SB-0094, As Passed Senate, June 19, 2007

 

 

 

 

 

 

 

 

 

 

 

SENATE SUBSTITUTE FOR HOUSE SUBSTITUTE FOR

 

SENATE BILL NO. 94

 

 

 

 

 

 

 

 

 

 

 

 

 

     A bill to provide for the imposition, levy, computation,

 

collection, assessment, reporting, payment, and enforcement of

 

taxes on certain commercial, business, and financial activities; to

 

prescribe the powers and duties of public officers and state

 

departments; to provide for the inspection of certain taxpayer

 

records; to provide for interest and penalties; to provide

 

exemptions, credits, and refunds; to provide for the disposition of

 

funds; to provide for the interrelation of this act with other

 

acts; and to repeal acts and parts of acts.

 

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

 

CHAPTER 1

 

     Sec. 101. This act shall be known and may be cited as the

 

"Michigan business tax act".

 

     Sec. 103. A term used in this act and not defined differently

 

shall have the same meaning as when used in comparable context in

 

the laws of the United States relating to federal income taxes in

 

effect for the tax year unless a different meaning is clearly

 

required. A reference in this act to the internal revenue code

 

includes other provisions of the laws of the United States relating

 

to federal income taxes.

 

     Sec. 105. (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 or other ownership interest 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 that term is 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 does 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 others 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 that part of federal taxable

 

income derived from business activity. For a partnership or

 

subchapter S corporation, business income includes payments and

 

items of income and expense that are attributable to business

 

activity of the partnership or subchapter S corporation and

 

separately reported to the partners or shareholders.

 

     Sec. 107. (1) "Casual transaction" means a transaction made or

 

engaged in other than in the ordinary course of repeated and

 

successive transactions of a like character, except that a

 

transaction made or engaged in by a person that is incidental to

 

that person's regular business activity is a business activity

 

within the meaning of this act.

 

     (2) "Compensation" means all wages, salaries, fees, bonuses,

 

commissions, or other payments made in the tax year on behalf of or

 

for the benefit of employees, officers, or directors of the

 

taxpayers. Compensation includes, but is not limited to, payments

 

that are subject to or specifically exempt or excepted from

 

withholding under sections 3401 to 3406 of the internal revenue

 

code. Compensation also includes, on a cash or accrual basis

 

consistent with the taxpayer's method of accounting for federal

 

income tax purposes, payments to individuals not currently working,

 

payments to dependents and heirs of individuals based on current or

 

previous labor services rendered by those individuals, payments to

 

a pension, retirement, or profit sharing plan, and payments for

 

insurance for which employees are the beneficiaries, including

 

payments under health and welfare and noninsured benefit plans and

 

payment of fees for the administration of health and welfare and

 

noninsured benefit plans. Compensation does not include any of the

 

following:

 

     (a) Discounts on the price of the taxpayer's merchandise or

 

services sold to the taxpayer's employees, officers, or directors

 

that are not available to other customers.

 

     (b) Payments to an independent contractor.

 

     (c) Payments to state and federal unemployment compensation

 

funds.

 

     (d) The employer's portion of payments under the federal

 

insurance contributions act, chapter 21 of subtitle C of the

 

internal revenue code, 26 USC 3101 to 3128, the railroad retirement

 

tax act, chapter 22 of subtitle C of the internal revenue code, 26

 

USC 3201 to 3241, and similar social insurance programs.

 

     (e) Payments, including self-insurance payments, for worker's

 

compensation insurance or federal employers' liability act

 

insurance pursuant to 45 USC 51 to 60.

 

     (f) 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.

 

     (3) "Corporation" means a person that is a corporation under

 

the internal revenue code.

 

     (4) "Department" means the department of treasury.

 

     (5) "Detroit consumer price index" means the most

 

comprehensive index of consumer prices available for the Detroit

 

area from the United States department of labor, bureau of labor

 

statistics.

 

     Sec. 109. (1) "Employee" means an employee as defined in

 

section 3401(c) of the internal revenue code. A person from whom an

 

employer is required to withhold for federal income tax purposes is

 

prima facie considered an employee.

 

     (2) "Employer" means an employer as defined in section 3401(d)

 

of the internal revenue code. A person required to withhold for

 

federal income tax purposes is prima facie considered an employer.

 

     (3) "Federal taxable income" means taxable income as defined

 

in section 63 of the internal revenue code.

 

     (4) "Financial organization" means any association, joint

 

stock company, or corporation, other than a financial institution

 

as defined under chapter 2B, at least 90% of whose assets consist

 

of intangible personal property and at least 90% of whose gross

 

receipts consist of dividends or interest or other charges

 

resulting from the use of money or credit.

 

(5) "Foreign person" means either of the following:

 

     (a) An individual who is not a United States resident, whether

 

or not the individual is subject to taxation under the internal

 

revenue code.

 

     (b) A person formed under the laws of a foreign country or a

 

political subdivision of a foreign country, whether or not the

 

person is subject to taxation under the internal revenue code.

 

     Sec. 111. (1) "Gross receipts" means the amount received by

 

the taxpayer from any activity whether in intrastate, interstate,

 

or foreign commerce carried on for direct or indirect gain,

 

benefit, or advantage to the taxpayer or to others except for the

 

following:

 

     (a) Proceeds from sales by a principal that the taxpayer

 

collects in an agency capacity solely on behalf of the principal

 

and delivers to the principal.

 

     (b) Amounts received by the taxpayer as an agent solely on

 

behalf of the principal that are expended by the taxpayer for any

 

of the following:

 

     (i) The performance of a service by a third party for the

 

benefit of the principal that is required by law to be performed by

 

a licensed person.

 

     (ii) The performance of a service by a third party for the

 

benefit of the principal that the taxpayer has not undertaken a

 

contractual duty to perform.

 

     (iii) Principal and interest under a mortgage loan or land

 

contract, lease or rental payments, or taxes, utilities, or

 

insurance premiums relating to real or personal property owned or

 

leased by the principal.

 

     (iv) A capital asset of a type that is, or under the internal

 

revenue code will become, eligible for depreciation, amortization,

 

or accelerated cost recovery by the principal for federal income

 

tax purposes, or for real property owned or leased by the

 

principal.

 

     (v) Property not described under subparagraph (iv) that is

 

purchased by the taxpayer on behalf of the principal and that the

 

taxpayer does not take title to or use in the course of performing

 

its contractual business activities.

 

     (vi) Fees, taxes, assessments, levies, fines, penalties, or

 

other payments established by law that are paid to a governmental

 

entity and that are the legal obligation of the principal.

 

     (c) Amounts that are excluded from gross income of a foreign

 

corporation engaged in the international operation of aircraft

 

under section 883(a) of the internal revenue code.

 

     (d) Amounts received by an advertising agency used to acquire

 

advertising media time, space, production, or talent on behalf of

 

another person.

 

     (e) Notwithstanding any other provision of this section,

 

amounts received by a taxpayer that manages real property owned by

 

the taxpayer's client that are deposited into a separate account

 

kept in the name of the taxpayer's client and that are not

 

reimbursements to the taxpayer and are not indirect payments for

 

management services that the taxpayer provides to that client.

 

     (f) Proceeds from the taxpayer's transfer of an account

 

receivable if the sale that generated the account receivable was

 

included in gross receipts for federal income tax purposes. This

 

subdivision does not apply to a taxpayer that during the tax year

 

both buys and sells any receivables.

 

     (g) Proceeds from any of the following:

 

     (i) The original issue of stock or equity instruments.

 

     (ii) The original issue of debt instruments.

 

     (h) Refunds from returned merchandise.

 

     (i) Cash and in-kind discounts.

 

     (j) Trade discounts.

 

     (k) Federal, state, or local tax refunds.

 

     (l) Security deposits.

 

     (m) Payment of the principal portion of loans.

 

     (n) Value of property received in a like-kind exchange.

 

     (o) Proceeds from a sale, transaction, exchange, involuntary

 

conversion, or other disposition of tangible, intangible, or real

 

property that is a capital asset as defined in section 1221(a) of

 

the internal revenue code or land that qualifies as property used

 

in the trade or business as defined in section 1231(b) of the

 

internal revenue code, less any gain from the disposition to the

 

extent that gain is included in federal taxable income.

 

     (p) The proceeds from a policy of insurance, a settlement of a

 

claim, or a judgment in a civil action less any proceeds under this

 

subdivision that are included in federal taxable income.

 

     (q) Compensation received by a taxpayer that is a staffing

 

company for personnel leased by that staffing company. As used in

 

this subdivision:

 

     (i) "Compensation" includes all payroll tax and worker's

 

compensation costs.

 

     (ii) "Staffing company" means a taxpayer whose business

 

activities are included in industry group 736 under the standard

 

industrial classification code as compiled by the United States

 

department of labor.

 

     (2) "Insurance company" means an authorized insurer as defined

 

in section 106 of the insurance code of 1956, 1956 PA 218, MCL

 

500.106.

 

     (3) "Internal revenue code" means the United States internal

 

revenue code of 1986 in effect on January 1, 2008 or, at the option

 

of the taxpayer, in effect for the tax year.

 

     (4) "Inventory" means, except as provided in subdivision (d),

 

all of the following:

 

     (a) The stock of goods held for resale in the regular course

 

of trade of a retail or wholesale business, including electricity

 

or natural gas purchased for resale.

 

     (b) Finished goods, goods in process, and raw materials of a

 

manufacturing business.

 

     (c) Materials and supplies, including repair parts and fuel.

 

     (d) Inventory does not include either of the following:

 

     (i) Personal property under lease or principally intended for

 

lease rather than sale.

 

     (ii) Property allowed a deduction or allowance for depreciation

 

or depletion under the internal revenue code.

 

     (5) "Nonbusiness income" means all income from casual

 

transactions and all income other than business income.

 

     (6) "Officer" means an officer of a corporation other than a

 

subchapter S corporation, including all of the following:

 

     (a) The chairperson of the board.

 

     (b) The president, vice president, secretary, or treasurer of

 

the corporation or board.

 

     (c) Persons performing similar duties to persons described in

 

subdivisions (a) and (b).

 

     Sec. 113. (1) "Partner" means a partner or member of a

 

partnership.

 

     (2) "Partnership" means a person that is a partnership for

 

federal income tax purposes.

 

     (3) "Person" means an individual, firm, bank, financial

 

organization, financial institution, limited partnership, limited

 

liability partnership, copartnership, partnership, joint venture,

 

association, corporation, subchapter S corporation, limited

 

liability company, receiver, estate, trust, or any other group or

 

combination of groups acting as a unit.

 

     (4) "Purchases from other firms" means all of the following:

 

     (a) Inventory acquired during the tax year.

 

     (b) Assets acquired during the tax year of a type that are, or

 

under the internal revenue code will become, eligible for

 

depreciation, amortization, or accelerated capital cost recovery for

 

federal income tax purposes.

 

     (5) "Rent" includes a lease payment or other payment for the

 

use of any property to which the taxpayer does not have legal or

 

equitable title.

 

     (6) "Revenue mile" means the transportation for a

 

consideration of 1 net ton in weight or 1 passenger the distance of

 

1 mile.

