November 19, 2008, Introduced by Rep. Alma Smith and referred to the Committee on Tax Policy.
A bill to amend 1967 PA 281, entitled
"Income tax act of 1967,"
by amending section 51e (MCL 206.51e), as amended by 2003 PA 239,
and by adding section 278; and to repeal acts and parts of acts.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
Sec. 51e. (1) On and after January 1, 2004, for receiving,
earning, or otherwise acquiring income from any source whatsoever,
there is levied and imposed upon the taxable income of every person
other than a corporation a tax at the following rate for the
applicable period:
(a) On and after January 1, 2004 and before July 1, 2004,
4.0%.
(b) On and after July 1, 2004 and before January 1, 2007,
3.9%.
(c) On and after January 1, 2007, 4.9%.
(2) It is the intent of the legislature that the increase in
the tax rate under subsection (1)(c) shall be used to offset
revenues not collected under this act based on credits claimed
under section 278.
Sec. 278. (1) The credit allowed under this section shall be
known as the "Michigan higher education learning promotion credit"
or "HELP credit".
(2) For tax years that begin after December 31, 2006 and
subject to the conditions under this section, an eligible taxpayer
may claim a credit against the tax imposed by this act equal to the
amount calculated under this section.
(3) An eligible taxpayer shall not claim the credit allowed
under this section for more than 6 years or for more than 120
credit hours, whichever is greater, beginning with the first year
that the eligible taxpayer enrolls in an eligible institution.
(4) The credit allowed under this section is equal to the
amount of tuition and fees paid by the eligible taxpayer minus all
of the following:
(a) Any amount of tuition and fees used to reduce that
eligible taxpayer's federal tax liability under the HOPE
scholarship tax credit, the lifetime learning tax credit, or any
successor tax credit to those credits.
(b) Educational benefits pursuant to the Montgomery GI Bill
program.
(c) Pell grant funds under section 411 of title IV of the
higher education act of 1965, 20 USC 1070a.
(d) Tuition paid under an advance tuition payment contract
purchased pursuant to the Michigan education trust act, 1986 PA
316, MCL 390.1421 to 390.1442 or an advance tuition payment
contract purchased through any other state's advance tuition
payment program.
(e) Any other amount of tuition and fees paid on behalf of or
as a reimbursement to the eligible taxpayer.
(5) For purposes of this section, all other tax credits under
this act are considered to have been taken before the credit
allowed under this section.
(6) An eligible taxpayer may claim 100% of tuition and fees if
the eligible student attended a high school in this state prior to
attending an eligible institution to which the eligible student
paid tuition and fees on which a credit under this section is
based.
(7) A credit under this section shall be reduced as follows
for each taxpayer whose household income exceeds $53,000.00 but is
less than $63,000.00 for a single return or exceeds $107,000.00 but
is less than $127,000.00 for a joint return:
(a) For a single return, the amount of the credit shall be
reduced by a percentage determined by subtracting $53,000.00 from
the taxpayer's income and dividing that result by $10,000.00.
(b) For a joint return, the amount of the credit shall be
reduced by a percentage determined by subtracting $107,000.00 from
the taxpayer's income and dividing that result by $20,000.00.
(8) For tax years that begin after December 31, 2007, the
maximum household income amounts under subsection (7) shall be
adjusted by the percentage increase in the United States consumer
price index for the immediately preceding calendar year.
(9) If the credit allowed under this section exceeds the tax
liability of the eligible taxpayer for the tax year, that portion
of the credit that exceeds the tax liability of the eligible
taxpayer for the tax year shall be refunded.
(10) On or before the first Monday in January beginning in
January 2008, the state treasurer shall determine all of the
following:
(a) The dollar value of the increase in the tax rate from 3.9%
to 4.9% for the immediately preceding calendar year.
(b) The amount of the credits claimed under this section for
the immediate preceding calendar year.
(c) The percentage that the amount in subdivision (b) is of
the amount in subdivision (a).
(11) It is the intent of the legislature that that portion of
the amount determined under subsection (10)(a) that is equal to the
amount determined under subsection (10)(b) be deposited into the
general fund to offset revenues not collected under this act based
on credits claimed under this section and that any remaining amount
shall be appropriated as follows:
(a) Until the state treasurer certifies that the assets in the
Michigan preschool endowment fund exceed $6,000,000,000.00, to the
Michigan preschool endowment fund to be distributed in the
following manner:
(i) Up to 20% of the remaining amount plus the interest and
earnings credited to the endowment fund shall be available for
disbursement for grants to preschool programs in this state for
early childhood education programs for 4-year-olds.
(ii) The amount remaining after the distribution under
subparagraph (i) shall be deposited into the Michigan preschool
endowment fund.
(b) For the tax year in which the state treasurer certifies
that the assets in the Michigan preschool endowment fund exceed
$6,000,000,000.00 and each tax year after that year, the remaining
amount each tax year shall be appropriated in only 1 state fiscal
year and solely for a 1-time spending purpose.
(12) On or before January 12 each year beginning January 12,
2008, the information determined under subsection (10) shall be
reported to the majority and minority leaders of the house of
representatives and the senate, the chairpersons of the house of
representatives and senate appropriations committees, and the house
and senate fiscal agencies, shall be posted on the official
governmental website of this state, and shall be disseminated to
every daily newspaper in this state.
