August 17, 2005, Introduced by Rep. Condino and referred to the Committee on Tax Policy.
A bill to amend 1975 PA 228, entitled
"Single business tax act,"
by amending sections 3, 9, 22a, 31, 36, 38e, and 71 (MCL 208.3,
208.9, 208.22a, 208.31, 208.36, 208.38e, and 208.71), sections 3,
31, and 71 as amended by 1999 PA 115, section 9 as amended by 2004
PA 258, section 22a as amended by 1996 PA 578, section 36 as
amended by 1995 PA 284, and section 38e as amended by 2003 PA 273,
and by adding sections 32, 79, and 79a.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
Sec. 3. (1) "Affiliated group" means 2 or more United States
corporations, 1 of which owns or controls, directly or indirectly,
80% or more of the capital stock with voting rights of the other
United States corporation or United States corporations. As used in
this subsection, "United States corporation" means a domestic
corporation as those terms are defined in section 7701(a)(3) and
(4) of the internal revenue code.
(2) "Business activity" means a transfer of legal or equitable
title to or rental of property, whether real, personal, or mixed,
tangible or intangible, or the performance of services, or a
combination thereof, made or engaged in, or caused to be made or
engaged
in, within this state, whether
in intrastate, interstate,
or foreign commerce, with the object of gain, benefit, or
advantage, whether direct or indirect, to the taxpayer or to
others, but shall not include the services rendered by an employee
to his or her employer, services as a director of a corporation, or
a casual transaction. Although an activity of a taxpayer may be
incidental to another or other of his or her business activities,
each activity shall be considered to be business engaged in within
the meaning of this act.
(3) "Business income" means federal taxable income plus the
amount of a deduction claimed under section 199 of the internal
revenue code related to domestic production activities, except that
for a person other than a corporation it means that part of federal
taxable income derived from business activity plus the amount of a
deduction claimed under section 199 of the internal revenue code
related to domestic production activities. For a partnership,
business
income includes payments and items of income and expense
which
that are attributable to business activity of the
partnership and separately reported to the partners of the
partnership.
Sec. 9. (1) "Tax base" means business income, before
apportionment or allocation as provided in chapter 3, even if zero
or negative, subject to the adjustments in this section.
(2) Add gross interest income and dividends derived from
obligations or securities of states other than Michigan, 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.
(3) Add all taxes on or measured by net income and the tax
imposed by this act to the extent the taxes were deducted in
arriving at federal taxable income.
(4) Add the following, to the extent deducted in arriving at
federal taxable income:
(a) A carryback or carryover of a net operating loss.
(b) A carryback or carryover of a capital loss.
(c) A deduction for depreciation, amortization, or immediate
or accelerated write-off related to the cost of tangible assets.
(d) A dividend paid or accrued except a dividend that
represents a reduction of premiums to policyholders of insurance
companies.
(e) A deduction or exclusion by a taxpayer due to a
classification as, or the payment of commissions or other fees to,
a domestic international sales corporation or any like special
classification the purpose of which is to reduce or postpone the
federal income tax liability. This subdivision does not apply to
the special provisions of sections 805, 809, and 815(c)(2)(A) of
the internal revenue code.
(f) All interest including amounts paid, credited, or reserved
by insurance companies as amounts necessary to fulfill the policy
and other contract liability requirements of sections 805 and 809
of the internal revenue code. Interest does not include payments or
credits made before October 1, 2005 to or on behalf of a taxpayer
by a manufacturer, distributor, or supplier of inventory to defray
any part of the taxpayer's floor plan interest, if these payments
are used by the taxpayer to reduce interest expense in determining
federal taxable income. For purposes of this section, "floor plan
interest" means interest paid that finances any part of the
taxpayer's purchase of automobile inventory from a manufacturer,
distributor, or supplier. However, amounts attributable to any
invoiced items used to provide more favorable floor plan assistance
to a taxpayer than to a person who is not a taxpayer is considered
interest paid by a manufacturer, distributor, or supplier.
(g) All royalties except for the following:
(i) On and after July 1, 1985, oil and gas royalties that are
excluded in the depletion deduction calculation under the internal
revenue code.
(ii) Cable television franchise fees described in section 622
of
part III of title VI of the communications act of 1934, 47
U.S.C.
USC 542.
