SENATE BILL No. 95

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 an

income tax on certain commercial, business, and financial

activities; to prescribe the powers and duties of certain 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 income tax act".

Sec. 2. (1) For the purposes of this act, the words and

phrases defined in sections 3 through 9 shall have the meanings

respectively ascribed to them in those sections.

(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 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) "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, within this state, 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 shall 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.

(3) Except as otherwise provided in section 22, "business

income" means that part of federal taxable income derived from

business activity. For a partnership or 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) "Commercial domicile" means the principal place from which

the business activity of the taxpayer is directed or managed.

(3) "Corporation" means a person that is a corporation under

the internal revenue code.

(4) "Department" means the department of treasury.

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 income consists 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.

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.

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.

(2) "Insurance company" means an authorized insurer as defined

in section 106 of the insurance code of 1956, 1956 PA 218, MCL

500.106.

(3) "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.

(4) "Nonbusiness income" means all income from casual

transactions and all income other than business income. For a tax-

exempt person, nonbusiness income means all income derived from

unrelated business activity other than business income.

Sec. 7. (1) "Person" means an individual, firm, bank,

financial institution, limited partnership, limited liability

partnership, co-partnership, 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.

(2) "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.

(3) "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) "Subchapter S corporation" means a corporation for

which there is in effect an election under section 1362 of the

internal revenue code, or for which there is a federal election to

opt out of the provisions of the subchapter S revision act of 1982,

Public Law 97-354, and have applied instead the prior federal

subchapter S rules as in effect on July 1, 1982.

(2) "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).

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.

(3) "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.

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) "Tax base" means a person's business income subject to the

adjustments in subdivisions (a) through (e), before allocation or

apportionment, and the adjustments in subdivisions (f) through (h)

after allocation or apportionment:

(a) Add interest income and dividends derived from obligations

or securities of states other than this state, in the same amount

that was excluded from federal taxable income, less the related

portion of expenses not deducted in computing federal taxable

income because of sections 265 and 291 of the internal revenue

code.

(b) Add all taxes on or measured by net income and the tax

imposed under this act to the extent the taxes were deducted in

arriving at federal taxable income.

the extent deducted in arriving at federal taxable income.

(d) To the extent included in federal taxable income, deduct

dividends and royalties received from foreign persons, including,

but not limited to, amounts determined under section 78 or sections

951 to 964 of the internal revenue code.

(e) To the extent included in federal taxable income, add the

loss or subtract the income from the business income tax base that

is attributable to another entity whose business activities are

taxable under this chapter or would be subject to the tax under

this chapter if the business activities were in this state.

(f) Adjust for any nonbusiness income or loss allocated to

this state.

(g) Deduct from the allocated or apportioned business income

tax base any remaining business loss carryforward calculated under

section 23b(h) of former 1975 PA 228 to the extent not deducted in

tax years beginning before January 1, 2008. A carryforward may be

deducted in any tax year that is not more than 10 taxable years

after the loss year.

(h) Deduct any available business loss. As used in this

subsection, "business loss" means a negative business income

taxable amount after allocation or apportionment. The business loss

shall be carried forward to the year immediately succeeding the

loss year as an offset to the allocated or apportioned business

income tax base, then successively to the next 19 taxable years

following the loss year or until the loss is used up, whichever

occurs first, but for not more than 20 taxable years after the loss

year.

(3) "Tax year" or "taxable 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 business activity

directly connected with an unrelated trade or business as defined

in section 513 of the internal revenue code.

CHAPTER 2

Sec. 20. (1) Except as otherwise provided in this act, there

is levied and imposed a business income tax on the tax base of

every person with business activity and nexus within this state

unless prohibited by 15 USC 381 to 384. The business income tax is

imposed on the tax base, after allocation or apportionment to this

state, at the rate of 1.97.

(2) A person with business income apportioned to this state

equal to or less than $350,000.00 shall have no business income tax

liability and no filing requirement.

(3) A person with gross receipts of more than $350,000.00 but

not more than $15,000,000.00 that elects under section 15 of the

business and economic stimulus tax act to calculate its tax

liability on the gross receipts tax base is exempt from the tax

imposed by this act for as long as the person remains eligible for

that election.

Sec. 21. (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.

