SB-1054, As Passed Senate, February 14, 2008

SUBSTITUTE FOR

SENATE BILL NO. 1054

     A bill to amend 2007 PA 36, entitled

"Michigan business tax act,"

by amending section 105 (MCL 208.1105), as amended by 2007 PA 145.

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

     Sec. 105. (1) "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, 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, or services as a director of a corporation, or services

Senate Bill No. 1054 as amended February 14, 2008

rendered by an individual <<in his or her capacity as a partner>> to a

partnership in which he or she is a

partner. Although an activity of a taxpayer may be incidental to

another or to other of his or her business activities, each

activity shall be considered to be business engaged in within the

meaning of this act.

     (2) "Business income" means that part of federal taxable

income derived from business activity . and as further described

for the following:

     (a) For a partnership or S corporation, business income

includes payments and items of income, and expense less expenses,

that are attributable to business activity of the partnership or S

corporation and separately reported to the partners or

shareholders.

     (b) For an organization that is a mutual or cooperative

electric company exempt under section 501(c)(12) of the internal

revenue code, business income equals the organization's excess or

deficiency of revenues over expenses as reported to the federal

government by those organizations exempt from the federal income

tax under the internal revenue code, less capital credits paid to

members of that organization, less income attributed to equity in

another organization's net income, and less income resulting from a

charge approved by a state or federal regulatory agency that is

restricted for a specified purpose and refundable if it is not used

for the specified purpose.

     (c) For a tax-exempt person, business income means only that

part of federal taxable income derived from unrelated business

activity.

Senate Bill No. 1054 as amended February 14, 2008

     (d) For an individual, estate, partnership organized

exclusively for estate or gift planning purposes, or trust

organized exclusively for estate or gift planning purposes, other

person organized for estate or gift planning purposes, or person

organized to conduct investment activity which neither conducts a

trade or business nor conducts investment activity for a trade or

business, business income is that part of federal taxable income

derived from transactions, activities, and sources in the regular

course of the taxpayer's trade or business, including <<both of>> the

following:

<<(i) Income included in business income under this subdivision includes, but is not limited to, the following:

(A)>> (a) All income from tangible and intangible property if the

acquisition, rental, management, or disposition of the property

constitutes integral parts of the taxpayer's regular trade or

business operations.

<<(B)>> (b) Gains or losses incurred in the taxpayer's trade or

business from stock and securities of any foreign or domestic

corporation and dividend and interest income.

<<(C)>> (c) Income derived from isolated sales, leases,

assignment, licenses, divisions, or other infrequently occurring

dispositions, transfers, or transactions involving property if the

property is or was used in the taxpayer's trade or business

operation.

<<(ii) (d) Income derived from the sale of a business.

(e) Income not included in business income for an UNDER THIS

SUBDIVISION

individual, estate, partnership organized exclusively for estate or

gift planning purposes, or trust organized exclusively for estate

or gift planning purposes

Senate Bill No. 1054 as amended February 14, 2008

>> includes, but is not

limited to, the following:

(A) (i) <<Personal investment INVESTMENT>> activity, including interest,

dividends, and gains from a <<personal>> investment portfolio or

retirement account.

(B) (ii) Disposition of tangible, intangible, or real property

held for personal use and enjoyment, such as a personal residence

or personal assets.