Bill Text: MI SB1037 | 2011-2012 | 96th Legislature | Introduced

Michigan Senate Bill 1037 (Prior Session Legislation)

NOTE: There are more recent revisions of this legislation. Read Latest Draft

Bill Title: Michigan business tax; administration; gross receipts, tax base, apportionment, and historic rehabilitation credit; modify to reflect original intent. Amends secs. 111, 201, 305 & 435 of 2007 PA 36 (MCL 208.111 et seq.).

Spectrum: Slight Partisan Bill (Republican 3-1)

Status: (Passed) 2012-12-31 - Assigned Pa 0605'12 With Immediate Effect [SB1037 Detail]

Download: Michigan-2011-SB1037-Introduced.html

SENATE BILL No. 1037

March 22, 2012, Introduced by Senators BRANDENBURG, HILDENBRAND, JANSEN and BIEDA and referred to the Committee on Finance.

A bill to amend 2007 PA 36, entitled

"Michigan business tax act,"

by amending sections 111, 113, 201, 305, 403, 413, 433, and 511

(MCL 208.1111, 208.1113, 208.1201, 208.1305, 208.1403, 208.1413,

208.1433, and 208.1511), section 111 as amended by 2011 PA 305,

section 113 as amended by 2011 PA 77, section 201 as amended by

2009 PA 135, section 305 as amended by 2007 PA 205, section 403 as

amended by 2008 PA 434, section 413 as amended by 2011 PA 316,

section 433 as amended by 2007 PA 215, and section 511 as amended

by 2011 PA 292.

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.

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 person organized for estate

or gift planning purposes, amounts received other than those from

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

person'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 person'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 person's regular trade

or business operations.

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

business from stock and securities of any foreign or domestic

corporation and dividend and interest income.

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 person's trade or

business operation.

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

business that constitutes an integral part of the person'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 person'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 other than

receipts from transactions, activities, and sources in the regular

course of the person's trade or business 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.

(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.

(ff) Amounts attributed to the taxpayer pursuant to a

discharge of indebtedness as described under section 61(a)(12) of

the internal revenue code, including forgiveness of a nonrecourse

debt.

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

in section ~~106~~ 108 of the insurance code of 1956, 1956 PA 218, MCL

~~500.106.~~500.108.

(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.

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.

persons described in subdivisions (a) and (b) such as major

decision making.

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.

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 or self-constructed 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.

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

For purposes of this subdivision, materials and supplies mean

tangible personal property expensed by the taxpayer and not

capitalized for federal income tax purposes.

(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.

(h) For a person classified under the 2002 North American

industrial classification system number 484 as compiled by the

United States office of management and budget that does not qualify

for a credit under section 417, payments to subcontractors to

transport freight by motor vehicle under a contract specific to

that freight to be transported by motor vehicle.

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

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

1 mile.

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%.

(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.

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~~ business 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~~ and that are reported to the taxpayer

or a partner or limited liability company member on a schedule K-1-

form 1065 as self-employment earnings for federal income tax

purposes.

(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. For purposes of this subsection, a taxpayer that

acquires the assets of another corporation in a transaction

described under section 381(a)(1) or (2) of the internal revenue

code may deduct any business loss attributable to that distributor

or transferor corporation. 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.

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. 305. (1) Sales of the taxpayer in this state are

determined as follows:

(a) Sales of tangible personal property are in this state if

the property is shipped or delivered, or, in the case of

electricity and gas, the contract requires the property to be

shipped or delivered, to any purchaser within this state based on

the ultimate destination at the point that the property comes to

rest regardless of the free on board point or other conditions of

the sales. For purposes of determining the ultimate destination and

when the property comes to rest under this subdivision, if the

buyer does not identify the ultimate destination at the time of the

transaction, property is considered temporarily stored at that

destination if it is stored for fewer than 30 days.

(b) Receipts from the sale, lease, rental, or licensing of

real property are in this state if that property is located in this

state.

property are sales in this state to the extent that the property is

utilized in this state. The extent of utilization of tangible

personal property in this state is determined by multiplying the

receipts by a fraction, the numerator of which is the number of

days of physical location of the property in this state during the

lease or rental period in the tax year and the denominator of which

is the number of days of physical location of the property

everywhere during all lease or rental periods in the tax year. If

the physical location of the property during the lease or rental

period is unknown or cannot be determined, the tangible personal

property is utilized in the state in which the property was located

at the time the lease or rental payer obtained possession.

