February 20, 2008, Introduced by Reps. Pearce, Meekhof, Rick Jones and Casperson and referred to the Committee on Tax Policy.
A bill to amend 1967 PA 281, entitled
"Income tax act of 1967,"
by amending sections 51a, 351, 355, and 365 (MCL 206.51a, 206.351,
206.355, and 206.365), section 51a as amended by 1996 PA 484,
section 351 as amended by 2003 PA 22, section 355 as amended by
2003 PA 48, and section 365 as amended by 2003 PA 47.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
Sec. 51a. (1) Notwithstanding any other provision of this act
and for tax years beginning after December 31, 1996, an eligible
taxpayer may elect to pay the tax imposed by this act calculated by
multiplying taxable compensation, less an amount equal to the
personal and dependency exemptions allowed as a subtraction under
section 30(2), (3), and (4), by the rate established in section 51.
(2) Except as provided in subsection (1), an eligible taxpayer
who elects to pay the tax imposed by this act calculated under this
section shall not claim any exemption, deduction, or credit allowed
under this act other than the credits allowed under all of the
following sections:
(a) The credit for taxes withheld under section 251.
(b)
The prescription drug credit under section 273.
(b) (c)
The home heating credit under
section 527a.
(3) An eligible taxpayer who elects to pay the tax imposed by
this act calculated under this section is not required to file an
annual return under this act.
(4) An eligible taxpayer who files a withholding exemption
certificate to elect to pay the tax imposed by this act calculated
under this section may file an annual return and pay the tax
calculated under section 51.
(5)
The statute of limitations provided in Act No. 122 of the
Public
Acts of 1941, being sections 205.1 to 205.31 of the Michigan
Compiled
Laws 1941 PA 122, MCL 205.1
to 205.31, begins to run on
the date that the annual return is due for the tax year for which
the taxpayer has filed an election to pay the tax imposed by this
act calculated under this section.
(6) The department may enforce the collection of the tax
imposed under this act and calculated under this section to the
extent the tax withheld under section 351 is less than the tax
imposed by this act and calculated under this section.
(7) For the 1998 tax year and each year after 1998 that the
no-form option allowed under this section is in effect, the
department shall file a report not later than July 1 with the house
tax policy committee and the senate finance committee that contains
all of the following information about the taxpayers who elect to
pay the tax imposed by this act pursuant to this section:
(a) The total number of taxpayers.
(b) The number of taxpayers by county and city.
(c) The average income of the taxpayers.
(8) As used in this section:
(a) "Eligible taxpayer" means a resident who meets both of the
following criteria:
(i) Has income for the tax year in total or from any 1 source,
other than taxable compensation or income described in subdivision
(b), (i), (ii), or (iii), of less than $100.00 for a single return or
$200.00 for a joint return.
(ii) Has filed a withholding exemption certificate to elect to
pay the tax imposed by this act calculated under this section for
the tax year.
(b) "Taxable compensation" means compensation from which tax
has
been withheld pursuant to section 351(1) or (7) (11),
except
the following:
(i) Compensation described in section 30(1)(e) or 30(1)(f)(i).
(ii) Social security benefits as defined in section 86 of the
internal revenue code.
(iii) Retirement benefits, pension benefits, or benefits from a
retirement annuity policy in which payments are made for life to a
senior citizen, other than benefits described in section 30(1)(e)
or 30(1)(f)(i), or described in section 86 of the internal revenue
code, not to exceed the amounts allowed as a deduction under
section
30(1)(f)(v) 30(1)(f)(iv).
Sec. 351. (1) Every employer in this state required under the
provisions of the internal revenue code to withhold a tax on the
compensation of an individual, except as otherwise provided, shall
deduct and withhold a tax in an amount computed by applying, except
as
provided by subsection (9) (10), the rate prescribed in section
51 to the remainder of the compensation after deducting from
compensation the same proportion of the total amount of personal
and dependency exemptions of the individual allowed under this act
that the period of time covered by the compensation is of 1 year.
