January 25, 2007, Introduced by Senator CASSIS and referred to the Committee on Finance.
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; and to provide for the interrelation of this act with other
acts.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
CHAPTER 1
Sec. 1. This act shall be known and may be cited as the
"business and economic stimulus tax act".
Sec. 2. 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. 3. (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) "Assets" means the total value of assets at the beginning
of the tax year as determined under subdivision (a), not including
inventory, or for a financial organization or a mortgage company as
defined in section 45, the average value of property owned or
rented by the taxpayer as determined under subdivision (b):
(a) The total asset value of the taxpayer is the value of
assets that is required to be reported for federal income tax
purposes or the value that would be required to be reported if the
reporting of those assets were required. As used in this
subdivision, "assets" includes the following subparagraphs (i)
through (ix) and excludes subparagraphs (x) through (xii):
(i) Cash and cash equivalents.
(ii) Trade notes and accounts receivable.
(iii) Loans to shareholders or officers.
(iv) Mortgage and real estate loans.
(v) Other investments.
(vi) Buildings and other depreciable assets less accumulated
depreciation.
(vii) Depletable assets less accumulated depreciation.
(viii) Land, net of amortization.
(ix) Amortizable intangible assets, less accumulated
amortization.
(x) Other items determined to be assets according to generally
accepted accounting principles.
(xi) United States treasury securities or other United States
government obligations exempted from state taxation under federal
law.
(xii) Tax-exempt obligations.
(xiii) Goodwill.
(b) Property owned by the taxpayer is valued at its original
cost. Property rented by the taxpayer is valued at 7 times the net
annual rental rate. Net annual rental rate is the average annual
rental rate paid by the taxpayer over the immediately preceding 3
years less any annual rental rate received by the taxpayer from
subrentals over the immediately preceding 3 years. The average
value of property is determined by averaging the values at the
beginning and ending of the tax year.
(3) "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, 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.
(4) "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. 4. (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. 5. (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 a bank, industrial bank,
trust company, building and loan or savings and loan association,
bank holding company as defined in 12 USC 1841, credit union,
safety and collateral deposit company, regulated investment company
as defined in the internal revenue code, or any other association,
joint stock company, or corporation 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.
(6) "Franchise tax base" means the taxpayer's assets less
liabilities.
Sec. 6. (1) "Gross receipts" means the entire 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) For a financial organization, gross proceeds do not
include any cost of funds or interest expense.
(2) "Gross receipts tax base" means, except for a foreign
person, the taxpayer's gross receipts less purchases from other
firms before apportionment under this act. For a foreign person,
gross receipts tax base is determined under section 12.
(3) "Insurance company" means an authorized insurer as defined
in section 106 of the insurance code of 1956, 1956 PA 218, MCL
500.106.
(4) "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.
(5) "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.
(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 any 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.
(iii) Purchases from other firms.
(6) "Liabilities" means the total value of liabilities that are
required to be reported for federal income tax purposes or the value
that would be required to be reported if the reporting of those
liabilities were required. As used in this subsection, liabilities
include, but are not limited to, all of the following:
(a) Accounts payable.
(b) Notes payable.
(c) Dividends payable.
(d) Unearned revenues or advances.
(e) Refundable deposits.
(f) Accrued liabilities.
(g) Taxes payable.
(h) Bonus payments.
(i) Sales incentives.
(j) Environmental remediation liabilities.
(k) Bonds payable.
(l) Debt issued with stock warrants.
(m) Accrued pension costs.
(n) Capital lease obligations.
(o) Deferred income taxes.
(p) Other items determined to be liabilities according to
generally accepted accounting principles.
(7) "Nonbusiness income" means all income from casual
transactions and all income other than business income.
(8) "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. 7. (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
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.
(b) Assets 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. 8. (1) "Sale" or "sales" means the amounts 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. 9. (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 sum of the gross receipts tax base and the franchise tax
base, as allocated by the taxpayer under section 13.
(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. 10. (1) Except as otherwise provided in this act, there
is levied and imposed a specific tax at a rate determined
unanimously by the department, in cooperation with the house and
senate fiscal agencies, to produce, in conjunction with the revenue
received under the business income tax act, an amount equal to
$1,510,000,000.00 on the tax base of every person with business
activity within this state adjusted for the exemptions provided in
section 11 allocated or apportioned to this state.
(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 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
$1,510,000,000.00 by an amount equal to the growth in the Detroit
consumer price index 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
$1,510,000,000.00.
Sec. 11. (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 (c) 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 shall exclude from adjusted tax base the
revenue and expenses attributable to business transacted with
farmer or farmer cooperative corporation patrons to whom net
earnings are allocated in the form of patronage dividends as
defined in section 1388 of the internal revenue code.
(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. 12. (1) A foreign person shall calculate gross receipts
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 5, the gross
receipts 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 gross
receipts 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. 13. (1) Except as otherwise provided under section 15, a
taxpayer shall elect 1 of the following methods for allocation of
the taxpayer's gross receipts tax base and the franchise tax base:
(a) 70% of the gross receipts tax base and 30% of the
franchise tax base.
(b) 60% of the gross receipts tax base and 40% of the
franchise tax base.
(c) 50% of the gross receipts tax base and 50% of the
franchise tax base.
(d) 40% of the gross receipts tax base and 60% of the
franchise tax base.
(e) 30% of the gross receipts tax base and 70% of the
franchise tax base.
(2) An election under subsection (1) shall be made every 3
years.
Sec. 15. (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 is not required to make an election under section 13, but
shall elect 1 of the following options:
(a) Calculate its tax liability under this act on the gross
receipts tax base only.
(b) Calculate its tax liability under the business income tax
act only.
(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 be subject to a tax under this act as follows:
(a) Gross receipts of an amount equal to or less than
$100,000.00, a tax liability of $0.00. A taxpayer with a tax liability
of $0.00 is not required to file a return under this act.
(b) Gross receipts of more than $100,000.00 but less than or
equal to $350,000.00, a tax liability of $100.00.
CHAPTER 3
Sec. 20. 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. 21. (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. 22. (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. 23. (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. 24. (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.
(d) "Payroll" means total salaries and wages before deducting
any personal or dependency exemptions.
(e) "Renaissance zone" means that term as defined in the
Michigan renaissance zone act, 1996 PA 376, MCL 125.2681 to
125.2696.
(f) "Renaissance zone business activity factor" means a
fraction, the numerator of which is the ratio of the average value
of the taxpayer's property located in a designated renaissance zone
to the average value of the taxpayer's property in this state plus
the ratio of the taxpayer's payroll for services performed in a
designated renaissance zone to all of the taxpayer's payroll in
this state and the denominator of which is 2.
(g) "Tax liability attributable to business activity conducted
within a renaissance zone" means the taxpayer's tax liability
multiplied by the renaissance zone business activity factor.
Sec. 25. (1) Subject to the criteria under this section, a
qualified taxpayer that has a preapproval letter issued after
December 31, 2007 and before January 1, 2013, or a taxpayer that
received a preapproval letter prior to January 1, 2008 under
section 38g of former 1975 PA 228 and has not received a
certificate of completion prior to the taxpayer's last tax year,
provided that the project is completed not more than 5 years after
the preapproval letter for the project is issued, or an assignee
under subsection (20), (21), or (22) may claim a credit that has
been approved under subsection (2), (3), or (4) against the tax
imposed by this act equal to either of the following:
(a) If the total of all credits for a project is $1,000,000.00
or less, 10% of the cost of the qualified taxpayer's eligible
investment paid or accrued by the qualified taxpayer on an eligible
property provided that the project does not exceed the amount
stated in the preapproval letter. If eligible investment exceeds
the amount of eligible investment in the preapproval letter for
that project, the total of all credits for the project shall not
exceed the total of all credits on the certificate of completion.