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. 22. (1) A foreign person shall calculate business income

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, the tax base

of a foreign person includes the sum of business income and the

adjustments under section 9(2) that are related to United States

business activity, whether or not the foreign person is subject to

taxation under the internal revenue code.

(3) To calculate business income and the adjustments under

section 9(2) 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 federal taxable income and

the permitted deductions 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 income from sales shipped or delivered to any purchaser

within the United States and for which title transfers outside the

United States.

(4) To calculate business income and the adjustments under

section 9(2) that are related to United States business activity, a

Canadian person that is subject to Canadian federal income tax

under the income tax act (RSC 1985, c. 1 (5th Supp)) may use

amounts properly calculated under the income tax act (RSC 1985, c.

1 (5th Supp)) to reasonably approximate business income and the

adjustments under section 9(2) that are related to United States

business activity. Amounts calculated under this subsection are

presumed to reasonably approximate business income and the

adjustments under section 9(2) that are related to United States

business activity. The tax base of a Canadian person shall not

include gross income 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.

(5) As used in this section:

(a) "Business income" means, for a foreign person, gross

income attributable to the taxpayer's United States business

activity and gross income derived from sources within the United

States minus the deductions allowed under the internal revenue code

that are related to that gross income. Gross income includes the

proceeds from sales shipped or delivered to any purchaser within

the United States and for which title transfers within the United

States; proceeds from services performed within the United States;

and a pro rata proportion of the proceeds from services performed

both within and outside the United States, based on cost of

performance.

(b) "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.

taxpayer's real and tangible personal property owned or rented in

the United States during the tax year.

(d) "United States person" means that term as defined in

section 7701(a)(30) of the internal revenue code.

CHAPTER 4

Sec. 40. (1) Except as otherwise provided in this chapter, the

entire tax base of a taxpayer whose business activities are

confined solely to this state shall be allocated to this state.

(2) To the extent that the following nonbusiness income is

included in the tax base under section 9(2)(f), that nonbusiness

income shall be allocated as follows:

(a) Net rents and royalties from real property located in this

state are allocable to this state.

(b) Net rents and royalties from tangible personal property

are allocable to this state as follows:

(i) If and to the extent that the property is utilized in this

state.

(ii) In their entirety if the taxpayer's commercial domicile is

in this state and the taxpayer is not organized under the laws of

or taxable in another state in which the property is utilized.

(iii) The extent of utilization of tangible personal property in

this state is determined by multiplying the rents and royalties by

a fraction, the numerator of the fraction is the number of days of

physical location of the property in this state during the rental

or royalty period in the taxable year and the denominator of the

fraction is the number of days of physical location of the property

everywhere during all rental or royalty periods in the taxable

year. If the physical location of the property during the rental or

royalty period is unknown or unascertainable by the taxpayer,

tangible personal property is utilized in the state in which the

property was located at the time the rental or royalty payer

obtained possession.

located in this state is allocable to this state.

(d) A capital gain or loss from sales of tangible personal

property is allocable to this state if the property had a situs in

this state at the time of the sale or if the taxpayer's commercial

domicile is in this state and the taxpayer is not taxable in the

state in which the property had a situs.

(e) A capital gain or loss from the sale of intangible

personal property is allocable to this state if the taxpayer's

commercial domicile is in this state.

(f) Interest and dividends are allocable to this state if the

taxpayer's commercial domicile is in this state.

(g) Patent and copyright royalties are allocable to this state

if the patent or copyright is utilized by the payer in this state

or if the patent or copyright is utilized by the payer in a state

in which the taxpayer is not taxable and the taxpayer's commercial

domicile is in this state. A patent is utilized in a state to the

extent that it is employed in production, fabrication,

manufacturing, or other processing in that state or to the extent

that a patented product is produced in that state. If the basis of

receipts from patent royalties does not permit allocation to 1 or

more states or if the accounting procedures do not reflect 1 or

more states of utilization, the patent shall be considered utilized

in the state in which the taxpayer's commercial domicile is

located.

(h) A copyright is utilized in a state to the extent that

printing or other publication originates in that state. If the

basis of receipts from copyright royalties does not permit

allocation to 1 or more states or if the accounting procedures do

not reflect 1 or more states of utilization, the copyright shall be

considered utilized in the state in which the taxpayer's commercial

domicile is located.

