August 8, 2007, Introduced by Reps. Bieda and Condino and referred to the Committee on Tax Policy.
A bill to amend 2007 PA 36, entitled
"Michigan business tax act,"
by amending section 201 (MCL 208.1201).
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
Sec. 201. (1) Except as otherwise provided in this act, there
is levied and imposed a business income tax on every taxpayer with
business activity within this state unless prohibited by 15 USC 381
to 384. The business income tax is imposed on the business income
tax base, after allocation or apportionment to this state, at the
rate of 4.95%.
(2) The business income tax base means a taxpayer's business
income subject to the following adjustments, before allocation or
apportionment, and the adjustment in subsection (4) after
allocation or apportionment:
(a) Add interest income and dividends derived from obligations
or securities of states other than this state, in the same amount
that was excluded from federal taxable income, less the related
portion of expenses not deducted in computing federal taxable
income because of sections 265 and 291 of the internal revenue
code.
(b) Add all taxes on or measured by net income and the tax
imposed under this act to the extent the taxes were deducted in
arriving at federal taxable income.
(c) Add any carryback or carryover of a net operating loss to
the extent deducted in arriving at federal taxable income.
(d) To the extent included in federal taxable income, deduct
dividends and royalties received from persons other than United
States persons and foreign operating entities, including, but not
limited to, amounts determined under section 78 of the internal
revenue code or sections 951 to 964 of the internal revenue code.
(e) To the extent included in federal taxable income, add the
loss or subtract the income from the business income tax base that
is attributable to another entity whose business activities are
taxable under this section or would be subject to the tax under
this section if the business activities were in this state.
(f) Except as otherwise provided under this subdivision, to
the extent deducted in arriving at federal taxable income, add any
royalty, interest, or other expense paid to a person related to the
taxpayer by ownership or control for the use of an intangible asset
if the person is not included in the taxpayer's unitary business
group. The addition of any royalty, interest, or other expense
described under this subdivision is not required to be added if the
taxpayer can demonstrate that the transaction has a nontax business
purpose other than avoidance of this tax, is conducted with arm's-
length pricing and rates and terms as applied in accordance with
sections 482 and 1274(d) of the internal revenue code, and
satisfies 1 of the following:
(i) Is a pass through of another transaction between a third
party and the related person with comparable rates and terms.
(ii) Results in double taxation. For purposes of this
subparagraph, double taxation exists if the transaction is subject
to tax in another jurisdiction.
(iii) Is unreasonable as determined by the treasurer, and the
taxpayer agrees that the addition would be unreasonable based on
the taxpayer's facts and circumstances.
(g) To the extent included in federal taxable income, deduct
interest income derived from United States obligations.
(h) To the extent included in federal taxable income, deduct
any earnings that are net earnings from self-employment as defined
under section 1402 of the internal revenue code of the taxpayer or
a partner or limited liability company member of the taxpayer
except to the extent that those net earnings represent a reasonable
return on capital.
(i) For the 2008 tax year, if the book-tax difference results
in a deferred liability, account for the book-tax difference as an
asset on the taxpayer's books and records. For each tax year after
the 2008 tax year, adjust to the extent necessary to reflect a 10-
year amortization of the book-tax difference for each qualifying
asset on the taxpayer's books and records, in equal installments
over each of the 10 tax years beginning with the 2013 tax year. If
the adjustment under this subdivision is greater than the
taxpayer's business income tax base, any adjustment that is unused
may be carried forward and applied as an adjustment to the
taxpayer's business income before apportionment in future years. As
used in this subdivision:
(i) "Book-tax difference" means the difference, if any, between
the taxpayer's qualifying asset's net book value shown on the
taxpayer's books and records on December 31, 2007, and the
qualifying asset's adjusted federal tax basis on December 31, 2007.
(ii) "Qualifying asset" means any asset shown on the taxpayer's
books and records on December 31, 2007, in accordance with
generally accepted accounting principles.
(3) For purposes of subsection (2), the business income of a
unitary business group is the sum of the business income of each
person, other than a foreign operating entity or a person subject
to the tax imposed under chapter 2A or 2B, included in the unitary
business group less any items of income and related deductions
arising from transactions including dividends between persons
included in the unitary business group.
(4) Deduct any available business loss incurred after December
31, 2007. As used in this subsection, "business loss" means a
negative business income taxable amount after allocation or
apportionment. The business loss shall be carried forward to the
year immediately succeeding the loss year as an offset to the
allocated or apportioned business income tax base, then
successively to the next 9 taxable years following the loss year or
until the loss is used up, whichever occurs first, but for not more
than 10 taxable years after the loss year.
Enacting section 1. This amendatory act takes effect January
1, 2008.