The commissioner may prescribe withholding tables that may be used
by employers to compute the amount of tax required to be withheld.
(2) Every payor required under the provisions of the internal
revenue code to withhold a tax on a pension, annuity, or other
deferred income payment that is also subject to the tax imposed by
this act to a resident of this state shall, if requested by the
resident payee, deduct and withhold a tax in an amount computed in
accordance with subsection (1) or an amount as specified by the
payee, whichever is greater. The payee shall provide the payor with
the information necessary for the payor to make an accurate
withholding.
(3) (2)
Every flow-through entity in this
state shall withhold
a tax in an amount computed by applying the rate prescribed in
section 51 to the share of taxable income available for
distribution of each nonresident member after deducting from that
distributive income the same proportion of the total amount of
personal and dependency exemptions of the individual allowed under
this act that the period of time covered by the distributive income
is of 1 year. If a flow-through entity is a nonresident member of a
separate flow-through entity in this state, the flow-through entity
in this state of which it is a member shall withhold the tax as
required by this subsection on behalf of the flow-through entity
that is a nonresident member and all nonresident members of that
flow-through entity that is a nonresident member.
(4) (3)
Every casino licensee shall
withhold a tax in an
amount computed by applying the rate prescribed in section 51 to
the winnings of a nonresident reportable by the casino licensee
under the internal revenue code.
(5) (4)
Every race meeting licensee or
track licensee shall
withhold a tax in an amount computed by applying the rate
prescribed in section 51 to a payoff price on a winning ticket of a
nonresident reportable by the race meeting licensee or track
licensee under the internal revenue code that is the result of
pari-mutuel wagering at a licensed race meeting.
(6) (5)
Every casino licensee or race
meeting licensee or
track licensee shall report winnings of a resident reportable by
the casino licensee or race meeting licensee or track licensee
under the internal revenue code to the department in the same
manner and format as required under the internal revenue code.
(7) (6)
The taxes withheld under this
section shall accrue to
the state on the last day of the month in which the taxes are
withheld but shall be returned and paid to the department by the
employer, payor, flow-through entity, casino licensee, or race
meeting licensee or track licensee within 15 days after the end of
any month or as provided in section 355, except prior to July 1,
1993, taxes deposited pursuant to section 19(2) of 1941 PA 122, MCL
205.19, are accrued on the last day of the filing period.
(8) (7)
An employer, payor,
flow-through entity, casino
licensee, or race meeting licensee or track licensee required by
this section to deduct and withhold taxes on compensation, pension,
annuity, or other deferred income payment under subsection (2), a
share of income available for distribution on which withholding is
required
under subsection (2) (3), winning on which withholding is
required
under subsection (3) (4), or a payoff price on which
withholding
is required under subsection (4) (5) holds the amount
of tax withheld as a trustee for the state, is liable for the
payment of the tax to the state, and is not liable to any
individual for the amount of the payment.
(9) (8)
An employer in this state is not
required to deduct
and withhold a tax on the compensation paid to a nonresident
individual employee, who, under section 256, may claim a tax credit
equal to or in excess of the tax estimated to be due for the tax
year or is exempted from liability for the tax imposed by this act.
In each tax year, the nonresident individual shall furnish to the
employer, on a form approved by the department, a verified
statement of nonresidence.
(10) (9)
An employer, payor, flow-through
entity, casino
licensee, or race meeting licensee or track licensee required to
withhold a tax under this act, by the fifteenth day of the
following month, shall provide the department with a copy of any
exemption certificate on which the employee, nonresident member, or
person
subject to withholding under subsection (3) or (2), (4), or
(5) claims more than 9 personal or dependency exemptions, claims a
status that exempts the employee, nonresident member, or person
subject
to withholding under subsection (3) or (2), (4), or (5)
from withholding under this section, or elects to pay the tax
imposed by this act calculated under section 51a.
(11) (10)
An employer shall deduct and
withhold the tax
imposed by this act calculated under section 51a for a resident who
files
an exemption certificate under subsection (9) (10) to
elect
to pay the tax calculated under section 51a.