(iii) Except as provided in subparagraph (iv), for the tax years
1986 and after 1986, a franchise fee as defined by section 3 of the
franchise investment law, 1974 PA 269, MCL 445.1503, in the
following amounts:
(A) For the tax years 1986, 1987, and 1988, 20% of the
franchise fee.
(B) For the tax years 1989 and 1990, 50% of the franchise fee.
(C) For the tax years 1991 and after 1991, 100% of the
franchise fee.
(iv) For the tax years ending before 1991, this subdivision
does not apply to a fee for services paid by a franchisee that,
with respect to a specific provision of a franchise agreement, a
court of competent jurisdiction, before June 5, 1985, has
determined is not a royalty payment under this act.
(v) Film rental or royalty payments paid by a theater owner to
a film distributor, a film producer, or a film distributor and
producer.
(vi) Royalties, fees, charges, or other payments or
consideration paid or incurred by radio or television broadcasters
for program matter or signals.
(vii) Royalties, fees, charges, or other payments or
consideration paid by a film distributor for copyrighted motion
picture films, program matter, or signals to a film producer.
(viii) For tax years that begin after December 31, 1993,
royalties paid by a licensee of application computer software,
operating system software, or system software pursuant to a license
agreement. As used in this subparagraph and subsection (7)(c)(vii):
(A) "Application computer software" means a set of statements
or instructions that when incorporated in a machine usable medium
is capable of causing a machine or device having information
processing capabilities to indicate, perform, or achieve a
particular business function, task, or result for the nontechnical
end user. Application computer software includes any other computer
software that does not qualify under sub-subparagraph (B) or (C).
(B) "Operating system software" means a set of statements or
instructions that when incorporated into a machine or device having
information processing capabilities is an interface between the
computer hardware and the application computer software or system
software.
(C) "System software" means a set of statements or
instructions that interacts with operating system software that is
developed, licensed, and intended for the exclusive use of data
processing professionals to build, test, manage, or maintain
application computer software for which a license agreement is
signed by the licensor and licensee at the time of the transfer of
the software and that is not transferred to the licensee as part of
or in conjunction with a sale or lease of computer hardware.
(ix) For tax years that begin after December 31, 2000,
royalties, fees, or other payments or consideration paid or
incurred by a franchisee to a franchisor to establish or maintain
the franchise relationship other than payments for the sale or
lease of inventory, equipment, fixtures, or real property at fair
rental or fair market value.
(h) A deduction for rent attributable to a lease back that
continues in effect under the former provisions of section
168(f)(8) of the internal revenue code of 1954 as that section
provided immediately before the tax reform act of 1986, Public Law
99-514, became effective or to a lease back of property to which
the amendments made by the tax reform act of 1986 do not apply as
provided in section 204 of the tax reform act of 1986.
(5) Add compensation.
(6) Add a capital gain related to business activity of
individuals to the extent excluded in arriving at federal taxable
income.
(7) Deduct the following, to the extent included in arriving
at federal taxable income:
(a) A dividend received or considered received, including the
foreign dividend gross-up provided for in the internal revenue
code.
(b) All interest except amounts paid, credited, or reserved by
an insurance company as amounts necessary to fulfill the policy and
other contract liability requirements of sections 805 and 809 of
the internal revenue code.
(c) All royalties except for the following:
(i) On and after July 1, 1985, oil and gas royalties that are
included in the depletion deduction calculation under the internal
revenue code.
(ii) Except as provided in subparagraph (iii), for the 1986 tax
year and after the 1986 tax year, a franchise fee as defined in
section 3 of the franchise investment law, 1974 PA 269, MCL
445.1503, in the following amounts:
(A) For the tax years 1986, 1987, and 1988, 20% of the
franchise fee.
(B) For the tax years 1989 and 1990, 50% of the franchise fee.
(C) For the tax years 1991 and after 1991, 100% of the
franchise fee.
(iii) For the tax years ending before 1991, this subdivision
does not apply to a fee for services paid by a franchisee that,
with respect to a specific provision of a franchise agreement, a
court of competent jurisdiction, before June 5, 1985, has
determined is not a royalty payment under this act.
(iv) Film rental or royalty payments paid by a theater owner to
a film distributor, a film producer, or a film distributor and
producer.
(v) Royalties, fees, charges, or other payments or
consideration paid or incurred by radio or television broadcasters
for program matter or signals.
