HOUSE BILL No. 5081 November 2, 1999, Introduced by Reps. Raczkowski, DeHart, Spade, Shackleton, Koetje, Pappageorge, O'Neil, Voorhees, Bishop, Ehardt and Bovin and referred to the Committee on Tax Policy. A bill to amend 1967 PA 281, entitled "Income tax act of 1967," by amending sections 520 and 522 (MCL 206.520 and 206.522), sec- tion 520 as amended by 1995 PA 245 and section 522 as amended by 1996 PA 484. THE PEOPLE OF THE STATE OF MICHIGAN ENACT: 1 Sec. 520. (1) Subject to the limitations and the defini- 2 tions in this chapter, a claimant may claim against the tax due 3 under this act for the tax year a credit for the property taxes 4 on the taxpayer's homestead deductible for federal income tax 5 purposes pursuant to section 164 of the internal revenue code, or 6 that would have been deductible if the claimant had not elected 7 the zero bracket amount or if the claimant had been subject to 8 the federal income tax. The property taxes used for the credit 03854'99 * RJA 2 1 computation shall not be greater than the amount levied for 1 tax 2 year. 3 (2) A person who rents or leases a homestead may claim a 4 similar credit computed under this section and section 522 based 5 upon 17% of the gross rent paid for tax years before the 1994 tax 6 year, or 20% of the gross rent paid for tax years after the 1993 7 tax year. A person who rents or leases a homestead subject to a 8 service charge in lieu of ad valorem taxes as provided by 9 section 15a of the state housing development authority act of 10 1966,Act No. 346 of the Public Acts of 1966, being11section 125.1415a of the Michigan Compiled Laws1966 PA 346, MCL 12 125.1415A, may claim a similar credit computed under this section 13 and section 522 based upon 10% of the gross rent paid. 14 (3) If the credit claimed under this section and section 522 15 exceeds the tax liability for the tax year or if there is no tax 16 liability for the tax year, the amount of the claim not used as 17 an offset against the tax liability shall, after examination and 18 review, be approved for payment, without interest, to the 19 claimant. In determining the amount of the payment under this 20 subsection, withholdings and other credits shall be used first to 21 offset any tax liabilities. 22 (4) If the homestead is an integral part of a multipurpose 23 or multidwelling building that is federally aided housing or 24 state aided housing, a claimant who is a senior citizen entitled 25 to a payment under subsection (2) may assign the right to that 26 payment to a mortgagor if the mortgagor reduces the rent charged 27 and collected on the claimant's homestead in an amount equal to 03854'99 * 3 1 the tax credit payment provided in this chapter. The assignment 2 of the claim is valid only if the Michigan state housing develop- 3 ment authority, by affidavit, verifies that the claimant's rent 4 has been so reduced. 5 (5) Only the renter or lessee shall claim a credit on prop- 6 erty that is rented or leased as a homestead. 7 (6) A person who discriminates in the charging or collection 8 of rent on a homestead by increasing the rent charged or col- 9 lected because the renter or lessee claims and receives a credit 10 or payment under this chapter is guilty of a misdemeanor. 11 Discrimination against a renter who claims and receives the 12 credit under this section and section 522 by a reduction of the 13 rent on the homestead of a person who does not claim and receive 14 the credit is a misdemeanor. If discriminatory rents are charged 15 or collected, each charge or collection of the higher or lower 16 payment is a separate offense. Each acceptance of a payment of 17 rent is a separate offense. 18 (7) A person who received aid to families with dependent 19 children, state family assistance, FAMILY INDEPENDENCE 20 ASSISTANCE, or state disability assistance pursuant to the social 21 welfare act,Act No. 280 of the Public Acts of 1939, as amended,22being sections 400.1 to 400.119b of the Michigan Compiled Laws23 1939 PA 280, MCL 400.1 TO 400.119B, in the tax year for which the 24 person is filing a return shall have a credit that is authorized 25 and computed under this section and section 522 reduced by an 26 amount equal to the product of the claimant's credit multiplied 27 by the quotient of the sum of the claimant's aid to families with 03854'99 * 4 1 dependent children, state family assistance, FAMILY INDEPENDENCE 2 ASSISTANCE, and state disability assistance for the tax year 3 divided by the claimant's household income. The reduction of 4 credit shall not exceed the sum of the aid to families with 5 dependent children, state family assistance, FAMILY INDEPENDENCE 6 ASSISTANCE, and state disability assistance for the tax year. 7 For the purposes of this subsection, aid to families with depen- 8 dent childrendoesAND FAMILY INDEPENDENCE ASSISTANCE DO not 9 include child support payments that offset or reduce payments 10 made to the claimant. 