(13) As used in this section:
(a) "Eligible institution" means a publicly funded accredited
university, college, community college, or vocational training
center in this state established before January 1, 1999 that is
also described in section 481 of the higher education act of 1965,
20 USC 1088, and is eligible to participate in student aid programs
administered by the federal department of education or any other
federal agency or department. In order for the tuition and fees
paid to an eligible institution to be used to claim the credit
under this section for any tax year, that eligible institution
shall not raise tuition and fees for the academic year that begins
in that tax year by more than the increase in the United States
consumer price index for the immediately preceding calendar year
plus 1%.
(b) "Eligible student" means an individual who meets all of
the following criteria:
(i) Is a Michigan resident. Once a student who is claimed as
dependent of another taxpayer under this act and who attends an
eligible institution in this state has been correctly determined to
meet the residency requirements for purposes of the credit under
this section, the residency status of the student continues to
attach to the student as long as the student is continuously
enrolled in an eligible institution.
(ii) Is enrolled in and attends an eligible institution in this
state for at least 1 academic period during the tax year in which
the credit under this section is claimed.
(iii) Is not claimed as a dependent on his or her parent's
annual return required under this act.
(iv) Does not have a certificate, an associate degree, or an
undergraduate degree at the time the credit under this section is
first claimed and who is pursuing a certificate, an associate
degree, or an undergraduate degree during the tax year in which a
credit under this section is claimed.
(v) Is enrolled in at least 6 credit hours and maintains
academic eligibility, as defined by the eligible institution, in
the course of study that the student is pursuing during the tax
year in which a credit under this section is claimed.
(vi) The student's tuition and fees used as a basis for a
credit under this section were also used as the basis for a credit
claimed under section 25a of the internal revenue code for the tax
year in which the credit for the tuition and fees under this
section is claimed.
(vii) Has filed a free application for federal student aid,
form OMB 1840-0110, with the United States department of education
for the academic year for which tuition payments are used as the
basis for a credit claimed under this section or an alternative
form developed by the department that requires substantially the
same information.
(c) "Eligible taxpayer" means an individual who is all of the
following:
(i) A Michigan resident.
(ii) Has household income of less than $63,000.00 if the
taxpayer files a single return or less than $127,000.00 if the
taxpayer files a joint return.
(iii) Meets 1 of the following criteria:
(A) Is eligible for the HOPE scholarship tax credit and has
filed a federal income tax return on which he or she claims the
HOPE scholarship tax credit for the same tax year in which he or
she files a claim for the credit allowed under this section.
(B) Meets the criteria for a HOPE scholarship tax credit or
lifetime learning tax credit in the year in which he or she files a
claim for the credit allowed under this section but was unable to
claim a HOPE scholarship tax credit or lifetime learning tax credit
on his or her annual federal income tax return for that year
because of insufficient tax liability. A taxpayer that qualifies
under this sub-subparagraph must file an annual federal income
return for the tax year in which he or she files a claim for the
credit allowed under this section.
(iv) An eligible student or the spouse or parent of a student.
(d) "HOPE scholarship tax credit" and "lifetime learning tax
credit" mean the credits allowed under section 25a of the internal
revenue code.
(e) "In-district tuition" means the tuition charged to a
Michigan resident who is also a resident of the community college
district as determined by the community college established under
the community college act of 1966, 1966 PA 331, MCL 389.1 to
389.195, of the community college he or she is attending.
(f) "In-state tuition" means the per credit hour charge or
semester charge to a Michigan resident who is enrolled in an
eligible institution.
(g) "Michigan resident" means an individual that is 1 of the
following:
(i) An eligible student who meets both of the following
criteria:
(A) Graduated from an accredited high school in this state or
attended an accredited high school in this state and passed this
state's general education development (GED) test.
(B) Has lived in this state for at least 12 months immediately
preceding the year in which he or she claims a credit under this
section.
(ii) An individual who meets all of the following criteria:
(A) Is a member of the armed forces of the United States and
was stationed in a state other than this state or a country other
than the United States in the 12 months immediately preceding
enrollment in an eligible institution.
(B) Graduated from an accredited high school in this state or
attended an accredited high school in this state and passed this
state's general education development (GED) test.
(iii) Not an eligible student but who has lived in this state
for at least 12 months immediately preceding the year in which he
or she claims a credit under this section for tuition and fees paid
on behalf of an eligible student.
(h) "Tuition and fees" means in-state or in-district tuition
for not more than a total of 120 credits for all tax years for
course work that leads to a baccalaureate degree or not more than a
total of 60 credits for all tax years for course work that leads to
an associate degree or is part of a certification program, and
mandatory fees that are required and uniformly paid by a majority
of the students of the eligible institution but does not include
any of the following:
(i) The amount claimed by the eligible taxpayer in the tax year
against his or her federal tax liability as a HOPE scholarship tax
credit or a lifetime learning tax credit.
(ii) Amounts paid that are excluded under section 25A(f)(1)(B)
and (C) of the internal revenue code.
(iii) Amounts described in section 25A(g)(2)(A), (B), and (C) of
the internal revenue code.
(i) "United States consumer price index" means the United
States consumer price index for all urban consumers as defined and
reported by the United States department of labor, bureau of labor
statistics.
Enacting section 1. Section 274 of the income tax act of 1967,
1967 PA 281, MCL 206.274, is repealed.