(vi) Royalties, fees, charges, or other payments or
consideration paid by a film distributor for copyrighted motion
picture films, program matter, or signals to a film producer.
(vii) For tax years that begin after December 31, 1997,
royalties received by a licensor, distributor, developer, marketer,
or copyright holder of application computer software or operating
system software pursuant to a license agreement. System software is
not included within the exception under this subparagraph.
(viii) For tax years that begin after December 31, 2000,
royalties, fees, or other payments or consideration paid or
incurred by a franchisee to a franchisor to establish or maintain
the franchise relationship other than payments for the sale or
lease of inventory, equipment, fixtures, or real property at fair
rental or fair market value.
(d) Rent attributable to a lease back that continues in effect
under the former provisions of section 168(f)(8) of the internal
revenue code of 1954 as that section provided immediately before
the tax reform act of 1986, Public Law 99-514, became effective or
to a lease back of property to which the amendments made by the tax
reform act of 1986 do not apply as provided in section 204 of the
tax reform act of 1986.
(8) Deduct a capital loss not deducted in arriving at federal
taxable income in the year the loss occurred.
(9) To the extent included in federal taxable income, add the
loss or subtract the gain from the tax base that is attributable to
another entity whose business activities are taxable under this
act. or
would be taxable under this act if the business activities
were
in this state.
(10) For tax years that begin after December 31, 2004, deduct,
to the extent included in federal taxable income, income received
from either of the following:
(a) Small business innovation research grants and small
business technology transfer programs established under the small
business innovation development act of 1982, Public Law 97-219,
reauthorized under the small business research and development
enhancement act, Public Law 102-564, and subsequently reauthorized
under the small business reauthorization act of 2000, Public Law
106-554.
(b) Grants from the Michigan technology tri-corridor SBIR
emerging business fund administered by the Michigan economic
development corporation.
Sec. 22a. (1) Except as otherwise provided, from August 3,
1987 to September 30, 1987, for the tax year beginning October 1,
1987 and ending September 30, 1988, and each tax year thereafter,
the tax base and adjusted tax base of an insurance company is the
product of .25 times the insurance company's adjusted receipts as
apportioned under section 62.
(2) The tax base and adjusted tax base calculated under this
section shall not be adjusted under sections 23 and 23b.
(3) The tax calculated under this section is in lieu of all
other privilege or franchise fees or taxes imposed by any other law
of this state, except taxes on real and personal property, taxes
imposed under the general sales tax act, 1933 PA 167, MCL 205.51 to
205.78, and taxes imposed under the use tax act, 1937 PA 94, MCL
205.91 to 205.111, and except as otherwise provided in this act and
in Act
No. 218 of the Public Acts of 1956 the
insurance code of
1956, 1956 PA 218, MCL 500.100 to 500.8302.
(4) As used in this section:
(a) "Adjusted receipts" means, except as provided in
subdivision (b), the sum of all of the following:
(i) Rental and royalty receipts from a person that is not
either of the following:
(A) An affiliated insurance company.
(B) An insurance agent of the taxpayer licensed under chapter
12
of the insurance code of 1956, Act No. 218 of the Public Acts
of
1956, being sections 500.1200 to 500.1244 of the Michigan
Compiled
Laws 1956 PA 218, MCL
500.1200 to 500.1247.
(ii) Gross direct premiums received for insurance on property
or risk, deducting premiums on policies not taken and returned
premiums on canceled policies.
(iii) Receipts from administrative services only contracts with
a person who is not an affiliated insurance company or an
affiliated nonprofit corporation.
(iv) Receipts from business activity other than the business of
insurance. As used in this subparagraph, "business of insurance"
means any activity related to the sale of insurance, payment of
claims, or claims handling, on policies written by the taxpayer.
(v) Charges not including interest charges attributable to
premiums paid on a deferred or installment basis.
(vi) Receipts from servicing carrier fees received from the
Michigan auto insurance placement facility.
(b) Adjusted receipts do not include any of the following:
(i) Receipts from interest, dividends, or proceeds from the
sale of assets.
(ii) Receipts, other than receipts described in subsection
(4)(a)(i) or (ii), from an affiliated insurance company, an
affiliated nonprofit corporation, an employee of the taxpayer, or
an insurance agent of the taxpayer licensed under chapter 12 of the
insurance
code of 1956, Act No. 218 of the Public Acts of 1956,
being
sections 500.1200 to 500.1244 of the Michigan Compiled Laws
1956 PA 218, MCL 500.1200 to 500.1247.
(iii) Receipts on the sale of annuities.