(i) Any other item of nonbusiness income is allocated to this

state if the taxpayer's commercial domicile is in 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 in that state.

(b) That state has jurisdiction to subject the taxpayer to 1

or more of the taxes listed in subdivision (a) regardless of

whether that state does or does not subject the taxpayer to that

tax.

Sec. 42. All of the tax base, other than the tax base of a

financial organization or the tax base derived principally from

transportation services or specifically allocated, shall be

apportioned to this state by multiplying the tax base by the sales

factor calculated under section 43.

Sec. 43. (1) Except as otherwise provided in this section and

in section 50, 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.

Sec. 44. Total sales of the taxpayer in this state are

determined as follows:

(a) A sale of tangible personal property is 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 sale.

(b) Receipts from the rent, lease, or sublease of real

property owned by the taxpayer are in this state if the property is

located within this state.

property are sales in this state to the extent that the property is

utilized in this state. The extent of utilization of tangible

personal property in this state is determined by multiplying the

receipts by a fraction, the numerator of which is the number of

days of physical location of the property in this state during the

lease or rental period in the tax year and the denominator of which

is the number of days of physical location of the property

everywhere during all lease or rental periods in the tax year. If

the physical location of the property during the lease or rental

period is unknown or unascertainable by the taxpayer, the tangible

personal property is utilized in the state in which the property

was located at the time the lease or rental payer obtained

possession.

(d) Receipts from the lease or rental of mobile transportation

property owned by the taxpayer are in this state to the extent that

the property is used in this state. The extent an aircraft will be

deemed to be used in this state and the amount of receipts that is

to be included in the numerator of this state's sales factor is

determined by multiplying all the receipts from the lease or rental

of the aircraft by a fraction, the numerator of the fraction is the

number of landings of the aircraft in this state and the

denominator of the fraction is the total number of landings of the

aircraft. If the extent of the use of any transportation property

within this state cannot be determined, then the receipts are in

this state if the property has its principal base of operations in

this state. A motor vehicle will be deemed to be used wholly in the

state in which it is registered.

Sec. 45. (1) Except as otherwise provided under section 46,

sales from the performance of services are in this state if the

receipts are derived from customers within this state or if the

receipts are otherwise attributable to this state's marketplace.

(2) The following shall be used to determine the amount of

sales from the performance of services that are attributable to

this state:

(a) Except as otherwise provided in this section, all receipts

from the performance of services are included in the numerator of

the apportionment factor if the recipient of the services receives

all of the benefit of the services in this state. If the recipient

of the services receives some of the benefit of the services in

this state, the receipts are included in the numerator of the

apportionment factor in proportion to the extent that the recipient

receives benefit of the services in this state.

(b) Sales derived from securities brokerage services

attributable to this state are determined by multiplying the total

dollar amount of receipts from securities brokerage services by a

fraction, the numerator of which is the sales of securities

brokerage services to customers within this state, and the

denominator of which is the sales of securities brokerage services

to all customers. Receipts from securities brokerage services

include commissions on transactions, the spread earned on principal

transactions in which the broker buys or sells from its account,

total margin interest paid on behalf of brokerage accounts owned by

the broker's customers, and fees and receipts of all kinds from the

underwriting of securities. If receipts from brokerage services can

be associated with a particular customer, but it is impractical to

associate the receipts with the address of the customer, then the

address of the customer shall be presumed to be the address of the

branch office that generates the transactions for the customer.

from the sale of management, distribution, administration, or

securities brokerage services to, or on behalf of, a regulated

investment company or its beneficial owners, including receipts

derived directly or indirectly from trustees, sponsors, or

participants of employee benefit plans that have accounts in a

regulated investment company, shall be attributable to this state

to the extent that the shareholders of the regulated investment

company are domiciled within this state. For purposes of this

subdivision, "domicile" means the shareholder's mailing address on

the records of the regulated investment company. If the regulated

investment company or the person providing management services to

the regulated investment company has actual knowledge that the

shareholder's primary residence or principal place of business is

different than the shareholder's mailing address, then the

shareholder's primary residence or principal place of business is

the shareholder's domicile. A separate computation shall be made

with respect to the receipts derived from each regulated investment

company. The total amount of sales attributable to this state shall

be equal to the total receipts received by each regulated

investment company multiplied by a fraction determined as follows:

(i) The numerator of the fraction is the average of the sum of

the beginning-of-year and end-of-year number of shares owned by the

regulated investment company shareholders who have their domicile

in this state.

