Bill Text: MI SB0658 | 2011-2012 | 96th Legislature | Introduced
Bill Title: Michigan business tax; replacement; administration, operation, and filing after enactment of corporate income tax; clarify. Amends secs. 107, 117, 431, 500 & 503 of 2007 PA 36 (MCL 208.1107 et seq.) & adds sec. 512.
Spectrum: Partisan Bill (Republican 1-0)
Status: (Introduced - Dead) 2011-10-13 - Referred To Committee On Finance [SB0658 Detail]
Download: Michigan-2011-SB0658-Introduced.html
SENATE BILL No. 658
September 15, 2011, Introduced by Senator JANSEN and referred to the Committee on Finance.
A bill to amend 2007 PA 36, entitled
"Michigan business tax act,"
by amending sections 107, 117, 431, 500, and 503 (MCL 208.1107,
208.1117, 208.1431, 208.1500, and 208.1503), sections 107 and 117
as amended and section 500 as added by 2011 PA 39, section 431 as
amended by 2009 PA 126, and section 503 as amended by 2009 PA 185,
and by adding section 512.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
Sec. 107. (1) "Certificated credit" means any of the
following:
(a) A tax voucher certificate that has been issued to a
taxpayer under an agreement entered into before January 1, 2012
under section 419 or section 23 of the Michigan early stage venture
investment act of 2003, 2003 PA 296, MCL 125.2253.
(b) A credit for which a preapproval letter has been issued to
a qualified taxpayer under section 437 before January 1, 2012 to
the extent the credit has not been fully claimed or paid prior to
January 1, 2012.
(c) A credit for which a taxpayer or a qualified taxpayer has
entered into an agreement with the Michigan economic growth
authority under sections 430, 431, 431a, 431b, 431c, 432, 434, or
450 before January 1, 2012 to the extent the credit has not been
fully claimed or paid prior to January 1, 2012.
(d) A credit for which a taxpayer or eligible production
company has entered into an agreement with the Michigan film office
with the concurrence of the state treasurer under section 455 or
457 before January 1, 2012 to the extent the credit has not been
fully claimed or paid before January 1, 2012.
(e) A credit for which a qualified taxpayer has received a
part 2 approval, approved rehabilitation plan, approved high
community impact rehabilitation plan, or preapproval letter from
the state historic preservation office under section 435 before
January 1, 2012 to the extent the credit has not been fully claimed
or paid before January 1, 2012.
(f) A credit under section 433 but only for a taxpayer that
has a development agreement executed between a taxpayer and the
Michigan strategic fund before January 1, 2012 or for a taxpayer
that has entered into a qualified collaborative agreement under the
Michigan renaissance zone act, 1996 PA 376, MCL 125.2681 to
125.2696, before January 1, 2012. As used in this subsection,
"qualified collaborative agreement" means that term as defined in
section
3 8d of the Michigan renaissance zone act, 1996 PA 376,
MCL
125.2683.125.2688d.
(g) A credit applicable to this act granted under section
36109 of the natural resources and environmental protection act,
1994 PA 451, MCL 324.36109.
(h) A credit allowed a taxpayer under section 409 if the
taxpayer has met the capital expenditure requirements under section
409(3).409(4).
(2) "Client" means an entity whose employment operations are
managed by a professional employer organization.
(3) "Compensation" means all wages, salaries, fees, bonuses,
commissions, other payments made in the tax year on behalf of or
for the benefit of employees, officers, or directors of the
taxpayers, and 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. Compensation includes, but is not limited
to, payments that are subject to or specifically exempt or excepted
from withholding under sections 3401 to 3406 of the internal
revenue code. Compensation also includes, on a cash or accrual
basis consistent with the taxpayer's method of accounting for
federal income tax purposes, payments to a pension, retirement, or
profit sharing plan other than those payments attributable to
unfunded accrued actuarial liabilities, and payments for insurance
for which employees are the beneficiaries, including payments under
health and welfare and noninsured benefit plans and payment of fees
for the administration of health and welfare and noninsured benefit
plans. Compensation 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, includes 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. Compensation does not include any of the following:
(a) Discounts on the price of the taxpayer's merchandise or
services sold to the taxpayer's employees, officers, or directors
that are not available to other customers.