 

     Sec. 115. (1) "Sale" or "sales" means the entire amount

 

received by the taxpayer as consideration from the following:

 

     (a) The transfer of title to, or possession of, property that

 

is stock in trade or other property of a kind that would properly

 

be included in the inventory of the taxpayer if on hand at the

 

close of the tax period or property held by the taxpayer primarily

 

for sale to customers in the ordinary course of the taxpayer's

 

trade or business.

 

     (b) The performance of services that constitute business

 

activities other than those included in subdivision (a), or any

 

combination of business activities described in this subdivision

 

and subdivision (a).

 

     (c) The rental, lease, licensing, or use of tangible or

 

intangible property that constitutes business activity.

 

     (d) Sale or sales do not include dividends, interest, and

 

royalties except to the extent earned in the ordinary course of

 

business activity.

 

     (2) "State" means any state of the United States, the District

 

of Columbia, the Commonwealth of Puerto Rico, any territory or

 

possession of the United States, and any foreign country, or a

 

political subdivision of any of the foregoing.

 

     (3) "Subchapter S corporation" means a corporation electing

 

taxation under subchapter S or chapter 1 of subtitle A of the

 

internal revenue code, sections 1361 to 1379 of the internal

 

revenue code.

 

     Sec. 117. (1) "Tax" means the tax imposed under this act,

 

including interest and penalties under this act, unless the term is

 

given a more limited meaning in the context of this act or a

 

provision of this act.

 

     (2) Except as otherwise provided under this act, "tax base"

 

means the taxpayer's gross receipts less purchases from other firms

 

before apportionment under this act. For a foreign person, tax base

 

is determined under section 205. For a financial organization, tax

 

base means the taxpayer's gross receipts less any cost of funds or

 

interest expenses. For an insurance company, tax base is determined

 

under chapter 2A. For a financial institution, tax base is

 

determined under chapter 2B.

 

     (3) "Tax year" means the calendar year, or the fiscal year

 

ending during the calendar year, upon the basis of which the tax

 

base of a taxpayer is computed under this act. If a return is made

 

for a fractional part of a year, tax year means the period for

 

which the return is made. Except for the first return required by

 

this act, a taxpayer's tax year is for the same period as is

 

covered by its federal income tax return. A person 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 of that tax year.

 

     (4) "Taxpayer" means a person liable for a tax, interest, or

 

penalty under this act.

 

     (5) "Unrelated business activity" means any business activity

 

that gives rise to unrelated taxable income as defined in the

 

internal revenue code.

 

CHAPTER 2

 

     Sec. 201. (1) Except as otherwise provided in this act and

 

except for a taxpayer that pays the tax imposed under chapter 2A or

 

2B, there is levied and imposed a specific tax at a rate of .54%.

 

     (2) The tax levied and imposed under this section is upon the

 

privilege of doing business and not upon income or property.

 

     (3) During December 2009, and during each subsequent December,

 

the department shall determine the total amount of revenue

 

collected pursuant to this act, not including any revenue collected

 

pursuant to chapter 2A, and the business income tax act for the

 

state fiscal year ending on the immediately preceding September 30.

 

If the revenue amount determined under this subsection exceeds

 

$1,560,000,000.00 adjusted annually by an amount equal to the

 

growth in the Detroit consumer price index for the immediately

 

preceding fiscal year plus 1%, then the rate established under this

 

section shall be reduced to a rate for the current tax year

 

determined by the department, in cooperation with the house and

 

senate fiscal agencies, to produce, in conjunction with the rate

 

applied under the business income tax act, an amount equal to

 

$1,560,000,000.00 adjusted annually by an amount equal to the

 

estimated growth in the Detroit consumer price index for the

 

current fiscal year as determined by the department, in cooperation

 

with the house and senate fiscal agencies, plus 1%.

 

     Sec. 203. (1) The following are exempt from the tax imposed by

 

this act:

 

     (a) The United States, this state, other states, and the

 

agencies, political subdivisions, and enterprises of the United

 

States, this state, and other states.

 

     (b) A person who is exempt from federal income tax under the

 

internal revenue code, and a partnership, limited liability

 

company, joint venture, general partnership, limited partnership,

 

unincorporated association, or other group or combination of

 

entities acting as a unit if the activities of the entity are

 

exclusively related to the charitable, educational, or other

 

purpose or function that is the basis for the exemption under the

 

internal revenue code from federal income taxation of the partners

 

or members and if all of the partners or members of the entity are

 

exempt from federal income tax under the internal revenue code,

 

except the following:

 

     (i) An organization included under section 501(c)(12) or

 

501(c)(16) of the internal revenue code.

 

     (ii) An organization exempt under section 501(c)(4) of the

 

internal revenue code that would be exempt under section 501(c)(12)

 

of the internal revenue code except that it failed to meet the

 

requirements in section 501(c)(12) that 85% or more of its income

 

consist of amounts collected from members.

 

     (iii) The adjusted tax base attributable to the activities

 

giving rise to the unrelated taxable business income of an exempt

 

person.

 

     (c) A nonprofit cooperative housing corporation. As used in

 

this subdivision, "nonprofit cooperative housing corporation" means

 

a cooperative housing corporation that is engaged in providing

 

housing services to its stockholders and members and that does not

 

pay dividends or interest on stock or membership investment but

 

that does distribute all earnings to its stockholders or members.

 

The exemption under this subdivision does not apply to a business

 

activity of a nonprofit cooperative housing corporation other than

 

providing housing services to its stockholders and members.

 

     (d) That portion of the tax base attributable to the

 

production of agricultural goods by a person whose primary activity

 

is the production of agricultural goods. "Production of

 

agricultural goods" means commercial farming, including, but not

 

limited to, cultivation of the soil; growing and harvesting of an

 

agricultural, horticultural, or floricultural commodity; dairying;

 

raising of livestock, bees, fish, fur-bearing animals, or poultry;

 

or turf or tree farming, but does not include the marketing at

 

retail of agricultural goods except for sales of nursery stock

 

grown by the seller and sold to a nursery dealer licensed under

 

section 9 of the insect pest and plant disease act, 1931 PA 189,

 

MCL 286.209.

 

     (e) Except as provided in subsection (2), a farmers'

 

cooperative corporation organized within the limitations of section

 

98 of 1931 PA 327, MCL 450.98, that was at any time exempt under

 

subdivision (b) because the corporation was exempt from federal

 

income taxes under section 521 of the internal revenue code and

 

that would continue to be exempt under section 521 of the internal

 

revenue code except for either of the following activities:

 

     (i) The corporation's repurchase from nonproducer customers of

 

portions or components of commodities the corporation markets to

 

those nonproducer customers and the corporation's subsequent

 

manufacturing or marketing of the repurchased portions or

 

components of the commodities.

 

     (ii) The corporation's incidental or emergency purchases of

 

commodities from nonproducers to facilitate the manufacturing or

 

marketing of commodities purchased from producers.

 

     (f) That portion of the tax base attributable to the direct

 

and indirect marketing activities of a farmers' cooperative

 

corporation organized within the limitations of section 98 of 1931

 

PA 327, MCL 450.98, if those marketing activities are provided on

 

behalf of the members of that corporation and are related to the

 

members' direct sales of their products to third parties or, for

 

livestock, are related to the members' direct or indirect sales of

 

that product to third parties. Marketing activities for a product

 

that is not livestock are not exempt under this subdivision if the

 

farmers' cooperative corporation takes physical possession of the

 

product. As used in this subdivision, "marketing activities" means

 

activities that include, but are not limited to, all of the

 

following:

 

     (i) Activities under the agricultural commodities marketing

 

act, 1965 PA 232, MCL 290.651 to 290.674, and the agricultural

 

marketing and bargaining act, 1972 PA 344, MCL 290.701 to 290.726.

 

     (ii) Dissemination of market information.

 

     (iii) Establishment of price and other terms of trade.

 

     (iv) Promotion.

 

     (v) Research relating to members' products.

 

     (g) That portion of the tax base attributable to the services

 

provided by an attorney-in-fact to a reciprocal insurer pursuant to

 

chapter 72 of the insurance code of 1956, 1956 PA 218, MCL 500.7200

 

to 500.7234.

 

     (h) That portion of the tax base attributable to a multiple

 

employer welfare arrangement that provides dental benefits only and

 

that has a certificate of authority under chapter 70 of the

 

insurance code of 1956, 1956 PA 218, MCL 500.7001 to 500.7090.

 

     (2) Subsection (1)(e) does not exempt a farmers' cooperative

 

corporation if the total dollar value of the farmers' cooperative

 

corporation's incidental and emergency purchases described in

 

subsection (1)(e)(ii) are equal to or greater than 5% of the

 

corporation's total purchases.

 

     (3) Except as otherwise provided in this section, a farmers'

 

cooperative corporation that is structured to allocate net earnings

 

in the form of patronage dividends as defined in section 1388 of

 

the internal revenue code to its farmer or farmer cooperative

 

corporation patrons shall exclude from its adjusted tax base the

 

revenue and expenses attributable to business transacted with its

 

farmer or farmer cooperative corporation patrons.

 

     (4) As used in subsection (1)(b), "exclusively" means that

 

term as applied for purposes of section 501(c)(3) of the internal

 

revenue code.

 

     Sec. 205. (1) A foreign person shall calculate tax base under

 

this section and, except as otherwise provided in this section, the

 

tax base of a foreign person is subject to all adjustments and

 

other provisions of this act.

 

     (2) Except as otherwise provided in this section, except for a

 

taxpayer that pays the tax imposed under chapter 2A or 2B, the tax

 

base of a foreign person includes the taxpayer's gross receipts

 

that are related to United States business activity less purchases

 

from other firms, whether or not the foreign person is subject to

 

taxation under the internal revenue code.

 

     (3) Compensation of a foreign person is total compensation

 

paid to employees, officers, and directors of the foreign person

 

for services performed in the United States.

 

     (4) Notwithstanding the provisions of subsection (3), a

 

foreign person that does not have a permanent establishment in the

 

United States and whose business activity consists of the

 

transportation of persons or property for others by motor vehicle

 

may elect for purposes of this section to calculate compensation

 

related to United States business activity by 1 of the following

 

methods:

 

     (a) Calculate compensation under subsection (3) and reduce the

 

final calculation by 50%.

 

     (b) Calculate compensation by determining total compensation

 

everywhere, apportioned to the United States by a formula, the

 

numerator of which is revenue miles traveled in the United States

 

and the denominator of which is revenue miles traveled everywhere.

 

     (5) To calculate gross receipts that are related to United

 

States business activity, a foreign person that does not have a

 

permanent establishment in the United States during the tax year or

 

that is not subject to taxation under the internal revenue code for

 

the tax year may use amounts that reasonably approximate the gross

 

receipts the person would have had had the person been subject to

 

the internal revenue code, provided the foreign person does not in

 

the ordinary course of its business maintain tax or financial

 

accounting records in accordance with the tax accounting

 

requirements of the internal revenue code. The tax base of a

 

foreign person described in this subsection shall not include gross

 

receipts from sales shipped or delivered to any purchaser within

 

the United States and for which title transfers outside the United

 

States.