(b) If the total of all credits for a project is more than
$1,000,000.00 but $30,000,000.00 or less and, except as provided in
subsection (6)(b), the project is located in a qualified local
governmental unit, a percentage as determined by the Michigan
economic growth authority not to exceed 10% of the cost of the
qualified taxpayer's eligible investment as determined under
subsection (9) paid or accrued by the qualified taxpayer on an
eligible property. If eligible investment exceeds the amount of
eligible investment in the preapproval letter for that project, the
total of all credits for the project shall not exceed the total of
all credits on the certificate of completion.
(2) If the cost of a project will be $2,000,000.00 or less, a
qualified taxpayer shall apply to the Michigan economic growth
authority for approval of the project under this subsection. An
application under this subsection shall state whether the project
is a multiphase project. The chairperson of the Michigan economic
growth authority or his or her designee is authorized to approve an
application or project under this subsection. Only the chairperson
of the Michigan economic growth authority is authorized to deny an
application or project under this subsection. A project shall be
approved or denied not more than 45 days after receipt of the
application. If the chairperson of the Michigan economic growth
authority or his or her designee does not approve or deny the
application within 45 days after the application is received by the
Michigan economic growth authority, the application is considered
approved as written. The total of all credits for all projects
approved under this subsection shall not exceed $10,000,000.00 in
any calendar year. If the chairperson of the Michigan economic
growth authority or his or her designee approves a project under
this subsection, the chairperson of the Michigan economic growth
authority or his or her designee shall issue a preapproval letter
that states that the taxpayer is a qualified taxpayer; the maximum
total eligible investment for the project on which credits may be
claimed and the maximum total of all credits for the project when
the project is completed and a certificate of completion is issued;
and the project number assigned by the Michigan economic growth
authority. If a project is denied under this subsection, a taxpayer
is not prohibited from subsequently applying under this subsection
for the same project or for another project. If the authority
approves a total of all credits for all projects under this
subsection of less than $10,000,000.00 in a calendar year, the
authority may carry forward for 1 year only the difference between
$10,000,000.00 and the total of all credits for all projects under
this subsection approved in the immediately preceding calendar
year. The Michigan economic growth authority shall develop and
implement the use of the application form to be used for projects
under this subsection. Before the Michigan economic growth
authority substantially changes the form, the Michigan economic
growth authority shall adopt the changes by resolution and give
notice of the proposed resolution to the secretary of the senate,
to the clerk of the house of representatives, and to each person
who requested from the Michigan economic growth authority in
writing or electronically to be notified regarding proposed
resolutions. The notice and proposed resolution and all attachments
shall be published on the Michigan economic growth authority's
internet website. The Michigan economic growth authority shall hold
a public hearing not sooner than 14 days and not later than 30 days
after the date notice of a proposed resolution is given and offer
an opportunity for persons to present data, views, questions, and
arguments. The Michigan economic growth authority board members or
1 or more persons designated by the Michigan economic growth
authority who have knowledge of the subject matter of the proposed
resolution shall be present at the public hearing and shall
participate in the discussion of the proposed resolution. The
Michigan economic growth authority may act on the proposed
resolution no sooner than 14 days after the public hearing. The
Michigan economic growth authority shall produce a final decision
document that describes the basis for its decision. The final
resolution and all attachments and the decision document shall be
provided to the secretary of the senate and to the clerk of the
house of representatives and shall be published on the Michigan
economic growth authority's internet website. The notice shall
include all of the following:
(a) A copy of the proposed resolution and all attachments.
(b) A statement that any person may express any data, views,
or arguments regarding the proposed resolution.
(c) The address to which written comments may be sent and the
date by which comments must be mailed or electronically
transmitted, which date shall not be restricted to only before the
date of the public hearing.
(d) The date, time, and place of the public hearing.
(3) If the cost of a project will be for more than
$2,000,000.00 but $10,000,000.00 or less, a qualified taxpayer
shall apply to the Michigan economic growth authority for approval
of the project under this subsection. An application under this
subsection shall state whether the project is a multiphase project.
The chairperson of the Michigan economic growth authority or his or
her designee is authorized to approve an application or project
under this subsection. Only the chairperson of the Michigan
economic growth authority is authorized to deny an application or
project under this subsection. A project shall be approved or
denied not more than 45 days after receipt of the application. If
the chairperson of the Michigan economic growth authority or his or
her designee does not approve or deny an application within 45 days
after the application is received by the Michigan economic growth
authority, the application is considered approved as written. The
total of all credits for all projects approved under this
subsection shall not exceed $30,000,000.00 in any calendar year. If
the authority approves a total of all credits for all projects
under this subsection of less than $30,000,000.00 in a calendar
year, the authority may carry forward for 1 year only the
difference between $30,000,000.00 and the total of all credits for
all projects approved under this subsection in the immediately
preceding calendar year. The criteria in subsection (7) shall be
used when approving projects under this subsection. When approving
projects under this subsection, priority shall be given to projects
on a facility. The total of all credits for an approved project
under this subsection shall not exceed $1,000,000.00. A taxpayer
may apply under this subsection instead of subsection (4) for
approval of a project that will be for more than $10,000,000.00,
but the total of all credits for that project shall not exceed
$1,000,000.00. If the chairperson of the Michigan economic growth
authority or his or her designee approves a project under this
subsection, the chairperson of the Michigan economic growth
authority or his or her designee shall issue a preapproval letter
that states that the taxpayer is a qualified taxpayer; the maximum
total eligible investment for the project on which credits may be
claimed and the maximum total of all credits for the project when
the project is completed and a certificate of completion is issued;
and the project number assigned by the Michigan economic growth
authority. If a project is denied under this subsection, a taxpayer
is not prohibited from subsequently applying under this subsection
or subsection (4) for the same project or for another project.
(4) If the cost of a project will be for more than
$10,000,000.00 and, except as provided in subsection (6)(b), the
project is located in a qualified local governmental unit, a
qualified taxpayer shall apply to the Michigan economic growth
authority for approval of the project. An application under this
subsection shall state whether the project is a multiphase project.
The Michigan economic growth authority shall approve or deny the
project not more than 65 days after receipt of the application. A
project under this subsection shall not be approved without the
concurrence of the state treasurer. If the Michigan economic growth
authority does not approve or deny the application within 65 days
after it receives the application, the Michigan economic growth
authority shall send the application to the state treasurer. The
state treasurer shall approve or deny the application within 5 days
after receipt of the application. If the state treasurer does not
deny the application within 5 days after receipt of the
application, the application is considered approved. The Michigan
economic growth authority shall approve a limited number of
projects under this subsection during each calendar year as
provided in subsection (6). The Michigan economic growth authority
shall use the criteria in subsection (7) when approving projects
under this subsection, when determining the total amount of
eligible investment, and when determining the percentage of
eligible investment for the project to be used to calculate a
credit. The total of all credits for an approved project under this
subsection shall not exceed the amount designated in the
preapproval letter for that project. If the Michigan economic
growth authority approves a project under this subsection, the
Michigan economic growth authority shall issue a preapproval letter
that states that the taxpayer is a qualified taxpayer; the
percentage of eligible investment for the project determined by the
Michigan economic growth authority for purposes of subsection
(1)(b); the maximum total eligible investment for the project on
which credits may be claimed and the maximum total of all credits
for the project when the project is completed and a certificate of
completion is issued; and the project number assigned by the
Michigan economic growth authority. The Michigan economic growth
authority shall send a copy of the preapproval letter to the
department. If a project is denied under this subsection, a
taxpayer is not prohibited from subsequently applying under this
subsection or subsection (3) for the same project or for another
project.
(5) If the project is on property that is functionally
obsolete, the taxpayer shall include with the application an
affidavit signed by a level 3 or level 4 assessor, that states that
it is the assessor's expert opinion that the property is
functionally obsolete and the underlying basis for that opinion.