(iv) Receipts on all reinsurance transactions.
(c) "Affiliated insurance company" means an insurance company
that is a member of an affiliated group with the taxpayer or if the
insurance company does not issue stock, 50% or more of the members
of that insurance company's board of directors are members of the
taxpayer's board of directors.
(d) "Affiliated nonprofit corporation" means a nonprofit
corporation, of which 80% or more of the members of the board of
directors are members of the taxpayer's board of directors.
(5) A refund for taxes paid for tax years before the 1996 tax
year shall not be paid under this section if the refund claim is
made
after June 30, 1997 and is based on this section as it exists
on
the effective date of the amendatory act that added this
subsection
existed on January 1, 1991.
Sec. 31. (1) Except as provided in subsections (5) and (6),
there is levied and imposed a specific tax upon the adjusted tax
base of every person with business activity in this state that is
allocated or apportioned to this state at the following rates for
the specified periods:
(a) Before October 1, 1994, 2.35%.
(b) After September 30, 1994 and before January 1, 1999,
2.30%.
(c) Beginning January 1, 1999 and each January 1 after 1999,
the rate under this subsection shall be reduced as provided in
subsection (5).
(2) As used in this section, "adjusted tax base" means the tax
base allocated or apportioned to this state pursuant to chapter 3
with the adjustments prescribed by sections 23 and 23b and the
exemptions prescribed by section 35. If the adjusted tax base
exceeds 50% of the sum of gross receipts for the period before
October 1, 2005 and 53% for the period beginning on and after
October 1, 2005 plus the adjustments provided in section 23b(a) to
(g), apportioned or allocated to Michigan with the apportionment
fraction calculated pursuant to chapter 3, the adjusted tax base
may, at the option of the taxpayer, be reduced by that excess. If a
taxpayer reduces the adjusted tax base under this subsection, the
taxpayer is not entitled to the adjustment provided in subsection
(4) for the same taxable year. This subsection does not apply to an
adjusted tax base under section 22a.
(3) The tax levied under this section and imposed is upon the
privilege of doing business and not upon income.
(4) In lieu of the reduction provided in subsection (2), a
person may elect to reduce the adjusted tax base by the percentage
that the compensation divided by the tax base exceeds 63% for the
period before October 1, 2005 and 66% for the period beginning on
and after October 1, 2005. The deduction shall not exceed 37% for
the period before October 1, 2005 and 34% for the period beginning
on and after October 1, 2005 of the adjusted tax base. For purposes
of computing the deduction allowed by this subsection, as effective
for the respective tax year, compensation does not include amounts
of compensation exempt from tax under section 35(1)(e). This
subsection does not apply to an adjusted tax base under section
22a.
(5) If the comprehensive annual financial report of this state
for a state fiscal year, published pursuant to section 494 of the
management and budget act, 1984 PA 431, MCL 18.1494, reports an
ending balance of more than $250,000,000.00 in the countercyclical
budget and economic stabilization fund created under section 351 of
the management and budget act, 1984 PA 431, MCL 18.1351, for that
state fiscal year, the tax rate under this section shall be reduced
by 0.1 percentage point on the January 1 following the end of the
state fiscal year for which the report was issued.
(6) The department shall annualize the rate under this section
as necessary, and the applicable annualized rate shall be imposed.
Sec. 32. For tax years that begin after December 31, 2005, a
taxpayer shall add to the taxpayer's tax liability for the tax year
an amount equal to the amount the taxpayer claimed as a credit
pursuant to chapter 361 of the natural resources and environmental
protection act, 1994 PA 451, MCL 324.36101 to 324.36117.
Sec. 36. (1) As used in this section:
(a) "Active shareholder" means a shareholder who receives at
least $10,000.00 in compensation, director's fees, or dividends
from the business, and who owns at least 5% of the outstanding
stock.
(b) "Officer" means an officer of a corporation other than a
subchapter S corporation including the chairperson of the board,
president, vice-president, secretary, and treasurer, or persons
performing similar duties.
(c) "Adjusted business income" means business income as
defined in section 3 with all of the following adjustments:
(i) Add compensation and director's fees of active shareholders
of a corporation.