(b) Except as otherwise provided in this subsection, payments
to an independent contractor.
(c) Payments to state and federal unemployment compensation
funds.
(d) The employer's portion of payments under the federal
insurance contributions act, chapter 21 of subtitle C of the
internal revenue code, 26 USC 3101 to 3128, the railroad retirement
tax act, chapter 22 of subtitle C of the internal revenue code, 26
USC 3201 to 3233, and similar social insurance programs.
(e) Payments, including self-insurance payments, for worker's
compensation insurance or federal employers' liability act
insurance pursuant to 45 USC 51 to 60.
(4) "Corporation" means a taxpayer that is required or has
elected to file as a corporation under the internal revenue code.
(5) "Department" means the department of treasury.
Sec. 117. (1) "Tangible personal property" means that term as
defined in section 2 of the use tax act, 1937 PA 94, MCL 205.92.
(2) "Tax" means the tax imposed under this act, including
interest and penalties under this act, unless the term is given a
more limited meaning in the context of this act or a provision of
this act.
(3) "Tax-exempt person" means an organization that is exempt
from federal income tax under section 501(a) of the internal
revenue code, and a partnership, limited liability company, joint
venture, unincorporated association, or other group or combination
of organizations acting as a unit if all such organizations are
exempt from federal income tax under section 501(a) of the internal
revenue code and if all activities of the unit are exclusively
related to the charitable, educational, or other purposes or
functions that are the basis for the exemption of such
organizations from federal income tax, except the following:
(a) An organization exempt under section 501(c)(12) or (16) of
the internal revenue code.
(b) 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 but for its failure to meet the
requirement in section 501(c)(12) that 85% or more of its income
must consist of amounts collected from members.
(4) "Tax year" means the calendar year, or the fiscal year
ending during the calendar year, upon the basis of which the tax
base of a taxpayer is computed under this act. If a return is made
for a fractional part of a year, tax year means the period for
which the return is made. Except for the first return required by
this act and except as otherwise provided under this subsection, a
taxpayer's tax year is for the same period as is covered by its
federal income tax return. A taxpayer that has a 52- or 53-week tax
year beginning not more than 7 days before December 31 of any year
is considered to have a tax year beginning after December of that
tax year. If the term tax year in this act is used in reference to
1 or more previous or preceding tax years and those referenced tax
years are before January 1, 2008, then those referenced tax years
are deemed those same tax years during which former 1975 PA 228 was
in effect. A taxpayer that has a fiscal tax year ending after
December 31, 2011 is considered to have 2 separate tax years as
follows: the first tax year is for the fractional part of the
fiscal tax year before January 1, 2012, and the second tax year is
for the fractional part of the fiscal tax year after December 31,
2011. Each short period tax return filed for each fractional part
of the fiscal year pursuant to this subsection is considered an
annual return under section 505.
(5) "Taxpayer" means, through December 31, 2011, a person or a
unitary business group liable for a tax, interest, or penalty under
this act. Beginning January 1, 2012, taxpayer means either of the
following:
(a) A person or unitary business group that has been approved
to receive, has received, or has been assigned a certificated
credit but is not subject to the tax imposed under part 2 of the
income tax act of 1967, 1967 PA 281, MCL 206.601 to 206.713, and
that elects under section 500 to file a return and pay the tax
imposed under this act, if any.
(b) A person or unitary business group that has been approved
to receive, has received, or has been assigned a certificated
credit and that elected under section 680 of the income tax act of
1967, 1967 PA 281, MCL 206.680, to file a return and pay the tax
imposed under this act, if any. If a person or unitary business
group that elects under section 680 of the income tax act of 1967,
1967 PA 281, MCL 206.680, to file a return and pay the tax imposed
under this act is part of a unitary business group as defined under
this act, the unitary business group as defined under this act
shall file the return and pay the tax, if any, under this act.