(6) The Michigan economic growth authority may approve not
more than 17 projects each calendar year under subsection (4), and
the following limitations apply:
(a) Of the 17 projects allowed under this subsection, the
total of all credits for each project may be more than
$10,000,000.00 but $30,000,000.00 or less for up to 2 projects.
(b) Of the 17 projects allowed under this subsection, up to 3
projects may be approved for projects that are not in a qualified
local governmental unit if the property is a facility for which
eligible activities are identified in a brownfield plan or, for 1
of the 3 projects, if the property is not a facility but is
functionally obsolete or blighted, property identified in a
brownfield plan. For purposes of this subdivision, a facility
includes a building or complex of buildings that was used by a
state or federal agency and that is no longer being used for the
purpose for which it was used by the state or federal agency.
(c) Of the 2 projects allowed under subdivision (a), 1 may be
a project that also qualifies under subdivision (b).
(7) The Michigan economic growth authority shall review all
applications for projects under subsection (4) and, if an
application is approved, shall determine the maximum total of all
credits for that project. Before approving a project for which the
total of all credits will be more than $10,000,000.00 but
$30,000,000.00 or less only, the Michigan economic growth authority
shall determine that the project would not occur in this state
without the tax credit offered under subsection (4). The Michigan
economic growth authority shall consider the following criteria to
the extent reasonably applicable to the type of project proposed
when approving a project under subsection (4), and the chairperson
of the Michigan economic growth authority or his or her designee
shall consider the following criteria to the extent reasonably
applicable to the type of project proposed when approving a project
under subsection (2) or (3) or when considering an amendment to a
project under subsection (9):
(a) The overall benefit to the public.
(b) The extent of reuse of vacant buildings and redevelopment
of blighted property.
(c) Creation of jobs.
(d) Whether the eligible property is in an area of high
unemployment.
(e) The level and extent of contamination alleviated by the
qualified taxpayer's eligible activities to the extent known to the
qualified taxpayer.
(f) The level of private sector contribution.
(g) The cost gap that exists between the site and a similar
greenfield site as determined by the Michigan economic growth
authority.
(h) If the qualified taxpayer is moving from another location
in this state, whether the move will create a brownfield.
(i) Whether the financial statements of the qualified taxpayer
indicate that it is financially sound and that the project is
economically sound.
(j) Any other criteria that the Michigan economic growth
authority or the chairperson of the Michigan economic growth
authority, as applicable, considers appropriate for the
determination of eligibility under subsection (3) or (4).
(8) A qualified taxpayer may apply for projects under this
section for eligible investment on more than 1 eligible property in
a tax year. Each project approved and each project for which a
certificate of completion is issued under this section shall be for
eligible investment on 1 eligible property.
(9) If, after a taxpayer's project has been approved and the
taxpayer has received a preapproval letter but before the project
is completed, the taxpayer determines that the project cannot be
completed as preapproved, the taxpayer may petition the Michigan
economic growth authority to amend the project. The total of
eligible investment for the project as amended shall not exceed the
amount allowed in the preapproval letter for that project.
(10) A project may be a multiphase project. If a project is a
multiphase project, when each component of the multiphase project
is completed, the taxpayer shall submit documentation that the
component is complete, an accounting of the cost of the component,
and the eligible investment for the component of each taxpayer
eligible for a credit for the project of which the component is a
part to the Michigan economic growth authority or the designee of
the Michigan economic growth authority, who shall verify that the
component is complete. When the completion of the component is
verified, a component completion certificate shall be issued to the
qualified taxpayer which shall state that the taxpayer is a
qualified taxpayer, the credit amount for the component, the
qualified taxpayer's federal employer identification number or the
Michigan treasury number assigned to the taxpayer, and the project
number. The taxpayer may assign all or part of the credit for a
multiphase project as provided in this section after a component
completion certificate for a component is issued. The qualified
taxpayer may transfer ownership of or lease the completed component
and assign a proportionate share of the credit for the entire
project to the qualified taxpayer that is the new owner or lessee.
A multiphase project shall not be divided into more than 20
components. A component is considered to be completed when a
certificate of occupancy has been issued by the local municipality
in which the project is located for all of the buildings or
facilities that comprise the completed component and a component
completion certificate is issued. A credit assigned based on a
multiphase project shall be claimed by the assignee in the tax year
in which the assignment is made. The total of all credits for a
multiphase project shall not exceed the amount stated in the
preapproval letter for the project under subsection (1). If all
components of a multiphase project are not completed by 10 years
after the date on which the preapproval letter for the project was
issued, the qualified taxpayer that received the preapproval letter
for the project shall pay to the state treasurer, as a penalty, an
amount equal to the sum of all credits claimed and assigned for all
components of the multiphase project and no credits based on that
multiphase project shall be claimed after that date by the
qualified taxpayer or any assignee of the qualified taxpayer. The
penalty under this subsection is subject to interest on the amount
of the credit claimed or assigned determined individually for each
component at the rate in section 23(2) of 1941 PA 122, MCL 205.23,
beginning on the date that the credit for that component was
claimed or assigned. As used in this subsection, "proportionate
share" means the same percentage of the total of all credits for
the project that the qualified investment for the completed
component is of the total qualified investment stated in the
preapproval letter for the entire project.
(11) When a project under this section is completed, the
taxpayer shall submit documentation that the project is completed,
an accounting of the cost of the project, the eligible investment
of each taxpayer if there is more than 1 taxpayer eligible for a
credit for the project, and, if the taxpayer is not the owner or
lessee of the eligible property on which the eligible investment
was made at the time the project is completed, that the taxpayer
was the owner or lessee of that eligible property when all eligible
investment of the taxpayer was made. The chairperson of the
Michigan economic growth authority or his or her designee, for
projects approved under subsection (2) or (3), or the Michigan
economic growth authority, for projects approved under subsection
(4), shall verify that the project is completed. The Michigan
economic growth authority shall conduct an on-site inspection as
part of the verification process for projects approved under
subsection (4). When the completion of the project is verified, a
certificate of completion shall be issued to each qualified
taxpayer that has made eligible investment on that eligible
property. The certificate of completion shall state the total
amount of all credits for the project and that total shall not
exceed the maximum total of all credits listed in the preapproval
letter for the project under subsection (2), (3), or (4) as
applicable and shall state all of the following:
(a) That the taxpayer is a qualified taxpayer.
(b) The total cost of the project and the eligible investment
of each qualified taxpayer.
(c) Each qualified taxpayer's credit amount.
(d) The qualified taxpayer's federal employer identification
number or the Michigan treasury number assigned to the taxpayer.
(e) The project number.
(f) For a project approved under subsection (4) for which the
total of all credits is more than $10,000,000.00 but $30,000,000.00
or less, the total of all credits and the schedule on which the
annual credit amount shall be claimed by the qualified taxpayer.
(g) For a multiphase project under subsection (10), the amount
of each credit assigned and the amount of all credits claimed in
each tax year before the year in which the project is completed.
(12) Except as otherwise provided in this section, qualified
taxpayers shall claim credits under this section in the tax year in
which the certificate of completion is issued. For a project
approved under subsection (4) for which the total of all credits is
more than $10,000,000.00 but $30,000,000.00 or less, the qualified
taxpayer shall claim 10% of its approved credit each year for 10
years. A credit assigned based on a multiphase project shall be
claimed in the year in which the credit is assigned.
(13) The cost of eligible investment for leased machinery,
equipment, or fixtures is the cost of that property had the
property been purchased minus the lessor's estimate, made at the
time the lease is entered into, of the market value the property
will have at the end of the lease. A credit for property described
in this subsection is allowed only if the cost of that property had
the property been purchased and the lessor's estimate of the market
value at the end of the lease are provided to the Michigan economic
growth authority.