 

     (6) To calculate gross receipts that are related to United

 

States business activity, a Canadian person that is subject to

 

Canadian federal income tax under the income tax act (R.S.C. 1985,

 

c. 1 (5th Supp)) may use amounts properly calculated under the

 

income tax act (R.S.C. 1985, c. 1 (5th Supp)) to reasonably

 

approximate gross receipts. Amounts calculated under this

 

subsection are presumed to reasonably approximate gross receipts

 

that are related to United States business activity. The tax base

 

of a Canadian person shall not include gross receipts from sales

 

shipped or delivered to any purchaser within the United States and

 

for which title transfers outside the United States. As used in

 

this subsection, "Canadian person" means a foreign person that does

 

not have a permanent establishment in the United States during the

 

tax year or that is not subject to taxation under the internal

 

revenue code for the tax year and is either of the following:

 

     (a) An entity formed under the laws of Canada or a province of

 

Canada.

 

     (b) An individual who is physically present in Canada in the

 

aggregate exceeding 182 days in the tax year.

 

     (7) As used in this section:

 

     (a) "Compensation" means, for a foreign person, the daily

 

compensation paid to each employee, officer, and director of the

 

foreign person multiplied by the number of days that the employee,

 

officer, or director has physical contact with the United States in

 

the tax year. Physical contact with the United States for any part

 

of a day equals 1 day.

 

     (b) "Gross receipts" means, for a foreign person, gross

 

receipts as defined in section 6 from United States business

 

activity or from sources within the United States. Gross receipts

 

includes all sales for which title transfers within the United

 

States; proceeds from all services performed within the United

 

States; and a pro rata portion of proceeds from services performed

 

both within and outside of the United States based on costs of

 

performance.

 

     (c) "Permanent establishment" means either of the following:

 

     (i) If an income tax treaty applies to the foreign person, that

 

term as defined in that income tax treaty in effect between the

 

United States and another nation.

 

     (ii) If an income tax treaty does not apply to the foreign

 

person, that term as defined in the United States model income tax

 

convention.

 

     (d) "Property" means, for a foreign person, all of the

 

taxpayer's real and tangible personal property owned or rented in

 

the United States during the tax year.

 

     (e) "United States person" means that term as defined in

 

section 7701(a)(30) of the internal revenue code.

 

     Sec. 207. (1) A taxpayer with gross receipts of more than

 

$350,000.00 but not more than $15,000,000.00 or that amount as

 

annually adjusted for inflation using the Detroit consumer price

 

index shall elect 1 of the following options:

 

     (a) Calculate its tax liability under this act.

 

     (b) Calculate its tax liability under the business income tax

 

act.

 

     (2) An election under subsection (1) shall be made every 3

 

years if the taxpayer remains eligible for the election under this

 

section.

 

     (3) A taxpayer with gross receipts equal to or less than

 

$350,000.00 shall have no tax liability and no filing requirement

 

under this act.

 

     Sec. 209. (1) An out-of-state person has nexus in this state

 

if that person engages in any of the following activities:

 

     (a) Has 1 or more employees who are residents of this state

 

conducting business activity in this state.

 

     (b) Owns, rents, leases, maintains, or has the right to use

 

and uses tangible personal or real property that is permanently or

 

temporarily physically located in this state.

 

     (c) Has employees who own, rent, lease, use, or maintain an

 

office or other establishment in this state.

 

     (d) Has agents, representatives, independent contractors,

 

brokers, or others acting on its behalf that own, rent, lease, use,

 

or maintain an office or other establishment in this state, and the

 

office or other establishment is used in the representation of the

 

out-of-state person in this state and is significantly associated

 

with the out-of-state person's ability to establish and maintain a

 

market in this state.

 

     (e) Has goods delivered to this state in vehicles it owns,

 

rents, leases, uses, or maintains or has goods delivered by a

 

related party acting as a representative of the out-of-state

 

person.

 

     (f) Regularly and systematically conducts business activity in

 

this state through its employees, agents, representatives,

 

independent contractors, brokers, or others acting on its behalf,

 

whether or not these individuals or organizations reside in this

 

state.

 

     (2) For purposes of subsection (1)(f), regular and systematic

 

business activity including, but not limited to those activities

 

listed under this subsection, exists if at least 10 days of

 

business activity occur in this state during that person's taxable

 

year. If less than 10 days of business activity occur during that

 

person's taxable year, regular and systematic business activity may

 

exist depending on the facts and circumstances of the taxpayer's

 

in-state business activity. Any of the following activities

 

conducted by the taxpayer in this state for 2 or more days within a

 

taxable year will be rebuttably presumed to constitute regular and

 

systematic business activity:

 

     (a) Soliciting sales.

 

     (b) Making repairs or providing maintenance or service to

 

property sold or to be sold.

 

     (c) Collecting current or delinquent accounts related to sales

 

of tangible personal property through assignment or otherwise.

 

     (d) Installing or supervising installation at or after

 

shipment or delivery.

 

     (e) Conducting training for employees, agents,

 

representatives, independent contractors, brokers, or others acting

 

on its behalf, or for customers or potential customers.

 

     (f) Providing customers any kind of technical assistance or

 

service, including, but not limited to, engineering assistance,

 

design service, quality control, product inspections, or similar

 

services.

 

     (g) Investigating, handling, or otherwise assisting in

 

resolving customer complaints.

 

     (h) Providing consulting services.

 

     (i) Soliciting, negotiating, or entering into franchising,

 

licensing, or similar agreements.

 

     (3) Lawyers, accountants, investment bankers, and other

 

similar professionals in this state who perform services for an

 

out-of-state person in their professional capacity shall not be

 

considered to be conducting in-state business activity on behalf of

 

the out-of-state person.

 

     (4) If none of the out-of-state person's business activities

 

in this state fall under the business activities described in

 

subsection (2) and its only contacts with this state are limited to

 

conducting any of the activities listed below, for less than 10

 

days, then those contacts will not be presumed to create nexus. If

 

an activity is listed in subdivisions (a) through (f) below but

 

also is described under subsection (2), then subsection (2) shall

 

control. If an out-of-state person's only in-state business

 

activity is listed in subdivision (g), that activity shall not be

 

considered as solicitation for the purposes of subsection (2).

 

Conducting any of the activities listed below for more than 10 days

 

does not necessarily create nexus. Whether nexus has been created

 

will depend on the facts and circumstances of the following in-

 

state business activities:

 

     (a) Meeting with in-state suppliers of goods or services.

 

     (b) In-state meeting with government representatives in their

 

official capacity.

 

     (c) Attending occasional meetings, including, but not limited

 

to, board meetings, retreats, seminars, and conferences sponsored

 

by others.

 

     (d) Holding recruiting or hiring events.

 

     (e) Advertising in this state through various media.

 

     (f) Renting customer lists to or from an in-state entity.

 

     (g) Attending or participating at a trade show at which no

 

orders for goods are taken and no sales are made.

 

     (5) Nexus shall be determined on a person-by-person basis. A

 

taxpayer that is a member of a unitary business group or a

 

consolidated taxpayer group not meeting the requirements of

 

subsections (1) through (4) shall not be deemed to have nexus with

 

this state based solely upon the in-state nexus of another member

 

of the taxpayer's unitary business group or consolidated taxpayer

 

group.

 

CHAPTER 2A

 

     Sec. 235. (1) Each insurance company and each formerly

 

authorized insurance company with respect to premiums received

 

while an insurance company in this state shall pay to the

 

department a tax calculated as the product of .010735 times the

 

insurance company's tax base.

 

     (2) The following are exempt from the tax imposed by this

 

section:

 

     (a) Beginning January 1, 2008 and after being apportioned

 

under section 51(3), the first $130,000,000.00 of disability

 

insurance premiums written in this state, other than credit

 

insurance and disability income insurance premiums, of each

 

insurance company subject to tax under this act. This exemption

 

shall be reduced by $2.00 for each $1.00 by which the insurance

 

company's gross premiums from insurance carrier services in this

 

state and outside this state exceed $180,000,000.00.

 

     (b) That portion of the tax base attributable to the services

 

provided by an attorney-in-fact to a reciprocal insurer pursuant to

 

chapter 72 of the insurance code of 1956, 1956 PA 218, MCL 500.7200

 

to 500.7234.

 

     (c) For tax years that begin after December 31, 2006, that

 

portion of the tax base attributable to a multiple employer welfare

 

arrangement that provides dental benefits only and that has a

 

certificate of authority under chapter 70 of the insurance code of

 

1956, 1956 PA 218, MCL 500.7001 to 500.7090.

 

     Sec. 236. (1) Except as otherwise provided in this section,

 

the tax base of an insurance company is the insurance company's

 

adjusted receipts as apportioned under subsection (3).

 

     (2) The tax calculated on an insurance company under this

 

chapter is in lieu of all other privilege or franchise fees or

 

taxes, income taxes, or other taxes imposed by this act or any

 

other law of this state, except taxes levied on real and personal

 

property and except as otherwise provided in the insurance code of

 

1956, 1956 PA 218, MCL 500.100 to 500.8302.

 

     (3) The tax base of an insurance company doing business both

 

within and outside of this state or partly within and outside of

 

this state shall be that portion of the tax base of the taxpayer

 

that the gross direct premiums received for insurance upon property

 

or risk in this state, deducting premiums upon policies not taken

 

and returned premiums on canceled policies from Michigan, bears to

 

the gross direct premiums received for insurance upon property or

 

risk, deducting premiums upon policies not taken and returned

 

premiums on canceled policies, everywhere.

 

     (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, 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 pursuant to chapter 33

 

of the insurance code of 1956, 1956 PA 218, MCL 500.3301 to

 

500.3390.

 

     (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, 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.

 

     Sec. 237. (1) An insurance company may claim a credit against

 

the tax imposed under this act in the following amounts, but may

 

not exceed the limitations provided in this section:

 

     (a) Amounts paid to the Michigan worker's compensation

 

placement facility pursuant to chapter 23 of the insurance code of

 

1956, 1956 PA 218, MCL 500.2301 to 500.2352.

 

     (b) Amounts paid to the Michigan basic property insurance

 

association pursuant to chapter 29 of the insurance code of 1956,

 

1956 PA 218, MCL 500.2901 to 500.2954.

 

     (c) Amounts paid to the Michigan automobile insurance

 

placement facility pursuant to chapter 33 of the insurance code of

 

1956, 1956 PA 218, MCL 500.3301 to 500.3390.

 

     (d) Amounts paid to the property and casualty guaranty

 

association pursuant to chapter 79 of the insurance code of 1956,

 

1956 PA 218, MCL 500.7901 to 500.7949.

 

     (e) Amounts paid to the Michigan life and health guaranty

 

association pursuant to chapter 77 of the insurance code of 1956,

 

1956 PA 218, MCL 500.7701 to 500.7780.

 

     (2) For each tax year, the total credit provided in subsection

 

(1) for all insurance companies shall not exceed the product of the

 

remainder obtained by deducting the sum of the statutory amount

 

certified by the director of management and budget in 2007 pursuant

 

to section 22c(3) of former 1975 PA 228, plus the credits allowed

 

under section 239 from the total tax liability of domestic

 

insurance companies under this act but before applying any credits

 

multiplied by a fraction the numerator of which is the total

 

assessments paid by all insurance companies to the associations and

 

facilities described in subsection (1) and the denominator of which

 

is the total assessments paid by domestic insurance companies to

 

the associations and facilities described in subsection (1). The

 

statutory amount certified by the director of management and budget

 

in 2007 pursuant to section 22c(3) of former 1975 PA 228 subtrahend

 

shall be adjusted annually in proportion to the change in total

 

general fund/general purpose revenues for the immediately preceding

 

year, as certified by the director of management and budget.