(ii) Make the adjustments provided in section 9(4)(a) and (b).
(iii) Add compensation and director's fees of officers of a
corporation.
(d) "Shareholder" means a person who owns outstanding stock in
the business or a member of a business entity that files as a
corporation for federal tax purposes. An individual is considered
as the owner of the stock owned, directly or indirectly, by or for
family members as defined by section 318(a)(1) of the internal
revenue code.
(e) "Loss adjustment" means the amount by which adjusted
business income was less than zero in any of the 5 tax years
immediately preceding the tax year for which eligibility for the
credit provided by this section is being determined. In determining
the loss adjustment for a tax year, a taxpayer is not required to
use more of the taxpayer's total negative adjusted business income
than the amount needed to qualify the taxpayer for the credit under
this section. A taxpayer shall not be considered to have used any
portion of the taxpayer's negative adjusted business income amount
unless the portion used is necessary to qualify for the credit
under this section. A taxpayer shall not reuse a negative adjusted
business income amount used as a loss adjustment in a previous tax
year or use a negative adjusted business income amount from a year
in which the taxpayer did not receive the credit under this
section.
(f) "Subchapter S corporation" means a corporation electing
taxation under subchapter S of chapter 1 of subtitle A of the
internal revenue code, sections 1361 to 1379 of the internal
revenue code.
(2) The credit provided in this section shall be taken before
any other credit under this act, and is available to any person
whose gross receipts do not exceed $6,000,000.00 for tax years
commencing on or after January 1, 1984 and before January 1, 1989;
$7,000,000.00 for tax years commencing in 1989; $7,250,000.00 for
tax years commencing in 1990; $7,500,000.00 for tax years
commencing in 1991; or $10,000,000.00 for tax years commencing
after 1991, and whose adjusted business income minus the loss
adjustment does not exceed $475,000.00 for tax years commencing on
or after January 1, 1985, subject to the following:
(a) An individual, a partnership, a business entity that files
as a partnership for federal tax purposes, or a subchapter S
corporation is disqualified if the individual, any 1 partner of the
partnership, any 1 member of the business entity that files as a
partnership for federal tax purposes, or any 1 shareholder of the
subchapter S corporation receives more than $95,000.00 for tax
years commencing on or after January 1, 1985 and before January 1,
1998 or more than $115,000.00 for tax years commencing after
December 31, 1997 as a distributive share of the adjusted business
income minus the loss adjustment of the individual, the
partnership, or the subchapter S corporation.
(b) A corporation other than a subchapter S corporation is
disqualified if either of the following occur for the respective
tax year:
(i) Compensation and director's fees of a shareholder or
officer exceed $95,000.00 for tax years commencing on or after
January 1, 1985 and before January 1, 1998 or exceed $115,000.00
for tax years commencing after December 31, 1997.
(ii) The sum of the following amounts exceeds $95,000.00 for
tax years commencing on or after January 1, 1985 and before January
1, 1998 or exceeds $115,000.00 for tax years commencing after
December 31, 1997:
(A) Compensation and director's fees of a shareholder.
(B) The product of the percentage of outstanding stock owned
by that shareholder multiplied by the difference between the sum of
business income and the adjustments provided in section 9(4)(a) and
(b) minus the loss adjustment.
(c) Subject to section 36d, for a taxpayer that is eligible
for the credit under this subsection for tax years beginning after
December 31, 1997, the credit determined under this subsection
shall be reduced by the following percentages in the following
circumstances:
(i) If an individual, any 1 partner of the partnership, any 1
member of the business entity that files as a partnership for
federal tax purposes, or any 1 shareholder of the subchapter S
corporation receives as a distributive share of adjusted gross
income minus the loss adjustment of the individual, partnership,
business entity that files as a partnership for federal tax
purposes, or subchapter S corporation; if compensation and
directors' fees of a shareholder or officer of a corporation other
than a subchapter S corporation are; or if the sum of the amounts
in subdivision (b)(ii)(A) and (B) is more than $95,000.00 but less
than $100,000.00, the credit is reduced by 20%.
(ii) If an individual, any 1 partner of the partnership, any 1
member of the business entity that files as a partnership for
federal tax purposes, or any 1 shareholder of the subchapter S
corporation receives as a distributive share of adjusted gross
income minus the loss adjustment of the individual, partnership,
business entity that files as a partnership for federal tax
purposes, or subchapter S corporation; if compensation and
directors' fees of a shareholder or officer of a corporation other
than a subchapter S corporation are; or if the sum of the amounts
in subdivision (b)(ii)(A) and (B) is $100,000.00 or more but less
than $105,000.00, the credit is reduced by 40%.