(14) Credits claimed by a lessee of eligible property are
subject to the total of all credits limitation under this section.
(15) Each qualified taxpayer and assignee under subsection
(20), (21), or (22) that claims a credit under this section shall
attach a copy of the certificate of completion and, if the credit
was assigned, a copy of the assignment form provided for under this
section to the annual return filed under this act on which the
credit under this section is claimed. An assignee of a credit based
on a multiphase project shall attach a copy of the assignment form
provided for under this section and the component completion
certificate provided for in subsection (10) to the annual return
filed under this act on which the credit is claimed but is not
required to file a copy of a certificate of completion.
(16) Except as otherwise provided in this subsection or
subsection (10), (18), (20), (21), or (22), a credit under this
section shall be claimed in the tax year in which the certificate
of completion is issued to the qualified taxpayer. For a project
described in subsection (11)(f) for which a schedule for claiming
annual credit amounts is designated on the certificate of
completion by the Michigan economic growth authority, the annual
credit amount shall be claimed in the tax year specified on the
certificate of completion.
(17) The credits approved under this section shall be
calculated after application of all other credits allowed under
this act. The credits under this section shall be calculated before
the calculation of the credit under section 23.
(18) If the credit allowed under this section for the tax year
and any unused carryforward of the credit allowed under this
section exceed the qualified taxpayer's or assignee's tax liability
for the tax year, that portion that exceeds the tax liability for
the tax year shall not be refunded but may be carried forward to
offset tax liability in subsequent tax years for 10 years or until
used up, whichever occurs first. Except as otherwise provided in
this subsection, the maximum time allowed under the carryforward
provisions under this subsection begins with the tax year in which
the certificate of completion is issued to the qualified taxpayer.
If the qualified taxpayer assigns all or any portion of its credit
approved under this section, the maximum time allowed under the
carryforward provisions for an assignee begins to run with the tax
year in which the assignment is made and the assignee first claims
a credit, which shall be the same tax year. The maximum time
allowed under the carryforward provisions for an annual credit
amount for a credit allowed under subsection (4) begins to run in
the tax year for which the annual credit amount is designated on
the certificate of completion issued under this section. A credit
carryforward available under section 38g of former 1975 PA 228 that
is unused at the end of the last tax year may be claimed against
the tax imposed under act for the years the carryforward would have
been available under former 1975 PA 228.
(19) If a project or credit under this section is for the
addition of personal property, if the cost of that personal
property is used to calculate a credit under this section, and if
the personal property is sold or disposed of or transferred from
eligible property to any other location, the qualified taxpayer
that sold, disposed of, or transferred the personal property shall
add the same percentage as determined under subsection (1) of the
federal basis of the personal property used for determining gain or
loss as of the date of the sale, disposition, or transfer to the
qualified taxpayer's tax liability under this act after application
of all credits under this act for the tax year in which the sale,
disposition, or transfer occurs. If a qualified taxpayer has an
unused carryforward of a credit under this section, the amount
otherwise added under this subsection to the qualified taxpayer's
tax liability may instead be used to reduce the qualified
taxpayer's carryforward under subsection (18).
(20) For credits under this section for projects for which a
certificate of completion is issued before January 1, 2006 and
except as otherwise provided in this subsection, if a qualified
taxpayer pays or accrues eligible investment on or to an eligible
property that is leased for a minimum term of 10 years or sold to
another taxpayer for use in a business activity, the qualified
taxpayer may assign all or a portion of the credit under this
section based on that eligible investment to the lessee or
purchaser of that eligible property. A credit assignment under this
subsection shall only be made to a taxpayer that when the
assignment is complete will be a qualified taxpayer. All credit
assignments under this subsection are irrevocable and, except for a
credit based on a multiphase project, shall be made in the tax year
in which the certificate of completion is issued, unless the
assignee is an unknown lessee. If a qualified taxpayer wishes to
assign all or a portion of its credit to a lessee but the lessee is
unknown in the tax year in which the certificate of completion is
issued, the qualified taxpayer may delay claiming and assigning the
credit until the first tax year in which the lessee is known. A
qualified taxpayer may claim a portion of a credit and assign the
remaining credit amount. Except as otherwise provided in this
subsection, if the qualified taxpayer both claims and assigns
portions of the credit, the qualified taxpayer shall claim the
portion it claims in the tax year in which the certificate of
completion is issued or, for a credit assigned and claimed for a
multiphase project before a certificate of completion is issued,
the taxpayer shall claim the credit in the year in which the credit
is assigned. If a qualified taxpayer assigns all or a portion of
the credit and the eligible property is leased to more than 1
taxpayer, the qualified taxpayer shall determine the amount of
credit assigned to each lessee. A lessee shall not subsequently
assign a credit or any portion of a credit assigned under this
subsection. A purchaser may subsequently assign a credit or any
portion of a credit assigned to the purchaser under this subsection
to a lessee of the eligible property. The credit assignment under
this subsection shall be made on a form prescribed by the Michigan
economic growth authority. The qualified taxpayer shall send a copy
of the completed assignment form to the Michigan economic growth
authority in the tax year in which the assignment is made. The
assignee shall attach a copy of the completed assignment form to
its annual return required to be filed under this act, for the tax
year in which the assignment is made and the assignee first claims
a credit, which shall be the same tax year. In addition to all
other procedures under this subsection, the following apply if the
total of all credits for a project is more than $10,000,000.00 but
$30,000,000.00 or less:
(a) The credit shall be assigned based on the schedule
contained in the certificate of completion.
(b) If the qualified taxpayer assigns all or a portion of the
credit amount, the qualified taxpayer shall assign the annual
credit amount for each tax year separately.
(c) More than 1 annual credit amount may be assigned to any 1
assignee and the qualified taxpayer may assign all or a portion of
each annual credit amount to any assignee.
(d) The qualified taxpayer shall not assign more than the
annual credit amount for each tax year.
(21) Except as otherwise provided in this subsection, for
projects for which a certificate of completion is issued before
January 1, 2006, and except as otherwise provided in this
subsection, if a qualified taxpayer is a partnership, limited
liability company, or subchapter S corporation, the qualified
taxpayer may assign all or a portion of a credit under this section
to its partners, members, or shareholders, based on their
proportionate share of ownership of the partnership, limited
liability company, or subchapter S corporation or based on an
alternative method approved by the Michigan economic growth
authority. A credit assignment under this subsection is irrevocable
and, except for a credit assignment based on a multiphase project,
shall be made in the tax year in which a certificate of completion
is issued. A qualified taxpayer may claim a portion of a credit and
assign the remaining credit amount. Except as otherwise provided in
this subsection, if the qualified taxpayer both claims and assigns
portions of the credit, the qualified taxpayer shall claim the
portion it claims in the tax year in which a certificate of
completion is issued or for a credit assigned and claimed for a
multiphase project, before the component completion certificate is
issued, the taxpayer shall claim the credit in the year in which
the credit is assigned. A partner, member, or shareholder that is
an assignee shall not subsequently assign a credit or any portion
of a credit assigned under this subsection. The credit assignment
under this subsection shall be made on a form prescribed by the
Michigan economic growth authority. The qualified taxpayer shall
send a copy of the completed assignment form to the Michigan
economic growth authority in the tax year in which the assignment
is made. A partner, member, or shareholder who is an assignee shall
attach a copy of the completed assignment form to its annual return
required under this act, for the tax year in which the assignment
is made and the assignee first claims a credit, which shall be the
same tax year. A credit assignment based on a credit for a
component of a multiphase project that is completed before January
1, 2006 shall be made under this subsection. In addition to all
other procedures under this subsection, the following apply if the
total of all credits for a project is more than $10,000,000.00 but
$30,000,000.00 or less:
(a) The credit shall be assigned based on the schedule
contained in the certificate of completion.