(d) Receipts from the lease or rental of mobile transportation

property owned by the taxpayer are in this state to the extent that

the property is used in this state. The extent an aircraft will be

deemed to be used in this state and the amount of receipts that is

to be included in the numerator of this state's sales factor is

determined by multiplying all the receipts from the lease or rental

of the aircraft by a fraction, the numerator of the fraction is the

number of landings of the aircraft in this state and the

denominator of the fraction is the total number of landings of the

aircraft. If the extent of the use of any transportation property

within this state cannot be determined, then the receipts are in

this state if the property has its principal base of operations in

this state.

(e) Royalties and other income received for the use of or for

the privilege of using intangible property, including patents,

know-how, formulas, designs, processes, patterns, copyrights, trade

names, service names, franchises, licenses, contracts, customer

lists, computer software, or similar items, are attributed to the

state in which the property is used by the purchaser. If the

property is used in more than 1 state, the royalties or other

income shall be apportioned to this state pro rata according to the

portion of use in this state. If the portion of use in this state

cannot be determined, the royalties or other income shall be

excluded from both the numerator and the denominator. Intangible

property is used in this state if the purchaser uses the intangible

property or the rights to the intangible property in the regular

course of its business operations in this state, regardless of the

location of the purchaser's customers.

(2) Sales from the performance of services are in this state

and attributable to this state as follows:

(a) Except as otherwise provided in this section, all receipts

from the performance of services are included in the numerator of

the apportionment factor if the recipient of the services receives

all of the benefit of the services in this state. If the recipient

of the services receives some of the benefit of the services in

this state, the receipts are included in the numerator of the

apportionment factor in proportion to the extent that the recipient

receives benefit of the services in this state.

(b) Sales derived from securities brokerage services

attributable to this state are determined by multiplying the total

dollar amount of receipts from securities brokerage services by a

fraction, the numerator of which is the sales of securities

brokerage services to customers within this state, and the

denominator of which is the sales of securities brokerage services

to all customers. Receipts from securities brokerage services

include commissions on transactions, the spread earned on principal

transactions in which the broker buys or sells from its account,

total margin interest paid on behalf of brokerage accounts owned by

the broker's customers, and fees and receipts of all kinds from the

underwriting of securities. If receipts from brokerage services can

be associated with a particular customer, but it is impractical to

associate the receipts with the address of the customer, then the

address of the customer shall be presumed to be the address of the

branch office that generates the transactions for the customer.

from the sale of management, distribution, administration, or

securities brokerage services to, or on behalf of, a regulated

investment company or its beneficial owners, including receipts

derived directly or indirectly from trustees, sponsors, or

participants of employee benefit plans that have accounts in a

regulated investment company, shall be attributable to this state

to the extent that the shareholders of the regulated investment

company are domiciled within this state. For purposes of this

subdivision, "domicile" means the shareholder's mailing address on

the records of the regulated investment company. If the regulated

investment company or the person providing management services to

the regulated investment company has actual knowledge that the

shareholder's primary residence or principal place of business is

different than the shareholder's mailing address, then the

shareholder's primary residence or principal place of business is

the shareholder's domicile. A separate computation shall be made

with respect to the receipts derived from each regulated investment

company. The total amount of sales attributable to this state shall

be equal to the total receipts received by each regulated

investment company multiplied by a fraction determined as follows:

(i) The numerator of the fraction is the average of the sum of

the beginning-of-year and end-of-year number of shares owned by the

regulated investment company shareholders who have their domicile

in this state.

(ii) The denominator of the fraction is the average of the sum

of the beginning-of-year and end-of-year number of shares owned by

all shareholders.

(iii) For purposes of the fraction, the year shall be the tax

year of the regulated investment company that ends with or within

the tax year of the taxpayer.

