Bill Text: MI HB4812 | 2009-2010 | 95th Legislature | Introduced

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Bill Title: Michigan business tax; gross receipts; phase-in of elimination of sales tax from gross receipts; accelerate. Amends sec. 111 of 2007 PA 36 (MCL 208.1111).

Spectrum: Partisan Bill (Republican 1-0)

Status: (Introduced - Dead) 2009-04-22 - Printed Bill Filed 04/22/2009 [HB4812 Detail]

Download: Michigan-2009-HB4812-Introduced.html

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HOUSE BILL No. 4812

 

April 21, 2009, Introduced by Rep. Opsommer and referred to the Committee on Tax Policy.

 

     A bill to amend 2007 PA 36, entitled

 

"Michigan business tax act,"

 

by amending section 111 (MCL 208.1111), as amended by 2008 PA 433.

 

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 2-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 2009 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.

 

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

 

in section 106 of the insurance code of 1956, 1956 PA 218, MCL

 

500.106.

 

     (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.

 

     (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).