(iii) If an individual, any 1 partner of the partnership, any 1
member of the business entity that files as a partnership for
federal tax purposes, or any 1 shareholder of the subchapter S
corporation receives as a distributive share of adjusted gross
income minus the loss adjustment of the individual, partnership,
business entity that files as a partnership for federal tax
purposes, or subchapter S corporation; if compensation and
directors' fees of a shareholder or officer of a corporation other
than a subchapter S corporation are; or if the sum of the amounts
in subdivision (b)(ii)(A) and (B) is $105,000.00 or more but less
than $110,000.00, the credit is reduced by 60%.
(iv) If an individual, any 1 partner of the partnership, any 1
member of the business entity that files as a partnership for
federal tax purposes, or any 1 shareholder of the subchapter S
corporation receives as a distributive share of adjusted gross
income minus the loss adjustment of the individual, partnership,
business entity that files as a partnership for federal tax
purposes, or subchapter S corporation; if compensation and
directors' fees of a shareholder or officer of a corporation other
than a subchapter S corporation are; or if the sum of the amounts
in subdivision (b)(ii)(A) and (B) is $110,000.00 or more but less
than $115,000.00, the credit is reduced by 80%.
(3) For the purposes of determining disqualification under
subsection (2), an active shareholder's share of business income
shall not be attributed to another active shareholder.
(4) A person who qualifies pursuant to subsection (2) is
allowed a credit against the tax imposed by section 31. For tax
years commencing before January 1, 1989, the credit is a percentage
reduction in tax liability. For tax years commencing on and after
January 1, 1989 and through tax years commencing in 1991, the
credit is the greater of the amount by which the tax imposed by
section 31 exceeds 4% of adjusted business income or 3% of adjusted
business income for tax years commencing after 1991 or a percentage
reduction in tax liability. However, beginning October 1, 1994, the
percentage of adjusted business income shall be 2%. The department
shall annualize the rates provided under this subsection as
necessary for tax years that end after September 30, 1994 and the
applicable annualized rate shall be imposed for those tax years.
(5) The percentage reduction provided in subsection (4) is
calculated by subtracting from 100% the percentage computed by
dividing adjusted business income by 45% of tax base.
(6) If gross receipts exceed $5,000,000.00 for tax years
commencing on or after January 1, 1984 and before January 1, 1989;
$6,000,000.00 for tax years commencing in 1989; $6,250,000.00 for
tax years commencing in 1990; $6,500,000.00 for tax years
commencing in 1991; or $9,000,000.00 for tax years commencing after
1991, the credit shall be reduced by a fraction, the numerator of
which is the amount of gross receipts over $5,000,000.00 for tax
years commencing on or after January 1, 1984 and before January 1,
1989; $6,000,000.00 for tax years commencing in 1989; $6,250,000.00
for tax years commencing in 1990; $6,500,000.00 for tax years
commencing in 1991; or $9,000,000.00 for tax years commencing after
1991, and the denominator of which is $1,000,000.00. The credit
shall not exceed 50% for tax years commencing before January 1,
1984; 90% for tax years commencing on or after January 1, 1984 and
before January 1, 1988; or 100% for tax years commencing on and
after January 1, 1988 of the tax liability imposed by section 31.
(7) An affiliated group as defined in this act, a controlled
group of corporations as defined in section 1563 of the internal
revenue
code and further described in 26 C.F.R. CFR
1.414(b)-1
and 1.414(c)-1 to 1.414(c)-5, or an entity under common control as
defined by the internal revenue code shall not take the credit
allowed by this section unless the business activities of the
entities are consolidated. For purposes of this subsection,
business activities include all activities within and outside of
this state.
(8) The department shall permit a taxpayer who elects to claim
the credit allowed by this section based on the amount by which the
tax imposed by section 31 exceeds the percentage of adjusted
business income for the tax year as determined under subsection
(4), and who is not required to reduce the credit pursuant to
subsection (2) or (6), to file and pay the tax imposed by this act
without computing the tax imposed under section 31.
(9) As used in this section, the term "corporation" includes a
business entity that files as a corporation for federal tax
purposes.