11 (8) A credit under subsection (1) or (2) shall be reduced by 12 10% for each claimant whose household income exceeds $73,650.00 13 and by an additional 10% for each increment of $1,000.00 of 14 household income in excess of $73,650.00. 15 (9) If the credit authorized and calculated under this sec- 16 tion and section 522 and adjusted under subsection (7) or (8) 17 does not provide to a senior citizen who rents or leases a home- 18 stead that amount attributable to rent that constitutes more than 19 40% of the household income of the senior citizen, the senior 20 citizen may claim a credit based upon the amount of household 21 income attributable to rent as provided by this section. 22 (10) A senior citizen whose gross rent paid for the tax year 23 is more than the percentage of household income specified in sub- 24 section (9) for the respective tax year may claim a credit for 25 the amount of rent paid that constitutes more than the percentage 26 of the household income of the senior citizen specified in 27 subsection (9) and that was not provided to the senior citizen by 03854'99 * 5 1 the credit computed pursuant to this section and section 522 and 2 adjusted pursuant to subsection (7) or (8). 3 (11) The department may promulgate rules to implement sub- 4 sections (9) to (16) and may prescribe a table to allow a claim- 5 ant to determine the credit provided under this section and sec- 6 tion 522 in the instruction booklet that accompanies the respec- 7 tive income tax or property tax credit forms used by claimants. 8 (12) A senior citizen may claim the credit under subsections 9 (9) to (16) on the same form as the property tax credit permitted 10 by subsection (2). The department shall adjust the forms 11 accordingly. 12 (13) A senior citizen who moves to a different rented or 13 leased homestead shall determine, for 2 tax years after the move, 14 both his or her qualification to claim a credit under subsections 15 (9) to (16) and the amount of a credit under subsections (9) to 16 (16) on the basis of the annualized final monthly rental payment 17 at his or her previous homestead, if this annualized rental is 18 less than the senior citizen's actual annual rental payments. 19 (14) For a return of less than 12 months, the claim for a 20 credit under subsections (9) to (16) shall be reduced 21 proportionately. 22 (15) The Michigan state housing development authority shall 23 report on the effect of the credit provided by subsections (9) to 24 (16) on the price of rented and leased homesteads. If the 25 authority determines that the price of rented and leased home- 26 steads has increased as a result of the credit provided by 27 subsections (9) to (16), the authority shall make recommendations 03854'99 * 6 1 to the legislature to remedy this situation. The report shall be 2 made to the chairpersons of the house and senate committees that 3 have primary responsibility for taxation legislation 2 years 4 after the credit provided by subsections (9) to (16) is in 5 effect. 6 (16)TheFOR TAX YEARS BEFORE THE 1999 TAX YEAR, THE total 7 credit allowed by this section and section 522 shall not exceed 8 $1,200.00 per year. FOR THE 1999 TAX YEAR AND TAX YEARS AFTER 9 THE 1999 TAX YEAR, THE TOTAL CREDIT ALLOWED BY THIS SECTION AND 10 SECTION 522 SHALL NOT EXCEED $1,600.00 PER YEAR. 11 Sec. 522. (1) The amount of a claim made pursuant to this 12 chapter shall be determined as follows: 13 (a) A claimant is entitled to a credit against the state 14 income tax liability equal to 60% of the amount by which the 15 property taxes on the homestead, or the credit for rental of the 16 homestead for the tax year, exceeds 3.5% of the claimant's house- 17 hold income for that tax year. 18 (b) A claimant who is a senior citizen or a paraplegic, 19 hemiplegic, or quadriplegic is entitled to a credit against the 20 state income tax liability for the amount by which the property 21 taxes on the homestead, the credit for rental of the homestead, 22 or a service charge in lieu of ad valorem taxes as provided by 23 section 15a of the state housing development authority act of 24 1966,Act No. 346 of the Public Acts of 1966, being section25125.1415a