(3) Receipts from the origination of a loan or gains from the

sale of a loan secured by residential real property is deemed a

sale in this state only if 1 or more of the following apply:

(a) The real property is located in this state.

(b) The real property is located both within this state and 1

or more other states and more than 50% of the fair market value of

the real property is located within this state.

state and the borrower is located in this state.

(4) Interest from loans secured by real property is in this

state if the property is located within this state or if the

property is located both within this state and 1 or more other

states, if more than 50% of the fair market value of the real

property is located within this state, or if more than 50% of the

fair market value of the real property is not located within any 1

state, if the borrower is located in this state. The determination

of whether the real property securing a loan is located within this

state shall be made as of the time the original agreement was made

and any and all subsequent substitutions of collateral shall be

disregarded.

(5) Interest from a loan not secured by real property is in

this state if the borrower is located in this state.

(6) Gains from the sale of a loan not secured by real

property, including income recorded under the coupon stripping

rules of section 1286 of the internal revenue code, are in this

state if the borrower is in this state.

(7) Receipts from credit card receivables, including interest,

fees, and penalties from credit card receivables and receipts from

fees charged to cardholders, such as annual fees, are in this state

if the billing address of the cardholder is in this state.

(8) Receipts from the sale of credit card or other receivables

is in this state if the billing address of the customer is in this

state. Credit card issuer's reimbursements fees are in this state

if the billing address of the cardholder is in this state. Receipts

from merchant discounts, computed net of any cardholder

chargebacks, but not reduced by any interchange transaction fees or

by any issuer's reimbursement fees paid to another for charges made

by its cardholders, are in this state if the commercial domicile of

the merchant is in this state.

(9) Loan servicing fees derived from loans of another secured

by real property are in this state if the real property is located

in this state, or the real property is located both within and

outside of this state and 1 or more states if more than 50% of the

fair market value of the real property is located in this state, or

more than 50% of the fair market value of the real property is not

located in any 1 state, and the borrower is located in this state.

Loan servicing fees derived from loans of another not secured by

real property are in this state if the borrower is located in this

state. If the location of the security cannot be determined, then

loan servicing fees for servicing either the secured or the

unsecured loans of another are in this state if the lender to whom

the loan servicing service is provided is located in this state.

(10) Receipts from the sale of securities and other assets

from investment and trading activities, including, but not limited

to, interest, dividends, and gains are in this state in either of

the following circumstances:

(a) The person's customer is in this state.

(b) If the location of the person's customer cannot be

determined, both of the following:

(i) Interest, dividends, and other income from investment

assets and activities and from trading assets and activities,

including, but not limited to, investment securities; trading

account assets; federal funds; securities purchased and sold under

agreements to resell or repurchase; options; futures contracts;

forward contracts; notional principal contracts such as swaps;

equities; and foreign currency transactions are in this state if

the average value of the assets is assigned to a regular place of

business of the taxpayer within this state. Interest from federal

funds sold and purchased and from securities purchased under resale

agreements and securities sold under repurchase agreements are in

this state if the average value of the assets is assigned to a

regular place of business of the taxpayer within this state. The

amount of receipts and other income from investment assets and

activities is in this state if assets are assigned to a regular

place of business of the taxpayer within this state.

(ii) The amount of receipts from trading assets and activities,

including, but not limited to, assets and activities in the matched

book, in the arbitrage book, and foreign currency transactions, but

excluding amounts otherwise sourced in this section, are in this

state if the assets are assigned to a regular place of business of

the taxpayer within this state.

(11) Receipts from transportation services rendered by a

person subject to tax in another state are in this state and shall

be attributable to this state as follows:

(a) Except as otherwise provided in subdivisions (b) through

(e), receipts shall be proportioned based on the ratio that revenue

miles of the person in this state bear to the revenue miles of the

person everywhere.

(b) Receipts from maritime transportation services shall be

attributable to this state as follows:

(i) 50% of those receipts that either originate or terminate in

this state.

(ii) 100% of those receipts that both originate and terminate

in this state.

business activity consists of the transportation both of property

and of individuals shall be proportioned based on the total gross

receipts for passenger miles and ton mile fractions, separately

computed and individually weighted by the ratio of gross receipts

from passenger transportation to total gross receipts from all

transportation, and by the ratio of gross receipts from freight

transportation to total gross receipts from all transportation,

respectively.