(ii) The denominator of the fraction is the average of the sum

of the beginning-of-year and end-of-year number of shares owned by

all shareholders.

(iii) For purposes of the fraction, the year shall be the tax

year of the regulated investment company that ends with or within

the tax year of the taxpayer.

(d) Sales in this state shall include royalty or other

receipts for the use of, or for the privilege of using, intangible

property, including patents, know-how, formulas, designs,

processes, patterns, copyrights, trade names, service names,

franchises, licenses, contracts, customer lists, or similar items

if such sales are from activities that constitute the taxpayer's

regular trade or business. Except as otherwise provided in this

section, such sales must be attributed to the state in which the

property is used by the purchaser. If the property is used in more

than 1 state, then the royalties or other income shall be

apportioned to this state pro rata according to the portion of use

in this state. Intangible property is used in this state if the

purchaser uses the intangible property or the rights of the

intangible property in this state.

(e) The taxpayer shall expend a reasonable amount of effort to

obtain the information necessary to determine the amount of sales

that are attributable to this state. If that information is not

available, the taxpayer may use another reasonable method to

determine the amount of sales attributable to this state.

(3) As used in this section:

(a) "Billing address" means the location indicated in the

books and records of the taxpayer as the address of record where

any notice, statement, or bill relating to a customer's account is

mailed.

(b) "Customers within this state" means either of the

following:

(i) A customer that is engaged in a trade or business and

maintains a regular place of business within this state.

(ii) A customer that is not engaged in a trade or business

whose billing address is in this state.

warehouse, or other business location at which the customer

conducts business in a regular and systematic manner and that is

continuously maintained, occupied, and used by employees, agents,

or representatives of the customer.

Sec. 46. (1) Interest from loans secured by real property is

in this state if the property is located within this state or if

the property is located both within this state and 1 or more other

states, if more than 50% of the fair market value of the real

property is located within this state, or if more than 50% of the

fair market value of the real property is not located within any 1

state, if the borrower is located in this state. The determination

of whether the real property securing a loan is located within this

state shall be made as of the time the original agreement was made

and any and all subsequent substitutions of collateral shall be

disregarded.

(2) Interest from loans not secured by real property is in

this state if the borrower is located in this state.

(3) Receipts from the sale of loans or a group of loans,

including income recorded under the coupon stripping rules of

section 1286 of the internal revenue code, are in this state as

follows:

(a) The amount of receipts from the sale of loans secured by

real property is in this state if the property is in this state or

the 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, or if more than 50% of the

fair market value of the real property is not located in any 1

state, then if the borrower is located in this state.

(b) The amount of receipts from the sale of loans not secured

by real property is in this state if the borrower is in this state.

(4) Receipts from credit card receivables, including interest

and fees or penalties in the nature of interest from credit card

receivables and receipts from fees charged to cardholders, such as

annual fees, are in this state if the billing address of the card

holder is in this state.

(5) Receipts from the sale of credit card receivables are in

this state if the billing address of the cardholder is in this

state. Credit card issuer's reimbursements fees are in this state

if the billing address of the cardholder is in this state. Receipts

from merchant discount, computed net of any cardholder chargebacks,

but not reduced by any interchange transaction fees or by any

issuer's reimbursement fees paid to another for charges made by its

cardholders, are in this state if the commercial domicile of the

merchant is in this state.

(6) Loan servicing fees derived from loans of another secured

by real property are in this state if the real property is located

in this state, or the real property is located both within and

outside of this state and 1 or more states if more than 50% of the

fair market value of the real property is located in this state, or

more than 50% of the fair market value of the real property is not

located in any 1 state, and the borrower is located in this state.

Loan servicing fees derived from loans of another not secured by

real property are in this state if the borrower is located in this

state. If the location of the security cannot be determined, then

loan servicing fees for servicing either the secured or the

unsecured loans of another are in this state if the lender to whom

the loan servicing service is provided is located in this state.