 

     (3) For each tax year, the credit for each insurance company

 

shall not exceed an amount equal to the product of the total credit

 

limitation calculated under subsection (2) multiplied by a fraction

 

the numerator of which is the insurance company's total assessments

 

paid to the associations and facilities described in subsection (1)

 

and the denominator of which is the total assessments paid by all

 

insurance companies to the associations and facilities described in

 

subsection (1).

 

     (4) The tax liability and assessments of an insurance company

 

from the immediately preceding tax year shall be used in

 

calculating the credits allowed under this section for each tax

 

year.

 

     (5) Not later than June 30 of each year after 2007, the state

 

treasurer shall certify the amounts needed to calculate the credits

 

allowed under this section for the insurance company tax year

 

ending in that calendar year.

 

     Sec. 239. An insurance company shall be allowed a credit

 

against the tax imposed under this act in an amount equal to 50% of

 

the examination fees paid by the insurance company during the tax

 

year pursuant to section 224 of the insurance code of 1956, 1956 PA

 

218, MCL 500.224.

 

     Sec. 241. (1) For amounts paid pursuant to section 352 of the

 

worker's disability compensation act of 1969, 1969 PA 317, MCL

 

418.352, an insurance company subject to the worker's disability

 

compensation act of 1969, 1969 PA 317, MCL 418.101 to 418.941, may

 

claim a credit against the tax imposed under this act for the tax

 

year in an amount equal to the amount paid during that tax year by

 

the insurance company pursuant to section 352 of the worker's

 

disability compensation act of 1969, 1969 PA 317, MCL 418.352, as

 

certified by the director of the bureau of worker's disability

 

compensation pursuant to section 391(6) of the worker's disability

 

compensation act of 1969, 1969 PA 317, MCL 418.391.

 

     (2) An insurance company claiming a credit under this section

 

may claim a portion of the credit allowed under this section equal

 

to the payments made during a calendar quarter pursuant to section

 

352 of the worker's disability compensation act of 1969, 1969 PA

 

317, MCL 418.352, against the estimated tax payments made under

 

section 501. Any credit in excess of an estimated payment shall be

 

refunded to the insurance company on a quarterly basis within 60

 

calendar days after receipt of a properly completed estimated tax

 

return. Any increase or decrease in the amount claimed for payments

 

made by the insurance company shall be reflected in the amount of

 

the credit taken for the calendar quarter in which the amount of

 

the adjustment is finalized.

 

     (3) The credit under this section is in addition to any other

 

credits the insurance company is eligible for under this act.

 

     (4) Any amount of the credit under this section that is in

 

excess of the tax liability of the insurance company for the tax

 

year shall be refunded, without interest, by the department to the

 

insurance company within 60 calendar days of receipt of a properly

 

completed annual return required under this act.

 

     Sec. 243. (1) An insurance company is subject to the tax under

 

this act or section 476a of the insurance code of 1956, 1956 PA

 

218, MCL 500.476a, if applicable, whichever is greater.

 

     (2) An insurance company's tax year is the calendar year.

 

     (3) An insurance company shall file the annual return required

 

under this act before the March 2 immediately succeeding the end of

 

the tax year.

 

     (4) For the purpose of calculating an estimated payment

 

required under section 501, the greater of the amount of tax

 

imposed on an insurance company under this act or under section

 

476a of the insurance code of 1956, 1956 PA 218, MCL 500.476a,

 

shall be considered the insurance company's tax liability for the

 

immediately preceding tax year.

 

     (5) The requirements of section 28(1)(f) of 1941 PA 122, MCL

 

205.28, that prohibit an employee or authorized representative of,

 

a former employee or authorized representative of, or anyone

 

connected with the department from divulging any facts or

 

information obtained in connection with the administration of a

 

tax, do not apply to disclosure of a tax return required under this

 

section.

 

CHAPTER 2B

 

     Sec. 261. As used in this chapter:

 

     (a) "Billing address" means the location indicated in the

 

books and records of the financial institution on the first day of

 

the tax year or on a later date in the tax year when the customer

 

relationship began as the address where any notice, statement, or

 

bill relating to a customer's account is mailed.

 

     (b) "Borrower is located in this state" or "credit card holder

 

is located in this state" means a borrower, other than a credit

 

card holder, that is engaged in a trade or business which maintains

 

its commercial domicile in this state, or a borrower that is not

 

engaged in a trade or business or a credit card holder whose

 

billing address is in this state.

 

     (c) "Commercial domicile" means the headquarters of the trade

 

or business, that is the place from which the trade or business is

 

principally managed and directed, or if a financial institution is

 

organized under the laws of a foreign country, of the commonwealth

 

of Puerto Rico, or any territory or possession of the United

 

States, such financial institution's commercial domicile shall be

 

deemed for the purposes of this chapter to be the state of the

 

United States or the District of Columbia from which such financial

 

institution's trade or business in the United States is principally

 

managed and directed. It shall be presumed, subject to rebuttal,

 

that the location from which the financial institution's trade or

 

business is principally managed and directed is the state of the

 

United States or the District of Columbia to which the greatest

 

number of employees are regularly connected or out of which they

 

are working, irrespective of where the services of such employees

 

are performed, as of the last day of the tax year.

 

     (d) "Credit card" means a credit, travel, or entertainment

 

card.

 

     (e) "Credit card issuer's reimbursement fee" means the fee a

 

financial institution receives from a merchant's bank because 1 of

 

the persons to whom the financial institution has issued a credit

 

card has charged merchandise or services to the credit card.

 

     (f) "Financial institution" means any of the following:

 

     (i) A bank holding company, a national bank, a state chartered

 

bank, an office of thrift supervision chartered bank or thrift

 

institution, a savings and loan holding company, or a credit union.

 

     (ii) Any entity with at least 90% of its gross receipts derived

 

from any combination of interest, financial services fees, leasing

 

fees, or gross proceeds from the sale or brokerage of loans and

 

investments.

 

     (iii) Any affiliate or subsidiary of an entity described in

 

subparagraph (i) or (ii).

 

     (g) "Gross business" means the sum of the following:

 

     (i) Fees, commissions, or other compensation for financial

 

services.

 

     (ii) Gross proceeds from trading in stocks, bonds, or other

 

securities.

 

     (iii) Interest charged to customers for carrying debit balances

 

of margin accounts, without deduction of any costs incurred in

 

carrying the accounts.

 

     (iv) Interest and dividends received.

 

     (v) Any other gross income resulting from the operation as a

 

financial institution.

 

     (h) "Loan" means any extension of credit resulting from direct

 

negotiations between the financial institution and its customer, or

 

the purchase, in whole or in part, of such extension of credit from

 

another. Loans include participations, syndications, and leases

 

treated as loans for federal income tax purposes. Loans shall not

 

include properties treated as loans under section 595 of the

 

internal revenue code, futures or forward contracts, options,

 

notional principal contracts such as swaps, credit card

 

receivables, including purchased credit card relationships, non-

 

interest-bearing balances due from depository institutions, cash

 

items in the process of collection, federal funds sold, securities

 

purchased under agreements to resell, assets held in a trading

 

account, securities, interests in a real estate mortgage investment

 

conduit, or other mortgage-backed or asset-backed security, and

 

other similar items.

 

     (i) "Loan secured by real property" means that 50% or more of

 

the aggregate value of the collateral used to secure a loan or

 

other obligation, when valued at fair market value as of the time

 

the original loan or obligation was incurred, was real property.

 

     (j) "Merchant discount" means the fee or negotiated discount

 

charged to a merchant by the financial institution for the

 

privilege of participating in a program whereby a credit card is

 

accepted in payment for merchandise or services sold to the credit

 

card holder.

 

     (k) "Michigan obligations" means a bond, note, or other

 

obligation issued by a governmental unit described in section 3 of

 

the shared credit rating act, 1985 PA 227, MCL 141.1053.

 

     (l) "Participation" means an extension of credit in which an

 

undivided ownership interest is held on a pro rata basis in a

 

single loan or pool of loans and related collateral. In a loan

 

participation, the credit originator initially makes the loan and

 

then subsequently resells all or a portion of it to other lenders.

 

The participation may or may not be known to the borrower.

 

     (m) "Principal base of operation", with respect to

 

transportation property, means the place of more or less permanent

 

nature from which said property is regularly directed or

 

controlled. With respect to an employee, the principal base of

 

operations means the place of more or less permanent nature from

 

which the employee regularly does any of the following:

 

     (i) Starts his or her work and to which he or she customarily

 

returns in order to receive instructions from his or her employer.

 

     (ii) Communicates with his or her customers or other persons.

 

     (iii) Performs any other functions necessary to the exercise of

 

his or her trade or profession at some other point or points.

 

     (n) "Real property owned" and "tangible personal property

 

owned" mean real and tangible personal property respectively on

 

which the financial institution may claim depreciation for federal

 

income tax purposes or to which the financial institution holds

 

legal title and on which no other person may claim depreciation for

 

federal income tax purposes or could claim depreciation if subject

 

to federal income tax. Real and tangible personal properties do not

 

include coin, currency, or property acquired in lieu of or pursuant

 

to a foreclosure.

 

     (o) "Regular place of business" means an office at which the

 

financial institution carries on its business in a regular and

 

systematic manner and which is continuously maintained, occupied,

 

and used by employees of the financial institution. The financial

 

institution shall have the burden of proving that an investment

 

asset or activity or trading asset or activity was properly

 

assigned to a regular place of business outside of this state by

 

demonstrating that the day-to-day decisions regarding the asset or

 

activity occurred at a regular place of business outside this

 

state. Where the day-to-day decisions regarding an investment asset

 

or activity or trading asset or activity occur at more than 1

 

regular place of business and 1 such regular place of business is

 

in this state and 1 such regular place of business is outside this

 

state, such asset or activity shall be considered to be located at

 

the regular place of business of the financial institution where

 

the investment or trading policies or guidelines with respect to

 

the asset or activity are established. Unless the financial

 

institution demonstrates to the contrary, such policies and

 

guidelines shall be presumed to be established at the commercial

 

domicile of the financial institution.

 

     (p) "Rolling stock" means railroad freight or passenger cars,

 

locomotives, or other rail cars.

 

     (q) "Syndication" means an extension of credit in which 2 or

 

more persons finance the credit and each person is at risk only up

 

to a specified percentage of the total extension of the credit or

 

up to a specified dollar amount.

 

     (r) "Transportation property" means vehicles and vessels

 

capable of moving under their own power, such as aircraft, trains,

 

water vessels, and motor vehicles, as well as any equipment or

 

containers attached to such property, such as rolling stock,

 

barges, or trailers.

 

     (s) "United States obligations" means all obligations of the

 

United States exempt from taxation under 31 USC 3124(a) or exempt

 

under the United States constitution or any federal statute,

 

including the obligations of any instrumentality or agency of the

 

United States that are exempt from state or local taxation under

 

the United States constitution or any statute of the United States.