(d) Receipts attributable to this state of a person whose

business activity consists of the transportation of oil by pipeline

shall be proportioned based on the ratio that the gross receipts

for the barrel miles transported in this state bear to the gross

receipts for the barrel miles transported by the person everywhere.

(e) Receipts attributable to this state of a person whose

business activities consist of the transportation of gas by

pipeline shall be proportioned based on the ratio that the gross

receipts for the 1,000 cubic feet miles transported in this state

bear to the gross receipts for the 1,000 cubic feet miles

transported by the person everywhere.

(12) For purposes of subsection (11), if a taxpayer can show

that revenue mile information is not available or cannot be

obtained without unreasonable expense to the taxpayer, receipts

attributable to this state shall be that portion of the revenue

derived from transportation services everywhere performed that the

miles of transportation services performed in this state bears to

the miles of transportation services performed everywhere. If the

department determines that the information required for the

calculations under subsection (11) are not available or cannot be

obtained without unreasonable expense to the taxpayer, the

department may use other available information that in the opinion

of the department will result in an equitable allocation of the

taxpayer's receipts to this state.

(13) Except as provided in subsections (14) through (19),

receipts from the sale of telecommunications service or mobile

telecommunications service are in this state if the customer's

place of primary use of the service is in this state. As used in

this subsection, "place of primary use" means the customer's

residential street address or primary business street address where

the customer's use of the telecommunications service primarily

occurs. For mobile telecommunications service, the customer's

residential street address or primary business street address is

the place of primary use only if it is within the licensed service

area of the customer's home service provider.

(14) Receipts from the sale of telecommunications service sold

on an individual call-by-call basis are in this state if either of

the following applies:

(a) The call both originates and terminates in this state.

(b) The call either originates or terminates in this state and

the service address is located in this state.

(15) Receipts from the sale of postpaid telecommunications

service are in this state if the origination point of the

telecommunication signal, as first identified by the service

provider's telecommunication system or as identified by information

received by the seller from its service provider if the system used

to transport telecommunication signals is not the seller's, is

located in this state.

(16) Receipts from the sale of prepaid telecommunications

service or prepaid mobile telecommunications service are in this

state if the purchaser obtains the prepaid card or similar means of

conveyance at a location in this state. Receipts from recharging a

prepaid telecommunications service or mobile telecommunications

service is in this state if the purchaser's billing information

indicates a location in this state.

(17) Receipts from the sale of private communication services

are in this state as follows:

(a) 100% of the receipts from the sale of each channel

termination point within this state.

(b) 100% of the receipts from the sale of the total channel

mileage between each termination point within this state.

a channel between 2 customer channel termination points, 1 of which

is located in this state and the other is located outside of this

state, which segments are separately charged.

(d) The receipts from the sale of service for segments with a

channel termination point located in this state and in 2 or more

other states or equivalent jurisdictions, and which segments are

not separately billed, are in this state based on a percentage

determined by dividing the number of customer channel termination

points in this state by the total number of customer channel

termination points.

(18) Receipts from the sale of billing services and ancillary

services for telecommunications service are in this state based on

the location of the purchaser's customers. If the location of the

purchaser's customers is not known or cannot be determined, the

sale of billing services and ancillary services for

telecommunications service are in this state based on the location

of the purchaser.

(19) Receipts to access a carrier's network or from the sale

of telecommunications services for resale are in this state as

follows:

(a) 100% of the receipts from access fees attributable to

intrastate telecommunications service that both originates and

terminates in this state.

(b) 50% of the receipts from access fees attributable to

interstate telecommunications service if the interstate call either

originates or terminates in this state.

charges, if the customer's service address is in this state. As

used in this subdivision, "interstate end user access line charges"

includes, but is not limited to, the surcharge approved by the

federal communications commission and levied pursuant to 47 CFR 69.

(d) Gross receipts from sales of telecommunications services

to other telecommunication service providers for resale shall be

sourced to this state using the apportionment concepts used for

non-resale receipts of telecommunications services if the

information is readily available to make that determination. If the

information is not readily available, then the taxpayer may use any

other reasonable and consistent method.