(b) If the qualified taxpayer assigns all or a portion of the
credit amount, the qualified taxpayer shall assign the annual
credit amount for each tax year separately.
(c) More than 1 annual credit amount may be assigned to any 1
assignee and the qualified taxpayer may assign all or a portion of
each annual credit amount to any assignee.
(d) The qualified taxpayer shall not assign more than the
annual credit amount for each tax year.
(22) For projects approved under section 38g of former 1975 PA
228 for which a certificate of completion is issued on and after
January 1, 2006, a qualified taxpayer may assign all or a portion
of a credit allowed under section 38g(2), (3), or (33) of former
1975 PA 228 under this subsection. A credit assignment under this
subsection is irrevocable and, except for a credit assignment based
on a multiphase project, shall be made in the tax year in which a
certificate of completion is issued unless the assignee is an
unknown lessee. If a qualified taxpayer wishes to assign all or a
portion of its credit to a lessee but the lessee is unknown in the
tax year in which the certificate of completion is issued, the
qualified taxpayer may delay claiming and assigning the credit
until the first tax year in which the lessee is known. A qualified
taxpayer may claim a portion of a credit and assign the remaining
credit amount. If the qualified taxpayer both claims and assigns
portions of the credit, the qualified taxpayer shall claim the
portion it claims in the tax year in which a certificate of
completion is issued pursuant to section 38g of former 1975 PA 228.
An assignee may subsequently assign a credit or any portion of a
credit assigned under this subsection to 1 or more assignees. An
assignment under this subsection of a credit allowed under section
38g(2), (3), or (33) of former 1975 PA 228 shall not be made after
10 years after the first tax year in which that credit under
section 38g(2), (3), or (33) of former 1975 PA 228 may be claimed.
The credit assignment or a subsequent reassignment under this
subsection shall be made on a form prescribed by the Michigan
economic growth authority. The qualified taxpayer shall send a copy
of the completed assignment form to the Michigan economic growth
authority in the tax year in which an assignment or reassignment is
made. An assignee or subsequent reassignee shall attach a copy of
the completed assignment form to its annual return required under
this act, for the tax year in which the assignment or reassignment
is made and the assignee or reassignee first claims a credit, which
shall be the same tax year. A credit assignment based on a credit
for a component of a multiphase project that is completed before
January 1, 2006 shall be made under section 38g(18) of former 1975
PA 228. A credit assignment based on a credit for a component of a
multiphase project that is completed on or after January 1, 2006
may be made under this section. In addition to all other procedures
and requirements under this section, the following apply if the
total of all credits for a project is more than $10,000,000.00 but
$30,000,000.00 or less:
(a) The credit shall be assigned based on the schedule
contained in the certificate of completion.
(b) If the qualified taxpayer assigns all or a portion of the
credit amount, the qualified taxpayer shall assign the annual
credit amount for each tax year separately.
(c) More than 1 annual credit amount may be assigned to any 1
assignee, and the qualified taxpayer may assign all or a portion of
each annual credit amount to any assignee.
(23) A qualified taxpayer or assignee under subsection (20),
(21), or (22) shall not claim a credit under subsection (1)(a) or
(b) based on eligible investment on which a credit claimed under
section 38d of former 1975 PA 228 was based.
(24) 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 38g of former 1975 PA 228.
The number of years for which the credit under this subsection may
be claimed under this act shall equal the maximum number of years
designated in the agreement reduced by the number of years for
which a credit had been claimed under section 38g of former 1975 PA
228.
(25) An eligible taxpayer that claims a credit under this
section is not prohibited from claiming a credit under section 23.
However, the eligible taxpayer shall not claim a credit under this
section and section 23 based on the same costs.
(26) Eligible investment attributable or related to the
operation of a professional sports stadium, and eligible investment
that is associated or affiliated with the operation of a
professional sports stadium, including, but not limited to, the
operation of a parking lot or retail store, shall not be used as a
basis for a credit under this section. Professional sports stadium
does not include a professional sports stadium that will no longer
be used by a professional sports team on and after the date that an
application related to that professional sports stadium is filed
under this section.
(27) Eligible investment attributable or related to the
operation of a casino, and eligible investment 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 as a basis for a credit under this
section. As used in this subsection, "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.
(28) Eligible investment attributable or related to the
construction of a new landfill or the expansion of an existing
landfill regulated under part 115 of the natural resources and
environmental protection act, 1994 PA 451, MCL 324.11501 to
324.11550, shall not be used as a basis for a credit under this
section.
(29) The Michigan economic growth authority annually shall
prepare and submit to the house of representatives and senate
committees responsible for tax policy and economic development
issues a report on the credits under subsection (3). The report
shall include, but is not limited to, all of the following:
(a) A listing of the projects under subsection (3) that were
approved in the calendar year.
(b) The total amount of eligible investment for projects
approved under subsection (3) in the calendar year.
(30) As used in this section:
(a) "Annual credit amount" means the maximum amount that a
qualified taxpayer is eligible to claim each tax year for a project
for which the total of all credits is more than $10,000,000.00 but
$30,000,000.00 or less, which shall be 10% of the qualified
taxpayer's credit amount approved under subsection (3).
(b) "Authority" means a brownfield redevelopment authority
created under the brownfield redevelopment financing act, 1996 PA
381, MCL 125.2651 to 125.2672.
(c) "Authorized business", "full-time job", "new capital
investment", "qualified high-technology business", "retained jobs",
and "written agreement" mean those terms as defined in the Michigan
economic growth authority act, 1995 PA 24, MCL 207.801 to 207.810.
(d) "Blighted", "brownfield plan", "eligible activities",
"facility", "functionally obsolete", "qualified local governmental
unit", and "response activity" mean those terms as defined in the
brownfield redevelopment financing act, 1996 PA 381, MCL 125.2651
to 125.2672.
(e) "Eligible investment" means demolition, construction,
restoration, alteration, renovation, or improvement of buildings or
site improvements on eligible property and the addition of
machinery, equipment, and fixtures to eligible property after the
date that eligible activities on that eligible property have
started pursuant to a brownfield plan under the brownfield
redevelopment financing act, 1996 PA 381, MCL 125.2651 to 125.2672,
and after the date that the preapproval letter is issued, if the
costs of the eligible investment are not otherwise reimbursed to
the taxpayer or paid for on behalf of the taxpayer from any source
other than the taxpayer. The addition of leased machinery,
equipment, or fixtures to eligible property by a lessee of the
machinery, equipment, or fixtures is eligible investment if the
lease of the machinery, equipment, or fixtures has a minimum term
of 10 years or is for the expected useful life of the machinery,
equipment, or fixtures, and if the owner of the machinery,
equipment, or fixtures is not the qualified taxpayer with regard to
that machinery, equipment, or fixtures.
(f) "Eligible property" means that term as defined in the
brownfield redevelopment financing act, 1996 PA 381, MCL 125.2651
to 125.2672, except that, for purposes of subsection (2), all of
the following apply:
(i) Eligible property means property identified under a
brownfield plan that was used or is currently used for commercial,
industrial, or residential purposes and that is 1 of the following:
(A) Property for which eligible activities are identified
under the brownfield plan, is in a qualified local governmental
unit, and is a facility, functionally obsolete, or blighted.
(B) Property that is not in a qualified local governmental
unit but is within a downtown development district established
under 1975 PA 197, MCL 125.1651 to 125.1681, and is functionally
obsolete or blighted, and a component of the project on that
eligible property is 1 or more of the following:
(I) Infrastructure improvements that directly benefit the
eligible property.
(II) Demolition of structures that is not response activity
under section 20101 of the natural resources and environmental
protection act, 1994 PA 451, MCL 324.20101.