(6) "Unitary business group" means a group of United States
persons, other than a foreign operating entity, 1 of which owns or
controls, directly or indirectly, more than 50% of the ownership
interest with voting rights or ownership interests that confer
comparable rights to voting rights of the other United States
persons, and that has business activities or operations which
result in a flow of value between or among persons included in the
unitary business group or has business activities or operations
that are integrated with, are dependent upon, or contribute to each
other. For purposes of this subsection, flow of value is determined
by reviewing the totality of facts and circumstances of business
activities and operations.
(7) "United States person" means that term as defined in
section 7701(a)(30) of the internal revenue code.
(8) "Unrelated business activity" means, for a tax-exempt
person, business activity directly connected with an unrelated
trade or business as defined in section 513 of the internal revenue
code.
Sec. 431. (1) Except as otherwise provided under this
subsection, for a period of time not to exceed 20 years as
determined by the Michigan economic growth authority, a taxpayer
that is an authorized business may claim a credit against the tax
imposed by this act equal to the amount certified each year by the
Michigan economic growth authority as follows:
(a) Except as otherwise provided under this subdivision, for
an authorized business for the tax year, an amount not to exceed
the payroll of the authorized business attributable to employees
who perform qualified new jobs as determined under the Michigan
economic growth authority act, 1995 PA 24, MCL 207.801 to 207.810,
multiplied by the tax rate; beginning after April 28, 2008, for an
authorized business for the tax year, an amount not to exceed the
sum of the payroll and health care benefits of the authorized
business attributable to employees who perform qualified new jobs
as determined under the Michigan economic growth authority act,
1995 PA 24, MCL 207.801 to 207.810, multiplied by the tax rate.
(b) For an eligible business as determined under section
8(5)(a) of the Michigan economic growth authority act, 1995 PA 24,
MCL 207.808, an amount not to exceed 50% of the payroll of the
authorized business attributable to employees who perform retained
jobs as determined under the Michigan economic growth authority
act, 1995 PA 24, MCL 207.801 to 207.810, multiplied by the tax rate
for the tax year.
(c) For an eligible business as determined under section
8(5)(b) of the Michigan economic growth authority act, 1995 PA 24,
MCL 207.808, an amount not to exceed the payroll of the authorized
business attributable to employees who perform retained jobs as
determined under the Michigan economic growth authority act, 1995
PA 24, MCL 207.801 to 207.810, multiplied by the tax rate for the
tax year.
(d) For an authorized business that is a qualified high-
technology business, for a period of time not to exceed 7 years as
determined by the Michigan economic growth authority, an amount not
to exceed 200% of the sum of the payroll and health care benefits
of the qualified high-technology business attributable to employees
who perform qualified new jobs as determined under the Michigan
economic growth authority act, 1995 PA 24, MCL 207.801 to 207.810,
for the first 3 tax years of the credit, multiplied by the tax rate
and, for each of the remaining tax years of the credit, an amount
not to exceed 100% of the sum of the payroll and health care
benefits of the qualified high-technology business attributable to
employees who perform qualified new jobs as determined under the
Michigan economic growth authority act, 1995 PA 24, MCL 207.801 to
207.810, multiplied by the tax rate.
(e) For an authorized business as determined under section
8(9) of the Michigan economic growth authority act, 1995 PA 24, MCL
207.808, an amount up to, but not to exceed 100% of, the sum of the
payroll and health care benefits of the authorized business
attributable to employees who perform retained jobs multiplied by a
fraction, the numerator of which is the amount of new capital
investment made at the facility and the denominator of which is the
product of the number of retained jobs multiplied by $100,000.00,
and then multiplied by the tax rate for the tax year.