(20) Except as otherwise provided under this subsection, for a

taxpayer whose business activities include live radio or television

programming as described in subsector code 7922 of industry group

792 under the standard industrial classification code as compiled

by the United States department of labor or are included in

industry ~~groups~~ group 483, 484, 781, or 782 under the standard

industrial classification code as compiled by the United States

department of labor, or any combination of the business activities

included in those groups, media receipts are in this state and

attributable to this state only if the commercial domicile of the

customer is in this state and the customer has a direct connection

or relationship with the taxpayer pursuant to a contract under

which the media receipts are derived. For media receipts from the

sale of advertising, if the customer of that advertising is

commercially domiciled in this state and receives some of the

benefit of the sale of that advertising in this state, the media

receipts from the advertising to that customer are included in the

numerator of the apportionment factor in proportion to the extent

that the customer receives the benefit of the advertising in this

state. For purposes of this subsection, if the taxpayer is a

broadcaster and if the customer receives some of the benefit of the

advertising in this state, the media receipts for that sale of

advertising from that customer shall be proportioned based on the

ratio that the broadcaster's viewing or listening audience in this

state bears to its total viewing or listening audience everywhere.

As used in this subsection:

(a) "Media property" means motion pictures, television

programs, internet programs and websites, other audiovisual works,

and any other similar property embodying words, ideas, concepts,

images, or sound without regard to the means or methods of

distribution or the medium in which the property is embodied.

(b) "Media receipts" means receipts from the sale, license,

broadcast, transmission, distribution, exhibition, or other use of

media property and receipts from the sale of media services. Media

receipts do not include receipts from the sale of media property

that is a consumer product that is ultimately sold at retail.

media property is integral to the performance of those services.

(21) Terms used in subsections (13) through (20) have the same

meaning as those terms defined in the streamlined sales and use tax

agreement administered under the streamlined sales and use tax

administration act, 2004 PA 174, MCL 205.801 to 205.833.

(22) For purposes of this section, a borrower is considered

located in this state if the borrower's billing address is in this

state.

Sec. 403. (1) Notwithstanding any other provision in this act,

the credits provided in this section and section 405 shall be taken

before any unused carryforward allowed under section 401 and before

any other credit under this act. Except as otherwise provided in

subsection (6), for the 2008 tax year, the total combined credit

allowed under this section shall not exceed 50% of the tax

liability imposed under this act before the imposition and levy of

the surcharge under section 281. For the 2009 tax year and each tax

year after 2009, the total combined credit allowed under this

section shall not exceed 52% of the tax liability imposed under

this act before the imposition and levy of the surcharge under

section 281.

(2) Subject to the limitation in subsection (1), for the 2008

tax year a taxpayer may claim a credit against the tax imposed by

this act equal to 0.296% of the taxpayer's compensation in this

state. For the 2009 tax year and each tax year after 2009, subject

to the limitation in subsection (1), a taxpayer may claim a credit

against the tax imposed by this act equal to 0.370% of the

taxpayer's compensation in this state. For purposes of this

subsection, a taxpayer includes a person subject to the tax imposed

under chapter 2A and a person subject to the tax imposed under

chapter 2B. A professional employer organization shall not include

payments by the professional employer organization to the officers

and employees of a client of the professional employer organization

whose employment operations are managed by the professional

employer organization. A client may include payments by the

professional employer organization to the officers and employees of

the client whose employment operations are managed by the

professional employer organization.

(3) Subject to the limitation in subsection (1), for the 2008

tax year a taxpayer may claim a credit against the tax imposed by

this act equal to 2.32% multiplied by the result of subtracting the

sum of the amounts calculated under subdivisions (d), (e), and (f)

from the sum of the amounts calculated under subdivisions (a), (b),

and (c). Subject to the limitation in subsection (1), for the 2009

tax year and each tax year after 2009, a taxpayer may claim a

credit against the tax imposed by this act equal to 2.9% multiplied

by the result of subtracting the sum of the amounts calculated

under subdivisions (d), (e), and (f) from the sum of the amounts

calculated under subdivisions (a), (b), and (c):

(a) Calculate the cost, including fabrication and

installation, paid or accrued in the taxable year of tangible

assets 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, provided

that the assets are physically located in this state for use in a

business activity in this state and are not mobile tangible assets.

