other tax reporting form prescribed by the department.

 

     (6) With respect to a taxpayer filing an estimated tax return

 

for the taxpayer's first tax year of less than 12 months, the

 

amounts paid with each return shall be proportional to the number

 

of payments made in the first tax year.

 

     (7) Payments made under this section shall be a credit against

 

the payment required with the annual tax return required in section

 

505.

 

     (8) If the department considers it necessary to insure payment

 

of the tax or to provide a more efficient administration of the

 

tax, the department may require filing of the returns and payment

 

of the tax for other than quarterly or annual periods.

 

     (9) A taxpayer that elects under the internal revenue code to

 

file an annual federal income tax return by March 1 in the year

 

following the taxpayer's tax year and does not make a quarterly

 

estimate or payment, or does not make a quarterly estimate or

 

payment and files a tentative annual return with a tentative

 

payment by January 15 in the year following the taxpayer's tax year

 

and a final return by April 15 in the year following the taxpayer's

 

tax year, has the same option in filing the estimated and annual

 

returns required by this act.

 

     Sec. 503. If a taxpayer's tax year to which this act applies

 

ends before December 31, 2008 or if a taxpayer's first tax year is

 

less than 12 months then a taxpayer subject to this act may elect

 

to compute the tax imposed by this act for the portion of that tax

 

year to which this act applies or that first tax year in accordance

 

with 1 of the following methods:

 

     (a) The tax may be computed as if this act were effective on

 

the first day of the taxpayer's annual accounting period and the

 

amount computed shall be multiplied by a fraction, the numerator of

 

which is the number of months in the taxpayer's first tax year and

 

the denominator of which is the number of months in the taxpayer's

 

annual accounting period.

 

     (b) The tax may be computed by determining the business income

 

tax base and modified gross receipts tax base in the first tax year

 

in accordance with an accounting method satisfactory to the

 

department that reflects the actual business income tax base and

 

modified gross receipts tax base attributable to the period.

 

     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

 

sales are less than $350,000.00 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

 

sales 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.

 

     Sec. 507. (1) A taxpayer required to file a return under this

 

act may be required to furnish a true and correct copy of any

 

return or portion of any return filed under the provisions of the

 

internal revenue code.

 

     (2) A taxpayer shall file an amended return with the

 

department showing any alteration in or modification of a federal

 

income tax return that affects its business income tax base or

 

modified gross receipts tax base under this act. The amended return

 

shall be filed within 120 days after the final determination by the

 

internal revenue service.

 

     Sec. 511. A unitary business group shall file a combined

 

return that includes each United States person, other than a

 

foreign operating entity, that is included in the unitary business

 

group. Each United States person included in a unitary business

 

group or included in a combined return shall be treated as a single

 

person and all transactions between those persons included in the

 

unitary business group shall be eliminated from the business income

 

tax base , modified gross receipts tax base, and the apportionment

 

formula under this act. If a United States person included in a

 

unitary business group or included in a combined return is subject

 

to the tax under chapter 2A or 2B, any business income attributable

 

to that person shall be eliminated from the business income tax

 

base , any modified gross receipts attributable to that person

 

shall be eliminated from the modified gross receipts tax base, and

 

any sales attributable to that person shall be eliminated from the

 

apportionment formula under this act.

 

     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, 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.

 

     (3) For the 2010 fiscal year and each fiscal year after 2010

 

and 2011 fiscal years, 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 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.

 

     (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 refund available under

 

subsection (1) 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) 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 through the 2011 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) "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. Sections 203, 403, and 405 of the Michigan

 

business tax act, 2007 PA 36, MCL 208.1203, 208.1403, and 208.1405,

 

are repealed effective January 1, 2012.

 

     Enacting section 2. This amendatory act takes effect January

 

1, 2012 and applies to all business activity occurring after

 

December 31, 2011.