(f) For an authorized business as determined under section
8(11) of the Michigan economic growth authority act, 1995 PA 24,
MCL 207.808, an amount not to exceed 100% of the sum of the payroll
and health care benefits of the authorized business attributable to
employees who perform new full-time jobs and retained jobs as
determined under the Michigan economic growth authority act, 1995
PA 24, MCL 207.801 to 207.810, multiplied by the tax rate for the
tax year.
(2) A taxpayer shall not claim a credit under this section
unless the Michigan economic growth authority has issued a
certificate to the taxpayer. The taxpayer shall attach the
certificate to the annual return filed under this act on which a
credit under this section is claimed.
(3) The certificate required by subsection (2) shall state all
of the following:
(a) The taxpayer is an authorized business.
(b) The amount of the credit under this section for the
authorized business for the designated tax year.
(c) The taxpayer's federal employer identification number or
the Michigan department of treasury number assigned to the
taxpayer.
(4) The Michigan economic growth authority may certify a
credit under this section based on an agreement entered into prior
to January 1, 2008 pursuant to section 37c of former 1975 PA 228.
The number of years for which the credit may be claimed under this
section shall equal the maximum number of years designated in the
resolution reduced by the number of years for which a credit has
been claimed or could have been claimed under section 37c of former
1975 PA 228.
(5) If the credit allowed under this section exceeds the tax
liability of the taxpayer for the tax year, that portion of the
credit that exceeds the tax liability of the taxpayer shall be
refunded.
(6) Except as otherwise provided under this subsection, a
taxpayer that claims a credit under subsection (1) or section 37c
or 37d of former 1975 PA 228, that has an agreement with the
Michigan economic growth authority based on qualified new jobs as
defined in section 3(q)(ii) of the Michigan economic growth
authority act, 1995 PA 24, MCL 207.803, and that removes from this
state 51% or more of those qualified new jobs within 3 years after
the first year in which the taxpayer claims a credit described in
this subsection shall pay to the department no later than 12 months
after those qualified new jobs are removed from the state an amount
equal to the total of all credits described in this subsection that
were claimed by the taxpayer. Beginning after April 28, 2008, a
taxpayer that claims a credit under subsection (1) and subsequently
fails to meet the requirements of this section or any other
conditions included in an agreement entered into with the Michigan
economic growth authority in order to obtain a certificate for the
credit claimed under this section or removes any of the qualified
new jobs from this state during the term of the written agreement
and for a period of years after the term of the written agreement,
as determined by the Michigan economic growth authority, may have
its credit reduced or terminated or have a percentage of the credit
amount previously claimed under this section added back to the tax
liability of the taxpayer in the tax year that the taxpayer fails
to comply with this section or the agreement.
(7) If the Michigan economic growth authority or a designee of
the Michigan economic growth authority requests that a taxpayer
that claims the credit under this section get a statement prepared
by a certified public accountant verifying that the actual number
of new jobs created is the same number of new jobs used to
calculate the credit under this section, the taxpayer shall get the
statement and attach that statement to its annual return under this
act on which the credit under this section is claimed. For
compliance reporting purposes, a taxpayer that claims the credit
under this section for health care benefits may report to the
Michigan economic growth authority the aggregate cost of applicable
employer-sponsored coverage applicable to employees who perform
qualified new jobs and employees who perform retained jobs, as
determined by the Michigan economic growth authority.
(8) A credit shall not be claimed by a taxpayer under this
section if the taxpayer's initial certification as required in
subsection (3) is issued after December 31, 2013.
(9) For the 2010 calendar year and each calendar year after
2010, the total amount of all credits allowed to be claimed in the
first year of all new written agreements approved in that calendar
year under this section shall not exceed $95,000,000.00.
(10) For purposes of this section, taxpayer includes a person
subject to the tax imposed under chapter 2A and a person subject to
the tax imposed under chapter 2B.
