August 24, 2005, Introduced by Rep. Sheen and referred to the Committee on Tax Policy.
A bill to amend 1975 PA 228, entitled
"Single business tax act,"
by amending sections 4a, 31, 36, and 45a (MCL 208.4a, 208.31,
208.36, and 208.45a), section 4a as added by 2003 PA 241, sections
31 and 45a as amended by 1999 PA 115, and section 36 as amended by
1995 PA 284, and by adding section 35d.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
Sec. 4a. (1) For tax years that begin after December 31, 2006
and before January 1, 2008, compensation for purposes of section
4(3) does not include 50% of payments under health and welfare and
noninsured benefit plans for the benefit of persons who are
residents of this state and payments of fees for the administration
of health and welfare and noninsured benefit plans for the benefit
of persons who are residents of this state paid by the taxpayer in
the tax year.
(2) For purposes of section 4(3), compensation does not
include the following percentages of payments under health and
welfare and noninsured benefit plans for the benefit of persons who
are residents of this state and payments of fees for the
administration of health and welfare and noninsured benefit plans
for the benefit of persons who are residents of this state paid by
the taxpayer for the specified tax years:
(a) For tax years that begin after December 31, 2007 and
before January 1, 2009, 62.5%.
(b) For tax years that begin after December 31, 2008 and
before January 1, 2010, 75%.
(c) For tax years that begin after December 31, 2009 and
before January 1, 2011, 87.5%.
(d) For tax years that begin after December 31, 2010, 100%.
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).
(d) Beginning January 1, 2006, the rate under this subsection
shall be reduced as provided in subsection (6).
(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 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%. The
deduction shall not exceed 37% 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) Except as otherwise provided in this subsection, beginning
in calendar year 2006 and each calendar year after 2006, if the
revenue estimating conference that meets in May, as provided in
section 367b of the management and budget act, 1984 PA 431, MCL
18.1367b, determines that the amount estimated by that revenue
estimating conference for revenues under this act for that state
fiscal year exceeds the revenues under this act for the state
fiscal year immediately preceding the state fiscal year in which
the revenue estimating conference meets by $80,000,000.00 or more,
the tax rate under this section shall be reduced by 0.05 percentage
point on the January 1 immediately preceding the May in which the
revenue estimating conference met. A reduction under this
subsection shall be made after the application of subsection (5)
for the same January 1. A maximum of 4 reductions under this
subsection are allowed.
(7) (6)
The department shall annualize the rate under this
section as necessary, and the applicable annualized rate shall be
imposed.
Sec. 35d. (1) A person may claim a credit equal to the sum of
the following:
(a) For tax years that begin on or after January 1, 2006, 25%
of the property taxes paid in the tax year by the person on
industrial personal property.
(b) For tax years that begin after December 31, 2005 and
before January 1, 2007, 5% of the property taxes paid on commercial
personal property.
(c) For tax years that begin after December 31, 2006, 10% of
the property taxes paid on commercial personal property.
(2) A person that is not otherwise required to file a return
under this act may claim the credit under this section.
(3) To qualify for the credits under this section for an item
of tangible personal property, a person that is otherwise eligible
to claim the credit allowed under this section shall file within
the time required the statement of personal property described in
section 19 of the general property tax act, 1893 PA 206, MCL
211.19, separately for items of tangible personal property used
that are classified as industrial personal property and classified
as commercial personal property for the location at which the
tangible personal property that is the basis of the credit allowed
under this section is located.
(4) If the total of the credits allowed under this section
exceeds the tax liability of the person for the tax year or if
person does not have a tax liability under this act for the tax
year, the excess or the amount of the credit shall be refunded or
paid to the person. The state treasurer shall establish a reserve
account in the department to fund and provide for payment of the
amount of refunds or payments for credits under this section that
are attributable to the fiscal years ending in the tax years for
which credits are claimed.
(5) As used in this section:
(a) "Commercial personal property" means personal property
classified as commercial personal property under section 34c of the
general property tax act, 1893 PA 206, MCL 211.34c.
(b) "Industrial personal property" means personal property
classified as industrial personal property under section 34c of the
general property tax act, 1893 PA 206, MCL 211.34c.
(c) "Property taxes" means a tax levied under any of the
following acts:
(i) The general property tax act, 1893 PA 206, MCL 211.1 to
211.157.
(ii) 1974 PA 198, MCL 207.551 to 207.572.
(iii) The obsolete property rehabilitation act, 2000 PA 146, MCL
125.2781 to 125.2797.
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. 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, or a subchapter S
corporation is disqualified if the individual, any 1 partner of the
partnership, 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, 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, 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, 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, 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, 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, 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, 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, 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.
The credit under this subsection is the greater of the amount by
which the tax imposed by section 31 exceeds the following
percentage of adjusted business income for the specified tax years
or a percentage reduction in tax liability:
(a) For tax years commencing on and after January 1, 1989 and
through tax years commencing in 1991, 4%.
(b) For tax years commencing after 1991 and before October 1,
1994, 3%.
(c) Beginning October 1, 1994 and before January 1, 2006, 2%.
(d) Beginning January 1, 2006 and before January 1, 2007,
1.8%.
(e) Beginning January 1, 2007 and before January 1, 2008,
1.6%.
(f) Beginning January 1, 2008 and before January 1, 2009,
1.4%.
(g) Beginning January 1, 2009 and before January 1, 2010,
1.2%.
(h) Beginning January 1, 2010, 1.0%.
(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. 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.
(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.
Sec.
45a. (1) Except as provided in subsection (2) (3)
and
for tax years beginning after December 31, 1998 and before January
1, 2006, all of the tax base, other than the tax base derived
principally from transportation, financial, or insurance carrier
services or specifically allocated, shall be apportioned to this
state by multiplying the tax base by a percentage, which is the sum
of all of the following percentages:
(a) The property factor multiplied by 5%.
(b) The payroll factor multiplied by 5%.
(c) The sales factor multiplied by 90%.
(2) For tax years beginning after December 31, 2005, all of
the tax base, other than the tax base derived principally from
transportation, financial, or insurance carrier services or
specifically allocated, shall be apportioned to this state by
multiplying the tax base by the sales factor.
(3) (2) For tax years beginning after December 31, 1998 and
before January 1, 2000 if section 23(e) is not in effect, all of
the tax base, other than the tax base derived principally from
transportation, financial, or insurance carrier services or
specifically allocated, shall be apportioned to this state by
multiplying the tax base by a percentage, which is the sum of all
of the following percentages:
(a) The property factor multiplied by 15%.
(b) The payroll factor multiplied by 15%.
(c) The sales factor multiplied by 70%.
(4) (3) For purposes of this section, a taxpayer that has a
52- or 53-week tax year beginning not more than 7 days before
December 31 of any year is considered to have a tax year beginning
after December 31 of that year.