(7) Interest, dividends, and other income from investment

assets and activities and from trading assets and activities,

including, but not limited to, investment securities; trading

account assets; federal funds; securities purchased and sold under

agreements to resell or repurchase; options; futures contracts;

forward contracts; notional principal contracts such as swaps;

equities; and foreign currency transactions are in this state if

the average value of the assets is assigned to a regular place of

business of the taxpayer within this state. Interest from federal

funds sold and purchased and from securities purchased under resale

agreements and securities sold under repurchase agreements are in

this state if the average value of the assets is assigned to a

regular place of business of the taxpayer within this state. The

amount of receipts and other income from investment assets and

activities is in this state if assets are assigned to a regular

place of business of the taxpayer within this state.

(8) The receipts from trading assets and activities,

including, but not limited to, assets and activities in the matched

book, in the arbitrage book, and foreign currency transactions, but

excluding amounts otherwise sourced in this section, are in this

state if the assets are assigned to a regular place of business of

the taxpayer within this state.

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 of this state

shall be determined as provided under this section and section 48.

(2) The tax base attributable to this state of a taxpayer

described in 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.

For a taxpayer providing maritime transportation, a revenue mile is

in this state if such transportation occurs within 3 nautical miles

of the Michigan shoreline.

(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 receipts from passenger transportation to

total receipts from all transportation, and by the ratio of

receipts from freight transportation to total receipts from all

transportation, respectively.

(4) If a taxpayer can show that revenue mile information is

not available or cannot be obtained without unreasonable expense to

the taxpayer, the tax base attributable to this state shall be that

portion of the tax base of the taxpayer derived from transportation

services everywhere performed that the miles of transportation

services performed in this state bears to the miles of

transportation services performed everywhere.

(5) If the department determines that the information required

for the calculations under this section are 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 of a financial organization shall be

apportioned to this state by multiplying the tax base by a faction

the numerator of which is the total gross receipts in this state

during the tax years and the denominator of which is the total

gross receipts of the taxpayer everywhere during the tax years.

Sec. 50. (1) Notwithstanding sections 43 through 46, 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 department shall 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.

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-year period 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 department

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 43 subject to both of

the following:

(a) A purchaser in this state under section 44 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 43 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

43. 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) "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.

(b) "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.

Sec. 51. (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 inclusion of 1 or more additional or alternative

factors that will fairly represent the taxpayer's business activity

in this state.

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 be

rebuttably presumed to 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 activity transacted in this state

and leads to a grossly distorted result.

(4) The filing of a return or an amended return is not

considered a petition for the purposes of subsection (1).

CHAPTER 6

Sec. 70. (1) A taxpayer that reasonably expects tax 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) Except as otherwise provided in this section, 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

required annual payment. The required annual payment means the

lesser of 100% of the tax shown on the return for that taxable

year, or 100% of the tax shown on the taxpayer's return for the

preceding taxable year. 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.

(4) For a taxpayer that calculates and pays estimated taxes to

the internal revenue service under section 6655(e) of the internal

revenue code, the taxpayer may use the same methodology as used to

calculate the annualized income installment or the adjusted

seasonal installment, whichever is used as the basis for the

federal estimated tax payment, to calculate the required estimated

payment to be made with each quarterly return under this section.

(5) 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 tax liability for that taxable year.

(b) If the preceding year's tax liability under this act was

$40,000.00 or less and if the taxpayer submitted 4 equal

installments the sum of which equals the immediately preceding tax

year's tax liability.

(6) 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 department. The

form prescribed under this subsection may be combined with any

other tax reporting form prescribed by the department.

(7) 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.

(8) Payments made under this section shall be a credit against

the payment required with the annual tax return required in section

72.

(9) If the department considers it necessary to ensure 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.

(10) 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. (1) 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:

(2) 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.

(3) 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 tax liability shall be remitted with this

return.

(2) 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 estimated tax due, if any, 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 any tax due unpaid for the period of the extension.

(3) If a taxpayer does not have an extension of time within

which to file the federal income tax return for any tax year, the

department, upon application of the taxpayer shall 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 department

shall require with the application payment of the estimated tax

liability unpaid for the tax period covered by the extension.

(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 in the internal revenue code shall consolidate the business

income of the members of the affiliated group, member corporations

of the controlled group, or entities under common control that have

apportioned or allocated business income, 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 business income

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 2 years 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.

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 so applicable to each member even if it were not a member of the

affiliated group.

(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 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. 94.

(b) Senate Bill No. 96.