(b) Calculate the cost, including fabrication and

installation, paid or accrued in the taxable year of mobile

tangible assets 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.

This amount shall be multiplied by the apportionment factor for the

tax year as prescribed in chapter 3.

purchased or acquired for use outside of this state in a tax year

beginning after December 31, 2007 and subsequently transferred into

this state and purchased or acquired for use in a business

activity, calculate the federal basis used for determining gain or

loss as of the date the tangible assets were physically located in

this state for use in a business activity plus the cost of

fabrication and installation of the tangible assets in this state.

(d) ~~If the cost of tangible assets described in subdivision~~

~~(a) was paid or accrued in a tax year beginning after December 31,~~

~~2007, or before December 31, 2007 to~~ To the extent the credit is

used and at the rate at which the credit was used under former 1975

PA 228 or this act, calculate the gross proceeds or benefit derived

from the sale or other disposition of the tangible assets minus the

gain, multiplied by the apportionment factor for the taxable year

as prescribed in chapter 3, and plus the loss, multiplied by the

apportionment factor for the taxable year as prescribed in chapter

3 from the sale or other disposition reflected in federal taxable

income and minus the gain from the sale or other disposition added

to the business income tax base in section 201.

(e) ~~If the cost of tangible assets described in subdivision~~

~~(b) was paid or accrued in a tax year beginning after December 31,~~

~~2007, or before December 31, 2007 to~~ To the extent the credit is

used and at the rate at which the credit was used under former 1975

PA 228 or this act, calculate the gross proceeds or benefit derived

from the sale or other disposition of the mobile tangible assets

minus the gain and plus the loss from the sale or other disposition

reflected in federal taxable income and minus the gain from the

sale or other disposition added to the business income tax base in

section 201. This amount shall be multiplied by the apportionment

factor for the tax year as prescribed in chapter 3.

(f) ~~For assets purchased or acquired in a tax year beginning~~

~~after December 31, 2007, or before December 31, 2007 to~~ To the

extent the credit is used and at the rate at which the credit was

used under former 1975 PA 228 or this act, for assets that were

eligible for a credit under subdivision (a) or (c) and that were

transferred out of this state, calculate the federal basis used for

determining gain or loss as of the date of the transfer.

(4) For a tax year in which the amount of the credit

calculated under subsection (3) is negative, the absolute value of

that amount is added to the taxpayer's tax liability for the tax

year.

(5) A taxpayer that claims a credit under this section is not

prohibited from claiming a credit under section 405. However, the

taxpayer shall not claim a credit under this section and section

405 based on the same costs and expenses.

(6) For a taxpayer primarily engaged in furnishing electric

and gas utility service that makes capital investments in electric

and gas distribution assets for which a portion of the credit

provided under subsection (3) would be denied for the 2008 tax year

by reason of the 50% limitation of subsection (1), the 50%

limitation on the total combined credit for the 2008 tax year

provided in subsection (1) shall be increased by an amount not to

exceed the lesser of the amount of the denied credit or 50% of the

tax increase under this act accrued for financial reporting

purposes due to the elimination of the deduction under section

168(k) of the internal revenue code by the amendatory act that

added this subsection. Provided, however, that the total combined

credit allowed under this section for the 2008 tax year shall not

exceed 80% of the tax liability imposed under this act after the

imposition and levy of the surcharge under section 281.

Sec. 413. (1) Subject to ~~subsection~~ subsections (2) and (3), a

taxpayer may claim a credit against the tax imposed by this act

equal to the following:

(a) For property taxes levied after December 31, 2007, 35% of

the amount paid for property taxes on eligible personal property in

the tax year.

(b) Twenty-three percent of the amount paid for property taxes

levied on eligible telephone personal property in the 2008 tax year

and 13.5% of the amount paid for property taxes levied on eligible

telephone personal property in subsequent tax years.

the amount paid for property taxes on eligible natural gas pipeline

property in the tax year.

