Bill Text: MI HB5112 | 2009-2010 | 95th Legislature | Introduced
Bill Title: Michigan business tax; credit; qualification for small business alternative credit; eliminate application of rules of attribution to shareholders. Amends sec. 417 of 2007 PA 36 (MCL 208.1417).
Spectrum: Partisan Bill (Republican 1-0)
Status: (Introduced - Dead) 2009-06-18 - Printed Bill Filed 06/18/2009 [HB5112 Detail]
Download: Michigan-2009-HB5112-Introduced.html
HOUSE BILL No. 5112
June 17, 2009, Introduced by Rep. Calley and referred to the Committee on Tax Policy.
A bill to amend 2007 PA 36, entitled
"Michigan business tax act,"
by amending section 417 (MCL 208.1417).
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
Sec. 417. (1) The credit provided in this section shall be
taken after the credits under sections 403 and 405 and before any
other credit under this act and is available to any taxpayer with
gross receipts that do not exceed $20,000,000.00 and with adjusted
business income minus the loss adjustment that does not exceed
$1,300,000.00 as adjusted annually for inflation using the Detroit
consumer price index and subject to the following:
(a) An individual, a partnership, a limited liability company,
or a subchapter S corporation is disqualified if the individual,
any 1 partner of the partnership, any 1 member of the limited
liability company, or any 1 shareholder of the subchapter S
corporation receives more than $180,000.00 as a distributive share
of the adjusted business income minus the loss adjustment of the
individual, the partnership, the limited liability company, or the
subchapter S corporation.
(b) A corporation other than a subchapter S corporation is
disqualified if either of the following occur for the respective
tax year:
(i) Compensation and directors' fees of a shareholder or
officer exceed $180,000.00.
(ii) The sum of the following amounts exceeds $180,000.00:
(A) Compensation and directors' fees of a shareholder.
(B) The product of the percentage of outstanding ownership or
of outstanding stock owned by that shareholder multiplied by the
difference between the sum of business income and, to the extent
deducted in determining federal taxable income, a carryback or a
carryover of a net operating loss or capital loss, minus the loss
adjustment.
(c) Subject to the reduction percentage determined under
subsection (3), the credit determined under this subsection shall
be reduced by the following percentages in the following
circumstances:
(i) If an individual, any 1 partner of the partnership, any 1
member of the limited liability company, or any 1 shareholder of
the subchapter S corporation receives as a distributive share of
adjusted business income minus the loss adjustment of the
individual, partnership, limited liability company, or subchapter S
corporation; if compensation and directors' fees of a shareholder
or officer of a corporation other than a subchapter S corporation
are; or if the sum of the amounts in subdivision (b)(ii)(A) and (B)
is more than $160,000.00 but less than $165,000.00, the credit is
reduced by 20%.
(ii) If an individual, any 1 partner of the partnership, any 1
member of the limited liability company, or any 1 shareholder of
the subchapter S corporation receives as a distributive share of
adjusted business income minus the loss adjustment of the
individual, partnership, limited liability company, or subchapter S
corporation; if compensation and directors' fees of a shareholder
or officer of a corporation other than a subchapter S corporation
are; or if the sum of the amounts in subdivision (b)(ii)(A) and (B)
is $165,000.00 or more but less than $170,000.00, the credit is
reduced by 40%.
(iii) If an individual, any 1 partner of the partnership, any 1
member of the limited liability company, or any 1 shareholder of
the subchapter S corporation receives as a distributive share of
adjusted business income minus the loss adjustment of the
individual, partnership, limited liability company, or subchapter S
corporation; if compensation and directors' fees of a shareholder
or officer of a corporation other than a subchapter S corporation
are; or if the sum of the amounts in subdivision (b)(ii)(A) and (B)
is $170,000.00 or more but less than $175,000.00, the credit is
reduced by 60%.
(iv) If an individual, any 1 partner of the partnership, any 1
member of the limited liability company, or any 1 shareholder of
the subchapter S corporation receives as a distributive share of
adjusted business income minus the loss adjustment of the
individual, partnership, limited liability company, or subchapter S
corporation; if compensation and directors' fees of a shareholder
or officer of a corporation other than a subchapter S corporation
are; or if the sum of the amounts in subdivision (b)(ii)(A) and (B)
is $175,000.00 or more but not in excess of $180,000.00, the credit
is reduced by 80%.