Sec. 38e. (1) A taxpayer may claim a credit against the tax
imposed by this act equal to the sum of 50% of the qualified
expenses incurred before October 1, 2005 as defined in subsection
(5)(d)(i) and (ii) and 100% of the qualified expenses incurred before
October 1, 2005 as defined in subsection (5)(d)(iii) paid by the
taxpayer in the tax year in each of the following circumstances:
(a) Except for apprentices trained under subdivision (b) or
(c), an amount not to exceed $2,000.00 for each apprentice trained
by the taxpayer in the tax year.
(b) For companies that have a classification under the North
American industrial classification system (NAICS) of 333511,
333512, 333513, 333514, or 333515 and for tax years that begin
after December 31, 2003, an amount not to exceed $4,000.00 for each
apprentice trained by the taxpayer in the tax year.
(c) For companies that have a classification under the North
American industrial classification system (NAICS) of 333511,
333512, 333513, 333514, or 333515 and for tax years that begin
after December 31, 2003, an amount not to exceed $1,000.00 for each
special apprentice trained by the taxpayer in the tax year.
(2) If the credit allowed under this section exceeds the tax
liability of the taxpayer under this act for the tax year, that
portion of the credit that exceeds the tax liability shall be
refunded.
(3) The credit allowed under this section shall be claimed on
the annual return required under section 73, or for a taxpayer that
is not required to file an annual return, the department shall
provide that the credit under this subsection may be claimed on the
C-8044 form, a successor form for persons not required to file an
annual return, or other simplified form prescribed by the
department.
(4) For each year that this credit is in effect, the
department of labor and economic growth shall prepare a report
containing information including, but not limited to, the number of
companies taking advantage of the apprenticeship credit, the number
of apprentices participating in the program, the number of
apprentices who complete a program the costs of which were the
basis of a credit under this section, the number of apprentices
that were hired by the taxpayer after the apprenticeship training
was completed for which the taxpayer claimed a credit under this
section for the costs of training that apprentice, information on
the employment status of individuals who have completed an
apprenticeship to the extent the information is available, and the
fiscal impact of the apprenticeship credit. This report shall then
be transmitted to the house tax policy and senate finance
committees and to the house and senate appropriations committees.
This report shall be due no later than the first day of March each
year.
(5) As used in this section:
(a) "Apprentice" means a person who is a resident of this
state, is 16 years of age or older but younger than 20 years of
age, has not obtained a high school diploma, is enrolled in high
school or a general education development (G.E.D.) test preparation
program, and is trained by a taxpayer through a program that meets
all of the following criteria:
(i) The program is registered with the bureau of apprenticeship
and training of the United States department of labor.
(ii) The program is provided pursuant to an apprenticeship
agreement signed by the taxpayer and the apprentice.
(iii) The program is filed with a local workforce development
board.
(iv) The minimum term in hours for the program shall be not
less than 4,000 hours.
(b) "Enrolled" means currently enrolled or expecting to enroll
after a period of less than 3 months during which the program is
not in operation and the apprentice is not enrolled.
(c) "Local workforce development board" means a board
established by the chief elected official of a local unit of
government pursuant to the job training partnership act, Public Law
97-300, 96 Stat. 1322, that has the responsibility to ensure that
the workforce needs of the employers in the geographic area
governed by the local unit of government are met.
(d) "Qualified expenses" means all of the following expenses
paid by the taxpayer in a tax year that begins after December 31,
1996 for expenses used to calculate a credit under subsection
(1)(a) and after December 31, 2003 for expenses used to calculate a
credit under subsection (1)(b) that were not paid for with funds
the taxpayer received or retained that the taxpayer would not
otherwise have received or retained and that are used for training
an apprentice:
(i) Salary and wages paid to an apprentice.
(ii) Fringe benefits and other payroll expenses paid for the
benefit of an apprentice.
(iii) Costs of classroom instruction and related expenses
identified as costs for which the taxpayer is responsible under an
apprenticeship agreement, including but not limited to tuition,
fees, and books for college level courses taken while the
apprentice is enrolled in high school.
(e) "Special apprentice" means a person who is not an
apprentice as defined by section (5)(a), is a resident of this
state, is 16 years of age or older but younger than 25 years of
age, and is trained by a taxpayer through a program that meets all
of the criteria under subdivision (a)(i) to (iv).