 

     Sec. 263. (1) Every financial institution with business

 

activity in this state and with nexus in this state as determined

 

under section 209 is subject to a franchise tax. The franchise tax

 

is imposed upon the tax base of the financial institution as

 

determined under section 265 after allocation or apportionment to

 

this state, at the rate of 0.225%.

 

     (2) The tax under this chapter is in lieu of the tax levied

 

and imposed under chapter 2 of this act and the business income tax

 

act.

 

     Sec. 265. (1) For a financial institution, tax base means the

 

financial institution's net capital. Net capital means equity

 

capital as computed in accordance with generally accepted

 

accounting principles less goodwill as determined in accordance

 

with generally accepted accounting principles and less the book

 

value of United States obligations and Michigan obligations. If the

 

financial institution does not maintain its books and records in

 

accordance with generally accepted accounting principles, net

 

capital shall be computed in accordance with the books and records

 

used by the financial institution, so long as the method fairly

 

reflects the financial institution's net capital for purposes of

 

the tax levied by this chapter.

 

     (2) Net capital shall be determined by adding the financial

 

institution's net capital for the current tax year and preceding 4

 

calendar years and dividing the resulting sum by 5. If a financial

 

institution has not been in existence for a period of 5 calendar

 

years, net capital shall be determined by adding together the

 

financial institution's net capital for the number of calendar

 

years the financial institution has been in existence and dividing

 

the resulting sum by the number of years the financial institution

 

has been in existence. For purposes of this section, a partial year

 

shall be treated as a full year.

 

     (3) For purposes of this section, each of the following

 

applies:

 

     (a) A change in identity, form, or place of organization of 1

 

financial institution shall be treated as if a single financial

 

institution had been in existence for the entire tax year in which

 

the change occurred and each tax year after the change.

 

     (b) The combination of 2 or more financial institutions into 1

 

shall be treated as if the constituent financial institutions had

 

been a single financial institution in existence for the entire tax

 

year in which the combination occurred and each tax year after the

 

combination, and the book values and deductions for United States

 

obligations and Michigan obligations of the constituent

 

institutions shall be combined. A combination shall include any

 

acquisition required to be accounted for by the surviving financial

 

institution in accordance with generally accepted accounting

 

principles or a statutory merger or consolidation.

 

     (c) The combination of 1 or more financial institutions and 1

 

or more savings and loan associations taxable under laws of this

 

state into a single financial institution shall be treated for the

 

taxable year in which the combination occurred as if the single

 

financial institution had been in existence for the entire tax year

 

and each tax year after the combination, and the book values and

 

deductions for United States obligations and Michigan obligations

 

of the financial institution and the equivalent for a savings and

 

loan association shall be combined. The conversion of a savings and

 

loan association taxable under the laws of this state into a

 

financial institution shall be treated for the tax year in which

 

the conversion occurred as if the savings and loan association had

 

been a financial institution for the entire tax year in which the

 

conversion occurred and each tax year after the conversion, and the

 

book values and deductions for United States obligations and

 

Michigan obligations which are the equivalent for a savings and

 

loan association shall be used. The savings and loan association

 

shall not be relieved of the responsibilities of filing and paying

 

tax under the laws of this state for tax years prior to the year of

 

any combination or conversion. Notwithstanding any other provision

 

of this chapter, the financial institution resulting from a

 

combination with or conversion of a savings and loan association

 

shall receive a credit on the franchise tax return equal to the

 

amount of tax paid under the laws of this state for the assessment

 

date occurring within the tax year during which the combination or

 

conversion takes place for franchise tax purposes.

 

     Sec. 267. (1) Except as otherwise provided under this chapter,

 

the tax base of a financial institution whose business activities

 

are confined solely to this state shall be allocated to this state.

 

The tax base of a financial institution whose business activities

 

are both within and outside this state shall apportion its tax base

 

to this state by multiplying the tax base by the gross business

 

factor.

 

     (2) The gross business factor is a fraction, the numerator of

 

which is the financial institution's total gross business in this

 

state during the tax year and the denominator of which is the total

 

gross business everywhere during the tax year.

 

     Sec. 269. (1) Gross business of the financial institution in

 

this state is determined as follows:

 

     (a) Receipts from credit card receivables including without

 

limitation interest and fees or penalties in the nature of interest

 

from credit card receivables and receipts from fees charged to

 

credit card holders such as annual fees are in this state if the

 

billing address of the credit card holder is located in this state.

 

     (b) Credit card issuer's reimbursement fees are in this state

 

if the billing address of the credit card holder is located in this

 

state.

 

     (c) Receipts from merchant discounts are in this state if the

 

commercial domicile of the merchant is in this state.

 

     (d) Loan servicing fees are in this state under any of the

 

following circumstances:

 

     (i) For a loan secured by real property, if the real property

 

for which the loan is secured is in this state.

 

     (ii) For a loan secured by real property, if the real property

 

for which the loan is secured is located both within and without

 

this state and 1 or more other states and more than 50% of the fair

 

market value of the real property is located in this state.

 

     (iii) For a loan secured by real property, if more than 50% of

 

the fair market value of the real property for which the loan is

 

secured is not located within any 1 state but the borrower is

 

located in this state.

 

     (iv) The borrower is located in this state.

 

     (e) Receipts from services are in this state if the service is

 

performed in this state or the service is performed both within and

 

without this state and based on cost of performance the greater

 

proportion of business activity is performed in this state.

 

     (f) Receipts from investment assets and activities and trading

 

assets and activities are in this state if the assets are assigned

 

to a regular place of business of the financial institution within

 

this state.

 

     (g) Interest charged to customers for carrying debit balances

 

on margin accounts without deduction of any costs incurred in

 

carrying the accounts is in this state if the customer is located

 

in this state.

 

     (h) Interest from loans secured by real property is in this

 

state if the property is located in this state, if the property is

 

located both within this state and 1 or more other states and more

 

than 50% of the fair market value of the real property is located

 

in this state, and if more than 50% of the fair market value of the

 

real property is not located within any 1 state but the borrower is

 

located in this state.

 

     (i) Interest from loans not secured by real property is in

 

this state if the borrower is located in this state.

 

     (j) Interest and dividends from investment assets and

 

activities are in this state if the average value of the assets is

 

assigned to a regular place of business of the financial

 

institution within this state.

 

     (k) Interest from federal funds sold and purchased and from

 

securities purchased under resale agreements and securities sold

 

under repurchase agreements is in this state if the agreements are

 

assigned to a regular place of business of the financial

 

institution within this state.

 

     (l) Interest and dividends from trading assets and activities

 

are in this state if the value of the traded assets is assigned to

 

a regular place of business of the financial institution within

 

this state.

 

     (m) Gross proceeds from the sale of loans secured by real

 

property are in this state if the property is in this state, if the

 

property is located both within this state and 1 or more other

 

states and more than 50% of the fair market value of the real

 

property is located within this state, or if more than 50% of the

 

fair market value of the real property is not located in any 1

 

state, but the borrower is located in this state.

 

     (n) Gross proceeds from the sale of loans not secured by real

 

property are in this state if the borrower is located in this

 

state.

 

     (o) Receipts from the lease of real property are in this state

 

if the property is located in this state.

 

     (q) Receipts from the lease of tangible personal property are

 

in this state if the property is located in this state when it is

 

first placed in service by the lessee.

 

     (r) Receipts from the lease of transportation of tangible

 

personal property are in this state if the property is used in this

 

state or if the extent of use of the property within this state

 

cannot be determined but the property has its principal base of

 

operations within this state.

 

     (2) For purposes of this section:

 

     (a) The value of real property owned by the financial

 

institution and tangible personal property owned by the financial

 

institution is the original cost or other basis of such property

 

for federal income tax purposes without regard to depletion,

 

depreciation, or amortization.

 

     (b) Loans are valued at their outstanding principal balance,

 

without regard to any reserve for bad debts. If a loan is charged

 

off in whole or in part for federal income tax purposes, the

 

portion of the loan charged off is not outstanding. A specifically

 

allocated reserve established pursuant to regulatory or financial

 

accounting guidelines which are treated as charged off for federal

 

income tax purposes shall be treated as charged off for purposes of

 

this chapter.

 

     (c) Credit card receivables are valued at their outstanding

 

principal balance, without regard to any reserve for bad debts. If

 

a credit card receivable is charged off in whole or in part for

 

federal income tax purposes, the portion of the receivable charged

 

off is not outstanding.

 

     (d) The average value of property owned by a financial

 

institution shall be computed on an annual basis by adding the

 

value of the property on the first day of the tax year and the

 

value on the last day of the tax year and dividing the sum by 2. If

 

averaging on this basis does not properly reflect average value,

 

the department may require averaging on a more frequent basis. The

 

financial institution may elect to average on a more frequent

 

basis. If required by the department to average on a more frequent

 

basis or if the financial institution elects to average on a more

 

frequent basis, the same method of valuation must be used

 

consistently by the financial institution with respect to property

 

within and without this state and on all subsequent returns unless

 

the financial institution receives prior permission from the

 

department or the department requires a different method of

 

determining average value.

 

CHAPTER 3

 

     Sec. 301. (1) Except as otherwise provided in this chapter,

 

the tax base of the taxpayer whose business activities are confined

 

solely to this state shall be allocated to this state.

 

     (2) The tax base of a taxpayer whose business activities are

 

taxable both within and outside of this state is taxable in another

 

state in either of the following circumstances:

 

     (a) The taxpayer is subject to a business privilege tax, a net

 

income tax, a franchise tax measured by net income, a franchise tax

 

for the privilege of doing business, or a corporate stock tax or a

 

tax of the type imposed under this act.

 

     (b) The other state has jurisdiction to subject the taxpayer

 

to 1 or more of the taxes listed in subdivision (a) regardless of

 

whether the state does or does not subject the taxpayer to the tax.

 

     Sec. 302. All of the tax base, other than the tax base derived

 

principally from transportation or financial services for a

 

financial organization or specifically allocated, shall be

 

apportioned to this state by multiplying the tax base by the sales

 

factor.

 

     Sec. 303. (1) Except as otherwise provided in subsection (2)

 

and section 305, the sales factor is a fraction, the numerator of

 

which is the sales of the taxpayer in this state during the tax

 

year and the denominator of which is the total sales of the

 

taxpayer everywhere during the tax year.

 

     (2) The sales factor for a foreign person is a fraction, the

 

numerator of which is the total sales of the taxpayer in this state

 

during the tax year and the denominator of which is the total sales

 

of the taxpayer in the United States during the tax year.

 

     (3) Sales of tangible personal property are in this state if

 

the property is shipped or delivered to any purchaser within this

 

state regardless of the free on board point or other conditions of

 

the sale. For the purposes of this subsection only, "state" means

 

any state of the United States, the District of Columbia, the

 

Commonwealth of Puerto Rico, any territory or possession of the

 

United States, or a political subdivision thereof.

 

     (4) Sales in this state also include the receipts from the

 

sale, lease, rental, or licensing of real property located in this

 

state and the lease, rental, or licensing of tangible personal

 

property located in this state.

 

     (5) Sales, other than sales of tangible personal property, are

 

in this state if the receipts are derived from customers within

 

this state. Sales in this state also include the receipts from the

 

performance of services if the recipient of the services receives

 

all of the benefit of the services in this state.