(III) Lead or asbestos abatement.
(IV) Site preparation that is not response activity under
section 20101 of the natural resources and environmental protection
act, 1994 PA 451, MCL 324.20101.
(C) Property for which eligible activities are identified
under the brownfield plan, is not in a qualified local governmental
unit, and is a facility.
(ii) Eligible property includes parcels that are adjacent or
contiguous to the eligible property if the development of the
adjacent or contiguous parcels is estimated to increase the
captured taxable value of the property or tax reverted property
owned or under the control of a land bank fast track authority
pursuant to the land bank fast track authority act, 2003 PA 258,
MCL 124.751 to 124.774.
(iii) Eligible property includes, to the extent included in the
brownfield plan, personal property located on the eligible
property.
(iv) Eligible property does not include qualified agricultural
property exempt under section 7ee of the general property tax act,
1893 PA 206, MCL 211.7ee, from the tax levied by a local school
district for school operating purposes to the extent provided under
section 1211 of the revised school code, 1976 PA 451, MCL 380.1211.
(g) "Last tax year" means the taxpayer's tax year under former
1975 PA 228 that begins after December 31, 2006 and before January
1, 2008.
(h) "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.
(i) "Multiphase project" means a project approved under this
section that has more than 1 component, each of which can be
completed separately.
(j) "Personal property" means that term as defined in section
8 of the general property tax act, 1893 PA 206, MCL 211.8, except
that personal property does not include either of the following:
(i) Personal property described in section 8(h), (i), or (j) of
the general property tax act, 1893 PA 206, MCL 211.8.
(ii) Buildings described in section 14(6) of the general
property tax act, 1893 PA 206, MCL 211.14.
(k) "Project" means the total of all eligible investment on an
eligible property or, for purposes of subsection (6)(b), 1 of the
following:
(i) All eligible investment on property not in a qualified
local governmental unit that is a facility.
(ii) All eligible investment on property that is not a facility
but is functionally obsolete or blighted.
(l) "Qualified local governmental unit" means that term as
defined in the obsolete property rehabilitation act, 2000 PA 146,
MCL 125.2781 to 125.2797.
(m) "Qualified taxpayer" means a taxpayer that meets both of
the following criteria:
(i) Owns or leases eligible property.
(ii) Certifies that, except as otherwise provided in this
subparagraph, the department of environmental quality has not sued
or issued a unilateral order to the taxpayer pursuant to part 201
of the natural resources and environmental protection act, 1994 PA
451, MCL 324.20101 to 324.20142, to compel response activity on or
to the eligible property, or expended any state funds for response
activity on or to the eligible property and demanded reimbursement
for those expenditures from the qualified taxpayer. However, if the
taxpayer has completed all response activity required by part 201
of the natural resources and environmental protection act, 1994 PA
451, MCL 324.20101 to 324.20142, is in compliance with any deed
restriction or administrative or judicial order related to the
required response activity, and has reimbursed the state for all
costs incurred by the state related to the required response
activity, the taxpayer meets the criteria under this subparagraph.
Sec. 26. (1) A qualified taxpayer that makes an eligible
contribution in an eligible business may claim a credit against the
tax imposed by the act equal to 50% of the taxpayer's eligible
contribution, not to exceed $500,000.00.
(2) Prior to making an eligible contribution, a qualified
taxpayer shall submit an application to the authority for approval
of the credit. The application shall include at least all of the
following:
(a) An economic impact analysis, including all of the
following:
(i) The impact on both the qualified taxpayer and eligible
business.
(ii) The innovation impact on the technology sector.
(iii) The number of jobs created.
(b) A project and collaboration structure that includes:
(i) The structure of investment between the qualified taxpayer
and eligible business.
(ii) Technology development roles and responsibilities.
(iii) A commercialization plan, including intellectual property
structure.
(c) A technology summary, including a due diligence review by
the qualified taxpayer.
(d) Other collaborators or interested and supportive
businesses.
(i) A financial summary.
(ii) Total eligible contribution by the qualified taxpayer.
(iii) In-kind services provided by the qualified taxpayer.
(iv) Other investors or service providers in the project.
(v) Total overall investment into the project.
(3) The authority shall develop criteria to competitively
review applications, including, but not limited to, criteria
related to all of the following:
(a) Economic impact in Michigan.
(b) Total cash investment by the qualified taxpayer.
(c) Total in-kind services provided by the qualified taxpayer.
(d) Other collaborators and services provided.
(e) Impact of technology development across specific and other
sectors.
(f) The commercialization plan and potential for
commercialization.
(4) A qualified 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.
(5) The certificate required by subsection (4) shall state all
of the following:
(a) The taxpayer is an eligible business.
(b) The amount of the credit under this section for the
eligible business for the designated tax year, which shall be the
year in which contribution is made.
(c) The taxpayer's federal employer identification number or
the Michigan department of treasury number assigned to the
taxpayer.
(6) The authority shall not grant more than 25 credits under
this section for any 1 year, based on an application and a
competitive review criteria.
(7) A qualified taxpayer that receives a credit under this
section and the eligible business to which a contribution is made
shall enter into an agreement with the authority that requires the
qualified taxpayer and the eligible business to comply with the
relevant provisions of the application as determined by the
authority for a period of 5 years. If the authority determines that
there has not been compliance with the requirements of the terms of
the agreement, the qualified taxpayer shall be liable for an amount
equal to 125% of the total of all credits received under this
section for all tax years.
(8) As used in this section:
(a) "Authority" means the Michigan economic growth authority
created in the Michigan economic growth authority act, 1995 PA 24,
MCL 207.801 to 207.810.
(b) "Eligible contribution" means the transfer of pecuniary
interest in the form of cash, for the purposes of research and
development and technology innovation. An eligible contribution
does not include contract research.
(c) "Eligible business" means a taxpayer engaged in research
and development that together with any affiliates employs fewer
than 50 full-time employees or has gross receipts of less than
$10,000,000.00 and has no prior financial interest in the qualified
taxpayer and in which the qualified taxpayer has no prior financial
interest.
(d) "Qualified taxpayer" means a taxpayer that meets all of
the following criteria:
(i) Proposes to fund, support, and collaborate in the research
and development and technology innovation with an eligible business
located in this state.
(ii) Has not received a credit under this section in the past
calendar year.
(e) "Research and development" means 1 of the following:
(i) Translational research conducted with the objective of
attaining a specific benefit or to solve a practical problem.
(ii) Activity that seeks to utilize, synthesize, or apply
existing knowledge, information, or resources to the resolution of
a specified problem, question, or issue, with high potential for
commercial application to create jobs in this state.
(iii) Original investigation for the advancement of scientific
or technological knowledge that will enhance the research capacity
of this state in a way that increases the ability to attract to or
develop companies, jobs, researchers, or students in this state.
Sec. 27. A taxpayer, other than a taxpayer that is a member of
an affiliated group, a controlled group of corporations, or an
entity under common control, whose gross receipts allocated or
apportioned to this state are greater than $350,000.00 but less
than $1,000,000.00, may claim a credit against the tax imposed
under this act equal to the tax liability before all other credits
multiplied by a fraction the numerator of which is the difference
between the taxpayer’s allocated or apportioned gross receipts and
$1,000,000.00 and the denominator of which is $350,000.00.
Sec. 28. (1) A taxpayer may claim a credit against the tax
imposed by this act equal to 10% of the property taxes paid on
eligible personal property in the tax year in which the credit
under this section is claimed.
(2) A taxpayer may claim the credit under subsection (1) on a
form prescribed by the department. The taxpayer shall attach both
of the following to the form:
(a) A copy of the statement of assessable personal property
prepared pursuant to section 19 of the general property tax act,
1893 PA 206, MCL 211.19, identifying the eligible personal property
for which the credit under subsection (1) is claimed.