(2) For the purposes of determining disqualification under
subsection
(1), an both of the
following apply:
(a) An active shareholder's share of business income shall not
be attributed to another active shareholder.
(b) The rules of attribution under section 318(a)(1) of the
internal revenue code do not apply. Accordingly, an individual is
not considered as the owner of the stock owned, directly or
indirectly, by or for family members.
(3) To determine the reduction percentage under subsection
(1)(c), the following apply:
(a) The reduction percentage for a partnership, limited
liability company, or subchapter S corporation is based on the
distributive share of adjusted business income minus loss
adjustment of the partner, member, or shareholder with the greatest
distributive share of adjusted business income minus loss
adjustment.
(b) The reduction percentage for a corporation other than a
subchapter S corporation is the greater of the following:
(i) The reduction percentage based on the compensation and
directors' fees of the shareholder or officer with the greatest
amount of compensation and directors' fees.
(ii) The reduction percentage based on the sum of the amounts
in subsection (1)(b)(ii)(A) and (B) for the shareholder or officer
with the greatest sum of the amounts in subsection (1)(b)(ii)(A) and
(B).
(4) A taxpayer that qualifies under subsection (1) is allowed
a credit against the tax imposed under this act. The credit under
this subsection is the amount by which the tax imposed under this
act exceeds 1.8% of adjusted business income.
(5) If gross receipts exceed $19,000,000.00, the credit shall
be reduced by a fraction, the numerator of which is the amount of
gross receipts over $19,000,000.00 and the denominator of which is
$1,000,000.00. The credit shall not exceed 100% of the tax
liability imposed under this act.
(6) For a taxpayer that reports for a tax year less than 12
months, the amounts specified in this section for gross receipts,
adjusted business income, and share of business income shall be
multiplied by a fraction, the numerator of which is the number of
months in the tax year and the denominator of which is 12.
(7) The department shall permit a taxpayer that elects to
claim the credit allowed under this section based on the amount by
which the tax imposed under this act exceeds the percentage of
adjusted business income for the tax year as determined under
subsection (4), and that is not required to reduce the credit
pursuant to subsection (1) or (5), to file and pay the tax imposed
by this act without computing the tax imposed under sections 201
and 203.
(8) Compensation paid by the professional employer
organization to the officers of the client and to employees of the
professional employer organization who are assigned or leased to
and perform services for the client shall be included in
determining eligibility of the client under this section.
(9) As used in this section:
(a) "Active shareholder" means a shareholder who receives at
least $10,000.00 in compensation, directors' fees, or dividends
from the business, and who owns at least 5% of the outstanding
stock or other ownership interest.
(b) "Adjusted business income" means business income as
defined in section 105 with all of the following adjustments:
(i) Add compensation and directors' fees of active shareholders
of a corporation.
(ii) Add, to the extent deducted in determining federal taxable
income, a carryback or a carryover of a net operating loss.
(iii) Add, to the extent deducted in determining federal taxable
income, a capital loss.
(iv) Add compensation and directors' fees of officers of a
corporation.
(c) "Detroit consumer price index" means the most
comprehensive index of consumer prices available for the Detroit
area from the United States department of labor, bureau of labor
statistics.
(d) "Loss adjustment" means the amount by which adjusted
business income was less than zero in any of the 5 tax years
immediately preceding the tax year for which eligibility for the
credit under this section is being determined. In determining the
loss adjustment for a tax year, a taxpayer is not required to use
more of the taxpayer's total negative adjusted business income than
the amount needed to qualify the taxpayer for the credit under this
section. A taxpayer shall not be considered to have used any
portion of the taxpayer's negative adjusted business income amount
unless the portion used is necessary to qualify for the credit
under this section. A taxpayer shall not reuse a negative adjusted
business income amount used as a loss adjustment in a previous tax
year or use a negative adjusted business income amount from a year
in which the taxpayer did not receive the credit under this
section.