(2) To qualify for the credit under subsection (1), the

taxpayer shall file, if applicable, within the time prescribed each

of the following:

(a) The statement of assessable personal property prepared

pursuant to section 19 of the general property tax act, 1893 PA

206, MCL 211.19, identifying the eligible personal property or

eligible natural gas pipeline property, or both, for which the

credit under subsection (1) is claimed.

(b) The annual report filed under section 6 of 1905 PA 282,

MCL 207.6, identifying the eligible telephone personal property for

which the credit under subsection (1) is claimed.

for the eligible personal property, eligible natural gas pipeline

property, or eligible telephone property for which the credit under

subsection (1) is claimed.

(3) If a credit was claimed under this section in connection

with property that was classified but not included as industrial

personal property under section 34c of the general property tax

act, 1893 PA 206, MCL 211.34c, before the effective date of the

amendatory act that added this subsection, the credit shall be

disallowed and the taxpayer shall have an amount equal to the

credit amount previously claimed under this section added back to

the tax liability of the taxpayer in the immediately succeeding tax

year. If a credit was not claimed under this section in connection

with property that was included but not classified as industrial

personal property under section 34c of the general property tax

act, 1893 PA 206, MCL 211.34c, before the effective date of the

amendatory act that added this subsection, the credit shall be

allowed and the taxpayer may file an amended return to claim a

refund for that credit under this section to the extent allowed

under section 27a of 1941 PA 122, MCL 205.27a.

(4) ~~(3)~~ If the amount of the credit allowed under this section

exceeds the tax liability of the taxpayer for the tax year, that

excess shall be refunded.

(5) ~~(4)~~ As used in this section:

(a) "Eligible natural gas pipeline property" means natural gas

pipelines that are classified as utility personal property under

section 34c of the general property tax act, 1893 PA 206, MCL

211.34c, and are subject to regulation under the natural gas act,

15 USC 717 to 717z.

(b) "Eligible personal property" means the following:

(i) Except as otherwise provided in subparagraph (ii), personal

property that is ~~classified~~ included as industrial personal

property under section 34c of the general property tax act, 1893 PA

206, MCL 211.34c. ~~, or in the case of personal property that is~~

~~subject to 1974 PA 198, MCL 207.551 to 207.572, is situated on land~~

~~classified as industrial real property under section 34c of the~~

~~general property tax act, 1893 PA 206, MCL 211.34c.~~

(ii) Beginning December 31, 2011, eligible personal property

does not include a turbine powered by gas, steam, nuclear energy,

coal, or oil the primary purpose of which is the generation of

electricity for sale.

property of a telephone company subject to the tax levied under

1905 PA 282, MCL 207.1 to 207.21.

(d) "Property taxes" means any of the following:

(i) Taxes collected under the general property tax act, 1893 PA

206, MCL 211.1 to 211.155.

(ii) Taxes levied under 1974 PA 198, MCL 207.551 to 207.572.

(iii) Taxes levied under the obsolete property rehabilitation

act, 2000 PA 146, MCL 125.2781 to 125.2797.

(iv) Taxes levied under 1905 PA 282, MCL 207.1 to 207.21.

Sec. 433. (1) A taxpayer that is a business located and

conducting business activity within a renaissance zone may claim a

credit against the tax imposed by this act for the tax year to the

extent and for the duration provided pursuant to the Michigan

renaissance zone act, 1996 PA 376, MCL 125.2681 to 125.2696, ~~equal~~

~~to the lesser of the following~~ as follows:

(a) Except as otherwise provided under subdivision (b), for a

taxpayer located and conducting business activity in a renaissance

zone after November 30, 2002, a credit equal to the lesser of the

following:

(i) ~~(a)~~ The tax liability attributable to business activity

conducted within a renaissance zone in the tax year.

(ii) ~~(b)~~ Ten percent of adjusted services performed in a

designated renaissance zone.

(b) ~~(c)~~ For a taxpayer located and conducting business

activity in a renaissance zone before December 31 1, 2002, ~~the~~ a

credit equal to the greater of the following:

(i) The amount calculated under subdivision (a)(i) or (ii),

whichever is less.