Sec. 71. (1) A taxpayer that reasonably expects liability for
the tax year to exceed $600.00 or adjustments under section 23 to
exceed $100,000.00 shall file an estimated return and pay an
estimated tax for each quarter of the taxpayer's tax year.
(2) For taxpayers on a calendar year basis the quarterly
returns and estimated payments shall be made by April 30, July 31,
October 31, and January 31. Taxpayers not on a calendar year basis
shall file quarterly returns and make estimated payments on the
appropriate due date which in the taxpayer's fiscal year
corresponds to the calendar year.
(3) The estimated payment made with each quarterly return of
each tax year shall be for the estimated tax base for the quarter
or 25% of the estimated annual liability. The second, third, and
fourth estimated payments in each tax year shall include
adjustments, if necessary, to correct underpayments or overpayments
from previous quarterly payments in the tax year to a revised
estimate of the annual tax liability.
(4) The interest and penalty provided by this act shall not be
assessed if any of the following occur:
(a) If the sum of the estimated payments equals at least 85%
of the liability or 1% of the gross receipts for the tax year and
the amount of each estimated payment reasonably approximates the
tax liability incurred during the quarter for which the estimated
payment was made.
(b) If the preceding year's tax liability was $20,000.00 or
less and if the taxpayer submitted 4 equal installments the sum of
which equals the previous year's tax liability.
(c) Effective for the 1 tax year of the taxpayer during which
the amendatory act that added this subdivision became effective, if
the underpayment is due to section 79a or to the changes made to
sections 3 and 36 by the amendatory act that added this
subdivision.
(5) Each estimated return shall be made on a form prescribed
by the department and shall include an estimate of the annual tax
liability and other information required by the commissioner. This
form may be combined with any other tax reporting form prescribed
by the department.
(6) With respect to a taxpayer filing an estimated tax return
for the taxpayer's first tax year of less than 12 months, the
amounts paid with each return shall be proportional to the number
of payments made in the first tax year.
(7) Payments made under this section shall be a credit against
the payment required with the annual tax return required in section
73.
(8) When the commissioner considers it necessary to insure
payment of the tax or to provide a more efficient administration of
the tax, the commissioner may require filing of the returns and
payment of the tax for other than quarterly or annual periods.
(9) A taxpayer that elects under the internal revenue code to
file an annual federal income tax return by March 1 in the year
following the taxpayer's tax year and does not make a quarterly
estimate or payment, or does not make a quarterly estimate or
payment and files a tentative annual return with a tentative
payment by January 15, in the year following the taxpayer's tax
year and a final return by April 15 in the year following the
taxpayer's tax year, shall have the same option in filing the
estimated and annual returns required by this act.
(10) Instead of the quarterly return prescribed in subsections
(1) and (2) the taxpayer may elect either of the following options:
(a) To file and pay before the sixteenth day of each month an
estimated return computed at the rate of 1% of the gross receipts
for the preceding month.
(b) To file and pay before the sixteenth day of the months
specified in subsection (2) an estimated return computed at the
rate of 1% of the gross receipts for the preceding quarter.
(11) A penalty for underpayment of an estimated tax under this
act shall not be assessed for the taxpayer's first tax year
beginning after December 31, 1999 if the taxpayer claimed a credit
under section 35a for the first time on the taxpayer's annual
return for that tax year and a penalty would not have applied if
the taxpayer had made adjustments under section 23 or 23b on that
return.
Sec. 79. A taxpayer that files a consolidated or combined
return under this act shall not claim a credit carryforward or loss
carryforward from a year in which the member from whom the credit
carryforward or loss carryforward originated did not file a return
on a consolidated or combined basis in an amount greater than the
total credit carryforward or loss carryforward that could have been
claimed by that member for the same taxable period if that member
had filed a separate return.
Sec. 79a. For tax years that begin on and after January 1,
2006, a taxpayer that files a return under this act that includes a
disregarded entity under an election pursuant to 26 CFR 301.7701-1
to 301.7701-3 or section 1361(b)(3) of the internal revenue code
shall not claim on that return a credit carryforward or loss
carryforward from a year in which the entity from whom the credit
carryforward or loss carryforward originated did not file a return
on a disregarded entity basis in an amount greater than the total
credit carryforward or loss carryforward that could have been
claimed by that entity if that entity had filed a separate return.