SB-0862, As Passed Senate, February 11, 2004                                

SUBSTITUTE FOR

SENATE BILL NO. 862

                                                                             A bill to amend 1975 PA 228, entitled                                             

"Single business tax act,"                                                  

(MCL 208.1 to 208.145) by adding section 31a.                               

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

1   Sec. 31a.  (1) For tax years that begin after December 31,                  

2   2003, a taxpayer that is a qualified start-up business that does            

3   not have net income for 2 consecutive tax years may claim a                 

4   credit against the tax imposed under this act for the second of             

5   those 2 consecutive tax years and each immediately following                

6   consecutive tax year in which the taxpayer does not have net                

7   income equal to the taxpayer's tax liability for the tax year in            

8   which the taxpayer has no net income.  If the taxpayer has net              

9   income in any of the intervening tax years, the 2 consecutive tax           

10  years without net income threshold must be met after the tax year           

11  in which the taxpayer has net income before the taxpayer may                

1   claim the credit under this section for any following tax year.             

2   A credit under this section shall not be claimed for more than a            

3   total of 5 tax years.                                                       

4       (2) A member of an affiliated group as defined in this act, a               

5   controlled group of corporations as defined in section 1563 of              

6   the internal revenue code and further described in 26 CFR                   

7   1.414(b)-1 and 1.414(c)-1 to 1.414(c)-5, or an entity under                 

8   common control as defined by the internal revenue code shall                

9   determine net income for purposes of this section on a                      

10  consolidated basis.                                                         

11      (3) As used in this section:                                                

12      (a) "Net income" means net income as determined under                       

13  generally accepted accounting principles (GAAP) excluding funds             

14  received from small business innovation research grants and small           

15  business technology transfer programs established under the small           

16  business innovation development act of 1982, Public Law 97-219,             

17  reauthorized under the small business research and development              

18  enhancement act, Public Law 102-564, and subsequently                       

19  reauthorized under the small business reauthorization act of                

20  2000, Public Law 106-554.                                                   

21      (b) "Qualified start-up business" means a business that meets               

22  all of the following criteria:                                              

23                                                                               (i) Has fewer than 25 full-time equivalent employees.                               

24      (ii) Has sales of less than $1,000,000.00 in the tax year for                

25  which the credit under this section is claimed.                             

26  (iii) Research and development make up at least 15% of its                   

27  expenses in the tax year for which the credit under this section            

1   is claimed.                                                                 

2       (iv) Is not publicly traded.                                                 

3       (c) "Research and development" means qualified research as                  

4   that term is defined in section 41(d) of the internal revenue               

5   code.