SOURCING FOR MORTGAGE COMPANY RECEIPTS

House Bill 5151 (Substitute H-1)

Sponsor:  Rep. Steve Bieda

Committee:  Tax Policy

Revised Summary

Complete to 9-11-07

A REVISED SUMMARY OF HOUSE BILL 5151(H-1) AS REPORTED FROM COMMITTEE

The bill would amend Section 53 of the Single Business Tax Act, which describes when sales that are not sales of tangible personal property are considered to be sales in Michigan.  The bill would specify that, for tax years beginning on or after November 1, 2005, receipts derived by a mortgage company from the origination or sale of a loan secured by residential real property would be deemed a sale in the state only if one or more of the following apply:

-- The real property is located in Michigan.

-- The real property is located both withinMichigan and one or more other states and more than 50 percent of the fair market value of the real property is located inMichigan.

-- More than 50 percent of the fair market value of the real property is not located in any one state and the borrower is located inMichigan.  (A borrower would be considered to be located in Michigan if the borrower's billing address is in Michigan.)

Under the bill, a "mortgage company" would mean a person who has greater than 70 percent of its revenues, in the ordinary course of business, from the origination, sale, or servicing of residential mortgage loans.

[The provisions in the bill for mortgage companies would apply notwithstanding the current provisions in the SBT Act for deciding when a sale, other than a sale of tangible personal property, takes place in the state.  The current criteria are:  (1) the business activity is performed in Michigan; (2) the business activity is performed both in and outside the state and, based on costs of performance, a greater proportion of the business activity is performed in Michigan than is performed outside Michigan; and (3) receipts derived from services performed for planning, design, or construction activities within Michigan are deemed Michigan receipts.]

MCL 208.53

FISCAL IMPACT:

This bill would reduce SBT revenue by an estimated 0.5 million.

                                                                                           Legislative Analyst:   Chris Couch

                                                                                                   Fiscal Analyst:   Rebecca Ross

■ This analysis was prepared by nonpartisan House staff for use by House members in their deliberations, and does not constitute an official statement of legislative intent.