(11) As used in this section:
(a) "Authorized business", "facility", "full-time job",
"qualified high-technology business", "retained jobs", and "written
agreement" mean those terms as defined in the Michigan economic
growth authority act, 1995 PA 24, MCL 207.801 to 207.810.
(b) "Health care benefits" means, as determined by the
Michigan economic growth authority, all costs paid for a self-
funded health care benefit plan or for an expense-incurred
hospital, medical, or surgical policy or certificate, nonprofit
health care corporation certificate, or health maintenance
organization contract. Health care benefit does not include
accident-only, credit, dental, or disability income insurance;
long-term care insurance; coverage issued as a supplement to
liability insurance; coverage only for a specified disease or
illness; worker's compensation or similar insurance; or automobile
medical payment insurance.
(c) "Michigan economic growth authority" means the Michigan
economic growth authority created in the Michigan economic growth
authority act, 1995 PA 24, MCL 207.801 to 207.810.
(d) "Payroll" means the total salaries and wages before
deducting any personal or dependency exemptions.
(e) "Qualified new jobs" means 1 or more of the following:
(i) The average number of full-time jobs at a facility of an
authorized business for a tax year in excess of the average number
of full-time jobs the authorized business maintained in this state
prior to the expansion or location as that is determined under the
Michigan economic growth authority act, 1995 PA 24, MCL 207.801 to
207.810.
(ii) The average number of full-time jobs at a facility created
by an eligible business up to 90 days before becoming an authorized
business that is in excess of the average number of full-time jobs
that the business maintained in this state up to 90 days before
becoming an authorized business, as determined under the Michigan
economic growth authority act, 1995 PA 24, MCL 207.801 to 207.810.
(f) "Tax rate" means the rate imposed under section 51 of the
income tax act of 1967, 1967 PA 281, MCL 206.51, for the tax year
in which the tax year of the taxpayer for which the credit is being
computed begins.
Sec. 500. (1) Except as otherwise provided in subsection (2),
a taxpayer described under section 117(5)(a) or under section 680
of the income tax act of 1967, 1967 PA 281, MCL 206.680, that
voluntarily elects for the taxpayer's first tax year ending after
December 31, 2011 to file a return and pay the tax imposed by this
act in order to claim a certificated credit or any unused
carryforward for that tax year shall continue to file a return and
pay the tax imposed under this act for each tax year thereafter
until that certificated credit and any carryforward from that
credit is used up. If a person awarded a certificated credit is a
member of a unitary business group, the unitary business group, and
not the member, shall file a return and pay the tax, if any, under
this act and claim the certificated credit. If the taxpayer that
elects to file a return and pay the tax imposed by this act in
order to claim a certificated credit or any unused carryforward of
that credit for that tax year is a unitary business group, the
return filed by the unitary business group shall include all
persons included in the unitary business group regardless of
whether that person is incorporated.
(2) A taxpayer with a certificated credit under section 435 or
437, which certificated credit or any unused carryforward may be
claimed in a tax year ending after December 31, 2011 may elect to
pay the tax imposed by this act in the tax year in which that
certificated credit may be claimed in lieu of the tax imposed under
part 2 of the income tax act of 1967, 1967 PA 281, MCL 206.601 to
206.713. If a person with a certificated credit under section 435
or 437 that elects under this subsection to pay the tax imposed by
this act is a member of a unitary business group, the unitary
business group, and not the member, shall file a return and pay the
tax, if any, under this act and claim that certificated credit.