(ii) The product of the following:

(A) (i) The credit claimed under section 39b of former 1975 PA

228 for the tax year ending in 2007.

(B) (ii) The ratio of the taxpayer's payroll in this state in

the tax year divided by the taxpayer's payroll in this state in its

tax year ending in 2007 under former 1975 PA 228.

activity factor for the tax year divided by the taxpayer's

renaissance zone business activity factor for its tax year ending

in 2007 under section 39b of former 1975 PA 228.

(2) Any portion of the taxpayer's tax liability that is

attributable to illegal activity conducted in the renaissance zone

shall not be used to calculate a credit under this section.

(3) The credit allowed under this section continues through

the tax year in which the renaissance zone designation expires.

(4) If the amount of 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 shall not be

refunded.

(5) A taxpayer that claims a credit under this section shall

not employ, pay a speaker fee to, or provide any remuneration,

compensation, or consideration to any person employed by the state,

the state administrative board created in 1921 PA 2, MCL 17.1 to

17.3, or the renaissance zone review board created in section 5 of

the renaissance zone act, 1996 PA 376, MCL ~~125.2681 to 125.2696,~~

125.2685, whose employment relates or related in any way to the

authorization or enforcement of the credit allowed under this

section for any year in which the taxpayer claims a credit under

this section and for the 3 years after the last year that a credit

is claimed.

(6) To be eligible for the credit allowed under this section,

an otherwise qualified taxpayer shall file an annual return under

this act in a format determined by the department.

(7) Any portion of the taxpayer's tax liability that is

attributable to business activity related to the operation of a

casino, and business activity that is associated or affiliated with

the operation of a casino, including, but not limited to, the

operation of a parking lot, hotel, motel, or retail store, shall

not be used to calculate a credit under this section.

(8) For purposes of this section, taxpayer includes a person

subject to the tax imposed under ~~chapters~~ chapter 2A and a person

subject to the tax imposed under chapter 2B.

(9) As used in this section:

(a) "Adjusted services performed in a designated renaissance

zone" means either of the following:

(i) Except as provided in subparagraph (ii), the sum of the

taxpayer's payroll for services performed in a designated

renaissance zone plus an amount equal to the amount deducted in

arriving at federal taxable income for the tax year for

depreciation, amortization, or immediate or accelerated write-off

for tangible property exempt under section 7ff of the general

property tax act, 1893 PA 206, MCL 211.7ff, in the tax year or, for

new property, in the immediately following tax year.

(ii) For a partnership, limited liability company, S

corporation, or individual, the amount determined under

subparagraph (i) plus the product of the following as related to the

taxpayer if greater than zero:

(A) Business income.

(B) The ratio of the taxpayer's total sales in this state

during the tax year divided by the taxpayer's total sales

everywhere during the tax year.

(b) "Casino" means a casino regulated by this state pursuant

to the Michigan gaming control and revenue act, 1996 IL 1, MCL

432.201 to 432.226.

to, or exempt from, the collection of taxes under the general

property tax act, 1893 PA 206, MCL 211.1 to ~~211.157,~~ 211.155, and

has not been subject to, or exempt from, ad valorem property taxes

levied in another state, except that receiving an exemption as

inventory property does not disqualify property.

(d) "Payroll" means total salaries and wages before deducting

any personal or dependency exemptions.

(e) "Renaissance zone" means that term as defined in the

Michigan renaissance zone act, 1996 PA 376, MCL 125.2681 to

125.2696.

(f) "Renaissance zone business activity factor" means a

fraction, the numerator of which is the ratio of the average value

of the taxpayer's property located in a designated renaissance zone

to the average value of the taxpayer's property in this state plus

the ratio of the taxpayer's payroll for services performed in a

designated renaissance zone to all of the taxpayer's payroll in

this state and the denominator of which is 2.

(g) "Tax liability attributable to business activity conducted

within a renaissance zone" means the taxpayer's tax liability

multiplied by the renaissance zone business activity factor.

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~~ for purposes of

determining the exemptions, deductions, subtractions, credits,

apportionment formula, and filing threshold 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.

Enacting section 1. This amendatory act is curative and

intended to clarify the original intent of 2007 PA 36.

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