(b) A copy of the assessment or bill issued to and paid by the
taxpayer for the eligible personal property for which the credit
under subsection (1) is claimed.
(3) If the credit allowed under subsection (1) exceeds the tax
liability of the taxpayer for the tax year, that portion of the
credit that exceeds the tax liability for the tax year shall not be
refunded but may be carried forward to offset tax liability in
subsequent tax years for 10 years or until used up, whichever
occurs first.
(4) As used in this section:
(a) "Eligible personal property" means personal property that
meets all of the following conditions:
(i) Was acquired by the taxpayer claiming the credit under
subsection (1) within 5 years immediately preceding the date that
the taxpayer claims the credit under subsection (1).
(ii) Is classified as industrial personal property under
section 34c of the general property tax act, 1893 PA 206, MCL
211.34c.
(b) "Property taxes" means any of the following:
(i) Taxes collected under the general property tax act, 1893 PA
206, MCL 211.1 to 211.157.
(ii) Taxes collected under 1905 PA 282, MCL 207.1 to 207.21.
(iii) Taxes levied under 1974 PA 198, MCL 207.551 to 207.572.
(iv) Taxes levied under the obsolete property rehabilitation
act, 2000 PA 146, MCL 125.2781 to 125.2797.
(v) Taxes levied under the technology park development act,
1984 PA 385, MCL 207.702 to 207.718.
(vi) Taxes levied under the commercial rehabilitation act, 2005
PA 210, MCL 207.841 to 207.856.
(vii) Any payments made by a taxpayer pursuant to a contract
with a local tax collecting unit to the extent that those payments
are made to reimburse taxing units for property taxes that would
otherwise be collected under the general property tax act, 1893 PA
206, MCL 211.1 to 211.157.
Sec. 29. (1) Subject to subsection (4), an eligible taxpayer
may claim the Michigan entrepreneurial credit equal to 100% of the
tax imposed by this act.
(2) An eligible taxpayer may claim the credit under subsection
(1) on a form prescribed by the department.
(3) As used in this section, "eligible taxpayer" means a
taxpayer that meets all of the following conditions:
(a) Had less than $25,000,000.00 in gross receipts in the
immediately preceding tax year. The $25,000,000.00 amount shall be
annually adjusted for inflation using the Detroit consumer price
index.
(b) Has created in this state or transferred into this state
not fewer than 20 new jobs in the immediately preceding tax year.
As used in this subdivision, "new jobs" means jobs that meet all of
the following criteria:
(i) Did not exist in this state in the immediately preceding
tax year.
(ii) Represent an overall increase in full-time equivalent jobs
of the taxpayer in this state in the immediately preceding tax
year.
(iii) Are not jobs into which employees transfer if the
employees worked in this state for the taxpayer, a related entity
of the taxpayer, or an entity with which the taxpayer files a
consolidated return under this act in other jobs prior to beginning
the new jobs.
(c) Has made a capital investment in this state of not less
than $3,000,000.00 in the immediately preceding tax year or
$5,000,000.00 in the 2 immediately preceding tax years.
(4) An eligible taxpayer may claim the Michigan entrepreneurial
credit under this section not more than 3 times in 3 consecutive
years, beginning in the first year that the taxpayer claims the
Michigan entrepreneurial credit.
(5) If a taxpayer relocates outside of this state within 5 years
after claiming the Michigan entrepreneurial credit under this section
and is no longer subject to the tax imposed under this act, that
taxpayer is liable in an amount equal to the total of all credits
received under this section. Any liability under this subsection shall
be collected under 1941 PA 122, MCL 205.1 to 205.31.
CHAPTER 4
Sec. 40. Except as otherwise provided in this chapter, the
entire tax base of the taxpayer whose business activities are
confined solely to this state shall be allocated to this state.
Sec. 41. 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. 42. All of the tax base, other than the tax base derived
principally from transportation or financial services or
specifically allocated, shall be apportioned to this state by
multiplying the tax base by the sales factor. However, a taxpayer
that has no sales within this state shall apportion the tax base
using the average of the payroll and property factors.
Sec. 43. (1) Except as provided in subsection (2), the
property factor is a fraction, the numerator of which is the
average value of the taxpayer's real and tangible personal property
owned or rented in this state during the tax year and the
denominator of which is the average value of all the taxpayer's
real and tangible personal property owned or rented during the tax
year.
(2) The property factor for a foreign person is a fraction,
the numerator of which is the average value of the taxpayer's real
and tangible personal property owned or rented in this state during
the tax year by the taxpayer and the denominator of which is the
average value of all the taxpayer's real and tangible personal
property owned or rented in the United States during the tax year.
(3) Property owned by the taxpayer is valued at its original
cost. Property rented by the taxpayer is valued at 8 times the net
annual rental rate. Net annual rental rate is the annual rental
rate paid by the taxpayer less any annual rental rate received by
the taxpayer from subrentals.
(4) The average value of property shall be determined by
averaging the values at the beginning and ending of the tax year,
except that the department may require the periodic averaging of
values during the tax year if doing that is reasonably required to
properly reflect the average value of the taxpayer's property.
Sec. 44. (1) Except as otherwise provided in subsection (2),
the payroll factor is a fraction, the numerator of which is the
total wages paid in this state during the tax year by the taxpayer
and the denominator of which is the total wages paid everywhere
during the tax year by the taxpayer. For the purposes of this
chapter only, "wages" means all wages, salaries, fees, bonuses, and
commissions paid in the tax year on behalf of or for the benefit of
employees, officers, or directors of the taxpayer and 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.
(2) The payroll factor for a foreign person is a fraction, the
numerator of which is the total wages paid for services performed
in this state during the tax year by the taxpayer and the
denominator of which is the total wages paid for services performed
in the United States during the tax year by the taxpayer.
(3) Wages are considered paid in this state in the following
circumstances:
(a) The individual's service is performed entirely within the
state.
(b) The individual's service is performed both within and
without the state, but the service performed without the state is
incidental to the individual's service within the state.
(c) Some of the individual's service is performed in the state
and the base of operations or, if there is no base of operations,
the place from which the service is directed or controlled is in
the state; or the base of operations or the place from which the
service is directed or controlled is not in any state in which some
part of the service is performed, but the individual's residence is
in this state.
Sec. 45. (1) Except as otherwise provided in subsection (2)
and section 46, the sales factor 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 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 sales and if personal property is shipped from an office,
store, warehouse, factory, or other place of storage in this state
and the taxpayer is not taxable in the state of the purchaser. 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 in any of the following circumstances:
(a) The business activity is performed in this state.
(b) The business activity is performed both within and outside
of this state and, based on costs of performance, a greater
proportion of the business activity is performed within this state
than is performed outside this state.
(c) The business activity is planning, designing, or otherwise
facilitating construction activities within 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. 46. (1) Notwithstanding section 45, 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 45 subject to both of
the following:
(a) A purchaser in this state under section 45 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 45 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
45. 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. 47. (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 48.
(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. 48. (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. 49. 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. 50. (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 5
Sec. 60. (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 62(4), 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. 61. (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 act
is in lieu of all other privilege or franchise fees, income taxes,
or other taxes imposed by 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. 62. (1) An insurance company may claim a credit against
the tax imposed under this act in the following amounts, but not to
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 63 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. 63. 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. 64. (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 70. 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 subsequent 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. 65. (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 70, 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 6
Sec. 70. (1) A taxpayer that reasonably expects liability for
the tax year to exceed $1,000.00 shall file an estimated return and
pay an estimated tax for each quarter of the taxpayer's tax year.