(12) (11)
The exemption certificate required
by this section
shall include the following statement, "Electing to file using the
no-form option may not be for everyone who is eligible. If a
taxpayer chooses the no-form option, he or she may not be eligible
for some of the credits allowed under this act including the
property tax credit allowed under sections 520 and 522, the tuition
tax credit allowed under section 274, and the city income tax
credit allowed under section 257.".
(13) (12)
As used in this section:
(a) "Casino" means that term as defined in section 110.
(b) "Casino licensee" means a person licensed to operate a
casino
under the Michigan gaming control and revenue act, the
Initiated
Law of 1996 1996 IL 1, MCL 432.201 to 432.226.
(c) "Payor" means a person or plan administrator with respect
to a payment made under section 3405 of the internal revenue code
that is taxable under this act.
(d) (c)
"Race meeting licensee"
and "track licensee" mean a
person to whom a race meeting license or track license is issued
pursuant to section 8 of the horse racing law of 1995, 1995 PA 279,
MCL 431.308.
Sec. 355. (1) All provisions relating to the administration,
collection, and enforcement of this act apply to the employer,
payor, flow-through entity, casino licensee, or race meeting
licensee or track licensee required to withhold taxes and to the
taxes required to be withheld. If the department has reasonable
grounds to believe that an employer, payor, flow-through entity,
casino licensee, or race meeting licensee or track licensee will
not pay taxes withheld to the state as prescribed by this act, or
to provide a more efficient administration, the department may
require the employer, payor, flow-through entity, casino licensee,
or race meeting licensee or track licensee to make the return and
pay to the department the tax deducted and withheld at other than
monthly periods, or from time to time, or require the employer,
payor, flow-through entity, casino licensee, or race meeting
licensee or track licensee to deposit the tax in a bank approved by
the department in a separate account, in trust for the department
and payable to the department, and to keep the amount of the taxes
in the account until payment over to the department. If a payor
fails or refuses to deduct and withhold the tax due from any
taxpayer as required by the department pursuant to this section,
the payor shall be personally liable for that tax and the
department may proceed against the payor as provided under 1941 PA
122, MCL 205.1 to 205.31.
(2) Every publicly traded partnership as that term is defined
under section 7704 of the internal revenue code that has equity
securities registered with the securities and exchange commission
under section 12 of title I of the securities and exchange act of
1934,
chapter 404, 48 Stat. 881, 15 U.S.C. USC 78l, shall file on or
before each August 31 all unitholder information from the publicly
traded partnership's schedule K-1 for the immediately preceding
calendar year by paper or electronic format on a form prescribed by
the department.
(3) As used in this section:
(a) "Casino" means that term as defined in section 110.
(b) "Casino licensee" means a person licensed to operate a
casino under the Michigan gaming control and revenue act, the
Initiated Law of 1996, MCL 432.201 to 432.226.
(c) "Payor" means a person or plan administrator with respect
to a payment made under section 3405 of the internal revenue code
that is taxable under this act.
(d) (c)
"Race meeting licensee"
and "track licensee" mean a
person to whom a race meeting license or track license is issued
pursuant to section 8 of the horse racing law of 1995, 1995 PA 279,
MCL 431.308.