(3) A taxpayer with a certificated credit under section 435 or
437 that elects under subsection (2) after the taxpayer's first tax
year ending after December 31, 2011 to pay the tax imposed by this
act may claim any other certificated credit that taxpayer would be
eligible for in the year in which the taxpayer claims a
certificated credit under section 435 or 437, but not any
certificated credit that would have accrued in any year before the
election under subsection (2). A taxpayer with a certificated
credit under section 437(10) that elects under subsection (2) after
the taxpayer's first tax year after December 31, 2011 to pay the
tax imposed by this act shall continue to file a return and pay the
tax imposed under this act for each tax year thereafter until the
certificated credit under section 437(10) is complete and that
credit is used up. When the taxpayer's certificated credit under
section 435 or 437 that was the basis for the taxpayer's election
under subsection (2) is extinguished, the taxpayer is no longer
eligible to pay the tax under this act and may no longer claim any
other remaining certificated credits.
(4) For tax years that begin after December 31, 2011, a
taxpayer's tax liability under this act, after application of all
credits, deductions, and exemptions, shall be the greater of the
following:
(a) The amount of the taxpayer's tax liability under this act,
notwithstanding the calculation required under this section, after
application of all credits, deductions, and exemptions and any
carryforward of any unused credit as prescribed in this act.
(b) An amount equal to the taxpayer's tax liability as
computed pursuant to part 2 of the income tax act of 1967, 1967 PA
281, MCL 206.601 to 206.713, after application of all credits,
deductions, and exemptions under part 2 of the income tax act of
1967, 1967 PA 281, MCL 206.601 to 206.713, as if the taxpayer were
subject to the tax imposed under part 2 of the income tax act of
1967, 1967 PA 281, MCL 206.601 to 206.713, less the amount of the
taxpayer's certificated credits, including any unused carryforward
of a certificated credit, that the taxpayer was allowed to claim
for the tax year under this act. However, in calculating the amount
under this subdivision, the following apply:
(i) A taxpayer described under section 117(5)(a) shall not
include a deduction for any business loss that was taken under
section 623(4) of the income tax act of 1967, 1967 PA 281, MCL
206.623, for any prior year in which the taxpayer was not subject
to the tax levied under this act.
(ii) A taxpayer shall not include any nonrefundable
certificated credit to the extent that credit exceeds the
taxpayer's tax liability. Any nonrefundable credit remaining after
application of the limitation in this subparagraph may be carried
forward.
(iii) For a taxpayer that is a partnership or S corporation,
business income includes payments and items of income and expense
that are attributable to business activity of the partnership or S
corporation and separately reported to the members.
(5) If the result of the calculation under subsection (4) is
negative, the taxpayer shall be refunded that amount.
(6) A taxpayer with a certificated credit under section 435 or
437 that elects to pay the tax under this act may elect to claim a
refundable credit as provided under section 510. If a refundable
credit is claimed under section 510, that credit shall not be used
to calculate a taxpayer's tax liability under subsection (4).
Sec. 503. (1) 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.
(2) The method chosen by a taxpayer under this section that is
subject to the tax imposed under this act and the tax imposed under
part 2 of the income tax act of 1967, 1967 PA 281, MCL 206.601 to
206.713, for a portion of the same tax year shall be the same as
the method used by that same taxpayer when computing the tax
imposed under part 2 of the income tax act of 1967, 1967 PA 281,
MCL 206.601 to 206.713, for the other portion of that same tax
year.
(3) A taxpayer that is subject to the tax imposed under this
act and required to file 2 separate short period annual returns
encompassing a fractional part of the taxpayer's same fiscal tax
year shall elect to compute the tax imposed by this act for each
short period return for each respective portion of the same fiscal
tax year using the same method as provided under this section. A
taxpayer that files 2 separate short period annual returns for a
fractional part of the same year as provided under this subsection
and section 117(4) shall calculate and claim its credits based on
actions taken or payments made during the period represented on
each short period return of those respective parts of the same tax
year.
Sec. 512. A United States person that is a disregarded entity
for federal income tax purposes under the internal revenue code
shall be treated as a disregarded entity for income tax purposes
under this act. A person other than a United States person that is
a disregarded entity for federal income tax purposes under the
internal revenue code shall not be treated as a disregarded entity
for income tax purposes under this act.
Enacting section 1. This amendatory act takes effect January
1, 2012.