 

     (6) Notwithstanding the provisions of subsection (5), receipts

 

derived by a mortgage company from the origination or sale of a

 

loan secured by residential real property is deemed a sale in this

 

state only if 1 or more of the following apply:

 

     (a) The real property is located in this state.

 

     (b) The real property is located both within this state and 1

 

or more other states and more than 50% of the fair market value of

 

the real property is located within this state.

 

     (c) More than 50% of the real property is not located in any 1

 

state and the borrower is located in this state.

 

     (7) For purposes of subsection (6), a borrower is considered

 

located in this state if the borrower’s billing address is in this

 

state.

 

     (8) For purposes of subsection (6), "mortgage company" means a

 

person who has greater than 70% of its revenues, in the ordinary

 

course of business, from the origination, sale, or servicing of

 

residential mortgage loans.

 

     Sec. 305. (1) Notwithstanding section 307, a spun off

 

corporation that qualified to calculate its sales factor for 7

 

years under section 54 of former 1975 PA 228 may elect to calculate

 

its sales factor under this section for an additional 4 years

 

following those 7 years or 3 years if a taxpayer had an election

 

approved under section 54(1)(e) of former 1975 PA 228. Prior to the

 

end of the first year following the 7 years for which the taxpayer

 

qualified under section 54 of former 1975 PA 228 and if the spun

 

off corporation is not required to file amended returns under

 

section 54(5) of former 1975 PA 228, the spun off corporation may

 

request, in writing, approval from the state treasurer for the

 

election of the 4 additional years under this section. If the

 

taxpayer had an election approved under section 54(1)(e) of former

 

1978 PA 228, the taxpayer is not required to seek approval under

 

this section. The state treasurer must approve the election under

 

this subsection if the requirements of this section are met. The

 

request shall include all of the following:

 

     (a) A statement that the spun off corporation qualifies for

 

the election under this section.

 

     (b) A list of all corporations, limited liability companies,

 

and any other business entities that the spun off corporation

 

controlled at the time of the restructuring transaction.

 

     (c) A commitment by the spun off corporation to invest at

 

least an additional $200,000,000.00 of capital investment in this

 

state within the additional 4 years and maintain at least 80% of

 

the number of full-time equivalent employees in this state based on

 

the number of full-time equivalent employees in this state at the

 

beginning of the additional 4-year period for all of the additional

 

4 years; a commitment by the spun off corporation to invest an

 

additional $400,000,000.00 in this state within the additional 4

 

years; or a commitment by the spun off corporation to invest a

 

total of $1,300,000,000.00 in this state within the 11-year period

 

beginning with the year in which the restructuring transaction

 

under which a spun off corporation qualified under this subsection

 

was completed. The 4 years under this subdivision begins with the

 

eighth year following the tax year in which the restructuring

 

transaction under which a spun off corporation qualified under this

 

subsection was completed. For purposes of this subdivision, the

 

number of full-time equivalent employees includes employees in all

 

of the following circumstances:

 

     (i) On temporary layoff.

 

     (ii) On strike.

 

     (iii) On a type of temporary leave other than the type under

 

subparagraphs (i) and (ii).

 

     (iv) Transferred by the spun off corporation to a related

 

entity or to its immediately preceding former parent corporation.

 

     (v) Transferred by the spun off corporation to another

 

employer because of the sale of the spun off corporation's location

 

in this state that was the work site of the employees.

 

     (2) Prior to the end of the eleventh year following the

 

restructuring transaction under which a spun off corporation

 

qualified under subsection (1), a taxpayer that is a buyer of a

 

plant located in this state that was included in the initial

 

restructuring transaction under subsection (1) may elect to

 

calculate its sales factor under subsection (3) and disregard sales

 

by the taxpayer attributable to that plant to a former parent of a

 

spun off corporation and the sales attributable to the plant shall

 

be treated as sales by a spun off corporation. This election shall

 

extend for a period of 4 years following the date that the plant

 

was purchased reduced by the number of years for which the taxpayer

 

calculated its sales factor pursuant to section 54(2) of former

 

1975 PA 228. On or before the due date for filing the buyer's first

 

annual return under this act following the purchase of the plant,

 

the buyer shall request, in writing, approval from the state

 

treasurer for the election provided under this section and shall

 

attach a statement that the buyer qualifies for the election under

 

this section.

 

     (3) A spun off corporation qualified under subsection (1) or

 

(2) that makes an election and is approved under subsection (1) or

 

(2) calculates its sales factor under section 303 subject to both

 

of the following:

 

     (a) A purchaser in this state under section 303 does not

 

include a person that purchases from a seller that was included in

 

the purchaser's combined or consolidated annual return under this

 

act but, as a result of the restructuring transaction, ceased to be

 

included in the purchaser's combined or consolidated annual return

 

under this act. This subdivision applies only to sales that

 

originate from a plant located in this state.

 

     (b) Total sales under section 303 do not include sales to a

 

purchaser that was a member of a Michigan affiliated group that had

 

included the seller in the filing of a combined or consolidated

 

annual return under this act but, as a result of the restructuring

 

transaction, ceased to include the seller. This subdivision applies

 

only to sales that originate from a plant located in this state to

 

a location in this state.

 

     (4) At the end of the fourth tax year following an election

 

under this section, if the spun off corporation that elected to

 

calculate its sales factor under this section for the additional 4

 

years allowed under subsection (1) has failed to maintain the

 

required number of employees or failed to pay or accrue the capital

 

investment required under subsection (1)(c), the spun off

 

corporation shall file amended annual returns under this act for

 

the first through fourth tax years following the election under

 

this section, regardless of the statute of limitations under

 

section 27a of 1941 PA 122, MCL 205.27a, and pay any additional tax

 

plus interest based on the sales factor as calculated under section

 

303. Interest shall be calculated from the due date of the annual

 

return under this act or former 1975 PA 228 on which an exemption

 

under this section was first claimed.

 

     (5) The amount of the spun off corporation's investment

 

commitments required under this section shall not be reduced by the

 

amount of any qualifying investments in Michigan plants that are

 

sold.

 

     (6) As used in this section:

 

     (a) "Spun off corporation" means an entity treated as a

 

controlled corporation under section 355 of the internal revenue

 

code. Controlled corporation includes a corporate subsidiary

 

created for the purpose of a restructuring transaction, a limited

 

liability company, or an operational unit or division with business

 

activities that were previously carried out as a part of the

 

distributing corporation.

 

     (b) "Restructuring transaction" means a tax free distribution

 

under section 355 of the internal revenue code and includes tax

 

free transactions under section 355 of the internal revenue code

 

that are commonly referred to as spin offs, split ups, split offs,

 

or type D reorganizations.

 

     Sec. 307. (1) The tax base of a taxpayer whose business

 

activities consist of transportation services rendered either

 

entirely within or partly within and partly outside this state

 

shall be determined under the provisions of this section and

 

section 309.

 

     (2) The tax base attributable to this state of a taxpayer

 

described subsection (1), other than a taxpayer whose activity

 

consists of the transportation of oil or gas by pipeline, is that

 

portion of the tax base of the taxpayer derived from transportation

 

services wherever performed that the revenue miles of the taxpayer

 

in this state bear to the revenue miles of the taxpayer everywhere.

 

     (3) The tax base attributable to this state of a taxpayer

 

whose business activity consists of the transportation both of

 

property and of individuals shall be that portion of the entire tax

 

base of the taxpayer that is equal to the sum of its passenger

 

miles and ton mile fractions, separately computed and individually

 

weighted by the ratio of gross receipts from passenger

 

transportation to total gross receipts from all transportation, and

 

by the ratio of gross receipts from freight transportation to total

 

gross receipts from all transportation, respectively.

 

     (4) If the department determines that the information required

 

for the calculations under this section is not available or cannot

 

be obtained without unreasonable expense to the taxpayer, the

 

department may use other available information that in the opinion

 

of the department will result in an equitable allocation of the

 

taxpayer's receipts to this state.

 

     Sec. 309. (1) The tax base attributable to this state of a

 

taxpayer whose business activity consists of the transportation of

 

oil by pipeline, is the tax base of the taxpayer in the ratio that

 

the barrel miles transported in this state bear to the barrel miles

 

transported by the taxpayer everywhere.

 

     (2) The tax base attributable to this state of a taxpayer

 

whose business activities consists of the transportation of gas by

 

pipeline is the tax base of the taxpayer in the ratio that the

 

1,000 cubic feet miles transported in this state bear to the 1,000

 

cubic feet miles transported by the taxpayer everywhere.

 

     Sec. 311. The tax base attributable to this state of a

 

taxpayer that is a financial organization is either of the

 

following:

 

     (a) The entire tax base of a taxpayer whose business

 

activities are confined solely to this state.

 

     (b) For a taxpayer whose business activities are conducted

 

both within and outside of this state, that portion of its tax base

 

as its gross business in this state is to its gross business

 

everywhere during the period covered by its return. Gross business

 

is the sum of all of the following:

 

     (i) Fees, commissions, or other compensation for financial

 

services.

 

     (ii) Gross profits from trading in stocks, bonds, or other

 

securities.

 

     (iii) Interest charged to customers for carrying debit balances

 

of margin accounts, without deduction of any costs incurred in

 

carrying the accounts.

 

     (iv) Interest and dividends received.

 

     (v) Any other gross income resulting from the operation as a

 

financial organization.

 

     Sec. 313. (1) If the apportionment provisions of this act do

 

not fairly represent the extent of the taxpayer's business activity

 

in this state, the taxpayer may petition for or the treasurer may

 

require the following, with respect to all or a portion of the

 

taxpayer's business activity, if reasonable:

 

     (a) Separate accounting.

 

     (b) The exclusion of 1 or more of the factors.

 

     (c) The inclusion of 1 or more additional factors that will

 

fairly represent the taxpayer's business activity in this state.

 

     (d) The use of any other method to effectuate an equitable

 

allocation and apportionment of the taxpayer's tax base.

 

     (2) An alternate method may be used only if it is approved by

 

the department.

 

     (3) The apportionment provisions of this act shall fairly

 

represent the business activity attributed to the taxpayer in this

 

state, taken as a whole and without a separate examination of the

 

specific elements of the tax base unless it can be demonstrated

 

that the business activity attributed to the taxpayer in this state

 

is out of all appropriate proportion to the actual business

 

transacted in this state and leads to a grossly distorted result.

 

The tax levied under this act is an indivisible tax and not a

 

combination or series of several smaller taxes and relief from

 

apportionment shall be given only in extraordinary circumstances.

 

     (4) The filing of a return or an amended return is not

 

considered a petition for the purposes of subsection (1).

 

CHAPTER 4

 

     Sec. 401. Except as otherwise provided under this act, any

 

unused carryforward for any credit under former 1975 PA 228 may be

 

applied for the 2007 tax year and any unused carryforward after

 

2007 shall be extinguished.

 

     Sec. 403. (1) For tax years that begin after December 31,

 

2008, a taxpayer that has been issued a tax voucher certificate

 

under section 23 of the Michigan early stage venture investment act

 

of 2003, 2003 PA 296, MCL 125.2253, or any taxpayer to which all or

 

a portion of a tax voucher is transferred pursuant to the Michigan

 

early stage venture investment act of 2003, 2003 PA 296, MCL

 

125.2231 to 125.2263, may use the tax voucher to pay a liability of

 

the taxpayer due under this act.