(2) For taxpayers on a calendar year basis, the quarterly
returns and estimated payments shall be made by April 15, July 15,
October 15, and January 15. Taxpayers not on a calendar year basis
shall file quarterly returns and make estimated payments on the
appropriate due date which in the taxpayer's fiscal year
corresponds to the calendar year.
(3) The estimated payment made with each quarterly return of
each tax year shall be for the estimated tax base for the quarter
or 25% of the estimated annual liability. The second, third, and
fourth estimated payments in each tax year shall include
adjustments, if necessary, to correct underpayments or overpayments
from previous quarterly payments in the tax year to a revised
estimate of the annual tax liability.
(4) The interest provided by this act shall not be assessed if
any of the following occur:
(a) If the sum of the estimated payments equals at least 85%
of the liability and the amount of each estimated payment
reasonably approximates the tax liability incurred during the
quarter for which the estimated payment was made.
(b) If the preceding year's tax liability under this act was
$20,000.00 or less and if the taxpayer submitted 4 equal
installments the sum of which equals the immediately preceding tax
year's tax liability.
(5) Each estimated return shall be made on a form prescribed
by the department and shall include an estimate of the annual tax
liability and other information required by the state treasurer.
The form prescribed under this subsection may be combined with any
other tax reporting form prescribed by the department.
(6) With respect to a taxpayer filing an estimated tax return
for the taxpayer's first tax year of less than 12 months, the
amounts paid with each return shall be proportional to the number
of payments made in the first tax year.
(7) Payments made under this section shall be a credit against
the payment required with the annual tax return required in section
72.
(8) If the department considers it necessary to insure payment
of the tax or to provide a more efficient administration of the
tax, the department may require filing of the returns and payment
of the tax for other than quarterly or annual periods.
(9) A taxpayer that elects under the internal revenue code to
file an annual federal income tax return by March 1 in the year
following the taxpayer's tax year and does not make a quarterly
estimate or payment, or does not make a quarterly estimate or
payment and files a tentative annual return with a tentative
payment by January 15 in the year following the taxpayer's tax year
and a final return by April 15 in the year following the taxpayer's
tax year, has the same option in filing the estimated and annual
returns required by this act.
Sec. 71. A taxpayer subject to this act may elect to compute
the tax imposed by this act for the first tax year if that tax year
is less than 12 months in accordance with 1 of the following
methods:
(a) The tax may be computed as if this act were effective on
the first day of the taxpayer's annual accounting period and the
amount computed shall be multiplied by a fraction, the numerator of
which is the number of months in the taxpayer's first tax year and
the denominator of which is 12.
(b) The tax may be computed by determining the tax base in the
first tax year in accordance with an accounting method satisfactory
to the department that reflects the actual tax base attributable to
the period.
Sec. 72. (1) An annual or final return shall be filed with the
department in the form and content prescribed by the department by
the last day of the fourth month after the end of the taxpayer's
tax year. Any final liability shall be remitted with this return.
(2) If a person has apportioned or allocated gross receipts
for a tax year of less than 12 months, the amount in subsection (1)
shall be multiplied by a fraction, the numerator of which is the
number of months in the tax year and the denominator of which is
12.
(3) The department, upon application of the taxpayer and for
good cause shown, may extend the date for filing the annual return.
Interest at the rate under section 23(2) of 1941 PA 122, MCL
205.23, shall be added to the amount of the tax unpaid for the
period of the extension. The treasurer shall require with the
application payment of the estimated tax liability unpaid for the
tax period covered by the extension.
(4) If a taxpayer is granted an extension of time within which
to file the federal income tax return for any tax year, the filing
of a copy of the request for extension together with a tentative
return and payment of an estimated tax with the department by the
due date provided in subsection (1) shall automatically extend the
due date for the filing of an annual or final return under this act
until the last day of the eighth month following the original due
date of the return. Interest at the rate under section 23(2) of
1941 PA 122, MCL 205.23, shall be added to the amount of the tax
unpaid for the period of the extension.
(5) 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 in the internal revenue code shall consolidate the gross
receipts of the members of the affiliated group, member
corporations of the controlled group, or entities under common
control that have apportioned or allocated gross receipts, to
determine whether the group or entity shall pay a tax or file a
return as provided under subsection (1). An individual member of an
affiliated group or controlled group of corporations or an entity
under common control is not required to file a return or pay the
tax under this act if that member or entity has apportioned or
allocated gross receipts of less than $100,000.00.
Sec. 73. (1) A taxpayer required to file a return under this
act may be required to furnish a true and correct copy of any
return or portion of any return filed under the provisions of the
internal revenue code.
(2) A taxpayer shall file an amended return with the
department showing any alteration in or modification of a federal
income tax return that affects its tax base under this act. The
amended return shall be filed within 120 days after the final
determination by the internal revenue service.
Sec. 74. (1) At the request of the department, a person
required by the internal revenue code to file or submit an
information return of income paid to others shall, to the extent
the information is applicable to residents of this state, at the
same time file or submit the information in the form and content
prescribed to the department.
(2) At the request of the department, a voluntary association,
joint venture, partnership, estate, or trust shall file a copy of
any tax return or portion of any tax return that was filed under
the provisions of the internal revenue code. The department may
prescribe alternate forms of returns.
Sec. 75. (1) The department may require or permit the filing
of a consolidated or combined return by an affiliated group of
United States corporations if all of the following conditions
exist:
(a) All members of the affiliated group are Michigan
taxpayers.
(b) Each member of the affiliated group maintains a
relationship with 1 or more members of the group which includes
intercorporate transactions of a substantial nature other than
control, ownership, or financing arrangements, or any combination
thereof.
(c) The business activities of each member of the affiliated
group are subject to apportionment by a specific apportionment
formula contained in this act, which specific formula also is
applicable to all other members of the affiliated group and would
be applicable to each member even if it were not a member of the
affiliated group.
(d) The consolidated or combined return includes all Michigan
taxpayers that meet the requirements of this subsection.
(2) As used in this section, "United States corporation" means
a domestic corporation as that term is defined in section
7701(a)(3) and (4) of the internal revenue code.
Sec. 76. (1) Except as expressly provided in section 75, a
provision of this act shall not be construed to permit or require
the filing of a consolidated or combined return or a consolidation
or combination of the tax base or apportionment factors of 2 or
more United States corporations.
(2) As used in this section, "United States corporation" means
a domestic corporation as that term is defined in section
7701(a)(3) and (4) of the internal revenue code.
Sec. 77. (1) The tax imposed by this act shall be administered
by the department of treasury pursuant to 1941 PA 122, MCL 205.1 to
205.31, and this act. If a conflict exists between 1941 PA 122, MCL
205.1 to 205.31, and this act, the provisions of this act apply.
(2) The department may promulgate rules to implement this act
pursuant to the administrative procedures act of 1969, 1969 PA 306,
MCL 24.201 to 24.328.
(3) The department shall prescribe forms for use by taxpayers
and may promulgate rules in conformity with this act for the
maintenance by taxpayers of records, books, and accounts, and for
the computation of the tax, the manner and time of changing or
electing accounting methods and of exercising the various options
contained in this act, the making of returns, and the
ascertainment, assessment, and collection of the tax imposed under
this act.
(4) The tax imposed by this act is in addition to all other
taxes for which the taxpayer may be liable.
(5) The department shall prepare and publish statistics from
the records kept to administer the tax imposed by this act that
detail the distribution of tax receipts by type of business, legal
form of organization, sources of tax base, timing of tax receipts,
and types of deductions. The statistics shall not result in the
disclosure of information regarding any specific taxpayer.
Sec. 78. The proceeds of the tax collected under this act
shall be deposited in the general fund.
Enacting section 1. This act takes effect January 1, 2008.
Enacting section 2. This act does not take effect unless all
of the following bills of the 94th Legislature are enacted into
law:
(a) Senate Bill No. 96.
(b) Senate Bill No. 95.