Sec. 365. (1) Every employer, payor, flow-through entity,
casino licensee, and race meeting licensee and track licensee
required by this act to deduct and withhold taxes for a tax year on
compensation, pension, annuity, or other deferred income payment,
share of income available for distribution, winnings, or payoff on
a winning ticket shall furnish to each employee, nonresident
member, or person with winnings or a payoff on a winning ticket
subject to withholding under this act on or before January 31 of
the succeeding year a statement in duplicate of the total
compensation, pension, annuity, or other deferred income payment,
share of income available for distribution, winnings, or payoff on
a winning ticket paid during the tax year and the amount deducted
or withheld. However, if employment is terminated before the close
of a calendar year by an employer who goes out of business or
permanently ceases to be an employer in this state, or a payor,
flow-through entity, casino licensee, race meeting licensee, or
track licensee goes out of business or permanently ceases to be a
payor, flow-through entity, casino licensee, race meeting licensee,
or track licensee before the close of a calendar year, then the
statement required by this subsection shall be issued within 30
days after the last compensation, pension, annuity, or other
deferred income payment, share of income available for
distribution, winnings, or payoff of a winning ticket is paid. A
duplicate of a statement made pursuant to this section and an
annual reconciliation return, MI-W3, shall be filed with the
department by February 28 of the succeeding year except that an
employer, payor, flow-through entity, casino licensee, and race
meeting licensee and track licensee who goes out of business or
permanently ceases to be an employer, payor, flow-through entity,
casino licensee, and race meeting licensee and track licensee shall
file the statement and the annual reconciliation return within 30
days after going out of business or permanently ceasing to be an
employer, payor, flow-through entity, casino licensee, and race
meeting licensee and track licensee.
(2) Every employer, payor, flow-through entity, casino
licensee, and race meeting licensee and track licensee required by
this act to deduct or withhold taxes from compensation, pension,
annuity, or other deferred income payment, share of income
available for distribution, winnings, or payoff on a winning ticket
shall make a return or report in form and content and at times as
prescribed by the department.
(3) Every employee, nonresident member, or person with
winnings or a payoff on a winning ticket subject to withholding
under this act shall furnish to his or her employer, flow-through
entity, casino licensee, and race meeting licensee and track
licensee information required for the employer, flow-through
entity, casino licensee, and race meeting licensee and track
licensee to make an accurate withholding. An employee, nonresident
member, or person with winnings or a payoff on a winning ticket
subject to withholding under this act shall file with his or her
employer, flow-through entity, casino licensee, and race meeting
licensee and track licensee revised information within 10 days
after a decrease in the number of exemptions or a change in status
from a nonresident to a resident. An employee shall file revised
information with his or her employer within 10 days after the
employee completes the residency requirements under section
31(11)(d), and when a change of status occurs from resident of a
renaissance zone to nonresident of a renaissance zone. Within 10
days after an employer receives revised information from an
employee who completes the residency requirements under section
31(11)(d), the employer shall forward a copy of that revised
information to the department. The employee, nonresident member, or
person with winnings or a payoff on a winning ticket subject to
withholding under this act may file revised information when the
number of exemptions increases or when a change in status occurs
from that of a resident of this state to a nonresident of this
state. Revised information shall not be given retroactive effect
for withholding purposes. An employer, payor, flow-through entity,
casino licensee, and race meeting licensee and track licensee shall
rely on this information for withholding purposes unless directed
by the department to withhold on some other basis. If an employee,
payee, nonresident member, or person with winnings or a payoff on a
winning ticket subject to withholding under this act fails or
refuses to furnish information, the employer, payor, flow-through
entity, casino licensee, and race meeting licensee and track
licensee shall withhold the full rate of tax from the employee's
total compensation, the payee's pension, annuity, or other deferred
income payment, the nonresident member's share of income available
for distribution, or the winnings of a person with winnings or a
payoff on a winning ticket subject to withholding under this act.
As used in this subsection, "renaissance zone" means a renaissance
zone designated pursuant to the Michigan renaissance zone act, 1996
PA 376, MCL 125.2681 to 125.2696.
(4) As used in this section:
(a) "Casino" means that term as defined in section 110.
(b) "Casino licensee" means a person licensed to operate a
casino
under the Michigan gaming control and revenue act, the
Initiated
Law of 1996 1996 IL 1, MCL 432.201 to 432.226.
(c) "Payor" means a person or plan administrator with respect
to a payment made under section 3405 of the internal revenue code
that is taxable under this act.
(d) (c)
"Race meeting licensee"
and "track licensee" mean a
person to whom a race meeting license or track license is issued
pursuant to section 8 of the horse racing law of 1995, 1995 PA 279,
MCL 431.308.