 

     (2) On and after November 21, 2005, the total amount of all

 

tax voucher certificates that shall be approved under this section,

 

section 37e of former 1975 PA 228, and the Michigan early stage

 

venture investment act of 2003, 2003 PA 296, MCL 125.2231 to

 

125.2263, shall not exceed an amount sufficient to allow the

 

Michigan early stage venture investment corporation to raise

 

$450,000,000.00 for the purposes authorized under the Michigan

 

early stage venture investment act of 2003, 2003 PA 296, MCL

 

125.2231 to 125.2263. The total amount of all tax voucher

 

certificates under this section and section 37e of former 1975 PA

 

228 shall not exceed $600,000,000.00.

 

     (3) The department shall not approve a tax voucher certificate

 

under section 23(2) of the Michigan early stage venture investment

 

act of 2003, 2003 PA 296, MCL 125.2253, after December 31, 2015.

 

     (4) For tax voucher certificates approved under subsection

 

(2), the amount of tax voucher certificates approved by the

 

department for use in any tax year shall not exceed 25% of the

 

total amount of all tax voucher certificates approved by the

 

department.

 

     (5) Investors shall apply to the Michigan early stage venture

 

investment corporation for approval of tax voucher certificates at

 

the time and in the manner required under the Michigan early stage

 

venture investment act of 2003, 2003 PA 296, MCL 125.2231 to

 

125.2263.

 

     (6) The Michigan early stage venture investment corporation

 

shall determine which investors are eligible for tax vouchers and

 

the amount of the tax vouchers allowed to each investor as provided

 

in the Michigan early stage venture investment act of 2003, 2003 PA

 

296, MCL 125.2231 to 125.2263.

 

     (7) The tax voucher certificate, and any completed transfer

 

form that was issued pursuant to the Michigan early stage venture

 

investment act of 2003, 2003 PA 296, MCL 125.2231 to 125.2263,

 

shall be attached to the taxpayer's annual return under this act.

 

The department may prescribe and implement alternative methods of

 

reporting and recording ownership, transfer, and utilization of tax

 

voucher certificates that are not inconsistent with this act.

 

     (8) A tax voucher shall be used to pay a liability of the

 

taxpayer due under this act only in a tax year that begins after

 

December 31, 2008. The amount of the tax voucher that may be used

 

to pay a liability of the taxpayer due under this act in any tax

 

year shall not exceed the lesser of the following:

 

     (a) The amount of the tax voucher stated on the tax voucher

 

certificate held by the taxpayer.

 

     (b) The amount authorized to be used in the tax year under the

 

terms of the tax voucher certificate.

 

     (c) The taxpayer's liability due under this act for the tax

 

year for which the tax voucher is to be applied.

 

     (9) The department shall administer transfers of tax voucher

 

certificates or the transfer of the right to be issued and receive

 

a tax voucher certificate as provided in the Michigan early stage

 

venture investment act of 2003, 2003 PA 296, MCL 125.2231 to

 

125.2263, and shall take any action necessary to enforce and

 

effectuate the permissible issuance and use of tax voucher

 

certificates in a manner authorized under this section and the

 

Michigan early stage venture investment act of 2003, 2003 PA 296,

 

MCL 125.2231 to 125.2263.

 

     (10) If the amount of a tax voucher certificate held by a

 

taxpayer or transferee exceeds the amount the taxpayer or

 

transferee may use under subsection (8)(b) or (c) in a tax year,

 

that excess may be used by the taxpayer or transferee to pay,

 

subject to the limitations of subsection (8), any future liability

 

of the taxpayer or transferee under this act.

 

     (11) If a taxpayer requests, the department shall issue

 

separate replacement tax voucher certificates, or replacement

 

approval letters, evidencing the right of the holder to be issued

 

and receive a tax voucher certificate in an aggregate amount equal

 

to the amount of a tax voucher certificate or an approval letter

 

presented by a taxpayer. Replacement tax voucher certificates may

 

be used, and replacement approval letters may be issued, to

 

evidence the right to be issued and receive a tax voucher

 

certificate that will be used for 1 or more of the following

 

purposes:

 

     (a) To pay any liability of the taxpayer under this act to the

 

extent permitted in any tax year by subsection (8).

 

     (b) To pay any liability of the taxpayer under and to the

 

extent allowed under section 270 of the income tax act of 1967,

 

1967 PA 281, MCL 206.270.

 

     (c) To be transferred to a taxpayer who may use the

 

replacement tax voucher certificate to pay any liability under this

 

act to the extent allowed under subsection (8).

 

     (d) To be transferred to a person who may use the tax voucher

 

certificate to pay any liability under and to the extent allowed

 

under section 270 of the income tax act of 1967, 1967 PA 281, MCL

 

206.270.

 

     (12) As used in this section:

 

     (a) "Investor" means that term as defined in the Michigan

 

early stage venture investment act of 2003, 2003 PA 296, MCL

 

125.2231 to 125.2263.

 

     (b) "Certificate" means the certificate issued under section

 

23 of the Michigan early stage venture investment act of 2003, 2003

 

PA 296, MCL 125.2253.

 

     (c) "Transferee" means a taxpayer to whom a tax voucher

 

certificate has been transferred under section 23 of the Michigan

 

early stage venture investment act of 2003, 2003 PA 296, MCL

 

125.2253, and this section.

 

     Sec. 405. (1) A taxpayer may claim a credit against the tax

 

imposed by this act for 1 or more of the following as applicable:

 

     (a) The credit allowed under subsection (2).

 

     (b) The credit allowed under subsection (6).

 

     (2) A taxpayer that is certified under the Michigan next

 

energy authority act, 2002 PA 593, MCL 207.821 to 207.827, as an

 

eligible taxpayer may claim a nonrefundable credit for the tax year

 

equal to the amount determined under subdivision (a) or (b),

 

whichever is less:

 

     (a) The amount by which the taxpayer's tax liability

 

attributable to qualified business activity for the tax year

 

exceeds the taxpayer's baseline tax liability attributable to

 

qualified business activity.

 

     (b) Ten percent of the amount by which the taxpayer's adjusted

 

qualified business activity performed in this state outside of a

 

renaissance zone for the tax year exceeds the taxpayer's adjusted

 

qualified business activity performed in this state outside of a

 

renaissance zone for the 2001 tax year under section 39e of former

 

1975 PA 228.

 

     (3) For any tax year in which the eligible taxpayer's tax

 

liability attributable to qualified business activity for the tax

 

year does not exceed the taxpayer's baseline tax liability

 

attributable to qualified business activity, the eligible taxpayer

 

shall not claim the credit allowed under subsection (2).

 

     (4) 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 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 under subsection (2) unless the qualified business activity

 

of the group or entities is consolidated.

 

     (5) A taxpayer that claims a credit under subsection (2) shall

 

attach a copy of each of the following as issued pursuant to the

 

Michigan next energy authority act, 2002 PA 593, MCL 207.821 to

 

207.827, to the annual return required under this act for each tax

 

year in which the taxpayer claims the credit allowed under

 

subsection (2):

 

     (a) The proof of certification that the taxpayer is an

 

eligible taxpayer for the tax year.

 

     (b) The proof of certification of the taxpayer's tax liability

 

attributable to qualified business activity for the tax year.

 

     (c) The proof of certification of the taxpayer's baseline tax

 

liability attributable to qualified business activity.

 

     (6) A taxpayer that is a qualified alternative energy entity

 

may claim a credit for the taxpayer's qualified payroll amount. A

 

taxpayer shall claim the credit under this subsection after all

 

allowable nonrefundable credits under this act.

 

     (7) If the credit allowed under subsection (6) exceeds the tax

 

liability of the taxpayer for the tax year, that portion of the

 

credit that exceeds the tax liability shall be refunded.

 

     (8) As used in this section:

 

     (a) "Adjusted qualified business activity performed in this

 

state outside of a renaissance zone" means either of the following:

 

     (i) Except as provided in subparagraph (ii), the taxpayer's

 

payroll for qualified business activity performed in this state

 

outside of a renaissance zone.

 

     (ii) For a partnership, limited liability company, subchapter S

 

corporation, or individual, the amount determined under

 

subparagraph (i) plus the product of the following as related to the

 

taxpayer:

 

     (A) Business income.

 

     (B) The apportionment factor as determined under this chapter.

 

     (C) The alternative energy business activity factor.

 

     (b) "Alternative energy business activity factor" means a

 

fraction, the numerator of which is the ratio of the value of the

 

taxpayer's property used for qualified business activity and

 

located in this state outside of a renaissance zone for the year

 

for which the factor is being calculated to the value of all of the

 

taxpayer's property located in this state for that year plus the

 

ratio of the taxpayer's payroll for qualified business activity

 

performed in this state outside of a renaissance zone for that year

 

to all of the taxpayer's payroll in this state for that year and

 

the denominator of which is 2.

 

     (c) "Alternative energy marine propulsion system",

 

"alternative energy system", "alternative energy vehicle", and

 

"alternative energy technology" mean those terms as defined in the

 

Michigan next energy authority act, 2002 PA 593, MCL 207.821 to

 

207.827.

 

     (d) "Alternative energy zone" means a renaissance zone

 

designated as an alternative energy zone by the board of the

 

Michigan strategic fund under section 8a of the Michigan

 

renaissance zone act, 1996 PA 376, MCL 125.2688a.

 

     (e) "Baseline tax liability attributable to qualified business

 

activity" means the taxpayer's tax liability for the 2001 tax year

 

under former 1975 PA 228 multiplied by the taxpayer's alternative

 

energy business activity factor for the 2001 tax year under former

 

1975 PA 228. A taxpayer with a 2001 tax year of less than 12 months

 

under former 1975 PA 228 shall annualize the amount calculated

 

under this subdivision as necessary to determine baseline tax

 

liability attributable to qualified business activity that reflects

 

a 12-month period.

 

     (f) "Eligible taxpayer" means a taxpayer that has proof of

 

certification of qualified business activity under the Michigan

 

next energy authority act, 2002 PA 593, MCL 207.821 to 207.827.

 

     (g) "Payroll" means total salaries and wages before deducting

 

any personal or dependency exemptions.

 

     (h) "Qualified alternative energy entity" means a taxpayer

 

located in an alternative energy zone.

 

     (i) "Qualified business activity" means research, development,

 

or manufacturing of an alternative energy marine propulsion system,

 

an alternative energy system, an alternative energy vehicle,

 

alternative energy technology, or renewable fuel.

 

     (j) "Qualified employee" means an individual who is employed

 

by a qualified alternative energy entity, whose job

 

responsibilities are related to the research, development, or

 

manufacturing activities of the qualified alternative energy

 

entity, and whose regular place of employment is within an

 

alternative energy zone.

 

     (k) "Qualified payroll amount" means an amount equal to

 

payroll of the qualified alternative energy entity attributable to

 

all qualified employees in the tax year of the qualified

 

alternative energy entity for which the credit under subsection (6)

 

is being claimed, multiplied by the tax rate for that tax year.