of the Michigan Compiled Laws1966 PA 346, MCL 26 125.1415A, for the tax year exceeds the percentage of the 03854'99 * 7 1 claimant's household income for that tax year computed as 2 follows: 3 4 Household income Percentage 5 Not over $3,000.00 .0% 6 Over $3,000.00 but not over $4,000.00 1.0% 7 Over $4,000.00 but not over $5,000.00 2.0% 8 Over $5,000.00 but not over $6,000.00 3.0% 9 Over $6,000.00 3.5% 10 (c) A claimant who is totally and permanently disabled is 11 entitled to a credit against the state income tax liability equal 12 to 60% of the amount by which the property taxes on the home- 13 stead, or the credit for rental of the homestead or for a service 14 charge in lieu of ad valorem taxes as provided in section 15a of 15Act No. 346 of the Public Acts of 1966THE STATE HOUSING DEVEL- 16 OPMENT AUTHORITY ACT OF 1966, 1966 PA 346, MCL 125.1415A, for the 17 tax year, exceeds the percentage of the claimant's household 18 income for that tax year based on the schedule in subdivision 19 (b). 20 (d) A claimant who is an eligible serviceperson, eligible 21 veteran, or eligible widow or widower is entitled to a credit 22 against the state income tax liability for a percentage of the 23 property taxes on the homestead for the tax year not in excess of 24 100% determined as follows: 25 (i) Divide the taxable value allowance specified in section 26 506 by the taxable value of the homestead or, if the eligible 27 serviceperson, eligible veteran, or eligible widow or widower 03854'99 * 8 1 leases or rents a homestead, divide 17% of the total annual rent 2 paid for tax years before the 1994 tax year, or 20% of the total 3 annual rent paid for tax years after the 1993 tax year on the 4 property by the property tax rate on the property. 5 (ii) Multiply the property taxes on the homestead by the 6 percentage computed in subparagraph (i). 7 (e) A claimant who is blind is entitled to a credit against 8 the state income tax liability for a percentage of the property 9 taxes on the homestead for the tax year determined as follows: 10 (i) If the taxable value of the homestead is $3,500.00 or 11 less, 100% of the property taxes. 12 (ii) If the taxable value of the homestead is more than 13 $3,500.00, the percentage that $3,500.00 bears to the taxable 14 value of the homestead. 15 (2) A person who is qualified to make a claim under more 16 than 1 classification shall elect the classification under which 17 the claim is made. 18 (3) Only 1 claimant per household for a tax year is entitled 19 to the credit, unless both the husband and wife filing a joint 20 return are blind, then each shall be considered a claimant. 21 (4) As used in this section, "totally and permanently 22 disabled" means disability as defined in section 216 of title II 23 of the social security act, 42 U.S.C. 416. 24 (5) A senior citizen who has a total household income for 25 the tax year of $6,000.00 or less and who for 1973 received a 26 senior citizen homestead exemption under former section 7c of the 27 general property tax act,Act No. 206 of the Public Acts of03854'99 * 9 118931893 PA 206, may compute the credit against the state 2 income tax liability for a percentage of the property taxes on 3 the homestead for the tax year determined as follows: 4 (a) If the taxable value of the homestead is $2,500.00 or 5 less, 100% of the property taxes. 6 (b) If the taxable value of the homestead is more than 7 $2,500.00, the percentage that $2,500.00 bears to the taxable 8 value of the homestead. 9 (6) For a return of less than 12 months, the claim shall be 10 reduced proportionately. 11 (7) The commissioner may prescribe tables that may be used 12 to determine the amount of the claim. 13 (8) The total credit allowedinBY this sectionfor each14year after December 31, 1975shall not exceed$1,200.00 per15yearTHE MAXIMUM ALLOWABLE UNDER SECTION 520(16). 16 (9) The total credit allowable under this act and part 361 17(farmland and open space preservation)of the natural resources 18 and environmental protection act,Act No. 451 of the Public Acts19of 1994, being sections 324.36101 to 324.36117 of the Michigan20Compiled Laws1994 PA 451, MCL 324.36101 TO 324.36117, shall not 21 exceed the total property tax due and payable by the claimant in 22 that year. The amount by which the credit exceeds the property 23 tax due and payable shall be deducted from the credit claimed 24 under part 361 ofAct No. 451 of the Public Acts of 1994THE 25 NATURAL RESOURCES AND ENVIRONMENTAL PROTECTION ACT, 1994 PA 451, 26 MCL 324.36101 TO 324.36117. 03854'99 * Final page. RJA