 

     (l) "Renaissance zone" means a renaissance zone designated

 

under the Michigan renaissance zone act, 1996 PA 376, MCL 125.2681

 

to 125.2696.

 

     (m) "Renewable fuel" means 1 or more of the following:

 

     (i) Biodiesel or biodiesel blends containing at least 20%

 

biodiesel. As used in this subparagraph, "biodiesel" means a diesel

 

fuel substitute consisting of methyl or ethyl esters produced from

 

the transesterification of animal or vegetable fats with methanol

 

or ethanol.

 

     (ii) Biomass. As used in this subparagraph, "biomass" means

 

residues from the wood and paper products industries, residues from

 

food production and processing, trees and grasses grown

 

specifically to be used as energy crops, and gaseous fuels produced

 

from solid biomass, animal wastes, municipal waste, or landfills.

 

     (n) "Tax liability attributable to qualified business

 

activity" means the taxpayer's tax liability multiplied by the

 

taxpayer's alternative energy business activity factor for the tax

 

year.

 

     (o) "Tax rate" means the rate imposed under section 51e of the

 

income tax act of 1967, 1967 PA 281, MCL 206.51e, annualized as

 

necessary, for the tax year in which the qualified alternative

 

energy entity claims a credit under subsection (6).

 

     Sec. 407. (1) For a period of time not to exceed 20 years as

 

determined by the Michigan economic growth authority, a taxpayer

 

that is an authorized business or an eligible taxpayer may claim a

 

credit against the tax imposed by section 10 equal to the amount

 

certified each year by the Michigan economic growth authority as

 

follows:

 

     (a) For an authorized business for the tax year, an amount not

 

to exceed the payroll of the authorized business attributable to

 

employees who perform qualified new jobs as determined under the

 

Michigan economic growth authority act, 1995 PA 24, MCL 207.801 to

 

207.810, multiplied by the tax rate.

 

     (b) For an eligible business as determined under section

 

8(5)(a) of the Michigan economic growth authority act, 1995 PA 24,

 

MCL 207.808, an amount not to exceed 50% of the payroll of the

 

eligible taxpayer attributable to employees who perform retained

 

jobs as determined under the Michigan economic growth authority

 

act, 1995 PA 24, MCL 207.801 to 207.810, multiplied by the tax rate

 

for the tax year.

 

     (c) For an eligible business as determined under section

 

8(5)(b) of the Michigan economic growth authority act, 1995 PA 24,

 

MCL 207.808, an amount not to exceed the payroll of the eligible

 

taxpayer attributable to employees who perform retained jobs as

 

determined under the Michigan economic growth authority act, 1995

 

PA 24, MCL 207.801 to 207.810, multiplied by the tax rate for the

 

tax year.

 

     (2) A taxpayer shall not claim a credit under this section

 

unless the Michigan economic growth authority has issued a

 

certificate to the taxpayer. The taxpayer shall attach the

 

certificate to the annual return filed under this act on which a

 

credit under this section is claimed.

 

     (3) The certificate required by subsection (2) shall state all

 

of the following:

 

     (a) The taxpayer is an authorized business or an eligible

 

taxpayer.

 

     (b) The amount of the credit under this section for the

 

authorized business or eligible taxpayer for the designated tax

 

year.

 

     (c) The taxpayer's federal employer identification number or

 

the Michigan department of treasury number assigned to the

 

taxpayer.

 

     (4) The Michigan economic growth authority may certify a

 

credit under this section based on an agreement entered into prior

 

to January 1, 2008 pursuant to section 37c of former 1975 PA 228.

 

The number of years for which the credit may be claimed under this

 

section shall equal the maximum number of years designated in the

 

resolution reduced by the number of years for which a credit has

 

been claimed under section 37c of former 1975 PA 228.

 

     (5) If the credit allowed under this section exceeds the tax

 

liability of the taxpayer for the tax year, that portion of the

 

credit that exceeds the tax liability of the taxpayer shall be

 

refunded.

 

     (6) A taxpayer that claims a credit under subsection (1)(a),

 

section 24(1)(a), or section 37c or 37d of former 1975 PA 228, that

 

has an agreement with the Michigan economic growth authority based

 

on qualified new jobs as defined in section 3(n)(ii) of the

 

Michigan economic growth authority act, 1995 PA 24, MCL 207.803,

 

and that removes from this state 51% or more of those qualified new

 

jobs within 3 years after the first year in which the taxpayer

 

claims a credit described in this subsection shall pay to the

 

department no later than 12 months after those qualified new jobs

 

are removed from the state an amount equal to the total of all

 

credits described in this subsection that were claimed by the

 

taxpayer.

 

     (7) If the Michigan economic growth authority or a designee of

 

the Michigan economic growth authority requests that a taxpayer who

 

claims the credit under this section get a statement prepared by a

 

certified public accountant verifying that the actual number of new

 

jobs created is the same number of new jobs used to calculate the

 

credit under this section, the taxpayer shall get the statement and

 

attach that statement to its annual return under this act on which

 

the credit under this section is claimed.

 

     (8) For a credit allowed under this section, 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 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 claim only 1 credit for each tax year as follows:

 

     (a) For an authorized business, for each expansion or location

 

evidenced by a written agreement whether or not a combined or

 

consolidated return is filed.

 

     (b) For an eligible taxpayer, as provided in each written

 

agreement whether or not a combined or consolidated return is

 

filed.

 

     (9) A credit shall not be claimed by a taxpayer under this

 

section if the taxpayer's initial certification as required in

 

subsection (3) is issued after December 31, 2013.

 

     (10) As used in this section:

 

     (a) "Authorized business", "facility", "full-time job",

 

"qualified high-technology business", and "written agreement" mean

 

those terms as defined in the Michigan economic growth authority

 

act, 1995 PA 24, MCL 207.801 to 207.810.

 

     (b) "Eligible taxpayer" means an eligible business that meets

 

the criteria under section 8(5) of the Michigan economic growth

 

authority act, 1995 PA 24, MCL 207.808.

 

     (c) "Michigan economic growth authority" means the Michigan

 

economic growth authority created in the Michigan economic growth

 

authority act, 1995 PA 24, MCL 207.801 to 207.810.

 

     (d) "Payroll" means the total salaries and wages before

 

deducting any personal or dependency exemptions.

 

     (e) "Qualified new jobs" means 1 or more of the following:

 

     (i) The average number of full-time jobs at a facility of an

 

authorized business for a tax year in excess of the average number

 

of full-time jobs the authorized business maintained in this state

 

prior to the expansion or location as that is determined under the

 

Michigan economic growth authority act, 1995 PA 24, MCL 207.801 to

 

207.810.

 

     (ii) The average number of full-time jobs at a facility created

 

by an eligible business within 120 days before becoming an

 

authorized business that is in excess of the average number of

 

full-time jobs that the business maintained in this state 120 days

 

before becoming an authorized business, as determined under the

 

Michigan economic growth authority act, 1995 PA 24, MCL 207.801 to

 

207.810.

 

     (f) "Tax rate" means the rate imposed under section 51e of the

 

income tax act of 1967, 1967 PA 281, MCL 206.51e, for the tax year

 

in which the tax year of the taxpayer for which the credit is being

 

computed begins.

 

     Sec. 409. (1) A taxpayer that is a business located and

 

conducting business activity within a renaissance zone may claim a

 

credit against the tax imposed by this act for the tax year to the

 

extent and for the duration provided pursuant to the Michigan

 

renaissance zone act, 1996 PA 376, MCL 125.2681 to 125.2696, equal

 

to the lesser of the following:

 

     (a) The tax liability attributable to business activity

 

conducted within a renaissance zone in the tax year.

 

     (b) Ten percent of adjusted services performed in a designated

 

renaissance zone.

 

     (c) For a taxpayer located and conducting business activity in

 

a renaissance zone before January 1, 2008, the product of the

 

following:

 

     (i) The credit claimed under section 39b of former 1975 PA 228

 

for the tax year ending in 2007.

 

     (ii) The ratio of the taxpayer's payroll in this state in the

 

tax year divided by the taxpayer's payroll in this state in its tax

 

year ending in 2007 under former 1975 PA 228.

 

     (iii) The ratio of the taxpayer's renaissance zone business

 

activity factor for the tax year divided by the taxpayer's

 

renaissance zone business activity factor for its tax year ending

 

in 2007 under section 39b of former 1975 PA 228.

 

     (2) Any portion of the taxpayer's tax liability that is

 

attributable to illegal activity conducted in the renaissance zone

 

shall not be used to calculate a credit under this section.

 

     (3) The credit allowed under this section continues through

 

the tax year in which the renaissance zone designation expires.

 

     (4) If the amount of the credit allowed under this section

 

exceeds the tax liability of the taxpayer for the tax year, that

 

portion of the credit that exceeds the tax liability shall not be

 

refunded.

 

     (5) A taxpayer that claims a credit under this section shall

 

not employ, pay a speaker fee to, or provide any remuneration,

 

compensation, or consideration to any person employed by the state,

 

the state administrative board created in 1921 PA 2, MCL 17.1 to

 

17.3, or the renaissance zone review board created in 1996 PA 376,

 

MCL 125.2681 to 125.2696, whose employment relates or related in

 

any way to the authorization or enforcement of the credit allowed

 

under this section for any year in which the taxpayer claims a

 

credit under this section and for the 3 years after the last year

 

that a credit is claimed.

 

     (6) To be eligible for the credit allowed under this section,

 

an otherwise qualified taxpayer shall file an annual return under

 

this act in a format determined by the department.

 

     (7) Any portion of the taxpayer's tax liability that is

 

attributable to business activity related to the operation of a

 

casino, and business activity that is associated or affiliated with

 

the operation of a casino, including, but not limited to, the

 

operation of a parking lot, hotel, motel, or retail store, shall

 

not be used to calculate a credit under this section.

 

     (8) As used in this section:

 

     (a) "Adjusted services performed in a designated renaissance

 

zone" means either of the following:

 

     (i) Except as provided in subparagraph (ii), the sum of the

 

taxpayer's payroll for services performed in a designated

 

renaissance zone plus an amount equal to the amount deducted in

 

arriving at federal taxable income for the tax year for

 

depreciation, amortization, or immediate or accelerated write-off

 

for tangible property exempt under section 7ff of the general

 

property tax act, 1893 PA 206, MCL 211.7ff, in the tax year or, for

 

new property, in the immediately following tax year.

 

     (ii) For a partnership, limited liability company, subchapter S

 

corporation, or individual, the amount determined under

 

subparagraph (i) plus the product of the following as related to the

 

taxpayer if greater than zero:

 

     (A) Business income.

 

     (B) The ratio of the taxpayer's total sales in this state

 

during the tax year divided by the taxpayer's total sales

 

everywhere during the tax year.

 

     (C) The renaissance zone business activity factor.

 

     (b) "Casino" means a casino regulated by this state pursuant

 

to the Michigan gaming control and revenue act, the Initiated Law

 

of 1996, MCL 432.201 to 432.226.

 

     (c) "New property" means property that has not been subject

 

to, or exempt from, the collection of taxes under the general

 

property tax act, 1893 PA 206, MCL 211.1 to 211.157, and has not

 

been subject to, or exempt from, ad valorem property taxes levied

 

in another state, except that receiving an exemption as inventory

 

property does not disqualify property.